Motion to Approve Stipulation/Settlement and Compromise of Controversies in the MSR Litigation By and Among the Trustee, the Debtor-Defendants, the Collateral Agent, the Counterparties, and the Committee (7/27/12)
As a result of their subsequent negotiations, the Parties have reached an agreement, subject to approval of this Court, with respect to the resolution of the MSR Litigation ONLY, as well as a procedure for the continuance of the Motion to Surcharge to allow the Parties to attempt the resolution thereof. The terms of the agreement are set forth in the “Settlement Agreement” attached as Exhibit 1 to the Motion. The materials terms of the Settlement Agreement provide as follows:
(a) within five (5) business days of the entry of an order approving the Settlement Agreement becoming final, the Trustee shall (i) transmit to the Collateral Agent for the benefit of the Counterparties the amount of $71,670,314.13 (the “Collateral Transfer”), representing an amount equal to 95% of the MSR Sale Proceeds (minus an escrowed reserve for the amounts that the Trustee seeks to recover in the Motion to Surcharge), which the Counterparties are entitled to receive in accordance with the Trial Order and allocation set forth in the Settlement Agreement; and (ii) transmit to the operating account of the Debtors the sum of $20,856,055.65, representing an amount equal to 5% the MSR Sale Proceeds and 100% of the Reimbursements, which sum the Debtors shall hold free and clear of all liens, claims, encumbrances and security interests of the Collateral Agent and the Counterparties.
(b) Each Counterparty hereby agrees that to the extent a Counterparty receives its share of the Collateral Transfer and the Trustee’s rights pursuant to Section 502(d) of the Bankruptcy Code, if any, become ripe by virtue of a final, non-appealable judgment entered in the Counterparty Litigation, each Counterparty against whom a final, non-appealable judgment has been entered shall disgorge and pay over to the Trustee any sum as required by: (x) such final, non-appealable judgment; or (y) any subsequent order (for which no stay with respect to such order is applicable or in effect). The Collateral Agent and the Counterparties reserve all rights to dispute the Trustee’s asserted application of Section 502(d) with respect to the amounts transmitted to the Collateral Agent and the Counterparties.
(c) No provision of the Settlement Agreement shall be construed as impairing or limiting the ability of the Counterparties to obtain distributions from the estates of the Debtors on account of their respective, allowed unsecured claims, or the Trustee or the Committee from objecting thereto.
(d) Following the transmittal of the Collateral Transfer, the Collateral Agent and the Trustee shall file a joint notice of dismissal with prejudice of Counts 1, 2, 3 and 5 in the MSR Litigation. Moreover, the Parties forever and finally waive all rights to seek reconsideration, rehearing, modification, review, and/or appeal of the MSR Litigation.
(e) The Parties shall jointly move for the entry of a stipulation and consent order providing for a sixty (60) day continuance of the deadline (which is currently July 30, 2012) by which the Collateral Agent and the Counterparties are required to file any objections to the Motion to Surcharge. The Parties further agree that, if the Court approves any such stipulation and consent order, the Parties agree to attempt a resolution of an agreed amount of all or part of the Surcharge Amounts.
(f) Simultaneous with the making of the Collateral Transfer, the Trustee will reserve, in a segregated and identifiable escrow account, the amount of $3,333,178.45 (pending agreement or other resolution as to the amount of the Surcharge Amounts), which represents the total amount sought by the Trustee in the Motion to Surcharge (the “Surcharge Reserve”), the entitlement to which, for avoidance of doubt, all Parties understand is disputed by the Collateral Agent and each of the Counterparties in its entirety.
(g) The Parties agree that the Settlement Agreement is a compromise only of the pending litigation and claims in the MSR Litigation. The Parties agree to reserve all rights and the Settlement Agreement shall have no effect with respect to the Counterparty Litigation, the Motion to Surcharge (except as set forth above) or any other contested matters and adversary proceedings.
The Trustee believes, in the exercise of his business judgment, after carefully reviewing the facts and applicable law that the proposed settlement is in the best interests of the Debtors’ estates and will result in a significant cash infusion into the bankruptcy estates, while at the same time eliminating the risks attendant to complex litigation and appellate practice as well as the necessity for the estates to incur substantial professional fees in connection therewith. The settlement brings an immediate end to the costs that the Trustee would otherwise have to incur to continue to defend this matter with the risks inherent in any litigation and allows the estates’ resources, as supplemented by the recovery achieved herein, to be redeployed to other matters. In making a judgment that the settlement is within the range of appropriate settlements, the Trustee has considered all evidence available to him during the course of the extensive MSR Litigation. Finally, the settlement provides for a mechanism for the Parties to attempt to resolve the recoveries sought in the Motion to Surcharge in an informal manner before resorting to litigation, if necessary, and preserves the estates’ rights to recover or obtain repayment any portion of the Collateral Transfer which any Counterparty is ordered to disgorge pursuant to Section 502(d) or otherwise.
Responses due by 8/20/2012.
Source: Epiq Systems [Docket 1628]
