SETTLEMENT AGREEMENT
This SETTLEMENT AGREEMENT is dated March 31, 1994 (the "Effective
Date") among Ames Department Stores, Inc., a Delaware corporation ("Reorganized
Ames"), the subsidiaries of Reorganized Ames (the "REORGANIZED AMES
SUBSIDIARIES"), Wertheim Schroder & Co. Incorporated, a Delaware corporation
("Wertheim"), and James A. Harmon ("Harmon").
W I T N E S E T H :
WHEREAS, the Plaintiffs (as hereinafter defined) have filed an
adversary proceeding seeking damages from Wertheim and Harmon in the United
States Bankruptcy Court for the Southern District of New York in Chapter 11
Reorganization Cases Nos. 90 B 11233 through 90 B 11285 (the "CHAPTER 11
CASES") entitled AMES DEPARTMENT STORES INC. ET AT. V. WERTHEIM SCHRODER & CO.
INC.,
et ano., Adv. Proc. No. 92-1002A (the "Ames Suit");
WHEREAS, Wertheim and Harmon have asserted certain counterclaims
against the Plaintiffs in the Ames Suit (the "COUNTERCLAIMS");
WHEREAS, certain third-party claims may be asserted against Wertheim
and Harmon related to the subject matter of the Ames Suit;
WHEREAS, the parties to the Ames Suit wish to settle and compromise
both the Ames Suit and the Counterclaims and to bar certain related third-party
claims;
WHEREAS, Wertheim and Harmon are contemporaneously executing a
settlement agreement with the Continuing Parent Creditors' Committee (as
hereinafter defined) acting by its counsel, as court authorized representatives
of the Class AG-6A Parent Unsecured Creditors (the "CLASS AG-6A Creditors"),
and Arnold Zahn as Trustee (the "Trustee"), for the benefit of the Class AG-6A
Creditors;
NOW, THEREFORE, in consideration of the premises and the mutual
promises, covenants and agreements contained herein, the parties hereto agree
as follows:
SECTION 1. DEFINITIONS. For purposes of this Settlement Agreement,
the following terms shall have the meanings indicated:
1.1 "ALLOWED CLAIM" shall have the meaning given in Section 1.5
of the Plan.
1.2 "AMES GROUP" means Reorganized Ames, the Reorganized Ames
Subsidiaries, their respective direct and indirect subsidiaries and affiliates,
and their respective predecessors, successors and assigns (but shall exclude
any Ames Transferee), as well as the former and current officers, directors,
and employees of each.
1.3 "AMES GROUP MEMBER" and "AMES GROUP MEMBERS" mean, as the
context requires, any or all members of the Ames Group.
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1.4 "AMES SUBSIDIARIES" means the Plaintiffs in the Ames Suit
other than Ames Department Stores, Inc., a debtor in the Chapter 11 Cases
("Ames").
1.5 "AMES TRANSFEREE" means the Litigation Trust, the Litigation
Trustee, and holders of Litigation Trust Units, each as defined in the Plan, to
or in favor of whom any Litigation Claim (as defined in the Plan) now or
previously owned by any Ames Group Member is, has been or may be transferred or
distributed pursuant to the Plan.
1.6 "APPROVAL MOTION" means a motion to be prepared by
Plaintiffs for filing in the Bankruptcy Court seeking approval of the
Settlement Agreement and the Class AG-6A Settlement Agreement.
1.7 "APPROVAL ORDER" means an order or judgment approving this
Settlement Agreement and the Class AG-6A Settlement Agreement, in all material
respects in the form of Exhibit A hereto, of the Bankruptcy Court or any other
court exercising appellate jurisdiction over the Chapter 11 Cases.
1.8 "BANKRUPTCY COURT" means the United States Bankruptcy Court
for the Southern District of New York.
1.9 "CERTIFICATES" means each of the certificates as discussed
in Section 3 herein.
1.10 "CLASS AG-6A SETTLEMENT AGREEMENT" means the Agreement by
and among the Continuing Parent Creditors' Committee and the Trustee, on the
one hand, and Wertheim and Harmon, on the other hand, which is being
contemporaneously executed, a copy of which is annexed hereto as Exhibit E.
1.11 "CONTINUING PARENT CREDITORS' COMMITTEE" means that body of
the Parent Creditors' Committee referred to in Article XIV(G) of the Plan.
1.12 "DISTRICT COURT" means the United States District Court for
the Southern District of New York.
1.13 "ELECTING CA HOLDER" shall have the meaning given in
Section 1.117 of the Plan.
1.14 "FINAL" with respect to any order of any court means an
order or judgment, the operation or effect of which has not been stayed,
reversed, or amended, and as to which order or judgment (or any revision,
modification or amendment thereto), the time to appeal or seek review or
rehearing, or to apply for an extension of the time to appeal or to seek review
or rehearing, has expired, and as to which no appeal or petition for review or
rehearing, or application for an extension of the time to appeal or to seek
review or rehearing, that was filed is pending.
1.15 "INDEMNITORS" means Reorganized Ames and the Reorganized
Ames Subsidiaries.
1.16 "JUDGMENT OVER" means a Final judgment arising out of or
relating in any way to a Zayre Related Matter (as hereinafter defined) obtained
by a Non-Party Defendant against any Wertheim Group Member arising out of or
relating in any way to a Primary Judgment.
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1.17 "NON-PARTY DEFENDANT" means any person or entity (i) that
is not a party to this Settlement Agreement and (ii) against whom any claim for
damages or other relief is asserted which, in turn, may give rise to any claim
by such person or entity against any Wertheim Group Member arising out of or
relating in any way to (x) the acquisition of the assets of the Zayre discount
store division by Ames (including the financing and refinancing of such
acquisition), (y) services rendered to the Ames Group or any Ames Group Member
by any Wertheim Group Member prior to the date of this Settlement Agreement or
(z) Harmon's service as a director of Ames (each of clause (x), (y) and (z)
individually, a "Zayre Related Matter").
1.18 "PLAINTIFFS" means the plaintiffs in the Ames Suit.
1.19 "Plan" means the Third Amended and Restated Joint Plan of
Reorganization of Ames Department Stores, Inc. and Other Members of the Ames
Group, dated October 23, 1992, as subsequently amended, modified or restated,
and as confirmed by order of the Bankruptcy Court dated December 18, 1992, as
amended.
1.20 "PRESS RELEASE" means a written statement designed or
intended for dissemination to any newspaper, radio, television or other member
of the news media.
1.21 "PRIMARY JUDGMENT" means a Final judgment entered in favor
of either any Ames Group Member or any Ames Transferee, against a Non-Party
Defendant arising out of or relating in any way to a Zayre Related Matter.
1.22 "PUBLIC RELEASE" means a written statement for public
filing with the NASD, or with the Securities Exchange Commission or any other
governmental body.
1.23 "RELEASES" means releases to be executed by Wertheim,
Harmon, Reorganized Ames, and the Reorganized Ames Subsidiaries in the form of
Exhibits B and C hereto.
1.24 "SETTLEMENT AGREEMENT" means this Agreement, including the
exhibits hereto.
1.25 "SETTLING CREDITORS" means the Class AG-6A Creditors acting
by the Continuing Parent Creditors' Committee and the Trustee.
1.26 "STIPULATION OF WITHDRAWAL" means a stipulation, in the
form of Exhibit D hereto, executed by the counsel to the parties hereto
withdrawing Wertheim's and Harmon's motion, dated April 20, 1993, to withdraw
the reference.
1.27 "WERTHEIM GROUP" means Wertheim Schroder Holdings, Inc., a
corporation, its direct and indirect subsidiaries and affiliates (including
Wertheim), and their respective predecessors, successors and assigns, as well
as the former and current officers, directors, managing directors, associate
managing directors, partners, employees, agents, attorneys and accountants of
each, and their respective legal representatives, heirs, successors and
assigns, and any person or entity claiming through them.
1.28 "WERTHEIM GROUP MEMBER" and "WERTHEIM GROUP MEMBERS" mean,
as the context requires, any or all members of the Wertheim Group, including
Wertheim and Harmon.
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SECTION 2. PROCEEDINGS FOR APPROVAL AND STAY OF LITIGATION.
(a) Promptly following the execution and delivery of the
Settlement Agreement and the Class AG-6A Settlement Agreement, Plaintiffs shall
prepare the Approval Motion and shall submit it to Wertheim and Harmon for
approval as to form and content. The Approval Motion, and the Approval Order
annexed hereto as Exhibit A, shall not be filed with the Court absent such
approval by Wertheim and Harmon, which shall not unreasonably be withheld. The
Approval Motion shall be preceded by an application seeking Court approval that
notice of the Approval Motion shall be given as follows: (i) by individual
mailing to (A) all holders of claims, whether allowed or disputed, as of the
date on which the Bankruptcy Court signs an order directing that notice of the
Approval Motion be given, in the following classes of creditors identified in
the Plan -- AG-4, 4A, 4B, 4C, 4D, 4E, 4F, 5, 6, 6A, 6B, 6C, 6D, 7, 7A, 7B,
and 8, BKC-1, and counsel for Class AG-9 -- as evidenced by the records
maintained by Claudia King & Associates, Inc. as Agent for the Clerk of the
Bankruptcy
Court pursuant to an order of the Bankruptcy Court entered in the Chapter 11
Cases on August 8, 1990, (B) all persons identified as having an interest in,
or as otherwise entitled, under Section 1.268 of the Plan, to receive any part
of the Wertheim Claim Proceeds (as defined in the Plan), (C) all persons
identified as having an interest in, or as otherwise entitled, under Paragraph
D of Article VII of the Plan, to receive any Litigation Trust Unit (as defined
in the Plan), (D) Citibank, N.A., as agent for the Electing CA Holders, (E)
Arthur Andersen & Co., S.C., Andersen Consulting, Bear Stearns & Co., Inc.,
Coopers & Lybrand, Hale and Dorr, and such other persons as Wertheim may
designate prior to the Court's
disposition of the Approval Motion, and (F) all persons or entities that have
filed a notice of appearance and demand for service of papers in the Chapter 11
Cases; and (ii) in addition, by appropriate publication. All expenses of notice
shall be borne equally by Reorganized Ames and Wertheim. Reorganized Ames, the
Reorganized Ames Subsidiaries, Wertheim, Harmon, and the Settling Creditors
shall use their best efforts to cause the Settlement Agreement and the Class
AG-6A Settlement Agreement to be approved; and to have the Approval Order
entered by the Bankruptcy Court and, if any appeal is taken therefrom, by any
court exercising appellate jurisdiction over the Chapter 11 Cases; and to
become Final on or before one year after the Effective Date.
(b) From and after the Effective Date, all proceedings in the
Ames Suit, including proceedings concerning the Counterclaims, shall be stayed
pending (i) entry of an Approval Order that shall have become Final; (ii) entry
of a Final Order disapproving the Settlement Agreement; or (iii) termination of
the Settlement Agreement pursuant to Section 3(d) below.
SECTION 3. THE CLOSING.
(a) There shall be a closing (the "CLOSING") at the offices of
Paul, Weiss, Rifkind, Wharton & Garrison, 1285 Avenue of the Americas, New York,
New
York at 10:00 a.m. on the fifth business day after the date on which the
Approval Order becomes Final.
(b) At the Closing and as a condition of the obligations of
Reorganized Ames and the Reorganized Ames Subsidiaries to consummate the
Closing:
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(i) The Wertheim Group Members shall pay or cause to be
paid to Reorganized Ames by wire transfer in immediately available Federal
funds the sum of Nineteen Million Dollars ($19,000,000) (the "Settlement
Amount"), unless otherwise (A) directed by the Bankruptcy Court, or (B)
instructed jointly by Reorganized Ames and the Trustee, to pay the Settlement
Amount in separate parts to Reorganized Ames and the Trustee. Nothing in this
Section 3(b)(i) is intended by the parties to modify Section 1.268 of the Plan:
(ii) Wertheim and Harmon shall deliver to Reorganized Ames
an executed Release in the form of Exhibit B hereto;
(iii) The representations and warranties of Wertheim and
Harmon set forth in Section 5 shall be true and correct as of the date hereof
and on the date of the Closing, and Wertheim shall deliver to Reorganized Ames
a duly executed certificate so stating; and
(iv) Wertheim and Harmon shall cause their counsel to
deliver to Reorganized Ames the Stipulation of Withdrawal as executed on their
behalf.
(c) At the Closing and as a condition of the obligations of
Wertheim and Harmon to consummate the Closing:
(i) Reorganized Ames and the Reorganized Ames Subsidiaries
shall deliver to Wertheim and Harmon an executed Release in the form of Exhibit
C hereto; and
(ii) The representations and warranties of Reorganized Ames
and the Reorganized Ames Subsidiaries set forth in Section 6 shall be true and
correct as of the date hereof and on the date of the Closing, and Reorganized
Ames and the Reorganized Ames Subsidiaries shall deliver to Wertheim a duly
executed certificate so stating.
(d) In the event that neither an Approval Order nor an order
disapproving the Settlement Agreement or the Class AG-6A Settlement Agreement
becomes Final on or before one year after the Effective Date, either
Reorganized Ames or Wertheim shall be entitled, by written notice (a
"TERMINATION NOTICE") served on all the other parties hereto, to declare this
Settlement Agreement terminated, whereupon this Settlement Agreement shall be
of no further force or effect.
SECTION 4. REDUCTION OF JUDGMENT IN CERTAIN CIRCUMSTANCES: INDEMNITY,
ETC.
(a) If any Primary Judgment is entered in favor of an Ames Group
Member, and the Non-Party Defendant against whom such Primary Judgment was
entered obtains a Judgment Over against any Wertheim Group Member
notwithstanding paragraphs 5 through 7 of the Approval Order, then (i) the
relevant Ames Group Member, if it is a party to the Settlement Agreement, shall
reduce or offset such Primary Judgment to the extent necessary to eliminate or
offset fully the amount of such Judgment Over against any Wertheim Group Member
or (ii) in the event and to the extent that any Wertheim Group Member is not
relieved of all liability on any such Judgment Over by such reduction or offset
of such Primary Judgment pursuant to clause (i) above (whether because such
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Judgment Over is the result of a separate action or proceeding to which the
Ames Group Member obtaining such Primary Judgment is not a party, or
otherwise), the Indemnitors shall indemnify and hold harmless each Wertheim
Group Member to the extent of its liability on such Judgment Over that is not
eliminated or offset fully pursuant to clause (i) above. In the event that any
such Judgment Over, whether Final or not, is entered against any Wertheim Group
Member in any action that may lead to the application of the judgment reduction
or indemnification provisions of this subsection (a), Wertheim, if so requested
by the Indemnitors, shall use its best efforts to ensure that any available
appeal is pursued prior to payment of such Judgment Over provided that (i) a
stay of all proceedings to enforce such Judgment Over is available as of right
or is obtained, in each case without any Wertheim Group Member being obliged to
pledge or otherwise encumber any of its assets in order to obtain such stay,
(ii) the Indemnitors shall pay all costs and furnish all collateral required to
secure payment of such Judgment Over (including interest and costs) in the
event the appeal is unsuccessful, and (iii) Wertheim shall not have received an
opinion of its counsel that there is no reasonable ground for appeal. In
addition, the Indemnitors shall indemnify the Wertheim Group Members against
any liability they may incur in settlement or compromise of any Judgment Over,
whether Final or not, arising out of or relating in any way to any such Primary
Judgment entered in favor of any Ames Group Member; PROVIDED that the
Indemnitors' obligations to indemnify pursuant to this sentence shall be
conditioned on the Indemnitors first having approved, or having been found by a
court to have unreasonably withheld their approval of, such settlement or
compromise.
(b) The Indemnitors agree to use their best efforts to notify
Wertheim promptly following receipt of notice of any decision, verdict or
judgment, or upon receipt of notice of any legal action or any negotiation of a
settlement, that may lead to the entry of any Judgment Over pursuant to which
the provisions of subsection (a) above may apply, and to use their best efforts
to provide the Wertheim Group with a reasonable opportunity to be heard with
respect thereto (to the extent that such prior notice and opportunity to be
heard are not prohibited by the applicable rules of court).
(c) Each Wertheim Group Member agrees that it will cooperate
with the Indemnitors in all reasonable respects in connection with any action
that may lead to the application of the judgment reduction or indemnification
provisions of subsection (a) above, including, without limitation, by making
available for examination any witnesses employed by Wertheim or under its
control and identified by the Indemnitors, and by providing the Indemnitors
with any documents required by them that are neither privileged nor contain
trade secrets or other sensitive information.
(d) The Indemnitors agree that they will indemnify the Wertheim
Group Members for the reasonable out-of-pocket costs and expenses (including
the reasonable counsel fees, disbursements and expenses) incurred by any
Wertheim Group Member in defense or settlement of any claim to which the
judgment reduction or indemnification provisions of subsection (a) above apply.
(e) The obligations of the Indemnitors under this Section 4
shall be both joint and several.
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(f) Notwithstanding anything contained in this Settlement
Agreement, the obligations of the Ames Group Members, the Indemnitors and the
Wertheim Group Members contained in this Section 4 shall not become operative
and shall have no force or legal effect until an Approval Order has become
Final, at which time such obligations shall become operative retroactive to the
Effective Date.
(g) Neither the Indemnitors nor any other Ames Group Member
shall have any obligation under this Section 4 to reduce or offset the amount
of any Primary Judgment, or to indemnify or hold harmless any Wertheim Group
Member to the extent of its liability on any Judgment Over, if and to the
extent that the Primary Judgment giving rise to such Judgment Over was not
entered in favor or for the benefit of any of Reorganized Ames, any Reorganized
Ames Subsidiary, any direct or indirect subsidiary or affiliate of Reorganized
Ames or any Reorganized Ames Subsidiary, any predecessor, successor or assign
of any of the foregoing, or the current officers, directors and employees of
any of the foregoing; PROVIDED HOWEVER that the successors and assigns of
Reorganized Ames and of the Reorganized Ames subsidiaries shall not include any
Ames Transferee.
(h) Neither the Indemnitors nor any other Ames Group Member
shall have any obligation under this Section 4 to reduce or offset the amount
of any Primary Judgment, or to indemnify or hold harmless any Wertheim Group
Member to the extent of its liability on any Judgment Over, unless and to the
extent that judicial application of Paragraphs 5, 6, and 7 of the Approval
Order has not had the effect of fully eliminating such Wertheim Group Member's
liability with respect to the Judgment Over, or because a court fails or
otherwise refuses to apply all or any part of Paragraphs 5, 6, or 7 of the
Approval Order.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF WERTHEIM. Wertheim
represents and warrants to Reorganized Ames and the Reorganized Ames
Subsidiaries that (i) the Settlement Agreement has been duly executed and
delivered by Wertheim and Harmon and is the legal, valid and binding obligation
of Wertheim and Harmon, enforceable against Wertheim and Harmon in accordance
with its terms, (ii) the execution, delivery and performance by Wertheim of the
Settlement Agreement and all related documents contemplated hereby are within
Wertheim's corporate powers, have been duly authorized by all necessary
corporate action, and do not contravene the certificate of incorporation or
bylaws of Wertheim or any law or contractual restriction binding on or
affecting Wertheim, and (iii) no consent, approval, order or authorization of,
or REGISTRATION, DECLARATION OR FILING with, any court or administrative agency
or commission or other governmental authority or instrumentality, is required
by or with respect to any Wertheim Group Member in connection with the
execution, delivery and performance by Wertheim and Harmon of the Settlement
Agreement, (iv) Wertheim and Harmon own all right, title and interest in and to
all Claims released in Exhibit B hereto, and no such claim has been assigned or
otherwise transferred to any other person or entity; (v) Wertheim and Harmon
have the full, complete, and exclusive right and authority to settle each and
every claim which is the subject of the Release referred to in Section 3(b)(ii)
of the Settlement Agreement; and (vi) neither Wertheim nor Harmon is aware of
any existing, pending or threatened litigation that could result in the entry
of a judgment that, if entered, would be a Primary Judqment or a Judgment Over.
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SECTION 6. REPRESENTATIONS AND WARRANTIES OF REORGANIZED AMES AND THE
REORGANIZED AMES SUBSIDIARIES. Each of Reorganized Ames and the Reorganized
Ames Subsidiaries, jointly and severally, represents and warrants to Wertheim,
subject to approval of the Settlement Agreement by the Bankruptcy Court of
those aspects hereof requiring its approval, that (i) the Settlement Agreement
has been duly executed and delivered by it and is the legal, valid and binding
obligation of it, enforceable against it in accordance with its terms; (ii) THE
EXECUTION, DELIVERY AND PERFORMANCEby it of the Settlement Agreement and all
related documentation contemplated hereby are within its corporate powers, have
been duly authorized by all necessary corporate action, and do not contravene
the certificate of incorporation or bylaws of it or any law or contractual
restriction binding on or affecting it; (iii) except as expressly provided in
the Settlement Agreement, no consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality is required by or
with respect to it in connection with the execution, delivery and performance
by it of the Settlement Agreement; (iv) Reorganized Ames and the Reorganized
Ames Subsidiaries own all right, title and interest in and to all Claims
released in Exhibit C hereto, and no such claim has been assigned or otherwise
transferred to any other person or entity; (v) Reorganized Ames and the
Reorganized Ames Subsidiaries have the full, complete, and exclusive right and
authority to settle each and every claim which is the subject of the Release
referred to in Section 3(c)(i) of the Settlement Agreement; (vi) Reorganized
Ames and the Reorganized Ames Subsidiaries have not assigned or otherwise
transferred any claim arising out of or relating in any way to a Zayre Related
Matter except as set forth in the Plan; (vii) Reorganized Ames and the
Reorganized Ames Subsidiaries do not own or otherwise hold any Litigation Trust
Unit (as defined in the Plan), or any right to receive any such Litigation
Trust Unit; (viii) Reorganized Ames and the Reorganized Ames Subsidiaries have
been notified that each of Arthur Andersen & Co., S.C., Andersen Consulting,
Bear
Stearns & Co., Inc., and Coopers & Lybrand was a holder of one or more Allowed
Claims in the
Chapter 11 Cases; (ix) Reorganized Ames and the Reorganized Ames Subsidiaries
have not executed, and have received no notice that any trustee has been
appointed under, the Litigation Trust Agreement; (x) the successor in interest,
if any, to each debtor in the Chapter 11 Cases is either Reorganized Ames or
one or more of the Reorganized Ames Subsidiaries; and (xi) neither Reorganized
Ames nor the Reorganized Ames Subsidiaries is aware of any existing, pending or
threatened litigation that could result in the entry of a judgment that, if
entered, would be a Primary Judgment or a Judgment Over.
SECTION 7. PUBLIC AND PRESS RELEASES. On the Effective Date, for the
purposes of making any disclosure or filing that either party determines is
required by the securities laws or NASD regulations, Reorganized Ames or
Wertheim may issue a Press Release and/or a Public Release describing the fact
and terms of the Settlement Agreement and the Class AG-6A Settlement Agreement.
If deemed necessary within the sole judgment of either of Reorganized Ames or
Wertheim, either of them after the Effective Date also may make other Public
Releases. The contents of any Press Release shall be jointly approved by
Reorganized Ames and Wertheim in advance of its disclosure or filing, which
approval shall not be unreasonably withheld. The party proposing to make any
Public Release shall permit either Reorganized Ames or Wertheim, as the case
may be, to review and comment on such proposed Public Release before it is
filed, but approval of the reviewing party shall not be required and the terms
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of this Section 7 shall not otherwise affect the timing or content of any such
Public Release. No party hereto shall, directly or indirectly, issue, or
initiate any contact with any press or media member for the purpose of making,
any other Press Release commenting on the fact or terms of the Settlement
Agreement, the Class-AG-6A Settlement Agreement or the Ames Suit absent prior
written consent of the other parties. If any party is contacted by any press or
media member with respect to the Settlement Agreement, the Class AG-6A
Settlement Agreement, or the Ames Suit, the party contacted shall decline any
comment. The parties hereto intend that performance of this Section 7 shall be
treated separately and distinctly from performance of all of the other
provisions of this Settlement Agreement, and that any alleged or actual breach
or non-performance of this Section 7 by any siqnatory hereto shall not affect
the rights and obligations of the parties under any other provision of this
Settlement Agreement, all of which shall remain in full force and effect.
Moreover, no party shall have any right to seek a rescission or termination of
this Settlement Agreement or any provision or term thereof by reason of any
such alleged or actual breach or non-performance of this Section 7.
SECTION 8. CONFIDENTIALITY. Each of the parties hereto acknowledges
that a Stipulation and Protective Order was entered in the Ames Suit on January
11, 1993 for the protection of confidential information, documents and
materials that are produced or otherwise disclosed during the course of the
Ames Suit, and each agrees to treat all "Confidential Information" referred to
in such Stipulation and Protective Order in accordance with the terms and
conditions of such Stipulation and Protective Order. Nothing in this Section 8
is intended to confer any benefits or rights on any person or entity that is
not a party to this Settlement Agreement.
SECTION 9. NO ADMISSION OF LIABILITY ETC. The parties hereto
acknowledge that the consideration tendered and received herein, and the
execution of the Settlement Agreement, are in compromise and settlement of
disputed claims in connection with the Ames Suit and are not an admission of
liability or fault or omission of any kind on the part of any of them; neither
the Settlement Agreement, nor any papers relating to it, nor any of the terms
hereof shall be offered or received in evidence or in any way referred to in
any civil, criminal or administrative action or proceeding other than such
actions or proceedings as may be necessary to obtain approval of or to
consummate or enforce the Settlement Agreement, or to seek damages for its
breach.
SECTION 10. ENTIRE AGREEMENT. The Settlement Agreement and the
exhibits hereto constitute the entire agreement and understanding between the
parties hereto relative to the subject matter hereof; PROVIDED HOWEVER that
nothinq herein contained shall affect or modify the Plan and the rights and
obligations of all parties thereunder except as set forth herein or in the
Class AG-6A Settlement Agreement or the Approval Order. In furtherance, and not
in limitation, of the foregoing, the parties hereto acknowledge that they are
not relying upon any statement, information, promise, term, condition,
obligation or representation made by any person or entity, except for those
expressly stated herein and in the Exhibits hereto.
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SECTION 11. BINDING EFFECT. The Settlement Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective legal
representatives, heirs, successors and assigns, and any person or entity
claiming through them.
SECTION 12. AMENDMENTS. No amendment, waiver or modification of any
provision of the Settlement Agreement shall be effective unless the same shall
be in writing and signed by each of the parties hereto.
SECTION 13. NOTICES. All notices and communications in connection
with the Settlement Agreement shall be in writing and shall be delivered by
hand, overnight courier or certified mail, return receipt requested, addressed
as follows:
If to Reorganized Ames or the Reorganized Ames Subsidiaries:
Ames Department Stores, Inc.
2418 Main Street
Rocky Hill, Connecticut 06067
Attention: General Counsel with copy to:
Patton, Boggs & Blow
2550 M Street, N.W.
Washington, D.C. 20037
Attention: Ronald S. Liebman, Esq.
If to Wertheim or Harmon:
Wertheim Schroder & Co. Incorporated
787 Seventh Avenue
New York, NY 10019-6016
Attention: Chief Executive Officer
With copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019-6064
Attention: Lewis A. Kaplan, Esq.
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If to Citibank, N.A.:
Citibank, N.A.
Citicorp Center
599 Lexington Avenue
New York. NY 10043
Attention: Jeroen Fikke
With a copy to:
Shearman & Sterling
Citicorp Center
153 East 53rd Street
New York, NY 10022
Attention: Jonathan Greenblatt, Esq.
If to the Class AG-6A Trustee:
Arnold Zahn
Class AG-6A Trustee
Zahn Associates Inc.
2050 Center Avenue
Fort Lee, NJ 07024
With a copy to:
Dewey Ballantine
1301 Avenue of the Americas
New York, NY 10019
Attention: Stuart Hirshfield, Esq.
All such notices and communications shall be effective when received.
SECTION 14. NO WAIVER. No failure on the part of any party hereto to
exercise, and no delay in exercising, any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.
SECTION 15. COSTS AND EXPENSES. Except as otherwise provided herein,
as between the Ames Group Members and the Wertheim Group Members, each of the
parties hereto shall pay all of its own costs and expenses in connection with
the litigation of the Ames Suit and of the Counterclaims, the negotiation,
preparation, execution and delivery of the Settlement Agreement and the other
documents to be delivered hereunder, and the consummation of the matters
provided for herein.
Page 15 of 37
SECTION 16. HEADINGS. Headings used herein are for convenience of
reference only, are not part of the Settlement Agreement and are not to affect
the construction of, or to be taken into consideration in interpreting, the
Settlement Agreement.
SECTION 17. GOVERNING LAW. The Settlement Agreement and the documents
to be executed pursuant hereto shall be governed by, and construed in
accordance with, the laws of the State of New York applied to contracts made
and to be performed entirely within such State.
SECTION 18. EXECUTION IN COUNTERPARTS. The Settlement Agreement may
be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
Dated: New York, New York
March 31, 1994
AMES DEPARTMENT STORES, INC.
By: /S/ PETER THORNER
---------------------------
PETER THORNER, PRESIDENT
ZAYRE CENTRAL CORP.
By: /S/ DAVID LISSY
---------------------------
DAVID LISSY, VICE PRESIDENT
ZAYRE NEW ENGLAND CORP.
By: /S/ DAVID LISSY
---------------------------
DAVID LISSY, VICE PRESIDENT
AMES REALTY II, INC.
By: /S/ PETER THORNER
---------------------------
PETER THORNER, PRESIDENT
Page 16 of 37
AMD, INC.
By: /S/ PETER THORNER
-----------------------------
PETER THORNER, VICE PRESIDENT
AMES TRANSPORTATION SYSTEMS, INC.
By: /S/ PETER THORNER
-----------------------------
PETER THORNER, PRESIDENT
WERTHEIM SCHRODER & CO. INCORPORATED
By: /S/ STEVE KOTLER
--------------------------------
STEVE KOTLER
By: /S/ JAMES A. HARMON
--------------------------------
JAMES A. HARMON
Page 17 of 37
The undersigned hereby consent to the entry of the Approval Order in the form
annexed as Exhibit A, agree to support the motion for approval of this
Settlement Agreement, and agree to be bound by: (a) the last sentence of
Section 2(a) and Sections 7, 8 and 9 of this Settlement Agreement; and (b) as
to the Continuing Parent Creditors' Committee and the Class AG-6A Trust,
Section 3(b)(i) of the Settlement Agreement.
CITIBANK, N.A., as agent for the Electinq CA Holders
By: /S/ JEROEN FIKKE
--------------------------------------------------
JEROEN FIKKE
CONTINUING PARENT CREDITORS' COMMITTEE
(Pursuant to Article XIV(G) of the Plan)
By: /S/ STUART HIRSHFIELD
--------------------------------------------------
STUART HIRSCHFIELD
CLASS AG-6A TRUST
By: /S/ ARNOLD ZAHN
--------------------------------------------------
ARNOLD ZAHN, TRUSTEE
Page 18 of 37
EXHIBIT A
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- ------------------------------------------
-
In re -
-
AMES DEPARTMENT STORES, INC., - Chapter 11
EASTERN RETAILERS SERVICE CORPORATION, - Reorganization Cases
ET AL., - Nos. 90 B 11233
- through 11285 (JAG)
Debtors. -
-
- ------------------------------------------
-
AMES DEPARTMENT STORES, INC., ET AL., -
-
Plaintiffs, - Adversary Proceeding
- No. 92-1002A (JAG)
-against- -
-
WERTHEIM SCHRODER & CO. INC. -
and JAMES A. HARMON, -
-
Defendants. -
-
- ------------------------------------------
ORDER AUTHORIZING AND APPROVING COMPROMISE
AND SETTLEMENT RELATING TO OUTSTANDING CLAIMS
BETWEEN AMES DEPARTMENT STORES, INC., ET AL.,
AND WERTHEIM SCHRODER & CO. INC. AND JAMES A. HARMON
A motion dated --------------- , 1994 (the "Motion") having been
filed by the Reorganized Ames Group (the "Ames Group"), as defined in the Third
Amended and Restated Joint Plan of Reorganization of Ames Department Stores,
Inc. and Other Members of the Ames Group, dated October 23, 1992, as
subsequently amended, modified or restated, and as confirmed by order of this
Court dated December 18, 1992, as amended (the "Plan"), as successor to Ames
Department Stores, Inc. ("Ames"), and certain of its subsidiaries, debtors in
the above-captioned Reorganization Cases, and by the Continuing Parent
Creditors Committee (as defined in the Class AG-6A Settlement Agreement), for
an Order approving the compromise and settlement set forth in a Settlement
Agreement and a Class AG-6A Settlement Agreement, each dated March _, 1994
(annexed as Exhibits 3 and 4, respectively, to the Motion), relating to certain
claims which have been asserted by and between the parties to the
above-captioned Adversary Proceeding, concerning, among other things, services
rendered by Wertheim Schroder & Co. Incorporated ("Wertheim") and James A.
Harmon
("Harmon") in connection with Ames' purchase of the Zayre Store Division of
Zayre Corp. and the services of Harmon as a director of Ames;
Page 19 of 37
And adequate notice of the Motion as determined by the Court having
been given: (a) by individual mailing to (i) all holders of claims, whether
allowed or disputed, as of the date on which the Court signed an order
directing that notice of the Approval Motion be given, in the following classes
of creditors identified in the Plan -- AG-4, 4A, 4B, 4C, 4D, 4E, 4F, 5, 6, 6A,
6B, 6C, 6D, 7, 7A, 7B, and 8, BKC-l, and counsel for Class AG-9 -- as evidenced
by the records maintained by Claudia King & Associates, Inc. as Agent for the
Clerk of
the Bankruptcy Court pursuant to an order of the Bankruptcy Court entered in
the Chapter 11 Cases on August 8, 1990, (ii) all persons identified as having
an interest in, or as otherwise entitled, under Section 1.268 of the Plan, to
receive any part of the Wertheim Claim Proceeds (as defined in the Plan), (iii)
all persons identified as having an interest in, or as otherwise entitled,
under Paragraph D of Article VII of the Plan, to receive any Litigation Trust
Unit (as defined in the Plan), (iv) Citibank, N.A., as agent for the Electing
CA Holders, (v) Arthur Andersen & Co., S.C., Andersen Consulting, Bear Stearns &
Co., Inc.,
Coopers & Lybrand, Hale and Dorr, and such other persons as Wertheim may
designate
prior to the Court's disposition of the Approval Motion, and (vi) all persons
or entities that have filed a notice of appearance and demand for service of
papers in the Chapter 11 Cases; and (b) in addition, by appropriate
publication;
And the notice described above being the best notice practicable
under the circumstances, and having met the requirements of the Bankruptcy Code
and Rules, and of due process, and constituting due and sufficient notice to
all persons entitled thereto;
And a hearing on the Motion having been held to consider the fairness
of the Settlement Agreement and the Class AG-6A Settlement Agreement; [and no
objections to the Motion having been interposed;] [and all objections to the
Motion having been duly considered;] and after due deliberation; and it
appearing that the compromise and settlement embodied in the Settlement
Agreement and the Class AG-6A Settlement Agreement is reasonable, fair and in
the best interests of all members of the Ames Group, their creditors and all
other parties in interest; and good and sufficient cause existing;
NOW, THEREFORE, pursuant to Bankruptcy Code 105(a), and pursuant to
this Court's retention of jurisdiction in accordance with ARTICLE XIII OF THE
PLAN, IT IS HEREBY ORDERED:
1. The service of the notice of the Motion and presentment of this
Order, as given by the Ames Group, constitutes good, adequate and timely notice
under the circumstances;
2. The Motion shall be and hereby is granted in all respects, and the
Settlement Agreement and the Class AG-6A Settlement Agreement be and each
hereby is approved in all respects;
3. The above-captioned Adversary Proceeding, and all counterclaims
therein, shall be and hereby are dismissed with prejudice, the parties thereto
to bear their own costs and fees;
4. The Ames Group and the Settling Creditors (as defined in the Class
AG-6A Settlement Agreement) shall be and they hereby are authorized, empowered
and directed to enter into and take all necessary acts to carry out and
implement the Settlement Agreement and the Class AG-6A Settlement Agreement;
Page 20 of 37
5. All claims that could be asserted now or at any time in the future
by any Ames Group Member (as defined in the Settlement Agreement) or by any
holder of any Allowed Claim (as defined in the Plan) against any Wertheim Group
Member (as defined in the Settlement Agreement) arising out of or related in
any way to (a) the acquisition of the assets of the Zayre store division by
Ames (including the financing and refinancing of SUCH ACQUISITION), (b)
services rendered to the Ames Group or any Ames Group Member by any Wertheim
Group Member prior to the date of this Order, or (c) Harmon's services as a
director of Ames, shall be and hereby are forever barred from assertion in any
action or proceeding;
6. All claims that could be asserted now or at any time in the future
against any Wertheim Group Member by any Non-Party Defendant (as defined in the
Settlement Agreement) arising out of or relating in any way to any Primary
Judgment (as defined in the Settlement Agreement) entered in favor of either
any Ames Group Member or any Ames Transferee (each as defined in the Settlement
Agreement) against a Non-Party Defendant that arises out of or relates in any
way to (a) the acquisition of the assets of the Zayre store division by Ames
(including the financing and refinancing of such acquisition), (b) services
rendered to the Ames Group or any Ames Group Member by any Wertheim Group
Member prior to the date of this Order or (c) Harmon's services as a director
of Ames, shall be and hereby are forever barred from assertion in any action or
proceeding;
7. Any Primary Judgment shall be reduced by the amount that the
Non-Party Defendant would, but for the bar order contained in paragraph 6
above, be entitled to recover from the Wertheim Group or any Wertheim Group
Member; and
8. Nothing in this Order or in the Settlement Agreement and the
exhibits thereto, shall affect or modify the Plan (as defined in the Settlement
Agreement) and the rights and obligations of all parties thereunder, except as
set forth herein, or in the Settlement Agreement or in the Class AG-6A
Settlement Agreement.
Dated: New York, New York
------------, 1994
--------------------------------
U.S.B.J.
Page 21 of 37
EXHIBIT B
RELEASE
KNOW ALL BY THESE PRESENTS (herein referred to as the "Release")
that, for good and valuable consideration, the receipt and SUFFICIENCY OF WHICH
IS HEREBY acknowledged, each of Wertheim Schroder & Co. Incorporated
("Wertheim") and
James A. Harmon ("Harmon"), and their respective predecessors and successors in
interest, including, but not limited to, their respective subsidiaries, parent
companies, affiliates, divisions, legal representatives and related entities,
and all of their past and present officers, directors, agents, shareholders,
employees, attorneys, representatives, successors, heirs and assigns, and each
and every one of them (hereinafter individually and collectively referred to as
the "Releasors"), do by this Release remise, release, and forever discharge
Ames Department Stores, Inc. ("Ames"), Zayre Central Corp., AMD, Inc., Ames
Realty II, Inc., Zayre New England Corp. and Ames Transportation Systems, Inc.
(hereinafter collectively referred to as the "Ames Plaintiffs"), and all of
their respective subsidiaries, affiliates, predecessors, successors (excluding
any Ames Transferee as defined in the Settlement Agreement), parent companies,
divisions, legal representatives and related entities, and all of their past
and present officers, directors, agents, shareholders, employees, attorneys,
accountants and representatives, and their respective successors in interest,
including, but not limited to, their respective successors, heirs, and assigns
(hereinafter individually and collectively referred to as the "Releasees") of
and from any and all manner of action, suits, obligations, liabilities, claims
and demands (collectively, "Claims") which the Releasors, or any of them, ever
had, now have, or hereafter can, shall, or may have, against the Releasees, or
any of them, whether or not now known, suspected, or claimed, for, upon, or by
reason of any matter, cause, or thing whatsoever from the beginning of the
world to the date of this Release, including but not limited to all Claims
arising out of, or relating in any way to (a) the acquisition of the assets of
the Zayre store division by Ames (including the financing and refinancing of
such acquisition), (b) services rendered to any of the Releasees by any of the
Releasors prior to the date of this Release, or (c) Harmon's services as a
director of Ames; PROVIDED, HOWEVER, that nothing herein shall release any
obligations owed by Releasees to Releasors pursuant to the Settlement Agreement
between and among Ames, the Ames Subsidiaries, Wertheim and Harmon, dated March
31, 1994 (the "Settlement Agreement").
The term "Ames Suit" shall have the meaning assigned to it in the
Settlement Agreement.
IN WITNESS WHEREOF, the Releasors have executed and delivered this
Release on the ---------- day of -------------, 1994, at New York, New York.
WERTHEIM SCHRODER & CO. INCORPORATED
By:
--------------------------------
--------------------------------
JAMES A. HARMON
Page 22 of 37
EXHIBIT C
RELEASE
KNOW ALL BY THESE PRESENTS (herein referred to as the "Release")
that, for good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, each of Ames Department Stores, Inc. ("Ames") (both for
itself and on behalf of each Ames Group Member) and Zayre Central Corp., AMD,
Inc., Ames Realty II, Inc., Zayre New England Corp., and Ames Transportation
Systems, Inc. (hereinafter collectively referred to as the "Ames
Subsidiaries"), and their respective predecessors and successors in interest
(excluding any Ames Transferee as defined in the Settlement Agreement),
including, but not limited to, their respective subsidiaries, parent companies,
affiliates, divisions, legal representatives and related entities, and all of
their past and present officers, directors, agents, shareholders, employees,
attorneys, representatives, successors, heirs and assigns, and each and every
one of them (hereinafter individually and collectively referred to as the
"Releasors"), do by this Release remise, release, and forever discharge
Wertheim Schroder & Co. Incorporated ("Wertheim") and James A. Harmon
("Harmon"), and
all of their respective subsidiaries, affiliates, predecessors, successors,
parent companies, divisions, legal representatives and related entities, and
all of their past and present officers, directors, managing directors,
associate managing directors, partners, agents, shareholders, employees,
attorneys, accountants and representatives, and their respective successors in
interest, including, but not limited to, their respective successors, heirs,
and assigns (hereinafter individually and collectively referred to as the
"Releasees") of and from any and all manner of action, suits, obligations,
liabilities, claims and demands (collectively, "Claims") which the Releasors,
or any of them, ever had, now have, or hereafter can, shall, or may have,
against the Releasees, or any of them, whether or not now known, suspected, or
claimed, for, upon, or by reason of any matter, cause, or thing whatsoever from
the beginning of the world to the date of this Release, including but not
limited to all Claims arising out of, or relating in any way to (a) the
acquisition of the assets of the Zayre store division by Ames (including the
financing and refinancing of such acquisition), (b) services rendered to any of
the Releasors by any of the Releasees prior to the date of this Release, or (c)
Harmon's services as a director of Ames; PROVIDED, HOWEVER, that nothing herein
shall release any obligations owed by Releasees to Releasors pursuant to the
Settlement Agreement between and among Ames, the Ames Subsidiaries, Wertheim
and Harmon, dated March 31, 1994 (the "Settlement Agreement"); and FURTHER
PROVIDED, that nothing herein shall release any of the Litigation Claims as
defined in the Plan.
The term "Ames Group Member" shall have the meaning assigned to it in
the Settlement Agreement.
IN WITNESS WHEREOF, the Releasors have executed and delivered this
Release on the ------------ day of --------------, 1994, at New York, New York.
AMES DEPARTMENT STORES INC.
BY: -----------------------
Page 23 of 37
ZAYRE CENTRAL CORP.
By: -----------------------
ZAYRE NEW ENGLAND CORP.
By: ----------------------------
AMES REALTY II, INC.
By: ----------------------------
AMD, INC.
By: ----------------------------
AMES TRANSPORTATION SYSTEMS, INC.
By: -----------------------------
Page 24 of 37
EXHIBIT D
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- ------------------------------------------
-
In re - 93 Civ. 2648 (MP)
-
AMES DEPARTMENT STORES, INC., - Chapter 11
EASTERN RETAILERS SERVICE CORPORATION, - Reorganization Cases
ET AL., - Nos. 90 B 11233
- through 11285 (JAG)
Debtors. -
-
- ------------------------------------------
-
AMES DEPARTMENT STORES, INC., ET AL., - Adversary Proceeding
- No. 92-1002A (JAG)
Plaintiffs, -
- STIPULATION WITHDRAWING
-against- - DEFENDANTS' MOTION TO
- WITHDRAW THE REFERENCE
WERTHEIM SCHRODER & CO. INC. -
and JAMES A. HARMON, -
-
Defendants. -
-
- ------------------------------------------
IT IS HEREBY STIPULATED AND AGREED, by and between the undersigned
counsel for the parties, that defendants' motion for an Order, pursuant to 28
U.S.C. 157(d), withdrawing the reference of jurisdiction over the above-
captioned adversary proceeding to the United States
Bankruptcy Court for the Southern District of New York, dated April
20, 1993, is hereby withdrawn with prejudice.
Dated: New York, New York
------------, 1994
PATTON, BOGGS & BLOW
By: ----------------------------
Ronald S. Liebman (RL-5211)
2550 M Street, N.W.
Washington, D.C. 20037
(202) 457-6000
Special Counsel for Plaintiffs
Page 25 of 37
PAUL, WEISS, RIFKIND, WHARTON & GARRISON
By: ------------------------------------
Lewis A. Kaplan (LAK-5681)
1285 Avenue of the Americas
New York, New York 10019-6064
(212) 373-3000
Attorneys for Defendants
SO ORDERED:
-----------------------------
U.S.D.J.
Page 26 of 37
EXHIBIT E
CLASS AG-6A CREDITORS SETTLEMENT AGREEMENT
This CLASS AG-6A CREDITORS SETTLEMENT AGREEMENT is dated March 31,
1994 (the "EFFECTIVE DATE") AMONG THE OFFICIAL Committee of Unsecured Creditors
(the "CONTINUING PARENT CREDITORS' COMMITTEE") of Ames Department Stores, Inc.
("Ames"), acting by their counsel, as court authorized representatives of the
Class AG-6A Parent Unsecured Creditors (the "CLASS AG-6A CREDITORS"), Arnold
Zahn as Trustee (the "TRUSTEE"), for the benefit of the Class AG-6A Parent
Unsecured Creditors of the Ames Group, as defined in the Third Amended and
Restated Plan of Reorganization of Ames Department Stores, Inc. and other
Members of the Ames Group, dated October 23, 1992, as subsequently amended,
modified or restated, and as confirmed by order of the Bankruptcy Court, dated
December 18, 1992, as amended (the "PLAN"), Wertheim Schroder & Co.
Incorporated, a
Delaware corporation ("WERTHEIM"), and James A. Harmon ("HARMON").
W I T N E S S E T H :
WHEREAS, the Trustee has been appointed pursuant to the Class AG-6A
Trust Agreement, dated December 30, 1992 (the "TRUST AGREEMENT"), by and
between the Continuing Parent Creditors' Committee, Arnold Zahn, and the Ames
Group (as therein defined), and pursuant to order of the Bankruptcy Court (as
defined below);
WHEREAS, Ames and certain subsidiaries of Ames (collectively, the
"PLAINTIFFS") have filed an adversary proceeding seeking damages from Wertheim
and Harmon in the United States Bankruptcy Court for the Southern District of
New York in Chapter 11 Reorganization Cases Nos. 90 B 11233 through 90 B 11285
(the "CHAPTER 11 CASES") entitled AMES DEPARTMENT STORES, INC., ET AL. v.
WERTHEIM SCHRODER & CO. Inc., et ano., Adv. Proc. No. 92-1002A (the "AMES
SUIT");
WHEREAS, Wertheim and Harmon have asserted certain counterclaims
against the Plaintiffs in the Ames Suit (the "COUNTERCLAIMS");
WHEREAS, certain third-party claims may be asserted against Wertheim
and Harmon related to the subject matter of the Ames Suit;
WHEREAS, the Plan contemplates the transfer of certain claims by Ames
to a trust established pursuant to a litigation trust agreement (the
"LITIGATION TRUST"), administered by a trustee with the authority to commence
and prosecute legal actions and proceedings based on such claims for the
benefit of certain creditor groups (a "LITIGATION Trust Case");
WHEREAS, pursuant to the Plan, the Class AG-6A Creditors have certain
riqhts with respect to any recovery, whether by judgment, settlement or
otherwise: (a) by Plaintiffs in the Ames Suit; and (b) by the trustee in any
Litigation Trust Case;
WHEREAS, the Plaintiffs, Wertheim, and Harmon are contemporaneously
executing a settlement agreement with respect to the Ames Suit in the form
annexed as Exhibit 1 (the "SETTLEMENT AGREEMENT"); and
Page 27 of 37
WHEREAS, in connection with the Settlement Agreement, the Class AG-6A
Creditors, Wertheim and Harmon wish to settle and compromise any third-party
claims that may be asserted aqainst Wertheim or Harmon in or arisinq from any
Litigation Trust Case to the extent that the Class AG-6A Creditors have rights
with respect to any recovery in any Litigation Trust Case.
NOW, THEREFORE, in consideration of the premises and the mutual
promises, covenants and agreements contained herein, the parties hereto agree
as follows:
SECTION 1. DEFINITIONS. For purposes of this Class AG-6A Creditors
Settlement Agreement, the following terms shall have the meanings indicated:
1.1 "ALLOWED CLAIM" shall have the meaning given in Section 1.5 of
the Plan.
1.2 "APPELLATE COURT" means any court exercising appellate
jurisdiction over the Chapter 11 Cases.
1.3 "APPROVAL ORDER" means an order or judgment approving both the
Settlement Agreement and the Class AG-6A Settlement Agreement, in all material
respects in the form of Exhibit A to the Settlement Agreement, of the
Bankruptcy Court or any Appellate Court.
1.4 "BANKRUPTCY COURT" means the United States Bankruptcy Court for
the Southern District of New York.
1.5 "CLAIM OVER" means any actual or potential CLAIM for
contribution, indemnity, subrogation or otherwise against any Wertheim Group
Member that arises from a Litigation Trust Case, whether or not in fact
asserted, and whether or not asserted in a Litigation Trust Case or in another
action or proceeding.
1.6 "CLASS AG-6A SETTLEMENT AGREEMENT" means this Agreement,
including the exhibit hereto.
1.7 "FINAL" with respect to any order of any court means an order or
judgment, the operation or effect of which has not been stayed, reversed, or
amended, and as to which order or judgment (or any revision, modification or
amendment thereto), the time to appeal or seek review or rehearing, or to apply
for an extension of the time to appeal or to seek review or rehearing, has
expired, and as to which no appeal or petition for review or rehearing, or
application for an extension of the time to appeal or to seek review or
rehearing, that was filed is pending.
1.8 "JUDGMENT OVER" means a judgment arising from a Claim Over.
1.9 "LITIGATION TRUST PROCEEDS" means all amounts received by the
Trustee in connection with any Litigation Trust Case, regardless of whether the
recovery in such case occurs as a result of a judgment, settlement or
otherwise, and regardless of whether a recovery is achieved by settlement or
otherwise prior to the actual commencement of suit.
1.10 "PRESS RELEASE" means a written statement designed or intended
for dissemination to any newspaper, television or other member of the news
media.
Page 28 of 37
1.11 "PUBLIC RELEASE" means a written statement for public filing
with the NASD or with the Securities Exchange Commission or any other
governmental body.
1.12 "SETTLING CREDITORS" means the Class AG-6A Creditors, acting by
the Continuing Parent Creditors' Committee and the Trustee.
1.13 "WERTHEIM GROUP" means Wertheim Schroder Holdings, Inc., a
corporation, its direct and indirect subsidiaries and affiliates (including
Wertheim), and their respective predecessors, successors and assigns, as well
as the former and current officers, directors, managing directors, associate
managing directors, partners, employees, agents, attorneys and accountants of
each and their respective legal representatives, heirs, successors and assigns,
and any person or entity claiming through them.
1.14 "WERTHEIM GROUP MEMBER" and "WERTHEIM GROUP MEMBERS" mean, as
the context requires, any or all members of the Wertheim Group, including
Wertheim and Harmon.
SECTION 2. THE SETTLEMENT. The Settling Creditors hereby assign the
Litigation Trust Proceeds to Wertheim on the following terms and conditions:
(a) The Trustee shall turn over all Litigation Trust Proceeds as
received to a commercial bank or trust company located in New York City having
combined capital and surplus in excess of $100,000,000 (the "ESCROW AGENT"),
which shall be selected by the Trustee, subject to the reasonable approval of
Wertheim.
(b) The Litigation Trust Proceeds turned over to the Escrow
Agent pursuant to subsection (a) above, and any interest earned thereon
(together being referred to as the "ESCROW AMOUNT"), shall be invested by the
Escrow Agent in U.S. treasury bills, A1-Pl rated commercial paper, short term
notes with maturities less than one year rated A+ or better, and such other
investments as may be provided for in the escrow agreement contemplated by
subsection (h) below. Interest earned on the Litigation Trust Proceeds shall be
credited to and deposited in the escrow and distributed in the same manner as
provided herein with respect to the Escrow Amount.
(c) The fees and expenses of the Escrow Agent shall be paid out
of the Escrow Amount, and such Amount shall be available to indemnify the
Escrow Agent in accordance with the usual and customary requirements of such
escrow arrangements.
(d) The Escrow Amount shall be distributed by the Escrow Agent,
in whole or in part, as follows:
(i) An Escrow Amount equal to the Claim Amount (as defined
below) shall be distributed to a Wertheim Group Member pursuant to
written instructions to the Escrow Agent executed by or on behalf of
such Wertheim Group Member, which shall include the following:
(A) a sworn statement that: (1) a Judgment Over has
been entered; (2) the Judgment Over is enforceable or has been
enforced against such Wertheim Group Member either because
application of Sections 5, 6, and 7 of the Approval Order has not had
the effect of fully eliminating such Wertheim Group
Page 29 of 37
Member's liability with respect to the Judgment Over, or because the
court has failed or otherwise refused to apply all or any part of
Sections 5, 6, or 7 of the Approval Order; and (3) sets forth the
amount of the Judgment Over, all interest thereon, all costs and
disbursements awarded in connection therewith, and all reasonable
out-of-pocket costs and expenses (including counsel fees,
disbursements and expenses) incurred by any Wertheim Group Member in
defense of the action or proceeding giving rise to the Judgment Over
(which in the aggregate shall constitute the "CLAIM AMOUNT"); or
(B) in lieu of the matters called for by subsection
(A) above, a sworn statement that: (1) a party in a Litigation Trust
Case has asserted a Claim Over, which the Court dismissed or which
was settled, but as a result of which any Wertheim Group Member
incurred expenses, either to obtain such dismissal, settlement or
otherwise; and (2) sets forth all reasonable out-of-pocket costs and
expenses (including counsel fees, disbursements and expenses)
incurred by any Wertheim Group Member arising from the Claim Over
(which in the aggregate shall constitute the "CLAIM AMOUNT"); and
(C) copies of the Judgment Over (or, as appropriate,
the pleading or other paper asserting the Claim Over and the
judgment, order or other paper effecting the dismissal or settlement
thereof) and other documents constituting or evidencing all other
items comprising the Claim Amount: and
(D) a direction identifying the person to whom the Escrow Amount
shall be distributed;
(ii) An Escrow Amount shall be distributed pursuant to
written instructions to the Escrow Agent executed by or on behalf of
each of Wertheim, Harmon, and the Trustee, specifying the portion of
the Escrow Amount to be distributed and identifying the person to
whom such Amount shall be distributed;
(iii) An Escrow Amount shall be distributed pursuant to
order of the Bankruptcy Court, any Appellate Court, the Supreme Court
of the State of New York, County of New York, or the United States
District Court for the Southern District of New York, obtained in an
action or proceeding of which all parties to the Class AG-6A
Settlement Agreement were given notice; or
(iv) After the time period within which to commence an
action or proceeding asserting a Claim Over has elapsed without any
such action or proceeding having been commenced, an Escrow Amount
shall be distributed pursuant to written instructions to the Escrow
Agent executed by or on behalf of the Trustee, which shall include a
sworn statement that:
(A) set forth the most recent date on which either a
judgment was entered that was not subject to a stay, modification or
reversal, or a settlement or other payment was made, which resulted
in a deposit of Litigation Trust Proceeds with the Escrow Agent, the
amount of that judgment, settlement
Page 30 of 37
or other payment, the amount of the resulting deposit of Litigation
Trust Proceeds, and the title of the action or proceeding in which it
was entered or made (the "MOST RECENT DEPOSIT");
(B) specifies the date by which any action or
proceeding asserting a Claim Over arising from the Most Recent
Deposit must be commenced in order to be timely, as determined using
the longest potentially applicable statute of limitations;
(C) identifies all statutes of limitations used to
determine the period referred to in subsection (B) above;
(D) confirms that, to the knowledge of the Trustee,
as of the date of the instruction: (1) no action or proceeding is
pending asserting any Claim Over; (2) all Litigation Trust Cases that
were commenced are concluded, and the time to take an appeal, or to
apply for permission to appeal, in all such Cases has elapsed with no
appeal having been taken or application for permission to appeal
having been made; (3) neither the commencement of any Litigation
Trust Case, nor the settlement of any potential Litigation Trust
Case, is being considered; (4) there is no outstanding judgment in a
Litigation Trust Case that is unpaid, in whole or in part, or any
amount owing to the Escrow Agent pursuant to subsection (a) above;
(5) there is no outstanding Judgment Over against any Wertheim Group
Member that is unpaid, in whole or in part; (6) no person has
expressed an intention to make any Claim Over, or to commence any
action or proceeding against any Wertheim Group Member arising out of
or relating in any way to (x) the acquisition of the assets of the
Zayre discount store division by Ames (including the financing and
refinancing of such acquisition), (y) services rendered to the Ames
Group or any Ames Group Member by any Wertheim Group Member prior to
the date of the Class AG-6A Settlement Agreement, or (z) Harmon's
service as a director of Ames; and (7) the period within which to
commence any action or proceeding asserting a Claim Over arising from
any Litigation Trust Case other than the matter giving rise to the
Most Recent Deposit has elapsed without any such action or proceeding
having been commenced: and
(E) specifies the portion of the Escrow Amount to be
distributed and the person to whom it shall be distributed;
(v) An Escrow Amount shall be distributed pursuant to
written instructions to the Escrow Agent executed by or on behalf of
the Trustee, which shall include the following:
(A) a sworn statement that a Final Order disapproving
the Settlement Agreement or the Class AG-6A Settlement Agreement has
been entered, or that the Settlement Agreement has been terminated
pursuant to Subsection 3(d) of the Settlement Agreement; and
(B) a direction specifying the portion of the Escrow
Amount (as defined above) to be distributed and identifying the
person to whom it shall be distributed.
Page 31 of 37
(e) The party giving instructions under subsections (d) (i),
(iv), or (v) above shall give all other parties to the Class AG-6A Settlement
Agreement copies of such instructions contemporaneous with delivery of the
original instructions to the Escrow Agent. The Escrow Agent shall refrain from
acting in accordance with such instructions for a period of seven business days
after receipt, during which time any party may make written objection to the
instructions (the "OBJECTION PERIOD"). If the Escrow Agent receives any written
objection during the Objection Period, it shall take no action until further
instructions are issued in accordance with either subsection (d)(ii) or (iii)
above.
(f) In any action or proceeding brought to obtain instructions
pursuant to subsection (d)(iii) above, the prevailing party shall be entitled,
in addition to all amounts authorized by law, to an award of reasonable
attorneys' fees, costs and disbursements (including experts' fees) incurred in
connection with the action or proceeding.
(g) As to all instructions given under subsections (d)(i), (iv) and
(v) above as to which no objection is received during the Objection Period, the
Escrow Agent shall distribute the Escrow Amount requested no later than five
business days from the date on which the Objection Period ends. As to all
instructions under subsections (d)(ii) above, the Escrow Agent shall distribute
the Escrow Amount no later than five business days from the date on which the
Escrow Agent shall receive the written instructions authorizing such
distribution. Notwithstanding the preceding two sentences, where a distribution
of the Escrow Amount within the time period called for would result in the
forfeiture of interest or other income earned on the Escrow Amount, the Escrow
Agent shall refrain from distributing such monies as may be necessary to
prevent the forfeiture of interest or other income. Upon expiration of the
period necessary to prevent forfeiture of interest or other income, the Escrow
Agent shall distribute the balance of the requested Escrow Amount in accordance
with the instructions authorizing the distribution.
(h) The Trustee, Wertheim and Harmon agree to use their best efforts
expeditiously to choose an Escrow Agent and to enter into a mutually
satisfactory escrow agreement on the terms specified herein and on such other
terms as are usual and customary in agreements of such type. In the event the
parties cannot reach agreement as to the additional terms to be contained in
the escrow agreement to be entered into, the escrow agreement shall include the
provisions herein set forth and such other provisions as are consistent
therewith as the Bankruptcy Court or any Appellate Court may determine.
(i) The Trustee agrees to use its best efforts to notify Wertheim
promptly following the commencement of any Litigation Trust Case, or the
receipt of notice of any decision, verdict or judqment, or upon receipt of
notice of any negotiation or settlement, in a Litigation Trust Case and to use
its best efforts to assist the Wertheim Group in obtaining reasonable
opportunity to be heard with respect thereto (to the extent that such prior
notice and opportunity to be heard are not prohibited by the applicable rules
of court).
(j) Notwithstanding any other parts of this Section 2, in no event
shall the Escrow Agent distribute any Escrow Amount prior to the Closing
pursuant to the Settlement Agreement. In addition to the other requirements for
instructions issued pursuant to subsection (d), any such instruction shall
include a sworn statement: (i) setting forth the dates on which an Approval
Order was entered, and on which it became Final; (ii) stating whether or not
Page 32 of 37
any appeal was taken from the Approval Order and, if an appeal was taken,
describing the disposition of the appeal and the date thereof; and (iii)
stating the date on which the Closing pursuant to the Settlement Agreement was
held.
(k) The Wertheim Group Members shall be entitled to issue or
otherwise obtain as many instructions as may be necessary to accomplish the
assignment provided for in this Section 2.
SECTION 3. EFFECTIVE DATE. The Class AG-6A Settlement Agreement shall
become effective on the Effective Date; provided that if the Settlement
Agreement is terminated, this Class AG-6A Settlement Agreement shall terminate
and be of no further force or effect.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF WERTHEIM. Wertheim
represents and warrants to the Continuing Parent Creditors' Committee and the
Trustee that (i) the Class AG-6A Settlement Agreement has been duly executed
and delivered by Wertheim and is the legal, valid and binding obligation of
Wertheim, enforceable against Wertheim in accordance with its terms, (ii) the
execution, delivery and performance by Wertheim of the Class AG-6A Settlement
Agreement and all related documents contemplated hereby are within Wertheim's
corporate powers, have been duly authorized by all necessary corporate action,
and do not contravene the certificate of incorporation or bylaws of Wertheim or
any law or contractual restriction binding on or affecting Wertheim, and (iii)
no consent, approval, order or authorization of, or registration, declaration
or filing with, any court or administrative agency or commission or other
governmental authority or instrumentality, is required by or with respect to
any Wertheim Group Member in connection with the execution, delivery and
performance by Wertheim of the Class AG-6A Settlement Agreement, (iv) neither
Wertheim nor Harmon has assigned or transferred to any person or entity any
claim that either has or ever had against any Ames Group Member (as defined in
the Settlement Agreement), and (v) neither Wertheim nor Harmon is aware of any
existing, pending or threatened Litigation Trust Case, Claim Over or Judgment
Over.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE CONTINUING PARENT
CREDITORS' COMMITTEE AND THE TRUSTEE. The Continuing Parent Creditors'
Committee and the Trustee, jointly and severally, represent and warrant to
Wertheim and Harmon, subject to approval of the Settlement Agreement and the
Class AG-6A Settlement Agreement by the Bankruptcy Court of those aspects
thereof requiring its approval, that (i) the Class AG-6A Settlement Agreement
has been duly executed and delivered by them and is the legal, valid and
binding obligation of them, enforceable against them in accordance with its
terms; (ii) the execution, delivery and performance by them of the Class AG-6A
Settlement Agreement and all related documentation contemplated hereby are
within their corporate and/or trustee powers, have been duly authorized by all
necessary corporate and/or trustee action, and do not contravene the
certificate of incorporation or bylaws of them, the Trust Agreement, or any law
or contractual restriction binding on or affecting them; (iii) except as
expressly provided in the Class AG-6A Settlement Agreement, no consent,
approval, order or authorization of, or registration, declaration or filing
with, any court, administrative agency or commission or other governmental
authority or instrumentality is required by or with respect to them in
connection with the execution, delivery and performance by them of the Class
AG-6A Settlement Agreement; (iv) they have not assigned or otherwise
Page 33 of 37
transferred to any person or entity any claim that they have or ever had
against any Wertheim Group Member except as set forth in the Trust Agreement;
(v) each of Arthur Andersen & Co., S.C., Andersen Consulting, Bear Stearns &
Co., Inc., and
Coopers & Lybrand was a holder of one or more Allowed Claims in the Chapter 11
Cases;
(vi) the Continuing Parent Creditors' Committee and the Trustee have not
executed, and have no notice that any trustee has been appointed under, the
Litigation Trust Agreement; and (vii) neither the Continuing Parent Creditors'
Committee nor the Trustee is aware of any existing, pending or threatened
Litigation Trust Case, Claim Over or Judgment Over.
SECTION 6. PUBLIC AND PRESS RELEASES. On the Effective Date, for the
purposes of making any disclosure or filing that any party determines is
required by the securities laws or NASD regulations, the Continuing Parent
Creditors' Committee, the Trustee or Wertheim may issue a Press Release and/or
a Public Release describing the fact and terms of the Settlement Agreement and
the Class AG-6A Settlement Agreement. If deemed necessary within the sole
judgment of any of the Continuing Parent Creditors' Committee, the Trustee, or
Wertheim, any of them after the Effective Date also may make other Public
Releases. The contents of any Press Release shall be jointly approved by the
Continuing Parent Creditors' Committee, the Trustee, and Wertheim in advance of
its disclosure or filing, which approval shall not be unreasonably withheld.
The party proposing to make any Public Release shall permit the other parties
hereto to review and comment on such proposed Public Release before it is
filed, but approval of the reviewing parties shall not be required and the
terms of this Section 6 shall not otherwise affect the timing or content of any
such Public Release. No party hereto shall, directly or indirectly, issue, or
initiate any contact with any press or media member for the purpose of making,
any other Press Release commentinq on the fact or terms of the Settlement
Agreement, the Class-AG-6A Settlement Agreement or the Ames Suit absent prior
written consent of the other parties. If any party is contacted by any press or
media member with respect to the Settlement Agreement, the Class AG-6A
Settlement Agreement, or the Ames Suit, the party contacted shall decline any
comment. The parties hereto intend that performance of this Section 6 shall be
treated separately and distinctly from performance of all of the other
provisions of this Class AG-6A Settlement Agreement, and that any alleged or
actual breach or non-performance of this Section 6 by any signatory hereto
shall not affect the rights and obligations of the parties under any other
provision of this Class AG-6A Settlement Agreement, all of which shall remain
in full force and effect. Moreover, no party shall have any right to seek a
rescission or termination of this Class AG-6A Settlement Agreement or any
provision or term thereof by reason of any such alleged or actual breach or
non-performance of this Section 6.
SECTION 7. CONFIDENTIALITY. Each of the parties hereto acknowledges
that a Stipulation and Protective Order was entered in the Ames Suit on January
11, 1993 for the protection of confidential information, documents and
materials that are produced or otherwise disclosed durinq the course of the
Ames Suit, and each agrees to treat all "Confidential Information" referred to
in such Stipulation and Protective Order in accordance with the terms and
conditions of such Stipulation and Protective Order. Nothing in this Section 7
is intended to confer any benefit or rights on any person or entity that is not
a party to the Class AG-6A Settlement Agreement.
Page 34 of 37
SECTION 8. NO ADMISSION OF LIABILITY, ETC. The parties hereto
acknowledge that the consideration tendered and received herein, and the
execution of the Class AG-6A Settlement Agreement, are in compromise and
settlement of disputed claims in connection with the Ames Suit and are not an
admission of liability or fault or omission of any kind on the part of any of
them; neither the Class AG-6A Settlement Agreement, nor any papers relating to
it, nor any of the terms hereof shall be offered or received in evidence or in
any way referred to in any civil, criminal or administrative action or
proceeding other than such proceedings as may be necessary to obtain approval
of or to consummate or enforce this Class AG-6A Settlement Agreement, or to
seek damages for its breach.
SECTION 9. ENTIRE AGREEMENT. The Class AG-6A Settlement Agreement and
the exhibit hereto constitute the entire agreement and understandinq between
the parties hereto relative to the subject matter hereof; PROVIDED HOWEVER that
nothing herein contained shall affect or modify the Plan and the rights and
obligations of all parties thereunder except as set forth herein or in the
Settlement Agreement or the Approval Order. In furtherance, and not in
limitation, of the foregoing, the parties hereto acknowledge that they are not
relying upon any statement, information, promise, term, condition, obligation
or representation made by any person or entity, except for those expressly
stated herein and in the Exhibit hereto.
SECTION 10. BINDING EFFECT. The Class AG-6A Settlement Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective legal representatives, heirs, successors and assigns, and any person
or entity claiming through them.
SECTION 11. AMENDMENTS. No amendment, waiver or modification of any
provision of the Class AG-6A Settlement Agreement shall be effective unless the
same shall be in writing and signed by each of the parties hereto.
SECTION 12. NOTICES. All notices and communications in connection
with the Class AG-6A Creditor Settlement Agreement shall be in writing and
shall be delivered by hand, overnight courier or certified mail, return receipt
requested, addressed as follows:
If to the Trustee:
Arnold Zahn
Class AG-6A Trustee
Zahn Associates Inc.
2050 Center Avenue
Fort Lee, New Jersey 07024
with a copy to:
Dewey Ballantine
1301 Avenue of the Americas
New York, New York 10019
Attention: Stuart Hirshfield, Esq.
Page 35 of 37
If to Wertheim or Harmon:
Wertheim Schroder & Co. Incorporated
787 Seventh Avenue
New York, NY 10019-6016
Attention: Chief Executive Officer
with copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019-6064
Attention: Lewis A. Kaplan, Esq.
All such notices and communications shall be effective when received.
SECTION 13. NO WAIVER. No failure on the part of any party hereto to
exercise, and no delay in exercising, any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.
SECTION 14. COSTS AND EXPENSES. Except as otherwise provided herein,
each of the parties hereto shall pay all of its own costs and expenses in
connection with the negotiation, preparation, execution and delivery of the
Class AG-6A Settlement Agreement and the other documents to be delivered
hereunder, and the consummation of the matters provided for herein.
SECTION 15. HEADINGS. Headings used herein are for convenience of
reference only, are not part of the Class AG-6A Settlement Agreement and are
not to affect the construction of, or to be taken into consideration in
interpreting, the Class AG-6A Settlement Agreement.
SECTION 16. GOVERNING LAW. The Class AG-6A Settlement Agreement and
the documents to be executed pursuant hereto shall be governed by, and
construed in accordance with, the laws of the State of New York applied to
contracts made and to be performed entirely within such State.
SECTION 17. EXECUTION IN COUNTERPARTS. The Class AG-6A Settlement
Agreement may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed shall
be deemed to be an original and all of which taken together shall constitute
one and the same agreement.
Dated:
New York, New York
March 31, 1994
Page 36 of 37
CONTINUING PARENT CREDITORS' COMMITTEE
By: /S/ STUART HIRSHFIELD
---------------------------------
STUART HIRSHFIELD
ARNOLD ZAHN, as Trustee
By: /S/ ARNOLD ZAHN
----------------------------------
ARNOLD ZAHN
WERTHEIM SCHRODER & CO. INCORPORATED
By: /S/ STEVE KOTLER
---------------------------------
STEVE KOTLER
By: /S/ JAMES A. HARMON
--------------------------------
JAMES A. HARMON
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