EXHIBIT 10.5
SETTLEMENT AGREEMENT
This Settlement Agreement (hereinafter the "Agreement") is entered into as
of March 28, 2002, by and among the parties specified in Recital A below
(collectively, the "Parties" and, individually, a "Party"), with reference to
the following facts and recitals:
Recitals
Parties:
A. The Parties to this Agreement are:
1. Motient Corporation ("Corporation"); Motient Holdings, Inc.;
Motient Communications, Inc.; and Motient Services, Inc.
(collectively, the "Debtors").
2. Rare Medium Group, Inc. ("Rare"). Background:
B. On January 10, 2002 (the "Commencement Date"), the Debtors
filed their respective voluntary petitions for relief under chapter 11 of the
Bankruptcy Code, initiating bankruptcy cases currently pending before the United
States Bankruptcy Court for the Eastern District of Virginia, Alexandria
Division, as In re Motient Corporation, et al., bankruptcy case number 02-80125
(the "Reorganization Cases"). The Debtors continue managing their property as
debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy
Code. The Bankruptcy Court has entered its Order providing for the joint
administration of these cases for procedural purposes.
C. Pursuant to Bankruptcy Code section 1102, on January 22, 2002,
the Office of the United States Trustee appointed the Official Committee of
Unsecured Creditors (the "Committee").
D. On February 27, 2002, the Debtors filed the Debtors' Amended
Joint Plan Of Reorganization Under Chapter 11 Of The Bankruptcy Code (the
"Plan"). By Order entered March 1, 2002, the Bankruptcy Court approved the
Debtors' Disclosure Statement for the Plan (the "Disclosure Statement").
E. A hearing to consider confirmation of the Plan (the
"Confirmation Hearing") has been scheduled for April 25-26, 2002.
F. The Plan provides for, among other things, the classification
of the Rare Claim (as defined below) in Class 5 and provides for distribution of
Senior Indebtedness Notes1 to holders of Allowed Claims in Class 5.
Rare And The Rare Claim
G. Pursuant to the terms of a note purchase agreement (the "Note
Purchase Agreement"), in April 2001, Corporation issued a note payable to Rare
in the amount of $25 million, and in July 2001, Corporation issued a second note
payable to Rare in the amount of $25 million. Corporation's obligation to repay
the notes was secured by Corporation's pledge of 5 million shares of Class A
common stock of XM Satellite Radio Holdings, Inc. (the "XM Stock"). The Note
Purchase Agreement provided that Corporation could pay the amounts due
thereunder either in cash or by tendering some or all of a specified number of
shares of XM Stock pursuant to certain mechanisms contained in the Note Purchase
Agreement. On October 12, 2001, Corporation repaid approximately $26.2 million
of principal and accrued interest under the notes by delivering to Rare all of
the 5 million shares of XM Stock. The remaining balance owed to Rare was
approximately $26.2 million.
H. The Debtors' Schedules of Assets and Liabilities ("Schedules") list
Rare as holding a disputed unsecured claim in the amount of $27,029,734. Rare
timely filed a proof of claim in the amount of $27.039 million (the "Rare
Claim").
I. The Schedules also list as an asset "various potential claims
against Rare Medium Group, Inc. relating to the October 12, 2001 transfer of
stock" with a value of "Unknown." According to the Disclosure Statement:
If a settlement cannot be negotiated with respect to the Rare
Medium Claims, Motient anticipates that it or the Creditors'
Committee will object to the Rare Medium Claim and file
litigation against Rare Medium with regard to the October 12,
2001 transfer to Rare Medium of 5 million shares of Class A
common stock in XM Radio.
Agreement and Compromise
The Parties have engaged in good faith negotiations to resolve the
disputes among them. Without in any manner admitting liability or the validity
of any claim or defense, the Parties desire to settle any and all disputes among
them. In consideration of the foregoing and for good and valuable consideration,
the receipt and adequacy of which is hereby acknowledged, it is hereby agreed by
and among the Parties as follows:
1. Recitals. The above Recitals are incorporated herein by this
reference.
2. Conditions Precedent.
a. Within five (5) days after the execution hereof, the
Debtors shall file a motion with the Bankruptcy Court
seeking entry of an order (i) approving and authorizing the
Debtors to enter into this Agreement, and (ii) determining
that the aggregate amount of claims in Class 5 does not
exceed $21 million (collectively, the "Settlement Motion").
Notice of the Settlement Motion shall be served on at least
all creditors that have asserted claims against Corporation.
b. To the extent practicable, the Debtors shall request that
the hearing on the Settlement Motion be scheduled in
conjunction with or prior to the Confirmation Hearing and
the Parties agree to stipulate to shorten time to schedule
such hearing, to the extent necessary. Approval of the
Settlement Motion shall be conditioned on the confirmation
of the Plan. The order confirming the Plan (the
"Confirmation Order") shall, among other things, contain
provisions granting the Settlement Motion.
c. This Settlement Agreement shall become effective on the
first date (the "Settlement Date") on which each of the
following shall have occurred: (i) the approval by the
Bankruptcy Court of the Settlement Motion, (ii) the entry of
the Confirmation Order (containing provisions confirming the
Plan and approving the Settlement Motion), and (iii) the
occurrence of the Effective Date of the Plan.
Notwithstanding anything to the contrary contained herein,
Rare, in its sole and absolute discretion, may waive, in
writing, the requirement of item (a)(ii) of this paragraph,
in which event, paragraphs 5(h) and 6(b) of the Rare Senior
Indebtedness Note, as hereafter defined, shall be modified
to conform to the terms of such waiver prior to the
execution of such note.
3. Senior Indebtedness Note. At the time provided in the Plan,
the Reorganized Debtors shall cause Newco to execute and deliver to
Rare the note (the "Rare Senior Indebtedness Note") in form and
substance substantially similar to that attached hereto as Exhibit A.
To the extent of any conflict between the Plan, the Rare Senior
Indebtedness Note or this Agreement, first, the terms of the Rare
Senior Indebtedness Note shall govern over the other documents; and
second, this Agreement shall govern over the Plan.
4. Determination of Aggregate Amount of Class 5 Claims. The
determination by the Bankruptcy Court of the aggregate amount of the
Senior Indebtedness Notes, under the terms of the Settlement Motion,
is a material economic term to this Agreement and Rare's willingness
to consummate the transaction is expressly conditioned upon receiving
assurances regarding the aggregate amount of Senior Indebtedness Notes
to be issued under the Plan. 5. Fees and Expenses. On the Settlement
Date, the Debtors shall pay the out-of-pocket expenses of Rare,
including reasonable fees and disbursements of counsel for Rare, in
connection with the Bankruptcy Cases, and the preparation, negotiation
and administration of this Agreement and the Rare Senior Indebtedness
Note, which shall not exceed the sum of $300,000.00 in the aggregate.
6. [Intentionally omitted.] 7. Mutual Release. The Parties acknowledge
that the Rare Senior Indebtedness Note is being issued in an amount
less than the Rare Claim and on terms and conditions that have been
negotiated between the Parties.
a. Effective as of the Settlement Date, the Debtors, on
behalf of themselves and the estates in the bankruptcy cases
(the "Estates"), and each of their respective past, present
and future officers, directors (in their representative and
individual capacities), employees, and each of them, shall
and hereby do release and forever discharge Rare and its
past, present and future officers, directors (in their
representative and individual capacities), and employees,
from any and all claims, demands, debts, liabilities and
obligations, known or unknown, contingent or fixed,
liquidated or unliquidated, arising out of any fact, matter,
occurrence, or transaction occurring prior to the Settlement
Date, including, but not limited to, any ability to object
to the Rare Claim and/or to commence an avoiding power cause
of action against Rare under Bankruptcy Code section 547, et
seq. (the "Released Rare Claims"); provided however, that
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this release shall not apply to any obligation arising
under this Agreement.
b. Effective as of the Settlement Date, other than the
obligations represented by the Rare Senior Indebtedness
Note, Rare, on behalf of itself and each of its respective
past, present and future officers, directors (in their
representative and individual capacities), employees, and
each of them, shall and hereby do release and forever
discharge the Debtors and their Estates, and each of their
respective past, present and future officers, directors (in
their representative and individual capacities), and
employees, from any and all claims, demands, debts,
liabilities and obligations, known or unknown, contingent or
fixed, liquidated or unliquidated, arising out of any fact,
matter, occurrence, or transaction occurring prior to the
Settlement Date (the "Released Debtor Claims"); provided
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however, that this release shall not apply to any obligation
arising under this Agreement.
c. With respect to the Released Rare Claims and the Released
Debtor Claims, the Debtors, on behalf of themselves and the
Estates, and Rare, and each of their respective past,
present and future officers, directors (in their
representative and individual capacities), employees, and
each of them, expressly waive all rights any of them may
have or may claim to have that any claim, demand, obligation
and/or cause of action has through ignorance, oversight or
error been omitted from the terms of this Agreement, and
hereby expressly waive all rights they may have or may claim
to have under any statutory or decisional authority or law
of any jurisdiction, including the provisions of California
Civil Code section 1542, which provides as follows: "A
general release does not extend to claims that the creditor
does not know or suspect to exist in his favor at the time
of executing the release, which if known by him must have
materially affected his settlement with the debtor."
d. Nothing herein shall be deemed in any manner to be a
release by or against a non-debtor affiliate or subsidiary
of the Debtors, including, without limitation, Mobile
Satellite Ventures, LP.
8. Bankruptcy Court Order. Other than with respect to the
provisions of paragraphs 2(a) and 9, the effectiveness of this
Agreement is expressly conditioned upon the occurrence of the
Settlement Date.
9. Cooperation in Seeking the Approval of the Settlement Motion.
The Parties agree to cooperate in seeking, and not to hinder or
interfere with any proceedings to obtain, the approval of the
Settlement Motion.
10. Notices. All notices, requests, demands, and other
communications required or permitted under this Agreement shall be in
writing and shall be deemed to have been duly given on the date of
service if served personally or by facsimile transmission on the Party
to whom directed; or on the third day after mailing if mailed to the
Party to whom directed, by first class mail, postage prepaid,
registered or certified and properly addressed to such Party as
follows: If to Rare:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Rare Medium Group, Inc.
▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
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Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
Professional Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
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Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Debtors:
Motient Corporation
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Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇
And
H. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Jr. Esq.
McGUIREWOODS LLP
One ▇▇▇▇▇ Center
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Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Any Party may change its address by giving written notice to all
Parties hereto in the manner set forth above.
11. Entire Agreement; Modification; Waiver. Other than with
respect to discovery and procedures regarding the confirmation of the
Plan, this Agreement and the Exhibits hereto constitute the entire
agreement between the Parties and supercede all prior and
contemporaneous agreements, representations, warranties, and
understanding of the Parties, whether oral, written or implied, as to
the subject matter hereof. No supplement, modification, or amendment
of this Agreement shall be binding unless executed in writing by all
Parties. No waiver of any of the provisions of this Agreement shall be
deemed or constitute a waiver of any other provision, whether or not
similar, nor shall any waiver constitute a continuing waiver. No
waiver shall be binding unless executed in writing by the Party making
the waiver.
12. Limitation on Third-Party Beneficiaries. Nothing contained in
this Agreement is intended to confer any rights or remedies under or
by reason of this Agreement on any person or entity other than the
Parties hereto, nor is anything in this Agreement intended to relieve
or discharge the obligation or liability of any third party to any
Party to this Agreement, nor shall any provision give any third party
any right of subrogation or action over or against any Party to this
Agreement.
13. Successors and Assigns. This Agreement shall be binding upon,
and shall inure to the benefit of, the Parties and their respective
legal representatives, successors, and assigns, including any trustee
or examiner with expanded powers given authority of the Estates.
14. Further Documents. Each Party hereto agrees to execute any
and all documents and to do and perform any and all acts and things
reasonably necessary or proper to effectuate or further evidence the
terms and provisions of this Agreement.
15. Severability. If any nonmaterial portion of this Agreement
shall be held to be invalid or unenforceable, then that portion shall
be deemed to have been severed out of this Agreement and the Parties
acknowledge that the balance of this Agreement shall be valid and
enforceable.
16. Headings. The descriptive headings of the several sections of
this Agreement are inserted for convenience of reference only and do
not constitute a part of this Agreement.
17. Applicable Law. This Agreement shall be governed in all
respects, including the validity, interpretation and effect, by the
laws of the State of New York without giving effect to the principles
of conflicts of law thereof.
18. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
19. Time of the Essence; Termination. Time is of the essence in
this Agreement. If the Settlement Date does not occur by May 31, 2002,
this Agreement shall be null and void and of no further effect.
20. No Admissions. Neither this Agreement, nor any of the terms
hereof, nor any negotiations or proceedings in connection herewith,
shall constitute or be construed as or be deemed to be evidence of an
admission on the part of any Party of any liability or wrongdoing
whatsoever, or the truth or untruth, or merit or lack of merit, of any
claim or defense of any Party; nor shall this Agreement, or any of the
terms hereof, or any negotiations or proceedings in connection
herewith, or any performance or forbearance hereunder, be offered or
received in evidence or used in any proceeding against any Party, or
used in any proceeding, or otherwise, for any purpose whatsoever
except with respect to the effectuation and enforcement of this
Agreement.
21. Consent to Entry of Orders and Judgments by the Bankruptcy
Court. Each Party hereto hereby consents to the determination by the
Bankruptcy Court, as a "core proceeding" within the meaning of 28
U.S.C. ss. 157 or any successor provision, and to have the Bankruptcy
Court hear and determine and enter appropriate orders and judgment
subject to review under 28 U.S.C. ss. 158, as provided in 28 U.S.C.
ss. 157(c)(2) or any successor provision, in any action brought to
enforce, interpret, reform or rescind this Agreement or any of the
provisions hereof and over any action to determine or declare the
rights of any of the Parties under or with respect to this Agreement.
22. Attorney's Fees. In any action or proceeding brought by a
Party hereto against any other Party hereto to enforce any provision
of this Agreement (other than an action to obtain the approval of the
Settlement Motion as contemplated by paragraph 9 of this Agreement),
or to seek damages for a breach of any provision hereof, or where any
provision hereof is validly asserted as a defense, the prevailing
Party shall be entitled to recover reasonable attorney's fees from the
other Party in addition to any other available remedy.
IN WITNESS WHEREOF, each of the Parties hereto has caused this Agreement to
be executed on its behalf, all as of the day and year first above written.
MOTIENT CORPORATION MOTIENT COMMUNICATIONS INC.
By:/s/▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. By:/s/▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
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Its: President and Chief Its: President and Chief
Executive Officer Executive Officer
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MOTIENT HOLDINGS INC. MOTIENT SERVICES INC.
By:/s/▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. By:/s/▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
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Its: President and Chief Its: President and Chief
Executive Officer Executive Officer
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RARE MEDIUM GROUP, INC.
By:/s/▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Its: Senior Vice President and
General Counsel
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1 Capitalized terms used herein but not otherwise defined have the meanings
ascribed to them in the Plan.