UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK
------x : In re: : Chapter 11 : Refco Inc., et al., : Case No. 05-60006 (RDD) : Debtors. : (Jointly Administered) : ------x
DISCLOSURE STATEMENT WITH RESPECT TO AMENDED JOINT CHAPTER 11 PLAN OF REFCO INC. AND CERTAIN OF ITS DIRECT AND INDIRECT SUBSIDIARIES
J. Gregory Milmoe Luc A. Despins Sally McDonald Henry Susheel Kirpalani J. Gregory St. Clair Dennis C. O'Donnell SKADDEN, ARPS, SLATE, MEAGHER MILBANK, TWEED, HADLEY & McCLOY LLP & FLOM LLP One Chase Manhattan Plaza Four Times Square New York, New York 10005 New York, New York 10036-6522 (212) 530-5000 (212) 735-3000 Attorneys for the Official Committee of Unsecured Attorneys for Refco Inc., et al. Creditors of Refco Inc., et al.
David S. Rosner Andrew K. Glenn Jeffrey R. Gleit KASOWITZ, BENSON, TORRES & FRIEDMAN LLP 1633 Broadway New York, New York 10019 (212) 506-1700
Attorneys for the Additional Committee of Unsecured Creditors of Refco Inc., et al.
THIS IS NOT A SOLICITATION OF ACCEPTANCE OR REJECTION OF THE PLAN. ACCEPTANCES OR REJECTIONS MAY NOT BE SOLICITED UNTIL A DISCLOSURE STATEMENT HAS BEEN APPROVED BY THE BANKRUPTCY COURT. THIS DISCLOSURE STATEMENT IS BEING SUBMITTED FOR APPROVAL BUT HAS NOT BEEN APPROVED BY THE COURT.
Dated: New York, New York October 6,13, 2006 INTRODUCTION
The following introduction is only a general overview, which is qualified in its entirety by, and should be read in conjunction with, the more detailed discussions, information and financial statements and notes thereto appearing elsewhere in this disclosure statement (the "Disclosure Statement") and the Amended Joint Chapter 11 Plan of Refco Inc. and Certain of its Direct and Indirect Subsidiaries (the "Plan"). All capitalized terms not defined in the Disclosure Statement have the meanings ascribed to such terms in the Plan, a copy of which is attached hereto as Exhibit A.
Bersec International LLC, Kroeck & Associates, LLC, Lind-Waldock Securities LLC, Marshall Metals, LLC, New Refco Group Ltd., LLC ("New Refco Group"), Refco Administration, LLC, Refco Capital Holdings, LLC, Refco Capital LLC, Refco Capital Management, LLC, Refco Capital Trading LLC, Refco Finance Inc., Refco Financial, LLC, Refco Fixed Assets Management, LLC, Refco F/X Associates, LLC ("FXA"), Refco Global Capital Management LLC, Refco Global Finance Limited, Refco Global Futures, LLC, Refco Global Holdings, LLC, Refco Group Ltd., LLC ("Refco Group"), Refco Inc. ("Refco"), Refco Information Services, LLC, Refco Managed Futures, LLC, Refco Mortgage Securities, LLC, Refco Regulated Companies, LLC, Summit Management, LLC, and Westminster-Refco Management LLC (collectively, the "Debtors"), the Official Committee of Unsecured Creditors of Refco Inc., et al. (the "Creditors' Committee"), and the Additional Committee of Unsecured Creditors of Refco Inc., et al. (the "Additional Committee" and, together with the Creditors' Committee, the "Committees") are furnishing the Disclosure Statement and the exhibits hereto and the related materials delivered herewith pursuant to section 1126(b) of the United States Bankruptcy Code, 11 U.S.C. §§ 101-1532 (as amended, the "Bankruptcy Code"), in connection with the solicitation (the "Solicitation") of acceptances of the Plan. The Debtors, the Committees, and the RCM Trustee (as defined below) (collectively, the "Plan Proponents") are soliciting acceptances of the Plan from Holders of: (i) Class 4 Senior Subordinated Note Claims, Class 5(a) Contributing Debtors General Unsecured Claims, Class 5(b) Related Claims and Class 6 RCM Intercompany Claims, against one or more of the Contributing Debtors; (ii) Class 4 FXA Senior Subordinated Note Claims, Class 5(a) FXA General Unsecured Claims, Class 5(b) Related Claims and Class 6 FXA Convenience Claims, against FXA; and (iii) Class 3 RCM FX/Unsecured Claims, Class 4 RCM Securities Customer Claims, Class 5 Leuthold Metals Claims, Class 6 RCM FX/Unsecured Convenience Claims, Class 7 RCM Securities Customer Convenience Claims and Class 68 Related Claims, against RCM (as defined below).
Marc S. Kirschner, the chapter 11 trustee (together with any successor chapter 11 trustee or, if the RCM Chapter 11 Case is converted to a chapter 7 case to be administered under subchapter III of chapter 7 of the Bankruptcy Code, any chapter 7 trustee, the "RCM Trustee") appointed in the case of Refco Capital Markets, Ltd. ("RCM" and, collectively with the Debtors, the "Chapter 11 Debtors"), while a co-proponent of the Plan, is not a signatory to this Disclosure Statement, and can make no representation or warranty with respect to the truth, accuracy or completeness of the disclosures made herein. Nevertheless, the RCM Trustee has concluded the Plan is in the best interests of the RCM Estate.
The Disclosure Statement is to be used by each record Holder of a Claim entitled to vote on the Plan solely in connection with its evaluation of the Plan; use of the Disclosure Statement for any other purpose is not authorized.
THE VOTING DEADLINE TO ACCEPT OR REJECT THE PLAN IS 5:00 P.M., EASTERN TIME, ON DECEMBER 8, 2006 (THE "VOTING DEADLINE"), UNLESS EXTENDED BY THE DEBTORSPLAN PROPONENTS. IN ORDER TO HAVE YOUR VOTE COUNTED, YOUR BALLOT(S) (AS DEFINED BELOW) MUST BE RECEIVED BY THE DEBTORS' VOTING AGENT (THE "VOTING AGENT") BY THE VOTING DEADLINE. IN THE CASE OF SECURITIES HELD THROUGH AN INTERMEDIARY, YOUR INSTRUCTIONS MUST BE RECEIVED BY YOUR INTERMEDIARY SUFFICIENTLY IN ADVANCE OF THE VOTING DEADLINE, SO THAT MASTER BALLOTS CAN BE PREPARED AND RECEIVED BY THE VOTING AGENT BY THE VOTING DEADLINE.
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i DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. THE CONFIRMATION AND EFFECTIVENESS OF THE PLAN ARE SUBJECT TO MATERIAL CONDITIONS PRECEDENT. THERE CAN BE NO ASSURANCE THAT THOSE CONDITIONS WILL BE SATISFIED.
THE PLAN PROPONENTS PRESENTLY INTEND TO SEEK TO CONSUMMATE THE PLAN AND TO CAUSE THE EFFECTIVE DATE TO OCCUR PROMPTLY AFTER CONFIRMATION OF THE PLAN. THE PLAN PROPONENTS INTEND THAT THE EFFECTIVE DATE OCCUR NO LATER THAN DECEMBER 31, 2006. THERE CAN BE NO ASSURANCE, HOWEVER, AS TO WHEN AND WHETHER CONFIRMATION OF THE PLAN AND THE EFFECTIVE DATE ACTUALLY WILL OCCUR.
THE PLAN PROPONENTS HAVE APPROVED THE PLAN AND RECOMMEND THAT THE HOLDERS OF CLAIMS ENTITLED TO VOTE ON THE PLAN VOTE TO ACCEPT THE PLAN IN ACCORDANCE WITH THE VOTING INSTRUCTIONS SET FORTH IN THE DISCLOSURE STATEMENT. TO BE COUNTED, YOUR BALLOT (OR, IN THE CASE OF SECURITIES HELD THROUGH AN INTERMEDIARY, THE MASTER BALLOT CAST ON YOUR BEHALF) MUST BE DULY COMPLETED, EXECUTED AND ACTUALLY RECEIVED NO LATER THAN THE VOTING DEADLINE. HOLDERS OF CLAIMS AND INTERESTS ENTITLED TO VOTE ON THE PLAN ARE ENCOURAGED TO READ AND CONSIDER CAREFULLY THE DISCLOSURE STATEMENT, THE PLAN AND THE APPENDICES OR EXHIBITS THERETO IN THEIR ENTIRETY.
THE DISCLOSURE STATEMENT CONTAINS SUMMARIES OF CERTAIN PROVISIONS OF THE PLAN, STATUTORY PROVISIONS, DOCUMENTS RELATED TO THE PLAN, EVENTS IN THE CHAPTER 11 CASES AND FINANCIAL INFORMATION. ALTHOUGH THE PLAN PROPONENTS BELIEVE THAT THE PLAN AND RELATED DOCUMENT SUMMARIES ARE FAIR AND ACCURATE, SUCH SUMMARIES ARE QUALIFIED TO THE EXTENT THAT THEY DO NOT SET FORTH THE ENTIRE TEXT OF SUCH DOCUMENTS OR STATUTORY PROVISIONS. FACTUAL INFORMATION CONTAINED IN THE DISCLOSURE STATEMENT HAS BEEN PROVIDED BY MANAGEMENT, EXCEPT WHERE OTHERWISE SPECIFICALLY NOTED. THE PLAN PROPONENTS ARE UNABLE TO WARRANT OR REPRESENT THAT THE INFORMATION CONTAINED HEREIN, INCLUDING THE FINANCIAL INFORMATION, IS WITHOUT ANY INACCURACY OR OMISSION. TO THE EXTENT ANY TERMS OF THE DISCLOSURE STATEMENT AND THE PLAN ARE INCONSISTENT, THE PLAN WILL CONTROL.
IN DETERMINING WHETHER TO VOTE TO ACCEPT THE PLAN, HOLDERS OF CLAIMS ENTITLED TO VOTE THEREON MUST RELY ON THEIR OWN EXAMINATION OF THE CHAPTER 11 DEBTORS AND THE TERMS OF THE PLAN, INCLUDING THE MERITS AND RISKS INVOLVED. THE CONTENTS OF THE DISCLOSURE STATEMENT SHOULD NOT BE CONSTRUED AS PROVIDING ANY LEGAL, BUSINESS, FINANCIAL OR TAX ADVICE. EACH SUCH HOLDER SHOULD CONSULT WITH ITS OWN LEGAL, BUSINESS, FINANCIAL AND TAX ADVISORS WITH RESPECT TO ANY SUCH MATTERS CONCERNING THE DISCLOSURE STATEMENT, THE SOLICITATION, THE PLAN AND THE TRANSACTIONS CONTEMPLATED THEREBY. SEE SECTION IX –"RISK FACTORS RELATING TO THE CHAPTER 11 CASES" FOR A DISCUSSION OF VARIOUS FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH THE PLAN.
EXCEPT AS SET FORTH IN SECTION XIII.M –"THE SOLICITATION; VOTING PROCEDURES – FURTHER INFORMATION; ADDITIONAL COPIES," NO PERSON HAS BEEN AUTHORIZED BY THE PLAN PROPONENTS IN CONNECTION WITH THE PLAN OR THE SOLICITATION TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED IN THE DISCLOSURE STATEMENT AND THE EXHIBITS ANNEXED HERETO OR INCORPORATED BY REFERENCE OR REFERRED TO HEREIN AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MAY NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE PLAN PROPONENTS. THE DISCLOSURE STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES, OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES IN ANY JURISDICTION IN WHICH, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
THE STATEMENTS CONTAINED IN THE DISCLOSURE STATEMENT ARE MADE AS OF THE DATE HEREOF (UNLESS OTHERWISE INDICATED) AND SHOULD NOT UNDER ANY CIRCUMSTANCE ii DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AT ANY TIME SUBSEQUENT TO THE DATE HEREOF. ANY ESTIMATES OF CLAIMS AND INTERESTS SET FORTH IN THE DISCLOSURE STATEMENT MAY VARY FROM THE AMOUNTS OF CLAIMS AND INTERESTS ULTIMATELY ALLOWED BY THE BANKRUPTCY COURT.
THE INFORMATION CONTAINED IN THE DISCLOSURE STATEMENT, INCLUDING, BUT NOT LIMITED TO, THE INFORMATION REGARDING THE HISTORY, BUSINESSES AND OPERATIONS OF THE CHAPTER 11 DEBTORS, THE HISTORICAL AND PROJECTED FINANCIAL INFORMATION OF THE CHAPTER 11 DEBTORS AND THE LIQUIDATION ANALYSIS RELATING TO THE CHAPTER 11 DEBTORS ARE INCLUDED HEREIN FOR PURPOSES OF SOLICITING ACCEPTANCES OF THE PLAN. AS TO ANY JUDICIAL PROCEEDINGS IN ANY COURT, INCLUDING ANY ADVERSARY PROCEEDINGS OR CONTESTED MATTERS THAT MAY BE FILED IN THE BANKRUPTCY COURT, SUCH INFORMATION IS NOT TO BE CONSTRUED AS AN ADMISSION OR STIPULATION BUT RATHER AS STATEMENTS MADE IN SETTLEMENT NEGOTIATIONS AND WILL BE INADMISSIBLE FOR ANY PURPOSE ABSENT THE EXPRESS WRITTEN CONSENT OF THE PLAN PROPONENTS.
iii DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. TABLE OF CONTENTS
Page INTRODUCTION ...... i
I. EXECUTIVE SUMMARY ...... 1
II. SETTLEMENTS EMBODIED IN THE PLAN ...... 89
1. Settlement of the RCM Dispute ...... 10 2. Settlement of the RCM Claims Priority Dispute...... 1213 3. Settlement of the Fraudulent Conveyance/Obligations Dispute...... 1314 4. Settlement of the Preference Dispute ...... 1516 5. Settlement of the Substantive Consolidation Dispute...... 1718 6. Settlement of the Intercompany Claims Disputes ...... 1819 7. Settlement of Administrative and Priority Claims Dispute...... 2526 8. Allocation of BAWAG Proceeds ...... 2527 9. Treatment of FXA Under the Plan ...... 2627 III. GENERAL INFORMATION ...... 2728
A. Description of the Company's Businesses ...... 2728 B. Capital Structure...... 2728 1. Secured Credit Facility...... 2728 2. Unsecured Publicly Traded Notes...... 2829 3. Equity...... 2830 C. Events Leading to the Chapter 11 Cases ...... 2830 1. The Leveraged Buy-Out ...... 2830 2. The Reincorporation...... 2930 3. The Initial Public Offering...... 2930 4. Disclosure of Possible Fraud, Loss of Customer Confidence: Threatened Action by CME ...... 2931 5. Governmental Investigations ...... 3032 IV. EVENTS DURING THE CHAPTER 11 CASES...... 3132
A. Global Plan Term Sheet and Plan Support Agreement...... 3132 1. Support of Global Plan ...... 3233 2. Actions Required by Chapter 7 Trustee...... 3233 3. Plan Support Conditions...... 3233 4. Plan Support Covenants...... 3334 5. Other Agreements and Reservations Under the Plan Support Agreement...... 3435 6. Withdrawal from Plan Support Agreement...... 3435 7. Secured Lender Settlement ...... 3536 B. Key Events During the Chapter 11 Cases...... 3638 1. Sale of the Regulated Commodities Futures Merchant Business ...... 3638 2. Concurrent Bermuda Proceedings...... 3839 3. RCM Estate Property Litigation...... 3840 4. RCM Conversion Motion ...... 3940 5. Appointment of RCM Trustee ...... 3941 6. Appointment of Examiner ...... 4041 iv DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. C. Other Chapter 11 Asset Sales ...... 4041 1. Proposed FXCM Sale...... 4041 2. Proposed GAIN Transaction...... 4042 3. Refco Hong Kong Ltd. Sale...... 4142 4. Refco Japan Ltd. Sale...... 4143 5. Partners Capital Sale ...... 4143 6. Artwork Sale...... 4143 7. Miscellaneous Asset Sales...... 4243 D. Other Chapter 11 Litigation-Related Matters ...... 4243 1. BAWAG Settlement...... 4244 2. SPhinX Settlement ...... 4345 3. Advanced Currency Markets Litigation...... 4446 4. Securities Class Action...... 4446 5. Arch Lift Stay Motion ...... 4547 6. Refco Securities, LLC (RSL)...... 4547 7. Sberbank Litigation...... 4547 8. Cargill, Incorporated ...... 4648 E. Other Events During the Chapter 11 Cases ...... 4850 1. Joint Administration, Bank Accounts and Cash Management System ...... 4850 2. Cash Management System...... 4850 3. Cash Collateral...... 4951 4. Filing of Schedules and Statements...... 5052 5. Establishment of Bar Date ...... 5052 6. Extension of Time to Assume or Reject Unexpired Leases of Nonresidential Real Property...... 5052 7. Extension of Exclusivity...... 5052 8. Extension of Time to File Notices of Removal ...... 5153 9. Key Employee Compensation Program...... 5153 10. Motion for Appointment of Equity Committee...... 5355 11. Appointment of Committees...... 5355 12. PlusFunds ...... 5456 13. Wind Down of Funds ...... 5456 F. Effects of Chapter 11 Filing on FXA Creditors...... 5557 1. Postpetition Customer Trading Activity ...... 5557 2. FXA Japan Clients ...... 5558 3. Claim of Saeed Abdulraham Alqahtani ...... 59 4. Client Claims for Constructive Trust and Other Related Claims ...... 59 5. Treatment of FXA Clients Under the Plan...... 5659 V. CORPORATE STRUCTURE AND MANAGEMENT OF THE REORGANIZED DEBTORS ...... 5761
A. The Board of Directors and Executive Officers of Refco Inc...... 5761 VI. REASONS FOR THE SOLICITATION; RECOMMENDATION...... 5963
VII. SUMMARY OF VOTING PROCEDURES...... 5963
VIII. SUMMARY OF THE PLAN ...... 6064
A. Classification and Treatment of Claims and Interests ...... 6165 1. Treatment of Claims and Interests of the Contributing Debtors...... 6165 2. Treatment of Claims of FXA ...... 6367 v DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. 3. Treatment of Claims of RCM ...... 6569 4. Allowed Claims and Interests ...... 6771 5. Alternative Treatment...... 6771 6. Limitation on Recoveries...... 6771 7. Special Provision Regarding Unimpaired Claims ...... 6771 8. Classification and Treatment of Non-Debtor Subsidiary Claims and Interests...... 6771 9. Classification and Treatment of Intercompany Claims...... 6772 10. Claims of Debtors against RCM ...... 6772 11. Non-Debtor Affiliates' Intercompany Claims Against RCM ...... 6772 B. Means for Implementation of the Plan ...... 6872 1. Merger of Subsidiaries Into Refco Inc...... 6872 2. Continued Corporate Existence and Dissolution of Reorganized Debtors...... 6872 3. Corporate Governance Documentation...... 6873 4. Directors, Managers and Officers: Effectuating Documents; Further Transactions ...... 6873 5. The Plan Administrator ...... 6973 6. Administration of Post-Confirmation RCM...... 7176 7. Litigation Trust ...... 7277 8. Private Actions Trust...... 7479 9. No Revesting of Assets...... 7579 10. Preservation of Rights of Action; Settlement of Litigation...... 7579 11. The Committees and the Plan Committee...... 7580 12. Fee Committee...... 7781 13. Cancellation of Securities, Instruments and Agreements Evidencing Claims and Interests ...... 7781 14. Sources of Cash for Plan Distributions...... 7782 15. Risk Sharing in Respect of Cargill Administrative Claim ...... 7782 16. Allocation of Administrative Claims, Priority Tax Claims and Non-Tax Priority Claims ...... 7882 17. Additional RCM Claim ...... 7883 18. Contributing Debtors BAWAG Proceeds ...... 7983 19. Exemption From Transfer Taxes...... 7984 20. RCM Settlement Agreement and Conversion ...... 7984 21. Allowance of VR/Leuthold Guarantee Claims...... 7984 22. Wind-Up of Non-Debtor Refco Entities...... 7984 23. FXCM ...... 84 24. Examiner ...... 85 C. Provisions Governing Distributions...... 8085 1. RCM Rights Distribution...... 8085 2. Distributions for Claims Allowed as of the Effective Date...... 8085 3. Distributions of Proceeds of the Litigation Trust ...... 8085 4. Single Distribution ...... 8085 5. Accounts; Escrows; Reserves for the Reorganized Debtors ...... 8186 6. Accounts; Escrows; Reserves for Post-Confirmation RCM...... 8287 7. Interest and Penalties on Claims ...... 8389 8. Distributions by Disbursing Agent and RCM Trustee...... 8489 9. Delivery of Distributions and Undeliverable or Unclaimed Distributions...... 8489 10. Record Date For Distributions ...... 8590 11. Distributions to Holders of Senior Subordinated Note Claims...... 8590 12. Senior Subordinated Note Indenture Trustee as Claim Holder ...... 8590 13. Allocation of Plan Distributions Between Principal and Interest ...... 8591 14. Means of Cash Payment ...... 8591 15. Withholding and Reporting Requirements...... 8691 vi DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. 16. Setoffs ...... 8691 17. Fractional Dollars...... 8691 18. Release of Liens...... 8691 D. Treatment of Executory Contracts and Unexpired Leases...... 8692 1. Rejected Contracts and Leases...... 8692 2. Bar to Rejection Damages ...... 8792 3. Assumed and Assigned Contracts and Leases ...... 8792 4. Compensation and Benefit Programs ...... 8792 5. Treatment of RCM Executory Contracts and Unexpired Leases...... 8792 E. Procedures for Resolving Disputed, Contingent and Unliquidated Claims and Interests...... 8792 1. Objection Deadline; Prosecution of Objections ...... 8792 2. No Distributions Pending Allowance ...... 8793 3. Distributions After Allowance ...... 8893 F. Confirmation and Consummation of the Plan...... 8893 1. Conditions to Confirmation ...... 8893 2. Conditions to Effective Date...... 8893 3. Waiver of Conditions ...... 8994 4. Consequences of Non-Occurrence of Effective Date ...... 8994 G. Effect of Plan Confirmation ...... 8995 1. Binding Effect...... 8995 2. Releases...... 8995 3. Exculpation and Limitation of Liability ...... 9197 4. No Discharge of Claims; Injunction...... 9197 5. Consent to Injunctions...... 9297 6. Term of Bankruptcy Injunction or Stays ...... 9297 H. Retention of Jurisdiction ...... 9298 1. Exclusive Jurisdiction of the Bankruptcy Court...... 9298 I. Miscellaneous Provisions...... 9499 1. Effectuating Documents and Further Transactions ...... 9499 2. Corporate Action...... 9499 3. Bar Dates for Certain Claims...... 94100 4. Payment of Statutory Fees ...... 95100 5. Amendment or Modification of the Plan ...... 95101 6. Severability of Plan Provisions ...... 95101 7. Successors and Assigns ...... 95101 8. Revocation, Withdrawal or Non-Consummation ...... 96101 9. Notice ...... 96101 10. Governing Law ...... 96101 11. Tax Reporting and Compliance...... 96102 12. Filing of Additional Documents...... 96102 13. Limit on Precedential Effect ...... 96102 14. Claims Preserved Pending Consummation ...... 96102 15. Continuation of RCM Settlement...... 97102 16. Continuation of Early Payment Order ...... 97102 IX. RISK FACTORS RELATING TO THE CHAPTER 11 CASES...... 97102
A. Failure to Receive Requisite Acceptances...... 97102 vii DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. B. Failure of Bankruptcy Court to Confirm the Plan...... 97103 C. Failure to Satisfy Conditions to Confirmation or Effective Date...... 97103 X. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN...... 98103
A. Certain Material U.S. Federal Income Tax Consequences to the Debtors...... 98104 B. U.S. Federal Income Tax Consequences of Receipt of Plan Consideration to Holders of Allowed Claims...... 99104 1. General Tax Considerations for Holders of Allowed Claims...... 99104 2. Accrued but Unpaid Interest ...... 99104 3. Bad Debt Deduction and Worthless Securities Deduction...... 99105 4. Market Discount...... 99105 5. Receipt of Cash and/or Litigation Trust Interests in Exchange for Allowed Claim ...... 100105 6. Treatment of Litigation Trust...... 100105 7. Treatment of Disputed Claims Reserve ...... 100106 8. Backup Withholding Tax and Information Reporting Requirements ...... 101106 XI. FEASIBILITY OF THE PLAN AND THE BEST INTERESTS OF CREDITORS...... 101107
A. Feasibility of the Plan ...... 101107 B. Best Interests Test...... 101107 C. Liquidation Analysis...... 102107 XII. ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE PLAN ...... 102108
XIII. THE SOLICITATION; VOTING PROCEDURES ...... 102108
A. Voting Deadline...... 102108 B. Voting Procedures...... 103108 C. Ballot Elections...... 103109 1. Ballot Elections to Opt Out of BAWAG Settlement ...... 103109 2. Ballot Election Not to Contribute Non-Estate Refco Claims to Private Actions Trust ...... 105111 3. Ballot Election for Treatment as FXA Convenience Claim...... 105111 4. Ballot Election Not to Assign RCM Related Debtor Claims to Litigation Trust and Not to Release RCM Related Claims Against Non-Debtor Entities ...... 106112 5. Ballot Election for Treatment as RCM FX/Unsecured Convenience Claim ...... 112 6. Ballot Election for Treatment as RCM Securities Customer Convenience Claim...... 113 D. Special Procedures for Holders of Senior Subordinated Notes...... 106113 1. Beneficial Owners...... 106113 2. Nominees...... 107114 3. Miscellaneous ...... 107115 E. Fiduciaries and other Representatives...... 108115 F. Parties Entitled to Vote ...... 108115 G. Classes Impaired Under the Plan ...... 108116 H. Elimination Of Classes...... 109116 viii DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. I. Confirmation Pursuant to Section 1129(b) of the Bankruptcy Code...... 109116 J. Agreements Upon Furnishing Ballots ...... 109116 K. Waivers of Defects, Irregularities, Etc...... 109116 L. Withdrawal of Ballots; Revocation...... 110117 M. Further Information; Additional Copies...... 110117 1. Voting Agent for Holders of the Debtors' Securities...... 110117 2. Voting Agent for All Other Holders of Claims Against and Interests In the Chapter 11 Debtors...... 110117 XIV. PROFESSIONALS...... 111118
1. Debtors' Professionals ...... 111118 2. The Committees and Related Professionals...... 111118 3. RCM Trustee's Professionals ...... 112119 4. Examiner's Professionals ...... 112120 5. Interim Compensation ...... 113120 XV. RECOMMENDATION AND CONCLUSION...... 114121
ix DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. TABLE OF EXHIBITS
Exhibit Name
A Amended Joint Chapter 11 Plan of Refco Inc. and Certain of its Direct and Indirect Subsidiaries
B Liquidation Analysis
C Retained Causes of Action
x DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. I. EXECUTIVE SUMMARY
The Debtors and the Committees hereby transmit the Disclosure Statement pursuant to section 1126(b) of the Bankruptcy Code, for use in the Solicitation of acceptances of the Plan, a copy of which is attached hereto as Exhibit A. The Plan contemplates the disposition of the Debtors' assets and the resolution of the outstanding Claims against and Interests in the Chapter 11 Debtors. The Plan generally does not contemplate the disposition of assets or the resolution of Claims against and interests in Refco, LLC, as such Claims and interests are being addressed separately in conjunction with the administration of the Refco, LLC chapter 7 case. In addition, although the Plan outlines certain aspects of the disposition of the assets of RCM and the votes by certain creditors of RCM will be solicited, the Plan contemplates that on or prior to the Effective Date, the RCM Chapter 11 Case will be converted to a case under subchapter III of chapter 7 of the Bankruptcy Code unless the Debtors and the RCM Trustee agree that there is a compelling reason for the RCM Estate to be administered under chapter 11 of the Bankruptcy Code. In the event of such a conversion to chapter 7, the Plan will constitute a settlement and compromise between the RCM Estate and the Debtors' Estates and among the Estates of the various Debtors and certain creditors, for which approval is sought simultaneously with the confirmation of the Plan. Furthermore, the Plan incorporates the terms of the Early Payment Order, a copy of which is attached to the Plan as Exhibit I. To the extent that the provisions of the Plan or in the Confirmation Order differ from the terms of the Early Payment Order with respect to the treatment of the Secured Lenders, the terms of the Early Payment Order will govern.
The Plan Proponents are soliciting acceptances of the Plan from Holders of: (i) Class 4 Senior Subordinated Note Claims, Class 5(a) Contributing Debtors General Unsecured Claims, Class 5(b) Related Claims and Class 6 RCM Intercompany Claims, against one or more of the Contributing Debtors; (ii) Class 4 FXA Senior Subordinated Note Claims, Class 5(a) FXA General Unsecured Claims, Class 5(b) Related Claims and Class 6 FXA Convenience Claims, against FXA; and (iii) Class 3 RCM FX/Unsecured Claims, Class 4 RCM Securities Customer Claims, Class 5 Leuthold Metals Claims, Class 6 RCM FX/Unsecured Convenience Claims, Class 7 RCM Securities Customer Convenience Claims and Class 68 Related Claims, against RCM.
The Disclosure Statement sets forth certain detailed information regarding the Chapter 11 Debtors' history, their projections for liquidation and significant events that have occurred and are expected to occur during the Chapter 11 Cases. The Disclosure Statement also describes the Plan, alternatives to the Plan, effects of confirmation of the Plan and the manner in which Distributions will be made under the Plan. In addition, the Disclosure Statement discusses the confirmation process and voting procedures that Holders of Claims and Interests in Impaired Classes entitled to vote must follow for their votes to be counted.
Certain unclassified Claims, including Administrative Claims and Priority Tax Claims, will receive payment in Cash either on the Effective Date, as such Claims are liquidated, or in installments over time, as permitted by the Bankruptcy Code, or as agreed with the Holders of such Claims. All other Claims and all Interests are classified into separate Classes and will receive the Distributions and recoveries, if any, described in the table below. The table below summarizes the classification and treatment of the principal prepetition Claims and Interests under the Plan. The classification and treatment for all Classes are described in more detail in Section VIII.A –"Classification and Treatment of Claims and Interests." Estimated Claim amounts are based upon the Chapter 11 Debtors' books and records as of October 17, 2005. There can be no assurance that the estimated amounts below are correct and actual Claim and Interest amounts may be significantly different from the estimates. This summary is qualified in its entirety by reference to the provisions of the Plan. Summary of Anticipated Distributions Under the Plan
Estimated Class Description Treatment Under the Plan % Recovery1
Treatment of Contributing Debtors' Creditors and Interest Holders Administrative Claims On the later of (a) the Effective Date, (b) the date on which its 100% Administrative Claim becomes Allowed, or (c) the date on which its Administrative Claim becomes payable under any agreement relating thereto, each Holder of an Allowed Administrative Claim will receive, in full and final satisfaction, settlement, release and discharge of, and in exchange for, such Allowed Administrative Claim against the Contributing Debtors, Cash equal to the unpaid portion of such Administrative Claim. Notwithstanding the foregoing, (i) any Administrative Claim based on a liability incurred by a Contributing Debtor in the ordinary course of business during the Chapter 11 Cases may be paid in the ordinary course of business in accordance with the terms and conditions of any agreement relating thereto and (ii) any Administrative Claim may be paid on such other terms as may be agreed on between the Holder of such Claim and the Contributing Debtors or the Plan Administrator. Priority Tax Claims On the later of (a) the Effective Date or (b) the date on which its 100% Priority Tax Claim becomes an Allowed Priority Tax Claim, in the sole discretion of the Contributing Debtors, each Holder of an Allowed Priority Tax Claim will receive, in full and final satisfaction, settlement, release and discharge of, and in exchange for, such Allowed Priority Tax Claim against the Contributing Debtors, (i) Cash equal to the unpaid portion of such Allowed Priority Tax Claim, (ii) treatment in any other manner such that its Allowed Priority Tax Claims will not be impaired pursuant to section 1124 of the Bankruptcy Code, including payment in accordance with the provisions of section 1129(a)(9)(C) of the Bankruptcy Code, or (iii) such other treatment as to which the Contributing Debtors or the Plan Administrator and such Holder have agreed upon in writing. Class 1 –Non-Tax Priority On (a) the Effective Date if such Non-Tax Priority Claim is an 100% Claims Allowed Non-Tax Priority Claim on the Effective Date or (b) the Estimated Amount: Quarterly Distribution Date following the date on which such Non-Tax Priority Claim becomes an Allowed Non-Tax Priority Claim against $3.0 million the Contributing Debtors, each Holder of an Allowed Class 1 Non-Tax Priority Claim will receive, in full and final satisfaction, release and
1 This summary description of distributions to be made under the Plan is based on several key assumptions including, among others, the estimated claims level and projected realizable value from assets (other than Litigation Claims and the BAWAG Contingent Proceeds, neither of which have not been assigned any projected value for these purposes). Significantly, these estimates assume that all Holders of RCM Securities Customer Claims, RCM FX/Unsecured Claims, Senior Subordinated Note Claims and Contributing Debtors General Unsecured Claims have elected to receive their share of BAWAG Proceeds, by not affirmatively opting out of the settlement with BAWAG on their respective Ballots. Recoveries for such Holders would be materially lower than reflected in this summary if such Holders opted out of the BAWAG settlement. See Section XIII.C –"Ballot Elections."
2 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. discharge of, and in exchange for, such Allowed Non-Tax Priority Claim, Cash equal to the unpaid portion of such Allowed Non-Tax Priority Claim in accordance with the allocation set forth in Section 5.16 of the Plan. Class 2 –Other Secured On the Effective Date, each Holder of an Allowed Class 2 Other 100% Claims Secured Claim against the Contributing Debtors will receive, in full Estimated Amount: and final satisfaction, settlement, release and discharge of, and in exchange for, such Allowed Other Secured Claim, one of the following $0.7 million Distributions: (i) the payment of such Holder's Allowed Other Secured Claim in full, in Cash; (ii) the sale or disposition proceeds of the property securing such Allowed Other Secured Claim to the extent of the lesser of the amount of such Allowed Other Secured Claim and the value of the interests in such property; (iii) the surrender to the Holder or Holders of such Allowed Other Secured Claim of the property securing such Claim; or (iv) such other Distributions as will be necessary to satisfy the requirements of chapter 11 of the Bankruptcy Code Class 3 –Secured Lender The Secured Lender Claims against the Contributing Debtors will be 100% Claims allowed to the extent provided in the Early Payment Order, the terms Estimated Amount: and conditions of which are incorporated by reference in the Plan, and such Allowed Secured Lender Claims, to the extent not paid in cash $704.0717.5 million prior to the Effective Date or estimated at zero pursuant to the Early Payment Order, will be paid the full amount set forth in and required to be paid by the Early Payment Order. In addition, the Secured Lenders will have the benefit of the releases to the full extent contemplated by paragraph 8 of the Early Payment Order and Section 10.2 of the Plan. Class 4 –Senior Subordinated On the Effective Date, each Holder of an Allowed Class 4 Senior 83.4% Note Claims Subordinated Note Claim against the Contributing Debtors will Estimated Amount: receive, to the extent not previously paid, in full and final satisfaction, settlement, release and discharge of, and in exchange for, such $397.4 million Allowed Class 4 Senior Subordinated Note Claim and any and all Claims against the Refco Entities, its Pro Rata share of the Senior Subordinated Note Holder Distribution (subject to the Senior Subordinated Note Indenture Trustee Charging Lien); and the Debtors will pay the Senior Subordinated Note Holder Fee Distribution; provided, however, to the extent that a Holder of an Allowed Class 4 Senior Subordinated Note Claim against the Contributing Debtors elects to not receive the Senior Subordinated Note Holder BAWAG Proceeds, such Holder's Distribution will consist of its Pro Rata share of the Senior Subordinated Note Holder Distribution less such Holder's portion of the Senior Subordinated Note Holder BAWAG Proceeds. Class 5(a) –Contributing Subject to section 6.4 of the Plan, on the Effective Date (but in no case 23.0% Debtors General Unsecured prior to payment in full of the Senior Subordinated Note Holder Claims Distribution and the Senior Subordinated Note Holder Fee Estimated Amount: Distribution), each Holder of an Allowed Class 5(a) Contributing Debtors General Unsecured Claim will receive, in full and final $522.7 million satisfaction, settlement, release and discharge of, and in exchange for, such Allowed Class 5(a) Contributing Debtors General Unsecured Claim and any and all Other Related Claims, its Pro Rata share of the Contributing Debtors General Unsecured Distribution; provided, however, to the extent that a Holder of an Allowed Class 5(a) General Unsecured Claim against the Contributing Debtors elects to not receive the Contributing Debtors General Unsecured BAWAG Proceeds, if any, such Holder's Distribution will consist of its Pro Rata 3 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. share of the Contributing Debtors General Unsecured Distribution less such Holder's portion of the Contributing Debtors General Unsecured BAWAG Proceeds. Class 5(b) –Related Claims On the Effective Date, pursuant to Section 6.4 of the Plan, each 0% Allowed Class 5(b) Related Claim against any Contributing Debtor will be subordinated and will receive no Distribution from the Contributing Debtors Distributive Assets unless and until such time as all Holders of Allowed Contributing Debtors General Unsecured Claims and Allowed RCM Intercompany Claims have been paid in full; provided, however, that any hHolder of an RCM Related Claim that provides an RCM Related Claim Subordination Form in accordance with Section 6.6(c) of the Plan will, on account of its RCM Securities Customer Claim or RCM FX/Unsecured Claim (if Allowed), receive its applicable share of the RCM Distribution Reserve as more fully set forth in Section 6.6(c) of the Plan. Class 6 –RCM Intercompany On the Effective Date (but in no case prior to payment in full of the N/A Claims Senior Subordinated Note Holder Distribution and the Senior Subordinated Note Holder Fee Distribution), the RCM Trustee, on behalf of RCM, will receive the RCM Intercompany Claim Distribution, which includes pursuant to the Settlements embodied in the Plan, among other things, a payment to RCM in the amount of approximately $460 million (subject to adjustment as set forth in the Plan). See Section VIII.A.1.c.(iv) below. Class 7 –Subordinated On the Effective Date (but in no case prior to payment in full of the 0% Claims Senior Subordinated Note Holder Distribution and the Senior Subordinated Note Holder Fee Distribution), each Holder of an Allowed Class 7 Subordinated Claim against the Contributing Debtors will receive, in full and final satisfaction, settlement, release and discharge of, and in exchange for, such Allowed Class 7 Subordinated Claim, its Pro Rata share of the Tranche B Litigation Trust Preferred Interests as more particularly set forth in Section 5.7(c) of the Plan. Class 8 –Old Equity Interests On the Effective Date, each Holder of an Allowed Class 8 Old Equity 0% Interest will receive, in full and final satisfaction, settlement, release and discharge of, and in exchange for, such Allowed Class 8 Old Equity Interest, the greater of (a) a Pro Rata share of 10% of the IPO Underwriter Claims Recovery or (b) a Pro Rata share of Tranche B Litigation Trust Common Interests; provided, however, that the Contributing Debtors and all parties in interest reserve the right to assert that the Interests of insider Refco Inc. shareholders should not be entitled to any distribution under the Plan. Treatment of FXA Creditors Administrative Claims On the later of (a) the Effective Date, (b) the date on which its 100% Administrative Claim becomes an Allowed, or (c) the date on which its Allowed Administrative Claim becomes payable under any agreement relating thereto, each Holder of an Administrative Claim against FXA will receive, in full and final satisfaction, settlement, release and discharge of, and in exchange for, such Allowed Administrative Claim, Cash equal to the unpaid portion of such Administrative Claim. Notwithstanding the foregoing, (i) any Administrative Claim based on a liability incurred by FXA in the ordinary course of business during the Chapter 11 Cases may be paid in the ordinary course of business in accordance with the terms and conditions of any agreement relating
4 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. thereto and (ii) any Administrative Claim may be paid on such other terms as may be agreed on between the Holder of such Claim and FXA or the Plan Administrator. Priority Tax Claims On the later of (a) the Effective Date or (b) the date on which its 100% Priority Tax Claim becomes an Allowed Priority Tax Claim, in the sole discretion of FXA, each Holder of an Allowed Priority Tax Claim against FXA will receive, in full and final satisfaction, settlement, release and discharge of, and in exchange for, such Allowed Priority Tax Claim, (i) Cash equal to the unpaid portion of such Allowed Priority Tax Claim, (ii) treatment in any other manner such that its Allowed Priority Tax Claims will not be impaired pursuant to section 1124 of the Bankruptcy Code, including payment in accordance with the provisions of section 1129(a)(9)(C) of the Bankruptcy Code, or (iii) such other treatment as to which FXA or the Plan Administrator and such Holder have agreed upon in writing. Class 1 –FXA Non-Tax On (a) the Effective Date if such Non-Tax Priority Claim against FXA 100% Priority Claims is an Allowed Non-Tax Priority Claim on the Effective Date or (b) the Estimated Amount: Quarterly Distribution Date following the date on which such Non-Tax Priority Claim becomes an Allowed Non-Tax Priority Claim, each $165,000 Holder of an Allowed Class 1 Non-Tax Priority Claim against FXA will receive, in full and final satisfaction, release and discharge of, and in exchange for, such Allowed Class 1 Non-Tax Priority Claim, Cash equal to the unpaid portion of such Allowed Class 1 Non-Tax Priority Claim in accordance with the allocation set forth in Section 5.16 of the Plan. Class 2 –FXA Other Secured On the Effective Date, each Holder of an Allowed Class 2 Other 100% Claims Secured Claim against FXA will receive, in full and final satisfaction, Estimated Amount: settlement, release and discharge of, and in exchange for, such Allowed Class 2 Other Secured Claim, one of the following $120,000 Distributions: (i) the payment of such Holder's Allowed Class 2 Other Secured Claim in full, in Cash; (ii) the sale or disposition proceeds of the property securing such Allowed Class 2 Other Secured Claim to the extent of the lesser of the amount of such Allowed Other Secured Claim and the value of the interests in such property; (iii) the surrender to the Holder or Holders of such Allowed Class 2 Other Secured Claim of the property securing such Claim; or (iv) such other Distributions as will be necessary to satisfy the requirements of chapter 11 of the Bankruptcy Code. Class 3 –FXA Secured The Secured Lender Claims against FXA will be allowed to the extent N/A Lender Claims provided in the Early Payment Order, the terms and conditions of Estimated Amount: which are incorporated by reference in the Plan, and such Allowed Secured Lender Claims against FXA, to the extent not paid in cash $704.0717.5 million prior to the Effective Date or estimated at zero pursuant to the Early Payment Order, will be paid the full amount set forth in and required to be paid by the Early Payment Order. In addition, the Secured Lenders will have the benefit of the releases to the full extent contemplated by paragraph 8 of the Early Payment Order and Section 10.2 of the Plan.
Class 4 –FXA Senior On the Effective Date, based on the agreements and settlement set N/A Subordinated Note Claims forth in the Plan, each Holder of an Allowed Class 4 FXA Senior Estimated Amount: Subordinated Note Claim will waive its share of the FXA General Unsecured Claims Distribution in return for the releases set forth in $397.4 million
5 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. Sections 10.2(a) and (b) of the Plan. Class 5(a) –FXA General On the Effective Date, each Holder of an Allowed Class 5(a) FXA 35%2 Unsecured Claims General Unsecured Claim will receive, in full and final satisfaction, Estimated Amount: settlement, release and discharge of, and in exchange for, such Allowed Class 5(a) FXA General Unsecured Claim and any and all $140.7 million to $180.7 Other Related Claims, its Pro Rata share of the FXA General million Unsecured Claim Distribution. Class 5(b) –Related Claims On the Effective Date, pursuant to Section 6.4 of the Plan, each 0% Allowed Class 5(b) Related Claim against FXA will be subordinated and will receive no Distribution from the FXA Distributive Assets unless and until such time as all Holders of Allowed FXA General Unsecured Claims have been paid in full; provided, however, that any hHolder of an RCM Related Claim that provides an RCM Related Claim Subordination Form in accordance with Section 6.6(c) of the Plan will, on account of its RCM Securities Customer Claim or RCM FX/Unsecured Claim (if Allowed), receive its applicable share of the RCM Distribution Reserve as more fully set forth in Section 6.6(c) of the Plan. Class 6 –FXA Convenience On the Effective Date, each Holder of an Allowed Class 6 FXA 40% Claims Convenience Claim will receive, in full and final satisfaction, Estimated Amount: settlement, release and discharge of, and in exchange for, such Allowed Class 6 FXA Convenience Claim, Cash equal to 40% of its $12.5 million Allowed Class 6 FXA Convenience Claim. Holders of Allowed Class 6 FXA Convenience Claims will not receive any interest in the Litigation Trust described in section 5.7 of the Plan. Class 7 –FXA Subordinated No Holder of a Class 7 Subordinated Claim against FXA will be 0% Claims entitled to, nor will it receive or retain, any property or interest in property on account of such Class 7 Subordinated Claim. Treatment of RCM Creditors Administrative Claims As is more fully set forth in and governed by the RCM Settlement 100% Agreement and applicable provisions of the Bankruptcy Code, on the later of (a) the Effective Date, (b) the date on which its Administrative Claim becomes Allowed, or (c) the date on which its Administrative Claim becomes payable under any agreement relating thereto, each Holder of an Allowed Administrative Claim will receive, in full and final satisfaction, settlement, release and discharge of, and in exchange for, such Administrative Claim, Cash equal to the unpaid portion of such Allowed Administrative Claim. Notwithstanding the foregoing, (i) any Administrative Claim based on a liability incurred by RCM in the ordinary course of business during the Chapter 11 Cases may be paid in the ordinary course of business in accordance with the terms
2 The ranges of claims and recoveries for Holders of General Unsecured Claims at FXA are subject to material deviations and may be significantly lower due to (i) the alleged administrative expenses incurred in trading activity post-bankruptcy and (ii) a dispute with a related entity in Japan (Japan KK) concerning ownership of, (ii) disputes with certain Japanese customers regarding the entitlement to a significant portion of FXA cash. FXA commenced a turnover action against Japan KK on October 5, 2006 to require Japan KK to turn certain cash assets over to FXA's cash that is held in Japan, (iii) the alleged administrative expenses of customers that assert that they made post-petition deposits and (iv) the alleged claims of certain customers that they hold secured claims or are otherwise entitled to preferred treatment under various theories, including constructive trust, unjust enrichment and similar theories. See Section IV.F –"Effects of Chapter 11 Filing on FXA Creditors."
6 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. and conditions of any agreement relating thereto and (ii) any Administrative Claim may be paid on such other terms as may be agreed on between the Holder of such Claim and the RCM Trustee. Priority Tax Claims As is more fully set forth in and governed by the RCM Settlement 100% Agreement and applicable provisions of the Bankruptcy Code, on the later of (a) the Effective Date or (b) the date on which its Priority Tax Claim becomes an Allowed Priority Tax Claim, in the sole discretion of the RCM Trustee, each Holder of an Allowed Priority Tax Claim against RCM will receive, in full and final satisfaction, settlement, release and discharge of, and in exchange for, such Allowed Priority Tax Claim, (i) Cash equal to the unpaid portion of such Allowed Priority Tax Claim, (ii) treatment in any other manner such that its Allowed Priority Tax Claims will not be impaired pursuant to section 1124 of the Bankruptcy Code, including payment in accordance with the provisions of section 1129(a)(9)(C) of the Bankruptcy Code, or (iii) such other treatment as to which the RCM Trustee and such Holder have agreed upon in writing. Class 1 –RCM Non-Tax As is more fully set forth in and governed by the RCM Settlement 100% Priority Claims Agreement and applicable provisions of the Bankruptcy Code, on (a) Estimated Amount: the Effective Date if such Class 1 Non-Tax Priority Claim is an Allowed Class 1 Non-Tax Priority Claim against RCM on the $90,000 Effective Date or (b) the Quarterly Distribution Date following the date on which such Class 1 Non-Tax Priority Claim becomes an Allowed Class 1 Non-Tax Priority Claim, each Holder of an Allowed Class 1 Non-Tax Priority Claim against RCM will receive, in full and final satisfaction, release and discharge of, and in exchange for, such Allowed Class 1 Non-Tax Priority Claim, Cash equal to the unpaid portion of such Allowed Class 1 Non-Tax Priority Claim in accordance with the allocation set forth in Section 5.16 of the Plan. Class 2 –RCM Other Secured As is more fully set forth in and governed by the RCM Settlement 100% Claims Agreement and applicable provisions of the Bankruptcy Code, on the Estimated Amount: Effective Date, each Holder of an Allowed Class 2 Other Secured Claim against RCM will receive, in full and final satisfaction, $110.4 million settlement, release and discharge of, and in exchange for, such Allowed Other Secured Claim, one of the following Distributions: (i) the payment of such Holder's Allowed Other Secured Claim in full, in Cash; (ii) the sale or disposition proceeds of the property securing such Allowed Other Secured Claim to the extent of the value of the interests in such property; (iii) the surrender to the Holder or Holders of such Allowed Other Secured Claim of the property securing such Claim; or (iv) such other Distributions as will be necessary to satisfy the requirements of chapter 11 of the Bankruptcy Code. Class 3 –RCM FX/Unsecured Subject to section 6.4 of the Plan, as is more fullyset forth in and 37.6% Claims governed by the RCM Settlement Agreement, on the Effective Date, Estimated Amount: each Holder of an Allowed Class 3 RCM FX/Unsecured Claim will receive, in full and final satisfaction, settlement, release and discharge $985.6 million of, and in exchange for, such Allowed RCM FX/Unsecured Claim, its applicable share (as more fully set forth in the RCM Settlement Agreement) of (A) the RCM FX/Unsecured Claims Distribution and (B) unless the Holder elects not to assign its RCM Related Claims to the Litigation Trust and to release its RCM Related Claims against any Refco Entity that is not a Debtor in the chapter 11 Cases, its applicable share of the RCM Cash Distribution in the amount of approximately $460 million (subject to adjustment as set forth in the Plan) and certain 7 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. other property, which will include, unless such Holder affirmatively elects otherwisenot to receive RCM BAWAG Proceeds prior to the Voting Deadline, the RCM BAWAG Proceeds; provided, however, that Claims against RCM held by any Debtor will receive no distribution consistent with the settlement among RCM and the Debtors contained in and implemented by the Plan. See Section VIII.A.10 –"Claims of Debtors Against RCM." Class 4 –RCM Securities Subject to section 6.4 of the Plan, as is more fully set forth in and 85.4% Customer Claims governed by the RCM Settlement Agreement, on the Effective Date, Estimated Amount: each Holder of an Allowed Class 4 RCM Customer Claim will receive, in full and final satisfaction, settlement, release and discharge of, and $2,793.8 million in exchange for, such Allowed RCM Customer Claim, its applicable share (as more fully set forth in the RCM Settlement Agreement) of (A) the RCM Securities Customer Claims Distribution and (B) unless the Holder elects not to release assign its RCM Related Claims to the Litigation Trust and to release its RCM Related Claims against any Refco Entity that is not a Debtor in the chapter 11 Cases, its applicable share of the RCM Cash Distribution in the amount of approximately $460 million (subject to adjustment as set forth in the Plan) and certain other property, which will include, unless such Holder affirmatively elects otherwisenot to receive RCM BAWAG Proceeds prior to the Voting Deadline, the RCM BAWAG Proceeds. Class 5 –RCM Leuthold Subject to Section 6.4 of the Plan, as is more fully set forth in and 100% Metals Claims governed by the RCM Settlement Agreement, on the Effective Date, Estimated Amount: each Holder of an Allowed Class 5 RCM Leuthold Metals Claim will receive, in full and final satisfaction, settlement, release and discharge $15.6 million of, and in exchange for, such Allowed Class 5 RCM Leuthold Metals Claim, its Pro Rata share of the RCM Leuthold Metals Claim Distribution. Class 6 –RCM FX/Unsecured On the Effective Date, each Holder of an Allowed Class 6 RCM 60% Convenience Claims FX/Unsecured Convenience Claim will receive, in full and final Estimated Amount: satisfaction, settlement, release and discharge of, and in exchange for, such Allowed Class 6 RCM FX/Unsecured Convenience Claim, Cash $2.43 million equal to 60% of its Allowed Class 6 RCM FX/Unsecured Convenience Claim. Holders of Allowed Class 6 RCM FX/Unsecured Convenience Claims will not receive any interest in the Litigation Trust described in Section 5.7 of the Plan. Class 7 –RCM Securities On the Effective Date, each Holder of an Allowed Class 7 RCM 100% Customer Convenience Securities Customer Convenience Claim will receive, in full and final Claims satisfaction, settlement, release and discharge of, and in exchange for, Estimated Amount: such Allowed Class 7 RCM Securities Customer Convenience Claim, Cash equal to 100% of its Allowed Class 7 RCM Securities Customer $0.333 million Convenience Claim. Holders of Allowed Class 7 RCM Securities Customer Convenience Claims will not receive any interest in the Litigation Trust described in Section 5.7 of the Plan. Class 68 –Related Claims On the Effective Date, pursuant to Section 6.4 of the Plan, each 0% Allowed Class 68 Other Related Claim against RCM will be subordinated and will receive no Distribution from RCM unless and until such time as all Holders of Allowed RCM FX/Unsecured Claims, Allowed RCM Securities Customer Claims and Allowed RCM Leuthold Metals Claims have been paid in full. Class 79 –RCM Subordinated No Holder of a Class 79 Subordinated Claim against RCM will be 0%
8 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. Claims entitled to, nor will it receive or retain, any property or interest in property on account of such Class 79 RCM Subordinated Claim. On the Effective Date, all Class 79 RCM Subordinated Claims will be cancelled and extinguished.
II. SETTLEMENTS EMBODIED IN THE PLAN
The cornerstone of the Plan is a series of interdependent settlements and compromises (each, a "Settlement" and, collectively, the "Settlements") of various debtor-creditor, inter-debtor, and inter-creditor disputes (each, a "Dispute" and, collectively, the "Disputes"). The Settlements, which are the product of protracted negotiations between and among various constituencies, including the Debtors, the RCM Trustee, the Committees, the Secured Lender Agent, the Senior Subordinated Note Indenture Trustee, certain Holders of Secured Lender Claims and Senior Subordinated Note Claims, certain customers of RCM, and other creditors of RCM and the Debtors (collectively, the "Settlement Negotiation Parties") and their respective financial and legal professionals, are reflected in the relative recoveries of the various creditor groups under the Plan and are designed to achieve a global, consensual resolution of these Chapter 11 Cases. The Settlement Negotiation Parties believe that settlement of the Disputes is the best way to ensure a prompt and fair resolution of the Chapter 11 Cases. Although litigation could produce somewhat different absolute and relative recoveries from those embodied in the Plan, the Settlement Negotiation Parties believe that such litigation would be extraordinarily expensive and would not be finally resolved for years, thus delaying and potentially materially reducing Distributions to all creditors. Moreover, the Settlement Negotiation Parties believe that the recoveries provided to Holders of General Unsecured Claims of the Chapter 11 Debtors under the Plan are substantially higher than the lowest point in the range of reasonable litigation outcomes in the absence of the Settlements, based on the assets and liabilities of the Contributing Debtors on a stand-alone basis. Key Settlements reached with the RCM Trustee, the Committees, the Secured Lender Agent, the Senior Subordinated Note Indenture Trustee and certain Holders of Secured Lender Claims and Senior Subordinated Note Claims have paved the way for the Plan, which will enable maximum distributions to all of the Chapter 11 Debtors' creditors, without the cost and delay of litigation.
The Disputes being resolved by the Settlements include, among others:
1. Whether certain property held by or on behalf of RCM constitutes property of the RCM Estate; whether RCM is a "stockbroker" as defined in section 101(53A) of the Bankruptcy Code, and the members of the Moving Customer Group (as defined below) are "customers" of RCM as defined in section 741(2) of the Bankruptcy Code; whether RCM's chapter 11 case is required to be converted to a case under chapter 7 because RCM is not eligible to be a debtor under chapter 11 of the Bankruptcy Code; and whether the members of the Moving Customer Group are entitled under section 752 of the Bankruptcy Code to enforce their claims as customers to "customer property" as defined in section 741(4) of the Bankruptcy Code (the "RCM Dispute");
2. Whether the RCM Intercompany Claims rank senior to, junior to, or pari passu with the Secured Lender Claims and the Senior Subordinated Note Claims as a result of contractual subordination or equitable subordination under section 510(c) of the Bankruptcy Code (the "RCM Claims Priority Dispute");
3. Whether (i) the Senior Subordinated Note Claims and (ii) the $231,262,500 partial redemption payment made on the Senior Subordinated Notes on September 16, 2005 (the "Notes Redemption Payment") are subject to avoidance, in whole or in part, under applicable state fraudulent conveyance laws and sections 544(a) or (b) and (as to the Notes Redemption Payment) 548(a)(1)(b) of the Bankruptcy Code on the grounds that the bulk of the proceeds of the Senior Subordinated Notes was used to finance a leveraged recapitalization and distributed to equity holders at a time when the obligors and guarantors of such Claims were, or were rendered, insolvent or undercapitalized (the "Fraudulent Conveyance/Obligations Dispute");
4. Whether the Notes Redemption Payment of $231,262,500, which was made in the ninety (90) days prior to the Petition Date (as defined below), constitutes a voidable preference under section 547(b)
9 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. of the Bankruptcy Code and, if so, whether the failure to return such payment to the appropriate Debtor's estate warrants disallowance of the Senior Subordinated Note Claims under section 502(d) of the Bankruptcy Code even if the current Holders of such Claims were not the entities receiving the preferential payments (the "Preference Dispute");
5. Whether and to what extent the estates of the Debtors should be treated separately or substantively consolidated for purposes of determining the rights of, and making payments to, Holders of Claims (the "Substantive Consolidation Dispute");
6. Whether and in what amount Claims asserted between and among the Debtors and RCM will be allowed (the "Intercompany Claims Disputes");
7. Whether and to what extent the liability for Administrative Claims and Priority Claims asserted against the Debtors and/or RCM will be allocated between and among the Debtors and RCM (the "Administrative and Priority Claims Dispute"); and
8. Whether and to what extent each of the Debtors and RCM are entitled to share in the BAWAG Proceeds.
While the Settlement Negotiation Parties disagree over the relative strengths and weaknesses of the claims and potential defenses involved in the Disputes and, accordingly, disagree as to how those claims and defenses would fare if litigated to final judgment, they do agree that resolution of the Disputes is crucial to confirmation of any plan and that resolution through litigation would result in substantial delay and expense, to the detriment of all stakeholders. The proposed treatment for the various Classes, which reflects the compromises and settlements embodied in the Plan, gives due consideration to the strengths and weaknesses of the parties' potential litigation positions, and the Distribution to any particular creditor is no better than the best possible judicial determination in favor of such creditor and no worse than the worst possible outcome that would be achieved if such disputes were resolved by judicial determination. Accordingly, the Settlement Negotiation Parties believe that the compromises and settlements embodied in the Plan are within the range of likely litigation results.
To approve a compromise or settlement, a court must find that it is fair and equitable and in the best interests of the bankruptcy estates. See Protective Comm. for Indep. Stockholders of TMT Trailer Ferry, Inc. v. Anderson, 390 U.S. 414, 424 (1968). In making that determination, a court must consider the probability of success in the litigation; the complexity of the litigation; the expense, inconvenience and delay necessarily attending it; and the paramount interests of the creditors, with a proper deference to their reasonable views. The decision to settle ordinarily is a matter of sound business judgment and, after reviewing all relevant facts, a court should approve a settlement unless it falls below the "lowest point in the range of reasonableness." See L M Ericsson Telecomm., Inc. v. Hessen (In re Teltronics Servs., Inc.), 762 F.2d 185, 189 (2d Cir. 1985).
In determining whether to approve a compromise and settlement, a court is neither required nor permitted to determine the ultimate merits of the underlying disputes. Thus, in considering whether to approve the Settlements, the Court need not and will not actually resolve, among other things, the relative priorities of the RCM Intercompany Claims, the Senior Subordinated Note Claims and the Secured Lender Claims; whether the Senior Subordinated Note Claims are avoidable under applicable fraudulent conveyance laws; whether the Holders of Senior Subordinated Note Claims received voidable preferences; whether substantive consolidation would be approved following a trial on the merits; and whether and in what amount Claims asserted between and among the Debtors and RCM would be allowed.
1. Settlement of the RCM Dispute
The RCM Dispute involves disputes raised in the RCM Estate Property Litigation (see Section IV.B.3 – "RCM Estate Property Litigation") and the RCM Conversion Motion (see Section IV.B.4 –"RCM Conversion Motion"). The RCM Dispute is resolved by the Settlement Agreement, by and among RCM and certain customers and creditors of RCM signatories thereto, dated as of June 29, 2006 (as amended, the "RCM Settlement Agreement"), and the other Settlements embodied in the Plan. The RCM Settlement Agreement, the terms of which are expressly incorporated into the Plan (see Section VIII.B.20 –"RCM Settlement Agreement and Conversion"), was approved by Bankruptcy Court, subject to the Assets in Place Adversary (as defined below), pursuant to order entered September 15, 2006. 10 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. The parties to the RCM Settlement Agreement consist of the RCM Trustee and three creditor constituencies (collectively, the "Settling Parties"): parties purporting to hold securities customer claims against RCM (the "Settling Securities Customers"); parties purporting to be foreign exchange ("FX") customers of RCM (the "Settling FX Customers"); and Leuthold Funds, Inc. and Leuthold Industrial Metals Fund, L.P. (together, "Leuthold"). The RCM Settlement Agreement is the product of negotiation among Holders of RCM FX/Unsecured Claims and Holders of RCM Securities Customer Claims, and currently has the support of approximately 55% of Holders of RCM FX/Unsecured Claims and approximately 85% of Holders of RCM Securities Customer Claims, representing an aggregate of approximately 51% of the outstanding claims asserted against RCM.
Assuming that the securities held by RCM are valued as of March 6, 2006, and allowed RCM Securities Customer Claims and RCM FX/Unsecured Claims total approximately $2.7 billion and $890 million, respectively, the RCM Settlement Agreement would provide distributions from RCM's assets (excluding any contingent recoveries on intercompany claims or litigation against third parties) to Holders of RCM Securities Customer Claims exceeding 70% of the value of their claims, and distributions to Holders of RCM FX/Unsecured Claims exceeding 26% of the value of their claims. Also under the RCM Settlement Agreement, Leuthold would receive its metals or the proceeds of sale thereof and, for any of its remaining claims, share in distributions as a Holder of RCM FX/Unsecured Claims. Further, RCM creditors will share recoveries on intercompany and third-party claims in accordance with a procedure set forth in the RCM Settlement Agreement, with provisions that adjust the sharing mechanism according to actual values of the securities portfolio at the time of the initial distribution, and the actual amounts of allowed claims from time to time.
The RCM Settlement Agreement establishes two primary sources of recovery: "Assets in Place" and "Additional Property" (both as defined in the RCM Settlement Agreement). Assets in Place consist of the proceeds from the SPhinX Settlement (as defined below) and cash, securities and certain other assets currently held by RCM; provided, however, that although the proceeds from the SPhinX Settlement are denominated as Assets in Place, such proceeds may not be used, distributed, assigned or encumbered until Final, non-appealable order approving the SPhinX settlement agreement. As of July 31, 2006, the Assets in Place had a value of approximately $2.407 billion. The Additional Property consists mainly of claims against Debtors, which pursuant to the Settlements embodied in the Plan will be resolved with a payment to RCM in the amount of approximately $460 million (subject to adjustment as set forth in the Plan) and a transfer to RCM of certain other Debtor property (see Section VIII.A.1.c –"Impaired Classes of Claims –Contributing Debtors"); the Debtors' release of claims held against RCM; claims against third parties; outstanding receivables; and other intangible assets. The Assets in Place will be used to create reserves for Administrative Claims and Priority Claims, and to make payment of the initial distributions described below.
The RCM Settlement Agreement essentially treats the Assets in Place as though the bulk of the assets constitute "customer property," as defined in section 741(4) of the Bankruptcy Code, while treating a smaller percentage of such assets as being available for distribution to Holders of RCM FX/Unsecured Claims in the event of conversion. The RCM Settlement Agreement provides for an initial distribution to Holders of RCM FX/Unsecured Claims of $221 million from Assets in Place, which is derived from (i) an absolute distribution of $97.4 million (a compromise based on the quantum that might be available to Holders of RCM FX/Unsecured Claims out of assets that do not constitute "customer property" under section 741(4) of the Bankruptcy Code), and (ii) an advance from customer property in the RCM Estate of approximately $123.6 million. That advance is repaid with 12% interest through the arrangements that govern subsequent distribution of proceeds of Additional Property, if and when received.
Among other things, the RCM Settlement Agreement is designed to resolve a dispute regarding the allocation of assets of the RCM Estate and establish an agreed mechanism for allocating those assets among Holders of RCM Securities Customer Claims, Holders of RCM FX/Unsecured Claims and Leuthold, whether as part of a global plan of reorganization for the Chapter 11 Debtors or a chapter 7 distribution process. Further, the RCM Settlement Agreement is intended to defer conversion of the RCM chapter 11 case to a case under chapter 7 and, if efforts to consummate the RCM Settlement Agreement fail, cause the parties to convert to chapter 7 on a more-efficient, significantly pre-planned basis.
The Rogers Settlement Joinder. The RCM Settlement Agreement provides that unless, if the RCM Trustee was unable to reach a settlement with Rogers Raw Materials Fund, L.P. ("RRMF") and Rogers International Raw Materials Fund, L.P. ("RIRMF" and, together with RRMF, the "Rogers Funds") joined as parties to the RCM Settlement Agreement within a specified period, the RCM Trustee would be obligated to seek to convert RCM's 11 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. chapter 11 case to a case under chapter 7. On July 20, 2006, the RCM Trustee entered into a settlement with the Rogers Funds pursuant to which the Rogers Funds elected to participate in the RCM Settlement Agreement (the "Rogers Settlement Joinder"), thereby avoiding conversion of the RCM chapter 11 case. The Rogers Settlement Joinder was approved by the Bankruptcy Court, subject to the Assets in Place Adversary, by order entered on September 15, 2006.
Under the Rogers Settlement Joinder, RIRMF will receive treatment as a Holder of an allowed RCM Securities Customer Claim in the amount of $75,256,083, and an allowed RCM FX/Unsecured Claim in the amount of $459,265; and RRMF will receive treatment as a Holder of an allowed RCM Securities Customer Claim in the amount of $287,627,440, and an allowed RCM FX/Unsecured Claim in the amount of $9,691,739. These claim values correlate to the Rogers Funds' RCM account statements on or about the Petition Date and to the claim schedules filed by RCM. Under the RCM Settlement Agreement, the assets of the RCM Estate claimed by the Rogers Funds are treated as Assets in Place, subject to the Assets in Place Adversary.
In addition, the Rogers Funds have asserted claims against Refco, LLC for the same liability settled under the RCM Settlement Agreement. If the Chapter 7 Trustee (as defined below) pays any Rogers Funds Claims (as defined below), with the result that the Rogers Funds have received and been paid and satisfied in full the total amount, without duplication, of all of the Rogers Funds Claims allowed in favor of the Rogers Funds in both the Refco, LLC and the RCM cases, then, to the extent of such payment by the Chapter 7 Trustee, (a) the Chapter 7 Trustee will thereby become subrogated to any rights of the holders of the Rogers Funds Claims to be treated as Holders of RCM Securities Customer Claims under the RCM Settlement Agreement, and (b) the Chapter 7 Trustee will thereupon be entitled to the same treatment as the holders of the Rogers Funds Claims would have had to be treated as a Holder of RCM Securities Customer Claims under the RCM Settlement Agreement without subordination or other disallowance of his subrogation claim as a RCM Securities Customer Claim. If the RCM Case is converted to a chapter 7 case to be administered under subchapter III of chapter 7, Refco, LLC's status as an affiliate of RCM will not affect the priority of the Rogers Funds Claims, whether asserted by the holders of the Rogers Funds Claims or, to the extent subrogated as described in clause (a) above, by the Chapter 7 Trustee. Under no circumstance will RCM's aggregate liability to the Chapter 7 Trustee in respect of the Chapter 7 Trustee's subrogation exceed what would have been RCM's liability to the holders of the Rogers Funds Claims, including with respect to postpetition interest and attorneys' fees, in the absence of such subrogation. Nothing described above prevents or affects (i) the Chapter 7 Trustee's rights to claim that any amounts are owed to the Chapter 7 Trustee by the RCM estate under any theory of recovery arising from or relating to any securities deposited by the Rogers Funds or any claims allowed against Refco, LLC in favor of the Rogers Funds or (ii) the RCM Trustee's rights to object to or defend against any such claims. The term "Rogers Funds Claims," as used in the foregoing provisions of this paragraph, includes, to the extent allowed, any Rogers Funds Claims for postpetition interest and attorneys' fees.
The Rogers Funds asserted claims against Refco, LLC (the "Rogers Funds LLC Claims") relating to the same transfers of assets that formed the basis for the Rogers Funds' claims against RCM, which claims were settled as to RCM under the RCM Settlement Agreement. In addition, claims against Refco, LLC for contribution or indemnification were asserted by Beeland Management Company, L.L.C. ("Beeland"), the Rogers Funds' managing agent and general partner, as well as Walter Thomas Price and Allen Goodman, Beeland's managing members (the "Rogers Related Claims"). The Chapter 7 Trustee (as defined below) objected to the Rogers Funds LLC Claims and the Rogers Related Claims.
A trial on the Chapter 7 Trustee's objection to the Rogers Funds LLC Claims was held on September 26-28 and October 3, 2006. After a full trial had been conducted, examinations of all witnesses closed, all evidence introduced into the record, and closing arguments made, and immediately before the Court was to render its decision, the Chapter 7 Trustee and the Rogers Funds agreed to a settlement (the "Rogers-LLC Settlement"), which resolves the Rogers Funds LLC Claims and the Rogers Related Claims, by providing for, among other things: (i) the withdrawal of the Rogers Funds LLC Claims and the Rogers Related Claims, and (ii) the allowance against Refco, LLC of a single allowed customer net equity claim allowable under section 766(h) of the Bankruptcy Code in the aggregate amount of $30 million. The Chapter 7 Trustee, the Rogers Funds parties and the RCM Trustee also agreed to the mutual release of any other related claims between or among the parties, including but not limited to the RCM Trustee's waiver of the right (expressly provided for in the RCM settlement) to seek to reduce the distributions to the Rogers Funds under the RCM settlement by the amount of the claim allowed against Refco, LLC. The Roger-LLC Settlement was approved by the Bankruptcy Court on October 11, 2006.
12 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. Approval of the RCM Settlement Agreement and the Rogers Settlement Joinder and Determinations in Respect of Assets in Place. On September 15, 2006, the Bankruptcy Court entered Orders approving both the RCM Settlement Agreement and the Rogers Joinder Settlement. Those settlement agreements set forth the intended treatment of the Assets in Place. The RCM Settlement Agreement, although approved, would have failed of a condition subsequent had the Bankruptcy Court not entered a declaration that the Assets in Place are property of RCM alone.
Prior to seeking approval of the RCM Settlement Agreement, the RCM Trustee sought approval from the Bankruptcy Court regarding service of the motion for approval of the RCM Settlement Agreement on parties in interest. Pursuant to an Order entered by the Bankruptcy Court on June 30, 2006, in addition to serving notice of the RCM Settlement Agreement on the parties listed on the "Service List" maintained in these Chapter 11 Cases, the RCM Trustee (i) served, by first class mail, notice of the RCM Settlement Agreement on all other known creditors of RCM, (ii) posted the RCM Settlement Agreement and corresponding motion to approve the same on an internet website maintained by the RCM Trustee, and (iii) published notice of the RCM Settlement Agreement in each of the Wall Street Journal (Global Edition), New York Times, Financial Times, USA Today, Times of London and Singapore Straits Times. In its Order approving the RCM Settlement Agreement, the Bankruptcy Court found that "[a]ny right that any … party in interest may otherwise have to challenge any finding in this paragraph [pertaining to Assets in Place] as to that party in interest is preserved so long as the party had timely lodged an objection to the [RCM] Settlement Agreement." (emphasis added).
Adversary Proceeding to Establish Assets in Place. OnSeparately, in order to quiet title to the Assets in Place in respect of certain objectors to the RCM Settlement Agreement, on September 7, 2006, the RCM Trustee commenced an adversary proceeding (the "Assets in Place Adversary") against the Debtors, certain non-Debtors and the Chapter 7 Trustee (collectively, the "Adversary Defendants") seeking declarations that (i) none of the Adversary Defendants have a property interest in the Assets in Place (as defined in the RCM Settlement Agreement), (ii) the Assets in Place are property of RCM and (iii) each of the Adversary Defendants is forever barred from asserting that any person other than RCM has a property interest in the Assets in Place. The RCM Settlement Agreement will fail of a condition subsequent unlessOn October 11, 2006, the Bankruptcy Court enters a declarationentered a Declaratory Judgment Order finding that the Assets in Place are the property of RCM alone. In that Order, the Bankruptcy Court affirmed its previous finding in respect of parties that did not object to the RCM Settlement Agreement. Specifically, the Bankruptcy Court found that:
In connection with the Assets in Place Adversary, the RCM Trustee has served discovery requests on each of the Adversary Defendants, requesting that such defendants admit or deny that specified accounts are property of RCM. If any of the Adversary Defendants denies that any such account is property of RCM, then such defendant is requested to produce documents supporting his denial. The Adversary Defendants have responded with limited denials, solely to the extent that the specified accounts contain property related to the Rogers Funds Claims if the Court finds that the Rogers Funds are creditors of Refco, LLC with respect to such property. The Creditors' Committee has intervened in the Assets in Place Adversary and reserved the right to serve an answer and counterclaims and to participate at the trial of the Assets in Place Adversary.
The Chapter 7 Trustee and the Debtors have taken the position that in the event the Rogers Funds' securities are determined by the Bankruptcy Court to have been intended to be deposited with Refco, LLC by the Rogers Funds, such securities should be property of Refco, LLC, and should not constitute Assets in Place of RCM.
Each of the assets listed on Exhibit A hereto (the "Assets in Place") is property of Refco Capital Markets, Ltd. ("RCM") and is an Asset in Place for purposes of the Settlement Agreement dated as of June 29, 2006, as amended (the "Settlement Agreement"), among RCM and certain of its securities customers and creditors, subject only to the rights of (a) the appellants from the order approving the settlement agreement, dated April 26, 2006 (the "SPhinX Settlement"), of the adversary complaint filed by the Official Committee of Unsecured Creditors of Refco Inc., et al., against SPhinX Managed Futures Funds SPC and certain of its affiliates (Adversary Proc. No. 05-03331 (RDD)) to claim, as a final result of their appeals if successful, that the proceeds of the SPhinX Settlement are not Assets in Place for purposes of the Settlement Agreement and (b) the holders of those claims expressly reserved in paragraph 12 of the Court's order dated September 15, 2006, approving the Settlement Agreement to claim that the assets expressly reserved for them under such paragraph 12 are not Assets in Place for purposes of the Settlement Agreement.
13 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. (emphasis added).
Pursuant to the above described Orders, any claim or cause of action asserting that any Assets in Place is not the property of RCM, including any claim or cause of action in the nature of constructive trust, is barred and can no longer be pursued against RCM, except where expressly reserved for in such Orders. Such reservations exist solely for the following adversary proceedings and appeals (the "Pending Assets in Place Adversaries"): (i) Living Water Fund L.P. v. Refco Capital Markets, Ltd., Adv. Proc. No. 06-01318 (RDD) (Bankr. S.D.N.Y.), (ii) Marc S. Kirschner v. Bencorp Casa de Bolsa, C.A., Adv. Proc. No. 06-01745 (RDD) (Bankr. S.D.N.Y.), (iii) Forex Trading, L.L.C. v. Refco F/X Associates, L.L.C., Adv. Proc. No. 06-01748 (RDD) (Bankr. S.D.N.Y.), and (iv) the appeal of the settlement in The Official Committee Of Unsecured Creditors Of Refco Inc. v. Sphinx Managed Futures Fund SPC, Adv. No. 05-03331 (RDD) (Bankr. S.D.N.Y.). Accordingly, the Assets in Place or the value thereof upon liquidation, subject only to the results of the Pending Assets in Place Adversaries, will be distributed pursuant to the terms of the Plan and the RCM Settlement Agreement.
2. Settlement of the RCM Claims Priority Dispute
The RCM Claims Priority Dispute is a dispute over whether the Intercompany Claims asserted by RCM against the Debtors are senior to, pari passu with, or junior to the Senior Subordinated Note Claims and the Secured Lender Claims. Under the terms of the Credit Agreement (as defined below), the obligors and guarantors of the Secured Lender Claims (which did not include RCM) were not permitted to incur intercompany debt to another Refco entity (such as RCM) unless that entity either was an obligor or guarantor of the Secured Lender Claims or expressly subordinated its claims to the Secured Lender Claims. Thus, under the Credit Agreement, the intention was to allow obligors and guarantors of the Secured Lender Claims to incur intercompany debt to non-obligors and non-guarantors such as RCM only if such debt was expressly subordinated to the Secured Lender Claims. Under the terms of the Senior Subordinated Note Indenture, to which RCM also was not a party, any indebtedness that by its terms was subordinate to other debt (such as the Secured Lender Claims) was to rank pari passu with the Senior Subordinated Note Claims even though it might otherwise fit within the definition of "Senior Indebtedness" under the Senior Subordinated Note Indenture. Moreover, in a prospectus dated April 8, 2005 (the "Notes Prospectus"), used in connection with the exchange of unregistered Senior Subordinated Notes for registered Senior Subordinated Notes, Holders of Senior Subordinated Notes (collectively, the "Noteholders") were advised that "as of November 30, 2004, the [Senior Subordinated N]otes and the guarantees ranked junior to approximately $798.0 million of our senior indebtedness, all of which would have consisted of borrowings under our senior credit facilities."
Notwithstanding the provisions of the Credit Agreement, certain Debtors who are obligors or guarantors of the Secured Lender Claims incurred significant intercompany indebtedness to RCM without requiring RCM to expressly subordinate its Claims and without requiring RCM to become an obligor or guarantor on the Secured Lender Claims. The RCM Trustee asserts that RCM was not a party to either the Credit Agreement or the Senior Subordinated Note Indenture, that it did not agree to subordinate its Claims and that these Claims of RCM are senior to the Senior Subordinated Notes and are entitled to be paid before any payments on the Senior Subordinated Notes or guarantees on the Senior Subordinated Notes.
As of the Petition Date, the gross amount of intercompany claims allegedly owing to RCM by obligors and guarantors on the Secured Lender Claims was approximately $608 million. Moreover, notwithstanding the statements in the Notes Prospectus that the only indebtedness senior to the Senior Subordinated Notes outstanding as of November 30, 2004, related to the Secured Lender Claims, there was in fact outstanding approximately $567 million intercompany debt to RCM at that time, thus suggesting either that RCM Claims were not intended to be senior to the Senior Subordinated Notes or that the Notes Prospectus was incorrect.
The Noteholders have asserted that notwithstanding RCM's apparent failure to expressly subordinate its Claims to the Secured Lender Claims (which would have rendered them, at best, pari passu with the Senior Subordinated Notes), the RCM Claims are subordinate to the Senior Subordinated Note Claims. In support of their position, the Noteholders assert, among other things, that: (1) under the terms of the Senior Subordinated Note Indenture, the RCM Claims do not fall within the definition of "Senior Indebtedness," either because such Claims are not for "money borrowed" or constitute "Customer Financing Indebtedness" under the Senior Subordinated Note Indenture, making RCM's failure to expressly subordinate its Claims irrelevant; (2) the Notes Prospectus evidences an intent that the RCM Claims not be senior to the Senior Subordinated Note Claims by failing to disclose the existence of $567 million of intercompany debt to RCM in existence on November 30, 2004; (3) the Senior Subordinated Note 14 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. Indenture only permits payments on intercompany claims in the absence of an event of default, demonstrating a lack of intent to treat such claims as senior; (4) RCM, being under common control with the parties to the Credit Agreement and the Senior Subordinated Note Indenture, knew about and is estopped from asserting that the RCM Claims are senior to the Senior Subordinated Note Claims; and (5) under section 510(c) of the Bankruptcy Code, the RCM Claims should be equitably subordinated to the Senior Subordinated Note Claims.
Moreover, the Noteholders have asserted that, regardless of the RCM Claims Priority Dispute, the Noteholders stand to collect the full amount of their Senior Subordinated Note Claims from Debtor entities that are guarantors under the Senior Subordinated Note Indenture, and which do not have any liability to RCM. In particular, the Noteholders have asserted that, among others, Refco Global Futures, Refco, LLC and FXA are guarantors that have small intercompany liabilities relative to their respective assets, and the RCM Claims Priority Dispute should not have any significant bearing on their ability to collect the full amount of their Senior Subordinated Note Claims, including interest accrued both pre-and post-petition. Nor would it alter their recovery, according to the Noteholders, whether the Secured Lender Claims had been satisfied by these same guarantor Debtors first because, under principles of subrogation, once the Secured Lender Claims are paid in full, the Debtor entities making such payments are subrogated to the rights of the Secured Lenders as secured creditors against other Debtor entities, thereby replenishing the value available to the Noteholders at Debtor entities with few intercompany claims.
The RCM Claims Priority Dispute is resolved by the Settlements embodied in the Plan, and the Plan Distributions reflect these Settlements.
3. Settlement of the Fraudulent Conveyance/Obligations Dispute
The Fraudulent Conveyance/Obligations Dispute is a dispute over whether and the extent to which the Senior Subordinated Note Claims and the Notes Redemption Payment may be avoided under applicable state and federal fraudulent conveyance statutes. As set forth in Section IV.A.7 –"Secured Lender Settlement," certain Lender Settlement Parties (as defined below) settled an analogous dispute with the Secured Lenders regarding whether and the extent to which the Secured Lender Claims (and the collateral securing them) and the $150 million partial repayment made to the Secured Lenders on January 24, 2005 (the "Term Loan Prepayment") may be avoided under applicable state and federal fraudulent conveyance statutes.
Pursuant to a series of transactions consummated in August 2004, THL Refco Acquisition Partners, an affiliate of Thomas H. Lee Partners, L.P., and its affiliates and co-investors (collectively, "THL") acquired a 57% equity stake in Refco Group (held through New Refco Group), with Refco Group Holdings, Inc. ("RGHI"), one of the two former owners of Refco Group, continuing to hold approximately 43% of Refco Group (also held through New Refco Group).3 The THL acquisition and accompanying recapitalization and related transactions (collectively, the "Acquisition") were leveraged, and substantial sums were borrowed by Refco Group and guaranteed by various of its affiliates in order to effectuate the Acquisition. Specifically, to fund the Acquisition, Refco Group issued the Senior Subordinated Notes in the original principal amount of $600 million and borrowed $800 million principal amount under a term loan (the "Bank Term Loan") from the Secured Lenders pursuant to the Credit Agreement. These funds, coupled with investment proceeds from THL of approximately $511 million, were used to (i) repay existing third-party, non-affiliate debt of approximately $387 million, (ii) pay transaction fees and expenses of the Acquisition of approximately $94 million and (iii) pay existing equity holders approximately $862 million in cash. Equity interests in Forstmann-Leff International, LLC also were transferred from Refco Group to RGHI in conjunction with the Acquisition, and $500 million in debt owing from RGHI was forgiven. Under the Credit Agreement, the Secured Lenders also provided a $75 million revolving working capital credit facility, which was never drawn.
Because the proceeds of the Senior Subordinated Notes were intended to be and in fact were used, at least in part, to fund distributions to equity holders in connection with the Acquisition, rather than being retained or used by the borrowers and guarantors for their own benefit, the holders of the Senior Subordinated Notes may be subject to suit under applicable fraudulent conveyance laws. In such a suit, the plaintiffs would seek to avoid the Senior
3 The corporate structure was subsequently changed in August 2005 when, among other things, THL and RGHI exchanged their interests in New Refco for shares of stock in Refco Inc., which is now the parent of New Refco Group, which in turn is the parent of Refco Group.
15 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. Subordinated Note Claims as well as the Notes Redemption Payment made to the Noteholders on September 16, 2005, on grounds that the Debtor obligors/guarantors (i) did not receive fair consideration or reasonably equivalent value (both being referred to as "Fair Consideration") from the Noteholders in exchange for the Senior Subordinated Note Claims because RGHI, an equity holder, received most of the proceeds, and (ii) (a) were, or were rendered by the Acquisition, insolvent; (b) had or, following the Acquisition, were left with unreasonably small capital; or (c) incurred or believed they would incur debts beyond their ability to pay as such debts become due (such insolvency, inadequate capitalization and inability to pay being referred to as "Financial Tests").
Assuming no actual intent to hinder, delay or defraud creditors, a transfer of property or incurrence of debt normally is not avoidable unless the debtor failed to receive Fair Consideration in exchange for the property transferred or debt incurred. Thus, if an obligation is incurred and secured in exchange for Fair Consideration, that obligation and the collateral securing it normally are not avoidable as fraudulent obligations or transfers. Moreover, satisfaction (such as repayment or redemption) of non-insider debt that was incurred for Fair Consideration also normally is not avoidable as a fraudulent conveyance.
Here, as in most leveraged transactions, the funds advanced by the Noteholders initially were transferred to and/or received by a Debtor, in this case Refco Finance Holdings LLC, which later merged with Refco Group. Moreover, as to any guaranty obligations of a Debtor, each such guaranty issued was subject to a so-called fraudulent conveyance savings clause, which purported to limit the liability on the guaranty to the greater of (i) the amount necessary to keep the guarantor from failing one or more of the Financial Tests and (ii) the value received, even indirectly, from the incurrence of the obligation. Accordingly, the Noteholders likely will argue that: (i) they gave, and the obligors received, the proceeds of the Senior Subordinated Notes, thereby satisfying the Fair Consideration requirement; (ii) it is inappropriate for the court to "collapse" the Senior Subordinated Notes transaction into the equity distribution and deem any part of the proceeds thereof to have been delivered by the Noteholders directly to RGHI because the Noteholders were unaware of the fraudulent transactions taking place at some of the Refco entities and did not believe, and had no reason to believe, that the Debtors were in danger of failing any of the Financial Tests; (iii) to the extent that the guarantors did not receive the proceeds of the Senior Subordinated Notes, they received indirect consideration from the Acquisition; (iv) to the extent the guarantors did not receive indirect consideration, they nevertheless could not have failed the Financial Tests as a result of the Acquisition and the Senior Subordinated Notes issuances because their liability was capped at whatever amount was necessary to keep the guaranties from triggering the Financial Tests; and (v) because the Senior Subordinated Notes were supported by Fair Consideration, their repayment or redemption is by definition supported by Fair Consideration and cannot be avoided as a fraudulent conveyance. Moreover, the Noteholders likely will argue that even if they did not give Fair Consideration in exchange for the Senior Subordinated Notes, and even if the fraudulent conveyance savings clauses set forth in the guaranties are unenforceable: (i) under the rule that permits a debtor to obtain only "one recovery" for a fraudulent conveyance or obligation, any recovery or avoidance against the Noteholders must be reduced by the full amount of the BAWAG Settlement (see Section IV.D.1 –"BAWAG Settlement") because that settlement represents settlement of the same fraudulent conveyance/obligation claims that are being asserted against the Noteholders; (ii) the amount of any direct or indirect benefit to the Debtors, such as refinancing of third-party debt, must be taken into account in determining whether the Debtors received Fair Consideration; and (iii) the Debtors' financial condition should be determined on a going-concern basis, not a liquidation basis, and on a going-concern basis, the Debtor obligors and guarantors did not fail any of the Financial Tests at the time of or as a result of the Acquisition and the incurrence of obligations under the Senior Subordinated Notes.
Representatives of the Debtors' Estates seeking to avoid the Senior Subordinated Note Claims and the Notes Redemption Payment likely would argue that: (i) because the Noteholders knew that they were financing a leveraged recapitalization and that a substantial part of the Senior Subordinated Notes proceeds would be immediately distributed to equity holders on account of their equity interests, a court must "collapse" the Senior Subordinated Notes transaction into the equity distributions and deem the proceeds of the Senior Subordinated Notes to have been delivered by the Noteholders directly to the equity holders rather than to the Debtors; (ii) so-called solvency caps or fraudulent conveyance savings clauses are unenforceable; (iii) the Debtors failed one or more of the Financial Tests at the time of, and/or as a result of, the Acquisition and incurrence of the Senior Subordinated Note Claims, and the Noteholders knew or should have known that fact from their due diligence; (iv) whether the Debtors failed the Financial Tests should be determined on a forced liquidation basis rather than on a going-concern basis; (v) even if the Noteholders in good faith after appropriate due diligence (all of which likely would be challenged) did not know that the Debtors failed one or more of the Financial Tests, that good faith belief is a defense only to the inadequacy of
16 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. capital Financial Test, not to the insolvency Financial Test; and (vi) the proceeds of the BAWAG Settlement are only partially attributable to the Acquisition and hence do not constitute a dollar-for-dollar reduction in the relief that may be sought against the Noteholders.
In addition to the foregoing, the parties to the Fraudulent Conveyance/Obligations Dispute are likely to litigate over choice of law and whether various technical requirements for bringing suit have been satisfied, such as existence of a prepetition creditor who could have asserted a claims against the Noteholders. Moreover, the Noteholders are likely to assert that the Secured Lenders' cash –rather than that loaned by the Noteholders –was transferred to RGHI.
The Fraudulent Conveyance/Obligations Dispute is resolved by the Settlements embodied in the Plan, and the Plan Distributions reflect these Settlements.
4. Settlement of the Preference Dispute
The Preference Dispute is a dispute over whether, under section 547(b) of the Bankruptcy Code, the Notes Redemption Payment made to Noteholders in the ninety (90) days before the Petition Date constitutes a voidable preference which must be returned to the Estates and, if so, whether failure to return that payment to the appropriate Estate warrants disallowance of the Senior Subordinated Note Claims even if the current Holders of those Claims are not the entities who received the preferential transfer.
In August 2004, Refco Finance Holdings LLC, which later merged into Refco Group, and Refco Finance Inc. (together, the "Notes Issuers") issued the Senior Subordinated Notes in unregistered form pursuant to the Senior Subordinated Note Indenture in the original principal amount of $600 million. The unregistered Senior Subordinated Notes were later exchanged for registered Senior Subordinated Notes in an exchange offer described in a prospectus dated April 8, 2005.
Generally, the Senior Subordinated Notes could not be partially redeemed or prepaid until August 1, 2008. However, prior to August 7, 2007, the Notes Issuers were permitted, but not required, to redeem up to 35% of the original principal amount of the Senior Subordinated Notes (i.e., up to $210 million) with the cash proceeds from one or more "Designated Offerings" (an "Early Optional Redemption") as long as (i) the redemption occurred within ninety (90) days of the Designated Offering and (ii) if the Designated Offering was an offering by a direct or indirect parent of Refco Finance Holdings LLC, a portion of the net cash proceeds thereof equal to the amount required to redeem the Senior Subordinated Notes was contributed to the equity of Refco Finance Holdings LLC. The redemption price for an Early Optional Redemption was 109% of the aggregate principal amount being redeemed, plus accrued and unpaid interest to the redemption date.
In August 2005, Refco, an indirect parent of Refco Finance Holdings LLC, did a public offering of its common stock (the "IPO"), receiving $340,703,000 (the "IPO Proceeds") on August 16, 2005. The IPO Proceeds were wired to a Refco Inc. account at Harris N.A. ("Harris"). The IPO Proceeds immediately were transferred from that account to another account at Harris, also in the name of Refco, designated as a securities safekeeping account.
The IPO prospectus, dated August 10, 2005 (the "IPO Prospectus"), stated that Refco and its subsidiaries "intend to use a portion of the net proceeds of this offering to redeem $210 million aggregate principal amount of [Senior Subordinated Notes] (together with the related prepayment penalty of $18.9 million and accrued and unpaid interest thereon to the redemption date) and for general corporate purposes, including working capital and potential acquisitions." On or about August 17, 2005, one day after Refco's receipt of the IPO Proceeds, the Notes Issuers sent a Notice of Partial Redemption of the Senior Subordinated Notes.
On September 8, 2005, eight days before the prepayment of the Senior Subordinated Notes, Refco and other Debtors posted a set of confusing and in some respects clearly inaccurate preliminary accounting entries to reflect the prepayment. As of the Petition Date, the books for this period had not been closed, and the accounting entries that were made had never been approved by management. The entries have since been modified by current management.
Notwithstanding the accounting entries, cash from the IPO Proceeds was never physically transferred to Refco Finance Holdings LLC. Thus, on September 16, 2005, $231,262,500 (i.e., the Notes Redemption Payment), representing $210 million in principal, $18.9 million in a prepayment premium and $2,362,500 in accrued interest on
17 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. the principal amount being prepaid, was transferred from Refco's safekeeping account at Harris to Refco's checking account at Harris and then to the Senior Subordinated Note Indenture Trustee. That same day, the Senior Subordinated Note Indenture Trustee transferred the Notes Redemption Payment to Cede & Co., the nominee of Depository Trust Company ("DTC") the clearing house for and sole record holder of the Senior Subordinated Notes, by wiring money to a Cede & Co. account specially designated for redemptions. DTC distributed the Notes Redemption Payment to its participants that same day, and those participants presumably distributed that money, directly or indirectly, to the beneficial owners of the Senior Subordinated Notes.
Section 547(b) of the Bankruptcy Code permits a trustee or debtor-in-possession to avoid a transfer of an interest of the debtor in property made (i) within ninety (90) days of the bankruptcy filing (one year for insiders) (ii) to or for the benefit of a creditor (iii) on account of antecedent debt (iv) while the debtor was insolvent (v) that enables the creditor to receive more than it would have in a chapter 7 case had the transfer not been made. See 11 U.S.C. § 547(b). There is a rebuttable presumption that the debtor was insolvent in the ninety (90) days before the filing of the petition. Section 550 of the Bankruptcy Code provides that a preferential payment may be recovered from "(1) the initial transferee of such transfer or the entity for whose benefit such transfer was made; or (2) any immediate or mediate transferee of such initial transferee." 11 U.S.C. § 550(a). If a payment is avoided as a preference under section 547(b) but not returned to the estate, the claimholder's claim must be disallowed until payment is made. See 11 U.S.C. § 502(d).
If a suit were commenced seeking to have the Notes Redemption Payment avoided as a preference, the Noteholders likely would assert multiple legal and factual defenses, including that: (i) the funds transferred were the property of Refco, which was not an Issuer of or guarantor on the Senior Subordinated Notes and, consequently, although the transfer was a transfer of property of a Debtor, it was not a transfer on account of that Debtor's antecedent debt; (ii) the Notes Redemption Payment constituted a "settlement payment" made by a stockbroker, financial institution or securities clearing agency and hence is insulated from avoidance by section 546(e) of the Bankruptcy Code; (iii) the Notes Redemption Payment is insulated from avoidance under section 547(c)(2) of the Bankruptcy Code because it was in payment of a debt incurred in the ordinary course of business of both the Notes Issuers and the Noteholders and made either in the ordinary course of business of the Notes Issuers and the Noteholders or according to ordinary business terms; (iv) the Notes Redemption Payment was not made from property of any Debtor because the funds used to make the payment had been "earmarked" by the IPO investors for prepayment of the Senior Subordinated Notes; (v) the Notes Redemption Payment did not enable the Noteholders to receive more than they would have received in a chapter 7 case; and (vi) Refco and the Notes Issuers were not insolvent when the Notes Redemption Payment was made.
There is no case law directly on point addressing any of these issues, and persuasive arguments can be made both for and against the proposition that the Notes Redemption Payment was a voidable preference. In addition to novel issues of law, litigation of the Preference Dispute with the Noteholders likely would involve extensive discovery as to facts surrounding the Notes Redemption Payment, including the Debtors' accounting entries, the Debtors' obligations under the Senior Subordinated Note Indenture and the IPO, the method by which prepayments are transmitted to beneficial holders of debt, the Debtors' solvency, and the complex financial structure and web of inter-company claims, guaranties and subordination provisions that affect the determination of how much the Noteholders would have received in a chapter 7 liquidation.
Moreover, because many of the Senior Subordinated Notes probably have been traded since their original issuance and the date of the Notes Redemption Payment, and because they likely will continue to trade, other legal and practical issues also may have to be addressed if parties seek to avoid the Notes Redemption Payment as a preference. If the Notes Redemption Payment is avoided as a preference but not repaid, there also likely will be litigation over whether section 502(d) requires disallowance of (i) the entire outstanding indebtedness represented by the Senior Subordinated Notes and (ii) claims other than those evidenced by the Senior Subordinated Notes (such as Secured Lender Claims held by Noteholders). Although there is one bankruptcy court decision in the Southern District of New York that addresses the first of these issues adversely to the Noteholders, see Enron Corp. v. Ave. Special Situations Fund II, LP ( In re Enron Corp.), 340 B.R. 180 (Bankr. S.D.N.Y.), leave to appeal granted sub. nom. Enron Corp. v. Springfield Assocs., L.L.C. (In re Enron Corp.), 2006 WL 2548592 (S.D.N.Y. Sept. 5, 2006), it is not settled law.
Given the novelty and importance to the markets of the issues involved, any litigation to recover the Notes Redemption Payment as a preference or to disallow the debt evidenced by the Senior Subordinated Notes (or other debt held by Noteholders) is likely to be expensive and time-consuming for all parties. Due to the lack of controlling 18 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. precedent and the market/policy implications of the issues involved, both sides have plausible arguments and litigation risk.
The Preference Dispute with the Noteholders is resolved by the Settlements embodied in the Plan, and the Plan Distributions reflect these Settlements. In particular, and in settlement of the various disputes set forth herein, the Noteholders have agreed to accept pursuant to the Plan an amount that is at least $65 million less than the undisputed amount to which they would otherwise be entitled and to forego any interest in the Litigation Trust and the BAWAG Contingent Proceeds.
5. Settlement of the Substantive Consolidation Dispute
The Substantive Consolidation Dispute is a dispute over whether, and the extent to which, the Debtors should be treated separately for purposes of determining the rights of and making payments to Holders of Claims. The Substantive Consolidation Dispute is resolved by the Substantive Consolidation Settlement and other Settlements embodied in the Plan.
Specifically, the Plan is premised on a consensual pooling of assets and liabilities by Refco, New Refco Group, Refco Group, Bersec International LLC, Kroeck & Associates, LLC, Marshall Metals, LLC, Refco Fixed Assets Management, LLC, Refco Mortgage Securities, LLC, Refco Regulated Companies, LLC, Refco Capital Holdings, LLC, Refco Capital LLC, Refco Capital Management, LLC, Refco Finance Inc., Summit Management, LLC, Refco Global Capital Management LLC, Refco Global Finance Limited, Refco Global Futures, LLC, Refco Global Holdings, LLC, Refco Administration, LLC, Refco Financial, LLC, Refco Capital Trading LLC and Refco Information Services, LLC (collectively, the "Contributing Debtors"), solely to implement the settlements and compromises reached by the primary constituencies in the Chapter 11 Cases, including the Debtors, the RCM Trustee, the Committees, the Secured Lenders and the Holders of Senior Subordinated Notes. If for any reason the Bankruptcy Court determines that such compromises and settlements as embodied in the Plan should not be implemented as set forth in the Plan, the Plan Proponents may seek confirmation of the Plan on the basis of complete substantive consolidation or on a Debtor-by-Debtor basis identifying subclasses of each of the listed Classes of Claims of the Contributing Debtors for each Contributing Debtor.
The assets and liabilities of the chapter 11 estates of RCM and FXA, and the chapter 7 estate of Refco, LLC, are not being pooled. The creditors and securities customers of RCM will be treated separately from the creditors of the Contributing Debtors in accordance with the terms of the RCM Settlement Agreement, and creditors of FXA will be classified and treated separately under the Plan. Creditors of Refco, LLC, which is being separately administered in chapter 7 by the chapter 7 trustee, Albert Togut (the "Chapter 7 Trustee"), will be paid in accordance with the distributive scheme set forth in sections 726 and 766 of the Bankruptcy Code, and it is anticipated that the amounts remaining after payment in full of allowed timely-filed claims against Refco, LLC will be distributed to the Debtors in settlement and resolution of claims asserted by them against Refco, LLC. The settlement and treatment of such claims is subject to the entry of one of more orders in the Refco, LLC chapter 7 case resolving the priority and treatment of claims against Refco, LLC that are asserted by the Debtors under the Plan.
6. Settlement of the Intercompany Claims Disputes
The Intercompany Claims Disputes involve disputes over whether and in what amount claims asserted between and among the Debtors and RCM will be allowed. The Claims asserted by non-Debtor subsidiaries of Refco against the Debtors and/or RCM will be treated as general unsecured Claims of those entities, subject to any appropriate adjustments, setoffs or objections the Debtors or RCM may have. It is anticipated that claims by or against Refco, LLC will be resolved and settled pursuant to one or more orders entered in the Refco, LLC chapter 7 case. The Intercompany Claims Disputes are resolved by the Settlements embodied in the Plan, and the Plan Distributions reflect these Settlements.
a. Analysis of Intercompany Claims and Accounts
Substantial intercompany balances existed between and among the Debtors, their non-Debtor affiliates, RCM and Refco, LLC (collectively, the "Company") as of the bankruptcy filing on October 17, 2005 (the "Petition Date"). Given the nature of the Company's organizational structure, cash management system and operating practices, over the period from April 2000 through the Petition Date, the Company generated hundreds of thousands of intercompany
19 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. transactions collectively aggregating well over $3 trillion. In an effort to understand these transactions and thereby provide the underlying information necessary to formulate and negotiate a chapter 11 plan, the Chapter 11 Debtors and their advisors undertook an analysis to review intercompany accounts and the related underlying transactions (the "Intercompany Analysis").
The Intercompany Analysis began in January 2006 and has actively involved significant representatives of the Chapter 11 Debtors' creditors both in connection with the design of the process for conducting the Intercompany Analysis, and the execution of this process. The Intercompany Analysis conducted by the Chapter 11 Debtors and their advisors was designed to yield interim results that would provide the basis for future areas of analysis. These interim results were formally and informally presented to certain of the Chapter 11 Debtors' most active creditor groups, including through six separate presentations that were given to different creditor constituencies.
Initially, the Chapter 11 Debtors' efforts focused on identifying the transactions and historical practices that led to RCM being owed approximately $2.1 billion by Refco Global Finance Limited as reported in Refco's bankruptcy statements and schedules. See Section IV.E.4 –"Filing of Schedules and Statements." During the course of the Chapter 11 Debtors' efforts, the scope of the Intercompany Analysis was expanded to include three primary analyses:
(i) The first analysis involved tracing the flow of funds related to intercompany transactions between RCM and Refco Global Finance Limited that were captured in the Company's intercompany account ledger between 2000 and 2005. All intercompany transactions that occurred between RCM and Refco Global Finance Limited greater than $50 million and a sample of intercompany transactions between RCM and Refco Global Finance Limited that were between $5 and $25 million were analyzed. To test the completeness of this analysis and examine the relationship between the Company's intercompany account ledger and its customer account ledger (which also was used to record certain intercompany transfers), the Chapter 11 Debtors analyzed the largest customer account ledger intercompany balances as of September 30, 2005 and traced the flow of funds related to transactions in selected accounts that were greater than $50 million. In addition, the flow of funds related to Refco Capital LLC transactions greater than $50 million that were captured in the intercompany account ledger between 2000 and 2005 were analyzed and traced.
(ii) The second analysis involved a detailed review of the transactions that resulted in three significant receivable balances: (a) $720 million receivable from RGHI (an entity controlled by Phillip Bennett, Refco's former President and CEO ("Bennett")) owed to Refco Capital LLC as of August 4, 2004; (b) the $424 million receivable from RGHI owed to RCM as of October 11, 2005, which ultimately was repaid by Bennett with a loan from BAWAG (as defined below); and (c) the $608 million receivable from Refco Group that was owed to RCM.
(iii) The third area of analysis involved a review of the acquisition activity at the Company, including tracing the source of funds for approximately twenty acquisitions involving consideration of $5 million or more. As part of this analysis, transactions that appear to have been "funded" (ignoring the intermediate intercompany transactions) by RCM were identified.
Based on the Intercompany Analysis, the following general conclusions regarding the Company's intercompany claims and accounts were identified:
• No material intercompany agreements were identified that govern the intercompany activity that occurred historically.
• For intercompany transactions greater than $50 million, it is typically possible to trace the flow of funds. For intercompany transactions less than $50 million, the fungibility of cash makes it difficult to trace the flow of funds. There is no reasonable basis by which to trace intercompany transactions less than $5 million.
• Disbursements for substantially all non-customer obligations and operating expenses of the Debtors and affiliated non-Debtors were made by Refco Capital LLC. Such entities receiving the benefit of these disbursements periodically reimbursed Refco Capital LLC for some of the disbursements. On a daily basis, Refco Capital LLC maintained a minimal cash balance. Any cash needs for these
20 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. disbursements typically were funded by RCM, and any remaining cash ultimately was returned to RCM.
• Interest that was included in the computation of intercompany balances was applied inconsistently across the intercompany balances.
• RGHI's $720 million intercompany balance as of August 4, 2004 represented the build-up of non-RGHI operational losses and expenses that shifted losses and expenses from certain Refco entities, including losses attributable to bad receivables historically originating at RCM.
• Certain larger asset acquisitions made by the Company were "funded" by RCM in whole or in part, in exchange for intercompany receivables, and the assets acquired were contributed to entities owned by Refco Group, other than RCM. With respect to smaller acquisitions made by the Company, it can not be directly established that the funding for such transactions originated from RCM.
b. Intercompany Proofs of Claims
Except with respect to claims held against the Debtors' non-Debtor affiliates, the intercompany claims asserted between and among the Debtors, their non-Debtor affiliates, RCM and Refco, LLC are set forth in the proofs of claim that have been filed by such parties in the Chapter 11 Cases and the chapter 7 case of Refco, LLC. These proofs of claim are described below.
(i) Refco Claimants' Master Proof of Claim
By Bankruptcy Court order dated June 29, 2006, the Debtors and certain of their non-Debtor affiliates were authorized to file a single master proof of claim in the Chapter 11 Cases with respect to all intercompany claims. Accordingly, on July 17, 2006, the Debtors and certain of their non-Debtor affiliates, including but not limited to Cargill Investor Services Limited, Haut Commodities, LLC, Lind-Waldock Financial Partners, LLC, Refco (LDN) Futures MU Account, Refco (Singapore) Pte Ltd., Refco Administrative Services, Inc., Refco Alternative Investments, LLC, Refco Canada Co., Refco Canada Finance, Inc., Refco Capital Markets International, Limited, Refco Commodity Management, Inc., Refco EasySolutions, LLC, Refco Europe Limited, Refco Futures (Canada) Ltd., Refco Futures (HK) Limited, Refco Hong Kong Limited, Refco Overseas Limited, Refco Securities SA, Refco Securities, LLC, Refco Taiwan and RefcoFund Holdings, LLC (together with the Debtors, the "Refco Claimants") filed a master proof of claim (Claim No. 11834) (the "Refco Claimants' Master Proof of Claim") asserting liquidated intercompany claims against the Debtors, RCM and Refco, LLC in the aggregate amount of approximately $4.076 billion, including claims against RCM and Refco, LLC in the amounts of $537,228,303.96 and $138,266,381.65, respectively.
In the Refco Claimants' Master Proof of Claim, the Refco Claimants note that in addition to the liquidated intercompany claims, they also hold and assert additional contingent and/or unliquidated claims against each of the Debtors, RCM and Refco, LLC arising before or after their respective bankruptcy petition dates. Such contingent and/or unliquidated claims include claims, rights and/or remedies, including secured claims, relating to (i) the full or partial satisfaction by any of the Refco Claimants of debts owed by the Debtors, RCM and Refco, LLC under the Credit Agreement, including contribution, reimbursement, or by way of subrogation under section 509 of the Bankruptcy Code or applicable state law, (ii) the full or partial satisfaction by any of the Refco Claimants of debts owed by the Debtors, RCM and Refco, LLC under the Senior Subordinated Note Indenture, including contribution, reimbursement, or by way of subrogation under section 509 of the Bankruptcy Code or applicable state law, (iii) any other guarantee agreements or legal or equitable principles of co-liability, (iv) any other claims, rights and/or remedies under applicable law or equity, including, but not limited to, claims for tort, misrepresentation, fraud, diversion of funds, indemnification, contribution, rescission, breach of contract, specific performance, reimbursement, conversion, constructive trust, unjust enrichment, breach of fiduciary duty, aiding and abetting breach of fiduciary duty, subordination and/or subrogation, related to or arising from transactions or wrongful acts involving the Debtors, RCM and Refco, LLC, and (v) actions by the Refco Claimants, or their estates, under Chapter 5 of the Bankruptcy Code (avoidance power actions), relating to, among other things, transfers to or for the benefit of any Debtors, RCM and Refco, LLC.
21 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. The Refco Claimants' Master Proof of Claim also provides that the Refco Claimants hold and assert an unliquidated or contingent claim for damages against RCM for transactions by RCM involving RCM's alleged fraudulent accounting, alleged misuse of assets, alleged fraudulent concealment of losses, or alleged manipulation of earnings; any transfers to or for the benefit of RCM; and any conduct or omissions that led to the commencement of the Debtors' Chapter 11 Cases. The Refco Claimants assert that the amount of alleged damages is equal to not less than the decline in value of these entities following the October 10, 2005 announcement of the alleged concealment of fraudulent receivables by Bennett. See Section III.C.4 –"Disclosure of Possible Fraud, Loss of Consumer Confidence: Threatened Action by CME."
In the Refco Claimants' Master Proof of Claim, the Refco Claimants further assert that they have reason to believe that various customers and other creditors of RCM intend to assert claims against the Refco Claimants potentially totaling hundreds of millions of dollars based on the alleged diversion, misdirection and/or misappropriation of funds to and/or from the Refco Claimants and RCM. The Refco Claimants believe that such claims, if allowed against the Refco Claimants or their estates, could give rise to claims assertable by the Refco Claimants against RCM based on subrogation, contribution, indemnification and other theories of liability in an amount equal to at least the amount the Refco Claimants may be found liable to RCM's customers and other creditors. The Refco Claimants accordingly have reserved in the Refco Claimants' Master Proof of Claim their rights to assert such claims against RCM if such claims arise as a result of such matters.
All intercompany claims asserted in the Refco Claimants' Master Proof of Claim are asserted as secured claims to the extent of any right of subrogation entitling the claimant to secured status, and to the extent of any right to setoff, counterclaim, credit or seek recoupment, and the balance of the intercompany claims is asserted to be unsecured. Each of the Refco Claimants has reserved any and all rights it may have with respect to subrogation, setoff or recoupment or other defenses, counterclaims or credits it may be entitled to assert. Furthermore, the Refco Claimants have not waived, and have expressly reserved, including, without limitation, as subrogee, (i) any right to any security held by or on behalf of the Refco Claimants, (ii) any right to claim specific assets or (iii) any other right or rights of action that the Refco Claimants have or may have against the Debtors, RCM and Refco, LLC.
(ii) Refco Chapter 7 Claimants' Master Proof of Claim
By Bankruptcy Court order dated July 14, 2006, the Debtors and certain of their non-Debtor affiliates were authorized to file a single master proof of claim form in the Refco, LLC chapter 7 case with respect to all intercompany claims held against Refco, LLC. Accordingly, on July 17, 2006, the Debtors and certain of their non-Debtor affiliates, including but not limited to Refco (Singapore) Pte Ltd., Refco Administrative Services, Inc., Refco Alternative Investments, LLC, Refco Commodity Management, Inc., Refco EasySolutions, LLC, Refco Investment Services Pte Limited, Refco Overseas Limited, Refco Securities, LLC and Refco Taiwan (together with the Debtors, the "Refco Chapter 7 Claimants") filed a master proof of claim (Claim No. 414) (the "Refco Chapter 7 Claimants' Master Proof of Claim") in the Refco, LLC chapter 7 case asserting liquidated intercompany claims against Refco, LLC in the aggregate amount of $138,266,381.65.
In the Refco Chapter 7 Claimants' Master Proof of Claim, the Refco Chapter 7 Claimants note that in addition to the liquidated intercompany claims, they also hold and assert additional contingent and/or unliquidated claims against Refco, LLC. Such contingent and/or unliquidated claims include (i) claims, rights and/or remedies relating to any guarantee agreements, (ii) claims, rights and/or remedies under applicable law or equity, including, but not limited to, claims for tort, misrepresentation, fraud, constructive trust, diversion of funds, indemnification, contribution, rescission, breach of contract, specific performance, reimbursement, conversion, unjust enrichment, breach of fiduciary duty, aiding and abetting breach of fiduciary duty, subordination and/or subrogation, related to or arising from transactions or wrongful acts involving Refco, LLC, and (iii) claims against Refco, LLC for actions by the estates of the Refco Chapter 7 Claimants under Chapter 5 of the Bankruptcy Code (avoidance power actions), relating to, among other things, transfers to or for the benefit of Refco, LLC.
All intercompany claims asserted in the Refco Chapter 7 Claimants' Master Proof of Claim are asserted as secured claims to the extent of any right to setoff, counterclaim, credit or seek recoupment, and the balance of the intercompany claims is asserted to be unsecured. Each of the Refco Chapter 7 Claimants has reserved any and all rights it may have with respect to setoff or recoupment or other defenses, counterclaims or credits it may be entitled to assert. Furthermore, the Refco Chapter 7 Claimants have not waived, and have expressly reserved, (i) any right to any
22 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. security held by or on behalf of the Refco Chapter 7 Claimants, (ii) any right to claim specific assets or (iii) any other right or rights of action that the Refco Chapter 7 Claimants have or may have against Refco, LLC.
(iii) RCM Claimants' Master Proof of Claim
By Bankruptcy Court order dated July 7, 2006, RCM was authorized to file a single master proof of claim form with respect to all intercompany claims. Accordingly, on July 14, 2006, RCM filed master proofs of claim against each of the Debtors (Claim Nos. 10028-10053 and 11826) and a separate master proof of claim in the chapter 7 case of Refco, LLC (Claim No. 290) (collectively, the "RCM Master Proof of Claim") based on the results of the RCM Trustee's ongoing investigation of RCM's claims and potential claims against the Debtors, Refco, LLC and others for money allegedly borrowed or converted (the "Investigation"). In the RCM Master Proof of Claim, RCM asserts a gross liquidated intercompany claim in the amount of $11,450,384 against Refco, LLC and additional gross liquidated intercompany claims in the aggregate amount of approximately $5.175 billion against Refco Global Finance Limited, Refco Global Holdings, LLC, Refco Group, Refco Capital LLC and FXA (collectively, the "Liquidated Indebtedness Claims").
The aggregate gross liquidated intercompany claim amount asserted by RCM against the five Debtors is largely comprised of two interrelated claims: a claim of $2,278,164,320 against Refco Global Finance Limited, and a claim of $2,278,164,695 against Refco Capital LLC. Based on the Investigation, the RCM Trustee has stated his belief that RCM's intercompany claim against Refco Global Finance Limited in the amount of $2,278,164,320 arises from amounts of cash loaned to Refco Capital LLC, but also booked as a liability by Refco Global Finance Limited. The RCM Master Proof of Claim asserts a related claim against Refco Capital LLC in the amount of $2,278,164,695 arising from the $2,278,164,320 cash loan and a de minimis additional direct transfer from RCM to Refco Capital LLC of several hundred dollars.
Furthermore, based on the Investigation, the RCM Trustee has stated his belief that, in respect of the alleged $2,278,164,695 Refco Capital LLC obligation to RCM (or the alleged $2,278,164,320 Refco Global Finance Limited obligation to RCM), substantially all of the funds were allegedly transferred from RCM for the purpose of directly benefiting, in addition to Refco Capital LLC or Refco Global Finance Limited, one or more other Debtors and/or Refco, LLC, and that such funds did in fact benefit such Debtors and/or Refco, LLC. Thus, through the RCM Master Proof of Claim the RCM Trustee also asserts against each of the Debtors and Refco, LLC, an unliquidated claim for, among other things, money borrowed, unjust enrichment, fraudulent conveyance or conversion up to $2,278,164,695 (or such other higher amount as the Investigation ultimately determines is owed to RCM by the Debtors and/or Refco, LLC).
The RCM Master Proof of Claim alleges the following legal bases for its intercompany claims:
(a) Contractual and Related Claims
The RCM Trustee asserts that RCM may have claims against certain of the Debtors and/or Refco, LLC for breach of contract, breach of the covenant of good faith and fair dealing, and related claims, including, without limitation, rescission, restitution, unjust enrichment, promissory estoppel, conversion and constructive trust (collectively, the "RCM Contractual and Related Claims"). The RCM Contractual and Related Claims are based on RCM's alleged transfer of money and/or property to affiliated Debtors and/or Refco, LLC, and the alleged unjustifiable failure by such Debtors and/or Refco, LLC to return the transferred money and/or property to RCM. The RCM Trustee asserts that the RCM Contractual and Related Claims have not been liquidated, but are believed to include, in total amount, the Liquidated Indebtedness Claims.
(b) Avoidance and Recovery Claims
The RCM Trustee further asserts that RCM may have claims for the avoidance and/or recovery of transfers from RCM to certain of the Debtors and/or Refco, LLC, including, without limitation, claims under sections 543, 544, 547, 548, 549, 749 and 550 of the Bankruptcy Code (collectively, the "RCM Avoidance and Recovery Claims"). The RCM Avoidance and Recovery Claims are based on RCM's alleged prepetition and postpetition transfers of money, property and/or interests of RCM in property to certain of the Debtors and/or Refco, LLC that may be subject to avoidance, recovery and/or turnover as preferences, fraudulent transfers and/or custodial property, respectively. Among the alleged prepetition transfers are sums that were allegedly transferred by RCM to or for the benefit of
23 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. BAWAG in connection with, among other things, (i) an alleged scheme to mask the true financial condition of other Debtors and/or Refco, LLC and (ii) the leveraged buy-out in August 2004 of the former shareholders of the Debtors. The RCM Trustee asserts that the Investigation has not determined the extent to which the amounts of any prepetition transfers may be captured within the Liquidated Indebtedness Claims, and further asserts that the amounts of any postpetition transfers are not captured within the Liquidated Indebtedness Claims and remain subject to the Investigation.
(c) Customer Property Claims
The RCM Trustee further asserts that RCM may have claims arising under section 749 of the Bankruptcy Code against certain of the Debtors and/or Refco, LLC for recovery of "customer property" (as defined in section 741 of the Bankruptcy Code) that was allegedly converted by the Debtors and, in the alternative, damages in an amount equal to the value of such property (collectively, the "RCM Customer Property Claims"). The RCM Trustee asserts that the RCM Customer Property Claims are currently unliquidated, pending the ongoing Investigation.
(d) Misrepresentation Claims
The RCM Trustee further asserts that RCM may have claims against certain of the Debtors and/or Refco, LLC for intentional and/or negligent misrepresentation in connection with the business relations between RCM and the Debtors and/or Refco, LLC (collectively, the "RCM Misrepresentation Claims"). RCM bases the RCM Misrepresentation Claims on the allegation that money and property of RCM were transferred to certain of the Debtors and/or Refco, LLC in reasonable reliance upon material misrepresentations made by the Debtors and/or Refco, LLC that were made either with knowledge of their inaccuracy and with intent that RCM rely upon them or, in the alternative, were made recklessly and in violation of the duty to provide RCM with accurate information. RCM asserts that but for these alleged misrepresentations, RCM would not have suffered substantial losses and moreover would not have incurred substantial potential liability to third parties as a result of those losses. RCM accordingly asserts the RCM Misrepresentation Claims for damages in the amount of RCM's losses, including the amount of RCM's liability to third parties as a result of the alleged misrepresentations of the Debtors and/or Refco, LLC. The RCM Trustee asserts that the RCM Misrepresentation Claims are currently unliquidated, pending the ongoing Investigation.
(e) Fiduciary Duty Claims
The RCM Trustee further asserts that RCM may have claims against certain of the Debtors and/or Refco, LLC for breach of fiduciary duty and/or aiding and abetting breach of fiduciary duty (the "RCM Fiduciary Duty Claims"). RCM bases the RCM Fiduciary Duty Claims on the allegation that by causing RCM to engage in transactions that were fraudulent, lacking a bona fide business purpose, likely to fail, etc., and by failing to protect RCM from engaging in such transactions, the Debtors and/or Refco, LLC breached their fiduciary duty to RCM. RCM asserts that but for such alleged breaches of fiduciary duty, RCM would not have suffered substantial losses and moreover would not have incurred substantial potential liability to third parties as a result of such losses. RCM accordingly asserts the RCM Fiduciary Duty Claims for damages in the amount of RCM's losses, including the amount of RCM's liability to third parties as a result of the alleged breaches of fiduciary duty by the Debtors and/or Refco, LLC. The RCM Trustee assets that the RCM Fiduciary Duty Claims are currently unliquidated, pending the ongoing Investigation.
(f) Secured Claims
The RCM Trustee further asserts that RCM may have debts to, and claims against, certain of the Debtors and/or Refco, LLC and that RCM is entitled to offset such debts against such claims pursuant to section 553 of the Bankruptcy Code and operative law. RCM asserts that those claims against those Debtors and/or Refco, LLC are secured claims to the extent of any such setoffs pursuant to section 506 of the Bankruptcy Code. Moreover, to the extent that RCM's debts to, and claims against, any of the Debtors and/or Refco, LLC arise from the same transaction, RCM asserts that it is entitled to recoupment rights with respect to such debts as a matter of equity.
24 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. (g) Other Claims
Finally, the RCM Trustee asserts that RCM may have additional claims arising from the breach of obligations or duties by certain of the Debtors and/or Refco, LLC in connection with RCM's transactions and relationships with the Debtors and/or Refco, LLC. RCM has reserved the right to amend the RCM Master Proof of Claim to include any such further claims upon their discovery, and also reserves the right to claim all amounts due in respect of any additional legal fees or expenses, prepetition interest, default interest and make-whole premiums in connection with RCM's claims to the extent allowed by law.
(iv) Additional Refco Non-Debtor Affiliate Claims
Certain of the Debtors' non-Debtor affiliates have filed separate and additional proofs of claim against the Debtors, RCM and/or Refco, LLC, which claims were not otherwise included in the Refco Claimants' Master Proof of Claim. Such additional proofs of claim were filed by the following non-Debtor affiliates:
(a) ACM Advanced Currency Markets SA
On June 26, 2006, ACM Advanced Currency Markets SA ("ACM") filed an unsecured claim against RCM in the amount of $637,700.39 (Claim No. 4756) based on the assignment of a claim in that amount allegedly held by creditor Anadolubank A.S. against Refco Overseas Ltd. On the same date, ACM also filed a secured claim against RCM in the amount of $499,874.26 (Claim No. 4757) on account of funds allegedly held on deposit.
(b) Forex Capital Markets, L.L.C.
On June 29, 2006, Forex Capital Markets, LLC ("FXCM") filed an unsecured claim against Refco Group in the amount of $9,122,113.70 (Claim No. 5601) and an unsecured claim against FXA in the amount of $7,806,681.54 (Claim No. 5602) for claims allegedly arising on account of services performed and money loaned under the Facilities Management Agreement between FXCM and Refco Group. See Section IV.C.1 –"Proposed FXCM Sale." On July 12, 2006, FXCM amended its claims against Refco Group and FXA (Claim Nos. 9871 and 9870, respectively), seeking unsecured claims against each entity in the amount of $8,481,529.63. On July 12, 2006, FXCM also filed an unsecured claim in the amount of $951,118.86 (Claim No. 9869) against RCM alleging the same causes of action under the Facilities Management Agreement.
Further, on June 29, 2006, FXCM filed an unliquidated claim against Refco (Claim No. 6633) for fraud, rescission, breach of fiduciary duty, breach of contract and breach of representation causes of action allegedly arising from the Refco Group's acquisition of the FXCM Equity Stake. On July 6, 2006, FXCM filed an unliquidated claim (Claim No. 7568) against FXA alleging the same causes of action.
(c) Forex Trading L.L.C.
On July 6, 2006, Forex Trading L.L.C. ("FT") filed unliquidated claims against Refco and FXA (Claim Nos. 6634 and 7569, respectively) for fraud, rescission, breach of fiduciary duty, breach of contract and breach of representation causes of action allegedly arising from Refco Group's acquisition of the FXCM Equity Stake. On July 12, 2006, FT filed an unsecured claim in the amount of $3,290.67 against FXA (Claim No. 9140) allegedly arising on account of services performed and money loaned.
(d) Refco Carlton Ltd.
On June 23, 2006, Refco Carlton Ltd. ("RC") filed an unsecured priority claim in the amount of $12,701.95 against Refco (Claim No. 4503) for claims allegedly owed on account of wages, salaries or commissions for accounting services performed. The Debtors' preliminary analysis of this claim indicates that such claim, even if valid, is not an intercompany claim.
(e) Refco Investment Services Pte Ltd.
On July 17, 2006, Refco Investment Services Pte Ltd. ("RIS") filed an unsecured claim in the amount of $114,235.38 in the chapter 7 case of Refco, LLC (Claim No. 459), which amount allegedly represents trade related receivables owed on account of certain rebates.
25 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. (f) Refco Trading Services, LLC
On July 17, 2006, Refco Trading Services, LLC ("RTS"), through its sole member, Refco, LLC, filed claims against each of the Debtors and RCM (Claim Nos. 11726-11760) and a separate proof of claim in the chapter 7 case of Refco, LLC (Claim No. 413) (collectively, the "RTS Intercompany Claims") seeking an undetermined amount for various causes of action arising from RTS's relationship with each of the Debtors, RCM and Refco, LLC. RTS asserts that the RTS Intercompany Claims include any and all claims, rights and/or remedies against the Debtors, RCM and Refco, LLC that may be assertable by RTS under applicable law or equity, including, but not limited to, claims for tort, misrepresentation, fraud, diversion of funds, indemnification, contribution, rescission, breach of contract, specific performance, reimbursement and/or subrogation, related to or arising from transactions involving RTS and the Debtors, RCM and Refco, LLC. The RTS Intercompany Claims against the Debtors, RCM and Refco, LLC also allegedly include unliquidated claims for damages (including constructive trust) arising from transactions by the Debtors, RCM and Refco, LLC involving their alleged fraudulent accounting, misuse of assets, fraudulent concealment of losses, and any other misconduct or omissions, including those that led to the commencement of the Chapter 11 Cases and the Refco, LLC chapter 7 case. RTS further asserts that the RTS Intercompany Claims are secured to the extent of any setoff, counterclaim or credit, and that the balance of the RTS Intercompany Claims is unsecured.
(g) Refco (Singapore) Pte. Ltd.
On July 17, 2006, Refco (Singapore) Pte Ltd. ("RSPL") filed an unsecured claim in the amount of $32,071,944.83 against RCM (Claim No. 12984) which amount allegedly is owed on account of (i) income due from RCM to RSPL, (ii) market and trade related expenses incurred by Refco Singapore Ltd. on behalf of RCM, (iii) Refco Singapore Ltd. FX Project expenses incurred on behalf of RCM, and (iv) claims of RCM customers who may have a claim against RSPL as a result of RCM's inability to release the respective customer's deposits for customers for which RCM was acting as agent to RSPL.
Also on July 17, 2006, RSPL filed an unsecured claim in the amount of $96,125.94 in the chapter 7 case of Refco, LLC (Claim No. 458), which amount allegedly represents trade-related receivables owed on account of certain disclosed clients and mutual offset customers.
(h) SPhinX Managed Futures Index Fund LP
On July 17, 2006 SPhinX Managed Futures Index Fund, LP (the "Index Fund") filed secured claims in the amount of $39,005,537 against each of the Debtors and RCM (Claim Nos. 13247-13273). The Index Fund has filed a Notice of Appeal with the Bankruptcy Court in connection with the settlement order approving the SPhinX Settlement, and also has filed an involuntary petition with the Grand Court of the Cayman Islands seeking the liquidation of the SPhinX fund. See Section IV.D.2 –"SPhinX Settlement."
The Index Fund asserts claims against the Debtors arising from the following: (i) the Debtors' role in the alleged improper movement of the Index Fund's investments into unregulated, commingled accounts at RCM; (ii) the SPhinX fund's failure to fully satisfy the Index Fund's redemption order and the extent to which the Debtors are responsible for that failure; (iii) the actions of the Debtors that resulted in the need, if any, for the SPhinX fund to make the SPhinX Settlement payment; (iv) the adversary proceeding commenced by the Creditors' Committee against SPhinX; and (v) other potential improper or inequitable conduct by the Debtors. The Index Fund also asserts additional claims against the Debtors, including: breach of fiduciary duty; aiding and abetting breach of fiduciary duty, fraud and fraud in the inducement; negligence; civil conspiracy; civil conspiracy to commit fraud; unjust enrichment and breach of agency. Finally, the Index Fund reserves its right to assert that its funds allegedly held by RCM or the Debtors do not form part of RCM's or the Debtors' estates, based upon constructive trust principles.
7. Settlement of Administrative and Priority Claims Dispute
The Administrative and Priority Claims Dispute is a dispute over whether and to what extent the liability for Administrative Claims and Priority Claims asserted against the Debtors and/or RCM will be allocated between and among the Debtors and RCM.
26 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. Under the Plan, payment of Allowed Priority Tax Claims and Allowed Non-Tax Priority Claims of the Contributing Debtors and of the RCM Estate and Allowed Administrative Claims of the Contributing Debtors and of the RCM Estate, other than amounts in respect of the RCM Advance, accrued through the Effective Date (excluding any amounts paid as of August 31, 2006) will be allocated such that RCM will first provide up to $60 million, the Contributing Debtors will next provide up to $120 million and to the extent that such Claims exceed $180 million in the aggregate, RCM and the Contributing Debtors will bear the cost of such excess (the "Excess Priority Claims") equally. FXA will be responsible for all of its Allowed Administrative Claims, Allowed Priority Tax Claims and Allowed Non-Tax Priority Claims; provided, however, that professional services (other than those related to FXA's claims resolution process and issues unique to FXA after the initial date of the filing of the Plan) and overhead allocable to FXA in the period between the Plan Filing Date and the Plan Effective Date will be borne by RCM and the Contributing Debtors as set forth in the preceding sentence. Only Allowed Administrative Claims accrued from the Petition Date through the Plan Effective Date that were or are paid after August 31, 2006 will be counted toward the sharing allocation of the preceding two sentences; provided that the Contributing Debtors will alone bear the cost of repaying the RCM Advance. To the extent RCM is responsible for bearing amounts in respect of Excess Priority Claims, payment of such amounts will be made from Cash otherwise available for the RCM Cash Distribution. Allowed Administrative Claims incurred by the Contributing Debtors after the Effective Date will be borne by the Contributing Debtors out of the Cash or value that would otherwise be paid to Holders of Allowed Contributing Debtors General Unsecured Claims. Allowed Administrative Claims incurred by RCM after the Effective Date will be borne by RCM from the RCM Wind-Down Reserve and, to the extent the RCM Wind-Down Reserve is not sufficient to pay such Allowed Administrative Claims, such Claims will be paid directly by RCM out of the Cash or value that would otherwise be paid to Holders of Allowed Securities Customer Claims and RCM FX/Unsecured Claims as more particularly set forth in the RCM Settlement Agreement. Allowed Administrative Claims incurred by FXA after the Effective Date will be borne by the FXA out of the Cash or value that would otherwise be paid to Holders of Allowed FXA General Unsecured Claims. All costs and expenses of administering the Litigation Trust described in Section 5.7 of the Plan will be separately funded by the Litigation Trust and will not be included in the calculation of the allocations of Administrative Claims, Priority Tax Claims and Non-Tax Priority Claims above.
8. Allocation of BAWAG Proceeds
Pursuant to the BAWAG Settlement Agreement, the Court reserved the issue of how to allocate the BAWAG Proceeds and the non-monetary benefits of the settlement, including, without limitation, the value of releases of claims asserted by BAWAG against multiple Debtors. The Creditors' Committee has asserted that all of the BAWAG Proceeds should be attributed to the claim or claims for fraudulent conveyance under New York law because, among other reasons, (i) the damages sought on such a claim are liquidated, (ii) the evidence submitted in connection with the Creditors' Committee's application for a pre-judgment attachment against BAWAG was principally based on this cause of action, (iii) the Court already has found the likelihood of success of the merits of this cause of action, and (iv) the remaining claims against BAWAG that could be asserted by other Debtors are for aiding and abetting a breach of fiduciary duties and for unjust enrichment, both of which also were asserted by RGLRefco Group, which was the entity directly harmed by the wrongs alleged.
On October 5, 2006, the Court issued an order approving a partial allocation of the BAWAG Proceeds, such that $100 million of the BAWAG Guaranteed Proceeds was indefeasibly allocated to RGLRefco Group, for payment to the Senior Secured Lenders. The Court made no definitive findings with respect to the relative merits of competing causes of action asserted by (a) the Creditors' Committee, on behalf of RGLRefco Group, and (b) the Ad Hoc Equity Committee, on behalf of Refco Inc., holding instead only that, under any circumstances, it would be proper to allocate $100 million (or approximately 19.7%) of the BAWAG Guaranteed Proceeds without prejudice to any parties' rights upon further allocation of the BAWAG Proceeds.
As part of the settlements embodied in the Plan, the consideration given by BAWAG under the BAWAG Settlement Agreement (aside from the $100 million already allocated to RGLRefco Group) will be allocated, or deemed allocated, as follows:
• $150 million will be allocated to the Contributing Debtors for payment to the Holders of Senior Subordinated Note Claims;
27 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. • $56.25 million (plus 100% of up to $150 million in the form of the BAWAG Contingent Payment) will be allocated to the Contributing Debtors for payment to the Holders of Allowed Contributing Debtors General Unsecured Claims;
• $200 million will be allocated (either directly or in payment of the RCM Intercompany Claim) to RCM for payment to the Holders of RCM Securities Customer Claims and RCM FX/Unsecured Claims; and
• the value of each release granted by BAWAG in favor of each of the Debtors and RCM would be allocated to each of the Debtors and RCM, as applicable, without any resulting transfer of Cash or other Distribution.
Holders of Allowed Claims against the Contributing Debtors and RCM can, if they affirmatively elect, opt out of the BAWAG settlement and thereby return their share of BAWAG Proceeds to BAWAG in lieu of agreeing to release BAWAG from liability. See Section VIII.G.2.d. –"Releases by Recipients of BAWAG Proceeds." The election not to receive BAWAG Proceeds, however, will significantly reduce the aggregate recoveries to be received by such Creditors under the Plan. See Section XIII.C. –"Ballot Elections."
9. Treatment of FXA Under the Plan
As part ofPursuant to the Settlements implemented under the Plan, the Secured Lenders have agreed to partially release their claims against FXA, the Noteholders have agreed to fully release(who assert claims against FXA as a guarantor of Refco Group's obligations under the Credit Agreement) and the Noteholders (who assert claims against FXA as a guarantor of the Notes Issuers' obligations under the Senior Subordinated Notes) have agreed to forgo any distribution from the assets of FXA on account of their claims against FXA, and the Contributing Debtors and RCM have agreed to pay amounts incurred by FXA for professional services (other than those related to FXA's claims resolution process and issues unique to FXA after the initial date of the filing of the Plan) and overhead allocable to FXA in the period between the Plan Filing Date and the Plan Effective Date. In return, FXA has agreed to release its claims against the Secured Lenders and Noteholders, and has agreed to the deemed resolution and satisfaction of Intercompany Claims among the Debtors. See Section VIII.A.9 –"Classification and Treatment of Intercompany Claims." Further, FXA has agreed that it will receive no distribution on account of its Intercompany Claim against RCM. See Section VIII.A.10 –"Claims of Debtors Against RCM."
Although the Secured Lenders are deemed satisfied in full under the Early Payment Order, the respective obligor Debtors that were liable to the Secured Lenders are deemed to be subrogated to the rights of the Secured Lenders against each of the obligor Debtors to ensure that there is an equitable sharing of the liability to the Secured Lenders. Notwithstanding FXA's status as a guarantor on the bank and bond debt, if the Plan is consummated, FXA will not be required to contribute any consideration (other than the waiver of the RCM intercompany claim) to either of these categories of claims.
The creditors of FXA will be classified and treated separately under the Plan and will be entitled to receive 100% of the ratable share of FXA's assets, without the claim of the Noteholders or any intercompany claim. See Section VIII.A.2 –"Treatment of Claims of FXA."
III. GENERAL INFORMATION
A. Description of the Company's Businesses
The Company was a provider of execution and clearing services for exchange-traded derivatives and a major provider of prime brokerage services in the fixed income and foreign exchange markets. The Company offered its customers rapid, low-cost trade execution and clearing services on a broad spectrum of derivatives exchanges and over-the-counter markets. In 2004, the Company was the largest provider of customer transaction volume to the Chicago Mercantile Exchange (the "CME"), the largest derivatives exchange in the United States. The Company serviced accounts from over twenty locations in over ten countries. The Company's customers included corporations, government agencies, hedge funds, managed futures funds, pension funds, financial institutions, retail clients and professional traders. The Company was also a clearing member on virtually all major domestic and international
28 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. derivatives exchanges, including the CME, CBOT, Eurex, the London Metal Exchange, Euronext.liffe, NYMEX and the IPE, and offered customers access to a broad range of derivatives contracts. The Company also provided prime brokerage services in the foreign exchange markets and other businesses.
B. Capital Structure
1. Secured Credit Facility
On August 5, 2005, Refco Finance Holdings LLC (now, Refco Group) entered into that certain Credit Agreement, dated as of August 5, 2004, with New Refco Group, and Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, Banc of America Securities LLC, Credit Suisse First Boston (acting through its Cayman Islands branch), and Deutsche Bank Securities Inc., as Co-Lead Arrangers and Joint Book Running Managers, Credit Suisse First Boston (acting through its Cayman Islands branch), as Syndication Agent, Deutsche Bank Securities Inc., as Documentation Agent, and the lenders parties thereto (as amended, and refinanced and replaced on March 15, 2005, the "Credit Agreement").
The Credit Agreement provided for term loans in the initial aggregate amount of up to $800 million, and a revolving credit facility (comprised of revolving credit loans, letter of credit obligations, and swing line loans) in the aggregate amount of $75 million. As of the Petition Date, there was approximately $644 million, including interest, outstanding under the Credit Agreement. Refco Group's obligations under the Credit Agreement were guaranteed by New Refco Group, pursuant to that certain Parent Guaranty, dated as of August 5, 2004, and by certain of Refco Group's affiliates,4 pursuant to that certain Subsidiary Guaranty, dated as of August 5, 2004 (collectively, the "Guarantors"). All of the Guarantors are Debtors in these Chapter 11 Cases.
To secure their obligations under the Credit Agreement, the Parent Guaranty and the Subsidiary Guaranty, Refco Group and the Guarantors (collectively, the "Grantors") also entered into that certain Security Agreement, dated as of August 5, 2004, with Bank of America, N.A. (the "Security Agreement"), and certain other collateral documents (the "Collateral Documents"). Under the Security Agreement and the Collateral Documents, the Grantors granted Bank of America, N.A., for the benefit of the lenders under the Credit Agreement, a security interest in substantially all of their assets. The Grantors did not grant a security interest in certain excluded property, including assets of Refco, LLC, Refco Securities, LLC and RCM; any deposit accounts of a Grantor; and any security accounts of a Grantor.
Borrowings under the Credit Agreement bear interest at a floating rate, which can be either the Eurodollar rate plus an applicable margin or, at Refco Group's option, an alternative base rate as set forth in the Credit Agreement. The Credit Agreement contains restrictive covenants which, among other things, limit indebtedness, investments, dividends, transactions with affiliates, asset sales, acquisitions, capital expenditures, mergers and consolidations, prepayments of other indebtedness, liens and encumbrances and other matters customarily restricted in such agreements.
2. Unsecured Publicly Traded Notes
On August 5, 2004, Refco Finance Holdings LLC (now, Refco Group) and Refco Finance Inc. (together, the "Issuers") issued $600 million in aggregate principal amount of 9% Senior Subordinated Notes due August 1, 2012 (the "Senior Subordinated Notes") pursuant to the Senior Subordinated Note Indenture.
Pursuant to the Senior Subordinated Note Indenture, the payment of principal of and interest on the Senior Subordinated Notes, and the performance of all other obligations of the Notes Issuers under the Senior Subordinated
4 Such affiliates include Refco Finance Holdings LLC, Refco Group, Refco Regulated Companies, LLC, Refco Global Futures, LLC, Lind-Waldock Securities LLC, Refco Global Holdings, LLC, Refco Global Capital Management, LLC, Refco Mortgage Securities, LLC, Refco Fixed Assets Management, LLC, Summit Management, LLC, Marshall Metals, LLC, Bersec International LLC, Kroeck & Associates, LLC, Market Educational Institute, LLC, Refco Capital Holdings, LLC, Refco Capital Management, LLC, Refco Capital LLC, FXA, Refco Financial, LLC, Refco Administration, LLC, Refco Capital Trading LLC, Refco Information Services, LLC, Westminster-Refco Management LLC and Refco Managed Futures, LLC.
29 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. Note Indenture, were guaranteed, jointly and severally, on a senior unsecured basis, by Refco Group's non-regulated domestic subsidiaries, including Refco Finance Inc., Refco Group, Refco Regulated Companies, LLC, Refco Global Futures, LLC, Lind-Waldock Securities LLC, Refco Global Holdings, LLC, Refco Global Capital Management LLC, Refco Mortgage Securities, LLC, Refco Fixed Assets Management, LLC, Summit Management, LLC, Marshall Metals, LLC, Bersec International LLC, Kroeck & Associates, LLC, Refco Capital Holdings, LLC, Refco Capital Management, LLC, Refco Capital LLC, FXA, Refco Financial, LLC, Refco Administration, LLC, Refco Capital Trading LLC, Refco Information Services, LLC, Westminster-Refco Management LLC and Refco Managed Futures, LLC (collectively, the "Note Guarantors").
The Senior Subordinated Notes mature on August 1, 2012, with interest thereon accruing at a rate of 9% payable semi-annually in arrears on February 1 and August 1 of each year, commencing on February 1, 2005. On September 16, 2005, Refco Inc., the newly-formed parent entity of the Notes Issuers, completed a redemption of $210 million in aggregate principal amount of the outstanding Senior Subordinated Notes with a portion of the proceeds from Refco's August 2005 initial public offering (the "IPO"). To effect the redemption, funds in the amount of $231,262,500, representing $210 million in principal, $18.9 million in a prepayment premium and $2,362,500 in accrued interest on the principal amount being prepaid, were transferred to the Senior Subordinated Note Indenture Trustee for distribution to the persons then holding the Senior Subordinated Notes.
The Senior Subordinated Notes are unsecured, subordinated in right of payment to all existing and future Senior Indebtedness (as such term is defined in the Senior Subordinated Note Indenture) of the Notes Issuers, and equal in right of payment to any future senior subordinated indebtedness of the issuersNotes Issuers. As of the Petition Date, there was approximately $397.4 million, including interest, outstanding on the Senior Subordinated Notes.
3. Equity
Of the approximately 127.5 million shares of Refco Inc. common stock that are outstanding, approximately 30.5 million shares are held by non-insiders. The latter shares were issued in the August 2005 IPO, which was underwritten by fifteen underwriters, and were traded on the New York Stock Exchange ("NYSE") under the symbol "RFX." Refco's shares currently trade on the over-the-counter market under the symbol "RFXCQ."
C. Events Leading to the Chapter 11 Cases
1. The Leveraged Buy-Out
On August 5, 2004, THL Refco Acquisition Partners, an affiliate of Thomas H. Lee Partners, L.P., and its affiliates and co-investors acquired approximately 57% of the equity interests in Refco Group through their acquisition of a portion of the subsidiary New Refco Group, for approximately $507 million in cash. In connection with the transaction, Bennett exchanged his existing $382.5 million investment in Refco Group for an approximate 42.8% equity interest in New Refco Group, and other members of management made an investment in New Refco Group aggregating approximately $4.5 million in cash. Concurrently with the closing of the acquisition, Refco Group (i) entered into the Credit Agreement, which, as described above, provided for a fully-drawn $800 million term loan and an undrawn $75 million revolving loan facility, and (ii) together with Refco Finance Inc., issued $600 million in aggregate principal amount of the Senior Subordinated Notes. Also concurrently with the consummation of the transactions described above, Refco Group distributed $550 million in cash and all of the equity interests of Forstmann-Leff International Associates, LLC, which entity, at the time, owned substantially all of the assets of Refco Group's asset management business, to RGHI, an entity that was owned by Tone Grant and Bennett, and subsequently wholly owned by Bennett. The foregoing transactions are referred to collectively as the "Leveraged Buy-Out" or "LBO."
2. The Reincorporation
Prior to Refco's IPO, the Company's business was conducted through Refco Group, and its direct and indirect subsidiaries. As a result of the transactions described in this paragraph, Refco owns all of the outstanding member interests of New Refco Group and became the holding company for the business. Prior to the effectiveness of its registration statement, Refco issued an aggregate of 63,122,588 shares of its common stock to Thomas H. Lee Equity Fund V, L.P., and its affiliates and co-investors, in exchange for the direct or indirect equity interests in New Refco Group held by such parties. RGHI contributed all of its Class A member interests in New Refco Group to Refco in
30 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. exchange for 28,529,522 shares of common stock. In addition, the Phillip R. Bennett Three Year Annuity Trust, in which Bennett was both trustee and beneficiary, contributed all of its Class A member interests in New Refco Group to Refco in exchange for 19,089,272 shares of its common stock. Officers of New Refco Group who held Class A member interests in New Refco Group contributed all of their Class A member interests in exchange for an aggregate of 242,758 shares of its common stock. Officers, directors and employees who held Class B member interests in New Refco Group contributed all of their Class B member interests in New Refco Group to Refco in exchange for an aggregate of 4,015,860 shares of its common stock.
3. The Initial Public Offering
On August 16, 2005, Refco consummated an initial public offering of 26,500,000 shares of its common stock at a price of $22.00 per share. Refco sold 12,500,000 shares, and 14,000,000 shares were sold by existing holders of Refco common stock. An additional 3,975,000 shares were sold by Refco pursuant to the exercise of the underwriters' option to purchase such shares to cover over-allotments. Proceeds from the sale of the 12,500,000 shares were used to redeem $210 million aggregate principal amount of the outstanding Senior Subordinated Notes and for general corporate purposes. The redemption price was 109% of the Senior Subordinated Notes redeemed, plus accrued and unpaid interest to the date of redemption, i.e., September 16, 2005. On August 18, 2005, Refco paid an aggregate dividend of $82,203,000 to its shareholders. This payment was made from proceeds received from the exercise by the underwriters' of their option to purchase additional shares from Refco in the IPO. Credit Suisse First Boston LLC, Goldman, Sachs & Co. and Banc of America Securities LLC acted as joint book-running managers for the IPO. Deutsche Bank Securities Inc., J.P. Morgan Securities Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Sandler O'Neill & Partners, L.P. and HSBC Securities (USA) Inc. acted as co-managers.
4. Disclosure of Possible Fraud, Loss of Customer Confidence: Threatened Action by CMEImpact on Futures Merchants' Operations
In connection with the preparation of its first quarterly financial statement following the IPO, a Company employee became aware that a receivable of $430 million (the "Undisclosed Receivable") which previously had been recorded on the Company's books and records as a receivable from an unaffiliated third party appeared to be owed by RGHI, a company controlled by the Company's Chief Executive Officer, Mr. Bennett. This revelation was brought to the attention of the Company's Chief Financial Officer and then to the Company's Audit Committee which immediately hired Latham &Watkins LLP and FTI Consulting Inc. to commence an investigation. Later that week, the Audit Committee determined that the receivable was in fact a related-party receivable, and by action of the Board of Directors demanded immediate repayment of the receivable and suspended Bennett pending further investigation. On October 10, 2005, the $430 million receivable including all accrued interest was repaid in full and the Company issued a press release describing the foregoing events and noting that because of this material discovery, its previously issued financial statements could no longer be relied upon. On Tuesday, October 11, Bennett was arrested.
The disclosure of the financial statement irregularities together with the news of Bennett's arrest precipitated a crisis at the Company which evolved at an incredibly rapid pace. First, customers at all of the Company's businesses sought to withdraw cash, securities and other property on deposit with the Company in a manner which rapidly turned into a "run on the bank." The Company's regulated businesses, principally Refco, LLC and Refco Securities, LLC, maintained customer property in segregated accounts and, in accordance with Securities and Exchange Commission ("SEC") and Commodity Futures Trading Commission ("CFTC") regulations, had sufficient excess capital to satisfy all customer demands, even at the extraordinarily elevated levels of withdrawal. For example, customer deposits at Refco, LLC which were approximately $7.5 billion on October 10, had declined to approximately $5.7 billion by October 17, 2005. The Company's unregulated business, principally RCM, however, was not required to and did not in fact maintain property received from customers in segregated accounts; nor did it maintain cash reserves beyond those which it deemed necessary to satisfy customer requests for withdrawal in the normal course plus a reasonable cushion. Accordingly, demands by customers to withdraw property from RCM, including several large withdrawals (see Section IV.D.2 –"SPhinX Settlement"), seriously and rapidly depleted RCM's liquidity, leading the Board of Directors on October 13, 2005 to declare a moratorium on further customer withdrawals from RCM for fifteen days.
Perceiving that the Company's principal concern was a lack of liquidity which would be alleviated if the Company's value were able to be realized in a more orderly fashion, over the next several days the Company investigated various liquidity enhancing measures including loans, standby credit mechanisms, guarantees, shared clearing arrangements and equity investments from the Company's principal shareholder and other potential investors 31 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. as well as a sale of all or parts of the Company's business. The crisis was compounded whenHowever, representatives of the CME, expressing concern for the protection of public investors notwithstanding the continuing payment in full of all customer withdrawals at Refco, LLC, advised the Company that it would invoke its emergency powers to seize and transfer to another registered commodities broker all of Refco, LLC's customer accounts if no "solutionplan designed" to stabilize the situation satisfactory to the CME's satisfaction was put in place by the opening of business on Monday, October 17, 2005. Faced with the prospect of losing the Company's flagship business for no consideration, the Company's strategy shifted to seeking to sell its regulated commodities futures merchant business as a going concern.
After considering its alternatives and strongly influenced by the deadline imposed byprospect of the CME's exercising its emergency powers, the Company negotiated a memorandum of understanding with a group of investors led by J.C. Flowers & Co. ("Flowers") for the sale of the Company's regulated commodities futures merchant business, which included the sale of the equity securities of Refco, LLC, and the business conducted through certain of the Company's overseas subsidiaries. The proposed transaction required that the Company's unregulated businesses (which were believed to be eligible to seek protection under chapter 11 of the Bankruptcy Code) file bankruptcy petitions as promptly as possible to allow a sale of assets free and clear of interests to be consummated under section 363(b) of the Bankruptcy Code. The memorandum of understanding also permitted the Company to entertain and solicit competing bids for the business subject to various customary buyer protection features including a "break-up" fee and expense reimbursement.
Completed in the early morning hours of October 17, 2005, the memorandum of understanding was described to the CME, which agreed to permit Refco, LLC to continue operating pending consummation of the transaction under close monitoring by the CME and CFTC. Later that morning, the transaction was disclosed in press releases issued by the Company and Flowers and representatives of Flowers sought to assure various constituencies including regulators, customers, creditors and employees that the crisis at the Company had been stabilized. Later that evening, the Initial Debtors (as defined below) commenced their chapter 11 cases.
5. Governmental Investigations
Immediately following the Company's October 10, 2005 announcement that it had discovered the Undisclosed Receivable, the Department of Justice ("DOJ"), the SEC and the CFTC initiated investigations into the Company generally and, in particular, the Undisclosed Receivable. As part of their investigations, the various agencies also scrutinized the roles of third parties, including BAWAG P.S.K. Bank Für Arbeit Und Wirtschaft Und Österreichische Postparkasse Aktiengesellschaft ("BAWAG"), that may have assisted Bennett and others in concealing Refco's losses. See Section IV.D.1 –"BAWAG Settlement." On or about October 12, 2005, Bennett was arrested and charged in a criminal complaint with having defrauded investors in the IPO by concealing the Undisclosed Receivable. Thereafter, on or about November 10, 2005, an eight-count indictment was returned against Bennett in the United States District Court for the Southern District of New York alleging, among other things, that Bennett engaged in a conspiracy to commit securities fraud by concealing losses sustained by the Company through its own and its customers' trading in the financial markets.
The Company has rendered substantial cooperation in connection with these investigations, as well as with regard to several other inquiries by the SEC and CFTC that relate to other activities involving the Company. Such cooperation has included responding to numerous requests for documents and other information from the DOJ, SEC and CFTC. In addition, the Company has made various of its current and former employees available for interviews by these agencies. The Company entered into confidentiality and non-waiver agreements with each of the agencies pursuant to which it has provided information that otherwise would be subject to a privilege or other protection. The Company believes that its cooperation with such governmental agencies will weigh positively in the event that any of the agencies considers whether or not to bring criminal and/or civil proceedings against the Company. There can be no assurance, however, that such proceedings will not be initiated.
IV. EVENTS DURING THE CHAPTER 11 CASES
On October 17, 2005, Bersec International LLC, Kroeck & Associates, LLC, Marshall Metals, LLC, New Refco Group, Refco Administration, LLC, Refco Capital Holdings, LLC, Refco Capital LLC, Refco Capital Management, LLC, RCM, Refco Capital Trading LLC, FXA, Refco Finance Inc., Refco Financial, LLC, Refco Fixed
32 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. Assets Management, LLC, Refco Global Capital Management LLC, Refco Global Finance Limited, Refco Global Futures, LLC, Refco Global Holdings, LLC, Refco Group, Refco, Refco Information Services, LLC, Refco Mortgage Securities, LLC, Refco Regulated Companies, LLC and Summit Management, LLC (collectively, the "Initial Debtors") each filed voluntary petitions in the United States Bankruptcy Court for the Southern District of New York seeking reorganization relief under chapter 11 of the Bankruptcy Code. On June 5, 2006, the Company sought chapter 11 protection for three additional subsidiaries and affiliates: Lind-Waldock Securities LLC, Refco Managed Futures, LLC and Westminster-Refco Management LLC (the "Additional Debtors"). The Additional Debtors are guarantors under the Credit Agreement and the Senior Subordinated Notes, are non-operating companies and have been named in the class action lawsuit, In re Refco Inc. Securities Litigation, Case No. 05 Civ. 8626 (GEL) (the "Securities Class Action"), currently pending in United States District Court in the Southern District of New York. From and after their respective petition dates, the Debtors have continued to operate their businesses and manage their properties as debtors-in-possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. RCM is a debtor in these chapter 11 cases, but not a debtor-in-possession. See Section IV.B.5 –"Appointment of RCM Trustee."
A. Global Plan Term Sheet and Plan Support Agreement
The Refco Entities, the Committees, the RCM Trustee, those individual customers and creditors of RCM that are or become signatories to the Plan Support Agreement (as defined below) (the "RCM Creditor Parties"), and the individual creditors of the Debtors and Refco, LLC that are or become signatories to the Plan Support Agreement (the "Refco Creditor Parties" and, collectively with the Refco Entities, the Committees, the RCM Trustee and the RCM Creditor Parties, the "Plan Support Parties") have negotiated a global plan term sheet (the "Global Term Sheet"), many of the terms of which are incorporated into the Plan. The same parties also have negotiated a plan support agreement (the "Plan Support Agreement"), to memorialize their support for a global reorganization plan implementing the terms of the Global Term Sheet. The Chapter 7 Trustee also is a party to the Plan Support Agreement, but only with respect to certain specified provisions.
The Plan Support Agreement, including the Global Term Sheet as an attachment, has been executed by the Requisite Parties (as defined below), including RCM Creditor Parties constituting the Super Majority (as defined in the RCM Settlement Agreement), and was filed with the Bankruptcy Court on or about September 15, 2006.
By negotiating and entering into the Plan Support Agreement, the Plan Support Parties have sought to avoid the inevitably costly and time-intensive litigation regarding the RCM Settlement Agreement and other outstanding disputes between and among the parties that otherwise would have consumed the parties' time and attention (see Section II –"Settlements Embodied in the Plan" for a discussion of such disputes). Rather, the Plan Support Parties have sought to focus their collective efforts on the negotiation, confirmation and implementation of a global reorganization plan.
1. Support of Global Plan
The Plan Support Agreement provides that if the terms and conditions of the Plan and supporting documents are consistent with the Global Term Sheet, and all other terms and conditions of the Plan Support Agreement have been satisfied or waived, then:
a. the Debtors and the RCM Trustee and, to the extent that the Creditors' Committee, the Additional Committee or both elect to do so before the hearing before the Bankruptcy Court on the adequacy of the Disclosure Statement, the Creditors' Committee, the Additional Committee, or both will act as Plan Proponents;
b. each Plan Support Party will refrain from proposing or supporting any chapter 11 plan for the Debtors other than the Plan; and
c. no Plan Support Party will object to the Plan or take any action directly or indirectly inconsistent with the terms and conditions of the Plan Support Agreement or that would unreasonably delay Confirmation or consummation of the Plan or approval of the Disclosure Statement.
33 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. 2. Actions Required by Chapter 7 Trustee
The Plan Support Agreement required the Chapter 7 Trustee to use his reasonable best efforts to take certain actions necessary to facilitate implementation of a global reorganization plan, which actions were timely completed. In particular:
a. The Chapter 7 Trustee was required to use his reasonable best efforts to file objections, if appropriate, by September 15, 2006, to (A) the ten largest timely-filed claims against Refco, LLC, excluding claims identified on the schedule attached to the Plan Support Agreement (the "LLC Claims Schedule"); and (B) any unliquidated timely-filed claims against Refco, LLC, excluding claims identified on the LLC Claims Schedule. In addition, on or before ten days after receipt by the Chapter 7 Trustee from the RCM Trustee of a list (the "RCM Non-Signatory List") identifying any claims on the LLC Claims Schedule as to which in the RCM Trustee's opinion the Chapter 7 Trustee will not be receiving an executed LLC Claim Subordination and Waiver (an "LLC Claim Subordination and Waiver") satisfactory to the Chapter 7 Trustee in the form attached to the Plan Support Agreement, the Chapter 7 Trustee must use his reasonable best efforts to file objections, if appropriate, to such claims.
b. The Chapter 7 Trustee was required to use his reasonable best efforts to file, by September 15, 2006, (A) a stipulation allocating the proceeds of the sale of the Debtors' regulated commodities futures merchant businesses if, on or before September 14, 2006, the Plan Proponents and the Chapter 7 Trustee have agreed to the stipulation; and (B) a motion to pay the amounts owed to Refco Capital LLC related to loans from Refco Capital LLC to Refco, LLC customers.
3. Plan Support Conditions
The effectiveness of the Plan Support Agreement was subject to the following conditions (collectively, the "Plan Support Conditions"), each of which was timely satisfied on or prior to September 14, 2006:
a. the Plan Support Agreement must have been executed by the Refco Entities, the Committees, certain designated RCM Creditor Parties, and Refco Creditor Parties D.E. Shaw Laminar Portfolios, L.L.C. and Esopus Creek Advisors LLC (collectively, the "Requisite Parties");
b. the RCM Trustee must have modified the proposed order (the "RCM Settlement Order Modification") approving the RCM Settlement Agreement to include a particular provision set forth in the Plan Support Agreement; and
c. subject to the Chapter 7 Trustee's right to object to the RCM Settlement Agreement, each of the Plan Support Parties that filed or joined in an objection with respect to the motions for approval of the RCM Settlement Agreement must have rested on the pleadings filed, without oral argument other than in response to questions from the Bankruptcy Court, and without the adducing of evidence, for purposes of the Bankruptcy Court hearing seeking an order or orders approving the RCM Settlement Agreement as contemplated by §14(b)(iv) of the RCM Settlement Agreement (the "Initial Approval Order"). The Bankruptcy Court entered the Initial Approval Order on September 15, 2006.
4. Plan Support Covenants
Under the Plan Support Agreement, the Plan Support Parties made the following covenants (collectively, the "Plan Support Covenants"):
a. each of the Plan Proponents must (a) support entry of the order or orders approving (i) the stipulation filed by the Chapter 7 Trustee allocating the proceeds of the sale of the Debtors' regulated commodities futures merchant businesses and (ii) the motion to pay the amounts owed to Refco Capital LLC related to loans from Refco Capital LLC to Refco, LLC customers; and (b) take all reasonable steps necessary to meet the deadlines contemplated by the Plan Support Agreement and Global Term Sheet;
b. each of the Plan Support Parties negotiating the terms and other provisions of the Plan and related documents must negotiate in good faith;
34 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. c. each of the Plan Support Parties must forbear from asserting or supporting the assertion by others of inter-company and other claims against other Plan Support Parties to be resolved as contemplated by the Global Term Sheet, and must cease all litigation preparation for and prosecution of any such claims and all inter-company and related forensic analysis, except as may be necessary to prepare for the Confirmation Hearing on the Plan;
d. the RCM Trustee and the RCM Creditor Parties must not amend the RCM Settlement Agreement in any manner inconsistent with the Plan Support Agreement or the Global Term Sheet exclusive of extending deadlines in the RCM Settlement Agreement;
e. the RCM Trustee must use his reasonable best efforts to enter into arrangements satisfactory to himself and the Chapter 7 Trustee, including the provision of any agreed indemnification, to enable the Chapter 7 Trustee to set reserves with respect to any claims filed against Refco, LLC by the Rogers Funds, or any of their affiliates, or any entities claiming derivatively or for the same or similar claims (collectively, the "Rogers Claims"), at no more than $75 million (if acceptable to the Chapter 7 Trustee) for purposes of facilitating Refco, LLC's distributions to the Debtors as contemplated by the Global Term Sheet, subject to the right of the Rogers Funds to challenge any such arrangements;
f. the Chapter 7 Trustee must use his reasonable best efforts to conclude litigation in the Bankruptcy Court over allowance and amount, if any, of the Rogers Claims against LLC on or prior to October 15, 2006;
g. If at any time the RCM Creditor Parties constitute the Super Majority (as defined in the RCM Settlement Agreement), then, on the earlier to occur of the date of entry of the Lender Settlement Order (as defined below) and one business day prior to the hearing before the Bankruptcy Court seeking an order or orders contemplated by §14(c)(ii) of the RCM Settlement Agreement (the "Final Approval Order"), (A) each of the Plan Support Parties that filed objections with respect to the pending motions for approval of the RCM Settlement Agreement will withdraw such objections, (B) each of the Debtors and the Committees will support the Final Approval Order other than for any ownership disputes arising out of the Rogers Claims as to securities deposited by the Rogers Funds and (C) none of the Refco Creditor Parties will object to such approval;
h. the RCM Trustee must provide the RCM Non-Signatory List to the Chapter 7 Trustee on or prior to September 26, 2006; and
i. the RCM Trustee must not (a) except with respect to claims for which specific reserves were established in the Initial Order and for any ownership disputes arising out of the Rogers Claims as to securities deposited by the Rogers Funds, commence the hearing before the Bankruptcy Court seeking the Final Approval Order prior to October 3, 2006; or (b) make any distributions to prepetition creditors or customers of RCM on account of their prepetition claims against RCM prior to December 1, 2006.
5. Other Agreements and Reservations Under the Plan Support Agreement
In addition to the agreements and covenants that are Plan Support Conditions and Plan Support Covenants, the Plan Support Agreement also memorializes certain other agreements between and among the Plan Support Parties:
a. Each RCM Creditor Party other than the Rogers Funds agrees to execute and deliver to the Chapter 7 Trustee an LLC Claim Subordination and Waiver.
b. Each RCM Creditor Party agrees to (a) elect to receive its pro rata share of the proceeds, contemplated by the Global Term Sheet, of the RCM BAWAG Proceeds (as defined in the Global Term Sheet), and (b) upon tender to it of a certificate or certificates evidencing its interest or interests in the Private Actions Trust contemplated by the Global Term Sheet, contribute its private Refco-related causes of action to the Private Actions Trust.
c. Generally, nothing in the Plan Support Agreement prevents any Plan Support Party from objecting to the exculpation provisions of the Plan in favor of any person for the person's acts or omissions during the course of the Chapter 11 Cases, (b) imposes any duty on the Chapter 7 Trustee to agree to any arrangements to lower
35 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. the reserves at Refco, LLC with respect to the Rogers Claims, (c) prevents the Rogers Funds from challenging any lowered reserves with respect to the Rogers Claims that may be sought to be established at Refco, LLC, (d) otherwise prejudices the claims or rights of the Rogers Funds with respect to the Rogers Claims, (e) impairs the Chapter 7 Trustee's right to object to any aspect of the RCM Settlement Agreement or the Plan that purports to resolve any of the Rogers Claims against RCM or the Debtors, or purports to allocate any securities or cash (or proceeds thereof) in which the Rogers Funds have asserted an interest, without a release of all claims that the Rogers Funds may assert against Refco, LLC or other resolution of the Rogers Claims acceptable to the Chapter 7 Trustee or (f) impairs the right of any Party who has filed or joined in an objection to the RCM Settlement Agreement to appeal from the Initial Approval Order or to maintain its objection or joinder to an objection to any and all orders approving the RCM Settlement Agreement.
d. Neither the execution or delivery of the Plan Support Agreement by any Plan Support Party nor the occurrence of any Cause (as defined below) for withdrawal from the Plan Support Agreement will constitute any ground to challenge the Initial Approval Order or any other order or orders of the Bankruptcy Court approving the RCM Settlement Agreement.
6. Withdrawal from Plan Support Agreement
Any Plan Support Party may withdraw from the Plan Support Agreement without recourse for Cause (as defined below) effective upon providing written notice thereof to counsel to each of the Debtors, the Committees and the RCM Trustee, provided that such Cause was not the result of such Plan Support Party's own act or omission. Excluding conditions that already have been satisfied, "Cause" means:
a. any covenant or other material term or provision of the Plan Support Agreement has been breached in any material respect by any Plan Support Party and (A) the breach has not been cured within five business days following notice by any Plan Support Party to all of the other Plan Support Parties of the breach or (B) within such five-business day period one or more of the Plan Proponents has not commenced an action against the breaching Plan Support Party for specific performance of the Plan Support Agreement;
b. the action against the breaching party referred to above is dismissed or not resolved in favor the plaintiff Plan Proponent or Plan Proponents within ten business days after having been commenced;
c. on or prior to September 19, 2006, (A) the Plan Support Agreement has not been executed by the Super Majority (as defined in the RCM Settlement Agreement), or (B) the Chapter 7 Trustee has not received an executed LLC Claim Subordination and Waiver satisfactory to the Chapter 7 Trustee, for purposes of facilitating Refco, LLC's distributions to the Debtors as contemplated by the Global Term Sheet, from the holders of at least the Super Majority (as defined in the RCM Settlement Agreement but excluding the Rogers Funds for purposes of determining the Super Majority if the Bankruptcy Court has by then approved the Rogers Settlement Joinder);
d. on or prior to October 5, 2006, an order allocating the BAWAG Proceeds (as defined in the Global Term Sheet), as contemplated by the Global Term Sheet, has not been issued by the Bankruptcy Court;
e. on or prior to October 16, 2006, (A) the Bankruptcy Court has not issued the Final Approval Order other than for those claims for which specific reserves were established under the Initial Approval Order, (B) the "Payment Date" under and as defined in the Lender Settlement Order has not occurred, (C) the Disclosure Statement has not been approved by the Bankruptcy Court, or (D) the Disclosure Statement, if approved on or prior to October 16, 2006, refers to and is accompanied by a plan that either is not consistent with the terms and conditions set forth in the Global Term Sheet, or that adds one or more terms that materially reduce the economic return or the timing of the economic return reasonably anticipated by RCM Creditor Parties or Refco Creditor Parties under the Plan;
f. on or prior to December 15, 2006, the Plan has not been confirmed by the Bankruptcy Court; or
g. on or prior to December 31, 2006, the Effective Date of the Plan has not occurred.
36 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. 7. Secured Lender Settlement
On September 7, 2006, the Debtors and the RCM Trustee filed a motion (and on September 8, 2006, an amended and restated motion) seeking approval of a settlement agreement (the "Lender Settlement") reached among the Debtors, the RCM Trustee, the Secured Lenders and certain other parties in interest (collectively, the "Lender Settlement Parties"). On September 20, 2006, the Debtors and the RCM Trustee filed a revised version of the Lender Settlement. Also on September 20, 2006, objections to the Lender Settlement motion were filed by (i) the Ad Hoc Committee of Equity Security Holders of Refco Inc.; (ii) the Ad Hoc Refco F/X Customer Committee, FXCM, and FT; and (iii) New York Financial LLC. On September 21, 2006, an additional objection to the Lender Settlement was filed by the Lead Plaintiffs in the Securities Class Action.
The Lender Settlement settles a dispute regarding whether and the extent to which the Secured Lender Claims (and the collateral securing them) and the $150 million partial repayment made to the Secured Lenders on January 24, 2005 may be avoided under applicable state and federal fraudulent transfer statutes (see Section II.3 –"Settlement of the Fraudulent Conveyance/Obligations Dispute"). The Chapter 11 Debtors' motion for approval of the Lender Settlement was granted by the Bankruptcy Court on September 27, 2006.
The Lender Settlement approved by the Bankruptcy Court provides that the Secured Lender Claims will be Allowed as Claims secured by valid and perfected liens. The Lender Settlement recites that the Secured Lender Claims and liens are not subject to avoidance and are to be paid in cash in accordance with the Lender Settlement as promptly as possible after the Lender Settlement becomes binding. In particular, the Lender Settlement requires the Debtors to pay the Secured Lenders the following monies by October 16, 2006 or such different date as may be agreed to by the Secured Lender Agent and/or the Secured Lenders (the "Payment Date"): (i) $642,000,000 (constituting the outstanding principal due under the Bank Term Loan); (ii) $1,693,276.42 (constituting the full amount of interest accrued and unpaid under the Bank Term Loan as of the Petition Date); (iii) all interest accrued on principal and interest payable under the Bank Term Loan from the Petition Date to the Payment Date, which amounts exclude interest at the default rate; (iv) the unpaid fees and expenses that are reimbursable under the Bank Term Loan through September 30, 2006; and (v) other fees and expenses payable under the Bank Term Loan incurred from October 1, 2006 through the Payment Date. Upon payment of these amounts, the Secured Lenders will be permanently enjoined from asserting their rights to recover any losses in respect of principal or interest (including default interest) under the Bank Term Loan (aside from amounts payable under the Lender Settlement) or the Senior Subordinated Note Indenture. Moreover, on the Payment Date, the Debtors will be permitted to use the Secured Lenders' cash collateral to pay administrative expenses. The Secured Lenders have agreed under the Lender Settlement that liens securing credit obligations incurred by the Debtors (of up to $200 million) to fund the above payments may partially prime the existing liens of the Secured Lenders.
The Lender Settlement also provides that upon the Payment Date, the Secured Lenders and all other agents, arrangers and book running managers in their capacities as such under the Bank Term Loan (as well as (i) the successors and assigns of each and (ii) the directors, officers, employees, agents, professionals, properties and advisors of each to the extent they acted on behalf of such parties with respect to the loans) will be fully released from all claims of the Debtors, their creditors and all other parties in interest in these cases to the extent such claims relate to the Bank Term Loan and transactions thereunder. The parties so released, however, will not include any past or present director, officer, employee, shareholder, affiliate, professional or advisor of a Debtor or any affiliate of a Debtor in such capacity. In exchange for the foregoing releases, contingent upon confirmation of a chapter 11 plan (i) adopting the terms of the Lender Settlement; (ii) releasing the Secured Lenders from the claims of third parties to the same extent that the Secured Lenders are released by the parties to the Lender Settlement; and (iii) containing injunctions giving effect to the releases contained in the Lender Settlement and Plan, becoming effective in these Chapter 11 Cases, (x) any Claims for indemnification and other amounts due under the Bank Term Loan (other than fees and expenses of counsel and financial advisors) will be valued at $0 (the "Estimated Unsatisfied Credit Agreement Claims") for purposes of Claims allowance and will be finally allowed (including for purposes of enforcement of any rights under the Senior Subordinated Note Indenture pursuant to Bankruptcy Code Section 510(a)) in such amount; (y) the Secured Lender's unsecured Claims will be valued at $0 for purposes of final Claims allowance; and (z) as against the holders of the Senior Subordinated Notes, the Secured Lenders' rights to seek recovery of Estimated Unsatisfied Credit Agreement Claims under the Senior Subordinated Note Indenture will be waived. The Secured Lenders have reserved all of their rights, however, with respect to any Secured Lender Claims that are not satisfied or extinguished by the terms of the Lender Settlement. Additionally, if the Secured Lender Agent and Secured Lenders are not released by
37 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. any party to the extent contemplated by the Lender Settlement, then their resulting Claims under the Bank Term Loan for indemnification will be Allowed secured Claims, which must be provided for under any plan of reorganization and the Secured Lender Agent and Secured Lenders may take any necessary actions to recover such Claims.
In order to satisfy certain of the objectors to the Lender Settlement motion, it was stipulated on the record before the Bankruptcy Court and so ordered that: (i) the Debtors will not use certain FXA cash accounts or FXA customer property to fund the payments to be made under the Lender Settlement; (ii) RCM is to make no funds available for payments under the Lender Settlement without further order of the Bankruptcy Court on notice to all parties in interest; (iii) nothing in the releases contained in the Lender Settlement bars certain claims asserted in the Securities Class Action; (iv) the parties released by the order are only released in their capacity as lender, agent, other agent, arranger or book running manager under the loan documents and not in any other capacity; and (v) if BAWAG Proceeds are used to fund the payments under the Lender Settlement, (x) the sole recourse of any party challenging such use of the BAWAG Proceeds will be to that portion of the collateral securing the Secured Lender Claims that is unencumbered as a result of such payment reducing the secured amount of the Secured Lender Claims, (y) such collateral will be deemed to be BAWAG Proceeds for purposes of the BAWAG Settlement Agreement; and (z) in such event, each of the Debtors that are Guarantors (as defined in the Credit Agreement) will retain any and all rights of subrogation, contribution or reimbursement and indemnification with respect to any other Debtor that is a Loan Party (as defined in the Credit Agreement).
The Plan Support Agreement provides that if the order approving the Lender Settlement (the "Lender Settlement Order") substantially and in all material respects conforms to the form of order attached to the Plan Support Agreement, and such order is entered by the Bankruptcy Court, then the Plan Support Parties will be irrevocably bound by all of the terms and conditions of the Lender Settlement Order (including, without limitation, the releases of the Secured Lender Agent and the Secured Lenders and related injunctions contained therein), in each case regardless of whether any plan of reorganization is agreed upon or confirmed in the chapter 11 cases of the Debtors or RCM or any of such cases is converted to chapter 7. The Plan Proponents further irrevocably agree, if the Lender Settlement Order is entered, to use their reasonable best efforts to ensure that any plan confirmed in the chapter 11 cases of the Debtors or RCM is a Qualifying Plan (as defined in the Lender Settlement Order), and the Plan Support Parties irrevocably agree not to (A) object to the entry of the Lender Settlement Order or (B) if the Lender Settlement Order is entered, propose any plan in the Chapter 11 Cases that does not contain the provisions of paragraph 10 of the Lender Settlement Order. These obligations of the Plan Proponents become effective immediately upon execution of the Plan Support Agreement by the Requisite Parties and the RCM Creditor Parties constituting a Super Majority (as defined in the RCM Settlement Agreement).
B. Key Events During the Chapter 11 Cases
1. Sale of the Regulated Commodities Futures Merchant Business
On October 21, 2005, the Debtors filed a motion seeking approval, on an expedited basis, of the agreement with Flowers, pursuant to which Flowers would be the stalking-horse bidder in an auction process, and to establish certain procedures governing the sale of the regulated commodities futures merchant business. As part of the agreement, the Debtors also sought approval of certain protections, including a break-up fee of 2.8% of the purchase price,5 a $5 million expense reimbursement, and a minimum overbid of $20 million in cash. On October 26, 2005, the Bankruptcy Court approved certain bid procedures in connection with the motion, but limited the maximum break-up fee to $5 million, and the expense reimbursement to $1 million. In light of the Bankruptcy Court's order, counsel for Flowers informed the Bankruptcy Court of its withdrawal from the sale process.
Although without a stalking-horse bidder, the Debtors continued working with their professionals, and with professionals for the Creditors' Committee and other parties in interest, to further the sale process and prepare for the auction of its regulated commodities futures merchant business in accordance with the procedures approved by the Bankruptcy Court. The Company received six bids, five of which were determined, for the purpose of the auction, to be "qualified bids." On November 9, 2005, the Debtors commenced an auction involving multiple bidders. The
5 Based on the purchase price specified in Flowers' stalking-horse bid, the amount of the break-up fee required by Flowers would have amounted to approximately $20 million.
38 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. auction lasted over twenty-one hours (concluding on November 10, 2005), culminating in the sale (the "Sale") of Refco's regulated commodities futures merchant business, U.S. government securities business, as conducted by RSL, and institutional foreign exchange business, as conducted by RCM (collectively, the "Acquired Business") to Man Financial (collectively with Refco, RGF, Refco Group, Refco Global Holdings, LLC, Refco (Singapore) Pte Ltd., Refco Canada Co., Refco Overseas Ltd., and certain other affiliates of Refco as sellers, the "Parties"). The Parties negotiated and executed an asset purchase agreement specifying the terms of the Sale, dated as of November 13, 2005 (the "Acquisition Agreement").
On November 10, 2005, the Bankruptcy Court conducted a hearing to consider the terms of the Sale and the Acquisition Agreement. The Acquisition Agreement was executed on November 13, 2005, and on November 14, 2005, was approved by order of the Bankruptcy Court (the "Chapter 11 Sale Order"). The domestic portion of the Acquisition Agreement closed on November 25, 2005, whereas the international portions of the Sale, including the sale of assets of Refco (Singapore) Pte Ltd., Refco Investment Services Pte Ltd., and Refco Overseas Limited and the sale of stock in Refco Canada Co. closed subsequently. Pursuant to the Acquisition Agreement, the Company received $282 million in cash, as well as an additional $1 million in liquidated damages resulting from Man Financial's decision not to purchase the assets of Refco Hong Kong Ltd. In the aggregate, nearly $1 billion has been or is in the process of being realized for the Company in connection with the Sale.
The Chapter 11 Sale Order contemplated the filing by Refco, LLC, a registered futures commission merchant (the "Chapter 7 Debtor"), of a petition under chapter 7 of the Bankruptcy Code, in order to implement the Acquisition Agreement. The Chapter 11 Sale Order further required, prior to consummation of the Acquisition Agreement, that the Chapter 7 Trustee comply with (i) the requirements of Subchapter IV, satisfaction of which was necessary to consummate the Acquisition Agreement, (ii) the applicable requirements of the Commodity Exchange Act ("CEA") and Title 17 of the Code of Federal Regulations, including Part 190, and (iii) the applicable rules and requirements of the Chapter 7 Debtor's designated self-regulatory organization, the CME. The Chapter 11 Sale Order also contemplated that the Chapter 7 Trustee, prior to the consummation of the Acquisition Agreement, would file a motion (the "Chapter 7 Sale Motion") seeking an order (the "Chapter 7 Sale Order") to sell the assets of the Chapter 7 Debtor.
As contemplated by the Chapter 11 Sale Order, on November 25, 2005 (the "LLC Petition Date"), the Chapter 7 Debtor filed a voluntary petition for relief under chapter 7 of the Bankruptcy Code. As of the LLC Petition Date, the Chapter 7 Debtor held more than $2 billion in public customer funds and property.
The United States Trustee appointed Albert Togut to serve as interim Chapter 7 Trustee, who, in connection with the Sale, filed the Chapter 7 Sale Motion. On November 25, 2005, the Bankruptcy Court approved the sale of Refco, LLC to Man Financial. The assets transferred included all of the customer accounts carried on the books of Refco, LLC as of the closing, all rights of Refco, LLC in respect of such customers and such accounts, and all cash, securities, positions or other assets in such customer accounts or constituting customer deposits or otherwise necessary to satisfy certain liabilities of such accounts as of the closing date, as well as such accounts and positions as were held by any third party on behalf of the applicable customers.
Several months after consummation of the Sale, on February 8, 2006, the Debtors filed a motion to convert Refco, LLC's chapter 7 case to a case under chapter 11 (the "Conversion Motion"). The Bankruptcy Court denied the Conversion Motion on May 12, 2006, without prejudice to the filing of a similar motion on a later date.
The Allocation Stipulation. On September 19, 2006, the Chapter 7 Trustee filed an amended stipulation and consent order (the "Allocation Stipulation"), jointly agreed to by the Debtors, the Chapter 7 Trustee, the Creditors' Committee, the Secured Lender Agent and the RCM Trustee, which allocated by agreement approximately $183 million of the $282 million in cash sale proceeds paid by Man Financial under the Acquisition Agreement. That $183 million was allocated as follows: (i) Refco, LLC $159,320,359 (87.1% of the sale proceeds); (ii) Refco Canada Co. $6,811,402 (3.7% of the sale proceeds); (iii) Refco Group $8,233,402 (4.5% of the sale proceeds); and (iv) Refco Global Holdings, LLC $8,599,331 (4.7% of the sale proceeds). As more fully set forth in the Allocation Stipulation, the allocations with respect to Refco, LLC and Refco Canada Co. (which account for approximately 90% of the sale proceeds distributed under the Allocation Order) are based on the average percentage share of customer segregated funds held by each such seller (as compared to the aggregate amount of all customer segregated funds held by all the sellers) on the Petition Date and LLC Petition Date. The sale proceeds attributable to Refco Canada Co. will be distributed to specific Refco Entities based on each such Entity's respective percentage ownership of the stock of Refco Canada Co. sold to Man Financial. Of the roughly $99 million in cash sale proceeds paid by Man Financial 39 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. under the Acquisition Agreement that was not allocated in the Allocation Stipulation, an additional $15 million previously was paid and allocated 100% to Refco (Singapore) Pte Limited; $70 million was deposited at closing into an escrow account to secure the sellers' indemnification obligations under the Acquisition Agreement ($69 million, plus accrued interest, remains in that escrow account); and approximately $14 million is attributable to the net unreturned balances of security deposits paid by the Chapter 7 Trustee at closing to commodity exchanges in order to facilitate the transfer of commodity exchange memberships to Man Financial, a portion of which is expected to be returned to the Chapter 7 Trustee. The amounts remaining in the escrow account, and the proceeds of any commodity exchange security deposits returned in the future to the Chapter 7 Trustee, remain subject to further allocation consistent with the percentage allocations used in the Allocation Stipulation, but specifically subject to adjustment for any cure costs, transition services or other sale-related expenses paid by the Debtors, the Chapter 7 Trustee or the RCM Trustee.
2. Concurrent Bermuda Proceedings
On October 19, 2005, RCM and Refco Global Finance Limited (together, the "Bermuda Debtors") filed petitions in the Supreme Court of Bermuda. The main purpose of these petitions was to invoke the automatic stay protections of section 167(4) of the Companies Act of 1981. On October 31, 2005, the Bermuda Debtors filed amended petitions in the Bermuda Supreme Court, seeking the appointment of two partners of KPMG entities, Michael W. Morrison and Richard Heis, as "Joint Provisional Liquidators" of the Bermuda Debtors. One of the duties of the Joint Provisional Liquidators is to coordinate the proceedings of the Bermuda Debtors being conducted under the supervision of the Bermuda Supreme Court in accordance with the laws of Bermuda with the Chapter 11 Cases.
On December 5, 2005, Allen & Overy LLP, counsel for the Joint Provisional Liquidators, filed a motion with the Bankruptcy Court requesting approval of a protocol for the payment of their professional fees, which among other things, requested that the Bermuda Court have exclusive jurisdiction and power to determine the compensation of the Joint Provisional Liquidators and their professionals. The Creditors' Committee opposed the motion on grounds relating to the proper scope of work to be performed, as well as to the lack of limitations on the Joint Provisional Liquidator's fees and expenses. After numerous adjournments, on August 8, 2006, the motion of the Joint Provisional Liquidators was withdrawn.
3. RCM Estate Property Litigation
On October 24, 2005, one week after the Petition Date, the Rogers Funds commenced an adversary proceeding (the "Rogers Litigation") against RCM. The Rogers Funds sought a declaratory judgment that approximately $362 million in cash and government securities (the "Assets") held by RCM was not property of RCM's bankruptcy estate but rather belonged to the Rogers Funds on the basis that the Assets were wrongfully diverted by an unspecified Refco entity from segregated accounts at Refco, LLC to unsegregated accounts at RCM.
In the complaint (the "Complaint"), the Rogers Funds sought, among other things, (i) a declaration that the Assets were not property of RCM's estate; (ii) a determination that RCM was unjustly enriched by the alleged wrongful diversion of the Assets to RCM and, therefore, the Rogers Funds were entitled to the imposition of a constructive trust over and immediate return of the Assets; (iii) restitution for the Assets; and (iv) the imposition of a resulting trust. More than twenty additional adversary proceedings were commenced by account-holders of RCM within the days and weeks following the commencement of the Rogers Funds' adversary proceeding, involving the same legal issues as those asserted by the Rogers Funds (collectively with the Rogers Litigation, the "Estate Property Litigation"). The plaintiffs claimed that securities and other property held by RCM were not property of RCM's bankruptcy estate, but rather property of the account holders (the "Estate Property Issue").
To alleviate the burden of litigating multiple adversaries involving the Estate Property Issue, the Debtors moved for an order establishing procedures for expedited litigation to determine common legal and factual issues relating to whether certain property held by, or on behalf of, RCM constituted property of RCM's bankruptcy estate. In conjunction therewith, the Debtors requested a stay of all of the adversary proceedings presenting the Estate Property Issue (the "Stayed Adversaries"), as well as future proceedings raising the same issue, while the expedited litigation was pending. On November 28, 2005, the Bankruptcy Court entered an order granting an interim stay of the Estate Property Litigation, which order was amended and extended by orders dated January 3, 2006, January 17, 2006, and January 27, 2006. Notwithstanding the Bankruptcy Court's entry of an order staying the Estate Property Litigation, the Bankruptcy Court authorized the Debtors and the Rogers Funds to continue with certain discovery.
40 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. The Bankruptcy Court subsequently entered a briefing schedule for dispositive motions in the Estate Property Litigation. The Bankruptcy Court suspended the briefing schedule, however, during the pendency of discovery and a trial held on a motion filed by certain RCM account holders (the "Moving Customer Group") to convert RCM's chapter 11 case to a chapter 7 stockbroker liquidation. See Section IV.B.4 –"RCM Conversion Motion." As of the date hereof, the Estate Property Litigation remains stayed.
Although technically stayed, the approval of the RCM Settlement Agreement has obviated the need to complete trial on most Estate Property Litigation. See Section II.1 –"Settlement of the RCM Dispute."
4. RCM Conversion Motion
On December 12, 2005, the Moving Customer Group filed a motion (i) asserting that RCM is a "stockbroker," as that term is defined in the Bankruptcy Code, and (ii) requesting, among other things, the conversion of RCM's chapter 11 case to a stockbroker liquidation case under subchapter III of chapter 7 of the Bankruptcy Code (the "RCM Conversion Motion"). Numerous parties in interest joined in the RCM Conversion Motion and many others filed oppositions thereto. Following a trial on the RCM Conversion Motion, the Bankruptcy Court concluded in a preliminary ruling that RCM was a "stockbroker" with at least one "customer," as such terms are defined in the Bankruptcy Code. The Bankruptcy Court, due to the existence of compelling and unusual circumstances, however, postponed (i) a final ruling on the matter and (ii) the conversion of RCM's case, to provide parties with additional time within which to negotiate and settle upon the terms of a chapter 11 plan for all Debtors and RCM. As of the date hereof, the Bankruptcy Court has not entered a final order on the RCM Conversion Motion.
Pursuant to the terms of the RCM Settlement Agreement, if the Bankruptcy Court does not approve the Disclosure Statement by October 17, 2006 and the Plan by December 15, 2006, then the RCM Trustee, or any other party to the RCM Settlement Agreement, may request that the preliminary ruling with respect to the RCM Conversion Motion become a final ruling, thereby converting the RCM Chapter 11 Case to a case under chapter 7 of the Bankruptcy Code.
In the event of a conversion of the RCM Chapter 11 Case to a chapter 7 case administered under Subchapter III of chapter 7, the terms of the RCM Settlement Agreement will be binding upon any trustee appointed in the chapter 7 case. In addition, the parties to the RCM Settlement Agreement are bound to support the election of the RCM Trustee as the chapter 7 Trustee.
5. Appointment of RCM Trustee
On December 9, 2005, the United States Trustee filed a motion (the "Trustee Motion") requesting the appointment of a chapter 11 trustee pursuant to 11 U.S.C. § 1104(a)(2). On January 10, 2006, the Bankruptcy Court denied the Trustee Motion on the condition that the members of the Board of Directors be removed and replaced with at least one independent director. On January 12, 2006, the Bankruptcy Court issued an amended order stating that, as to RCM, the Court's consideration of the Trustee Motion was adjourned pending the resolution of the RCM Conversion Motion. On March 22, 2006, as part of its resolution of the RCM Conversion Motion, the Bankruptcy Court issued an order authorizing appointment of one disinterested person as chapter 11 trustee for the estate of RCM, pursuant to 11 U.S.C. § 1104(d) and Interim Fed. R. Bankr. P. 2007.1(c). On April 10, 2006, Marc S. Kirschner was appointed as the chapter 11 trustee for RCM (the "RCM Trustee").
6. Appointment of Examiner
On January 27, 2006, the United States Trustee filed a motion requesting the appointment of an examiner (the "Examiner") pursuant to 11 U.S.C. § 1104(c)(2). On March 16, 2006, the Bankruptcy Court entered an order appointing Joshua R. Hochberg as the Examiner and authorizing the Examiner to investigate and report on any topic that might reasonably result in the assertion of a claim or right by any of the Debtors' estates, except by RCM. After several motions addressed to the scope of the Examiner's mandate were filed and resolved, the Bankruptcy Court approved the work plan for the Examiner on June 21, 2006. Pursuant to the work plan, the Examiner will focus on causes of action arising out of the IPO, the LBO and the Undisclosed Receivable.
41 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. C. Other Chapter 11 Asset Sales
1. Proposed FXCM Sale
The Debtors have been involved in a complicated and contested proposed sale of the Company's online retail foreign exchange business conducted primarily through FXA. The operation and management of FXA's business is governed by a Facilities Management Agreement ("FMA") between FXCM, on the one hand, and Refco Group and its designated subsidiaries, including FXA, on the other hand. In connection with the execution of the FMA, Refco Group also acquired a 35% limited liability interest in FXCM and certain of its affiliates (the "FXCM Equity Stake"). Shortly after the commencement of the bankruptcy cases, FXCM approached the Debtors with a proposal to purchase FXA's assets and the FXCM Equity Stake.
Over a period of nearly three weeks, the Debtors and their professionals conducted due diligence regarding the complex structure between the Debtors and FXCM and negotiated the terms of a proposed sale to FXCM. On or about November 9, 2005, the parties reached agreement on the material terms of a proposed sale and memorialized that agreement in a Memorandum of Understanding (the "FXCM MOU"). Contemporaneously with the execution of the FXCM MOU, the Debtors began negotiating a stipulation (the "FMA Stipulation") that would modify the FMA and allow FXA customers to continue to trade pending the closing of a sale. On or about November 19, 2005, the Debtors filed a sale motion to approve the FMA Stipulation and authorize the sale to FXCM after an auction process (the "FXCM Sale Motion"). Thereafter, the Debtors engaged in extensive arm's-length negotiations among FXCM, the Administrative Agent and the Creditors' Committee regarding the purchase agreement and modifications to the proposed bid procedures. The Bankruptcy Court entered an ordering approving the agreed bid procedures on December 15, 2005.
Prior to and during the auction process, several parties raised an issue regarding the consideration to be provided by FXCM under the purchase agreement, resulting in a modification to the FMA Stipulation and postponement of the bid deadline until February 13, 2006. No competing bids were received by this deadline. On February 16, 2006, the Administrative Agent and Creditors' Committee filed an objection to the proposed sale. Despite the Debtors' willingness to proceed with a contested hearing, on March 30, 2006, FXCM announced that is was terminating the purchase agreement. The Debtors have disputed the validity of this purported termination. In an effort to continue negotiations among the parties and avoid unnecessary expense and litigation, the parties agreed to adjourn the sale hearing and all related discovery requests indefinitely.
Subsequent to its purported termination of the purchase agreement, FXCM has stated that it presently does not anticipate making an offer to purchase Refco Group's FXCM Equity Stake in any future attempts of Refco Group or its successor under the Plan to sell such assets. FXCM has also stated that (i) it believes that the Refco Group's FXCM Equity Stake was acquired by fraud and is subject to, among other remedies, claims for rescission and (ii) by operation of the relevant limited liability company operating agreement, all of Refco Group's rights with respect to the FXCM Equity Stake, except the right to receive profits and losses, were terminated as a result of the commencement of the Chapter 11 Cases. The Debtors dispute the foregoing assertions of FXCM and believe that Refco Group remains a full member in FXCM with all of the rights related thereto. Since the purported termination of the asset purchase agreement by FXCM, the Debtors have not actively marketed the FXCM Equity Stake but have continued to respond to inquiries from potential purchasers and have been in negotiations with FXCM regarding potential amendments to FXCM's limited liability company operating agreement.
2. Proposed GAIN Transaction
After negotiations with the Administrative Agent and the Creditors' Committee regarding the sale of FXA's assets and the FXCM Equity Stake reached an impasse, the Debtors and their financial and legal advisors began intense negotiations with GAIN Capital Group ("GAIN") regarding GAIN's possible acquisition of FXA's customer database. These negotiations culminated on July 27, 2006, in the execution of a term sheet setting forth the material terms of GAIN's proposed acquisition of FXA's customer database.
On June 30, 2006, the Debtors filed a motion seeking approval of the sale transaction contemplated by the GAIN term sheet (as amended), subject to (i) higher and better offers and (ii) the negotiation and execution of a definitive purchase agreement. Notwithstanding their efforts, the parties were unable to finalize the terms of the proposed asset sale and, ultimately, the Debtors and GAIN elected not to pursue further discussions or efforts with
42 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. respect to the proposed transaction. On July 26, 2006, the Debtors filed a notice of withdrawal of the motion seeking approval of the GAIN transaction and, on September 12, 2006, the Court approved a mutual settlement agreement and release between FXA and GAIN terminating the parties' obligations under the GAIN term sheet.
Subsequent to termination of the proposed transaction with GAIN, the Debtors have continued in discussions with a potential purchaser of FXA's customer database. If the Debtors reach a definitive agreement with such entity, they will seek Court approval of the transaction, subject to higher and better offers. If the Debtors are not able to reach a definitive agreement with this entity, there can be no assurances that the Debtors will be able to realize any material value for FXA's customer database, which the Debtors believe is a deteriorating asset.
3. Refco Hong Kong Ltd. Sale
Refco Hong Kong Ltd., a subsidiary of Debtor Refco Global Futures, LLC and Refco, LLC, was licensed by the Securities and Futures Commission of Hong Kong (the "SFC") to engage in the regulated activities of dealing in securities and dealing and advising on futures contracts. As part of the sale to Man Financial of its regulated commodities futures merchant business, the Company agreed to sell to Man Financial Refco Hong Kong Ltd. Pursuant to the Acquisition Agreement, Man Financial had the right to elect to acquire these assets. As a result of Man Financial's decision not to purchase Refco Hong Kong Ltd., Man Financial paid liquidated damages to the Company in the amount of $1 million. Subsequent to Man Financial's decision, the Debtors received an offer from ADMIS Holding Company Inc. ("ADMIS") to purchase Refco Hong Kong Ltd. On March 30, 2006, the Bankruptcy Court approved the sale of Refco Hong Kong to ADMIS for approximately $9.6 million. The closing of the sale occurred on May 9, 2006.
4. Refco Japan Ltd. Sale
Refco Japan Ltd., a wholly-owned subsidiary of Debtor Refco Global Holdings, LLC, was widely marketed during the worldwide sale process that ultimately resulted in the Company's sale of its regulated commodities futures merchant business to Man Financial. Refco Japan Ltd. was not included in the Man Financial sale, but, on March 17, 2006, the Bankruptcy Court approved the sale of Refco Japan Ltd. to VC Square Toushi Kikin Uneikumiai Company Limited for approximately $4.6 million. The closing of the sale occurred on March 27, 2006.
5. Partners Capital Sale
Refco Group sold its 14.29% minority equity interest (the "Membership Shares") in Partners Capital Investment Group Ltd., LLC ("Partners Capital") pursuant to an agreement dated December 16, 2005 (as amended, the "Repurchase Agreement"), in which Partners Capital agreed, subject to approval by the Bankruptcy Court and completion of an auction process, to buy the Membership Shares back from Refco Group for $1.54 million. The Repurchase Agreement included bidding procedures to govern the auction of the Membership Shares, which effectively positioned Partners Capital as the "stalking horse" bidder with a cash bid of $1.54 million. The bidding procedures for the auction were approved by the Bankruptcy Court on January 12, 2006.
On February 20, 2006, Constellation Capital Management ("Constellation") submitted a competing $1.651 million cash bid for the Membership Shares. At the auction held on February 24, 2006, Partners Capital and Constellation each submitted enhanced bids, which resulted in the highest and best offer from Partners Capital of $1.793 million (an increase of $253,000 over its "stalking horse" bid). Constellation's final bid was $1.72 million.
On March 17, 2006, the Bankruptcy Court entered an order approving the Partners Capital sale, and the sale was consummated shortly thereafter.
6. Artwork Sale
On January 25, 2006, the Debtors filed a motion seeking authority to sell their extensive modern art collection, consisting of well over five hundred (largely photographic) artworks (collectively, the "Artwork"), pursuant to auctions and sales conducted by Christie's, Inc. ("Christie's"). On February 28, 2006, the Bankruptcy Court approved the Debtors' uncontested motion, and allowed the sale and auction of the Artwork. The majority of the Artwork was sold in a series of auctions conducted by Christie's on April 25, 2006, May 5, 2006 and May 10, 2006 (the "Auctions"). As a result of the Auctions, the Debtors' estates received proceeds from the sale of the Artwork in
43 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. excess of $9 million. The few pieces of Artwork that remain will be sold by Christie's pursuant to an auction to be held in Autumn, 2006, or by private sale, each in accordance with the order granting the Debtors' motion to sell the Artwork.
7. Miscellaneous Asset Sales
On March 9, 2006, the Debtors filed a motion seeking authority to sell miscellaneous assets, including fixtures, furniture and equipment, pursuant to streamlined sale procedures. On March 31, 2006, the Bankruptcy Court approved the miscellaneous asset sale motion, and the Debtors since have conducted no fewer than five sales, yielding approximately $70,000 in proceeds for the Debtors' Estates and creditors.
D. Other Chapter 11 Litigation-Related Matters
The Company is party to various legal proceedings asserting causes of action allegedly related to the events giving rise to the Chapter 11 Cases, as well as certain legal proceedings incidental to the normal course of the Company's businesses. Such actions include parallel and derivative litigation relating to the Securities Class Action (see Section IV.D.4 –"The Securities Class Action") and the SPhinX litigation (see Section IV.D.2 –"SPhinX Settlement"), certain indemnification claims brought by former officers and directors, patent litigation and other actions asserting claims that are routinely brought against providers of brokerage, clearing and exchange services. Based on the Debtors' current assessment of the underlying merits of the actions, as well as their historical experience in litigating such actions and the availability of applicable insurance reserves and coverage, management believes that the final resolution of these matters will not have a material adverse affect on the Debtors' financial position, liquidity, cash flows or results of operations. Certain litigation matters are discussed below.
1. BAWAG Settlement
On November 16, 2005, BAWAG commenced an adversary proceeding against the Debtors in the Bankruptcy Court (the "Adversary Proceeding"). The BAWAG complaint alleged, among other things, that Mr. Bennett, the former President and Chief Executive Officer of Refco Inc., fraudulently procured a €350 million (approximately $420 million at the time of the complaint) loan from BAWAG. The BAWAG complaint further alleged that the Company participated in the alleged fraud and sought the imposition of a constructive trust on the $350 million loan proceeds and/or judgment in the amount of $350 million. On December 29, 2005, the Debtors filed an answer and, on April 25, 2006, the Creditors' Committee, acting on behalf of Refco Group as authorized by the Bankruptcy Court by order of the same date, filed an amended answer and counterclaim asserting, among other things (i) claims seeking to recover allegedly fraudulent transfers totaling at least $1.325 billion subsequently transferred to BAWAG from Refco Group's initial transferee, RGHI; and (ii) claims seeking damages arising out BAWAG's alleged aiding and abetting of breaches of fiduciary duty by Bennett. In order to ensure the collectability of any judgment against BAWAG, at the request of the Creditors' Committee, the Bankruptcy Court entered an ex parte order of attachment and temporary restraining order, dated April 25, 2006 (the "Attachment Order"). On May 1, 2006, BAWAG filed a motion seeking to vacate the Attachment Order asserting, among other things, the lack of merit of the counterclaim and the undue prejudice and threat to the ongoing viability of BAWAG should the attachment continue.
Just days following entry of the Attachment Order, and as a result of vigorous, arm's-length and good faith negotiations conducted in New York, London and Vienna, the Creditors' Committee, BAWAG and the USAO reached a settlement agreement (the "BAWAG Settlement Agreement"). The signatories to the BAWAG Settlement Agreement were BAWAG and certain of its subsidiaries and affiliates, the Creditors' Committee, the Debtors and certain of their subsidiaries and affiliates, the Chapter 7 Trustee and the RCM Trustee. On June 5, 2006, the Creditors' Committee filed a motion seeking Bankruptcy Court approval of the BAWAG Settlement Agreement, and the agreement ultimately was approved by order of the Bankruptcy Court on July 6, 2006 (the "Settlement Approval Order"). Entry into the BAWAG Settlement Agreement facilitated BAWAG's entry into a series of other settlements with Refco-related United States concerns (collectively with the BAWAG Settlement Agreement, the "BAWAG Global Settlement"); the United States Attorney's Office for the Southern District of New York ("USAO"), which at the time was investigating BAWAG's potential criminal liability related to events leading up to the Petition Date; the SEC; the shareholders in a securities class action (the "Lead Plaintiffs"); and Thomas H. Lee Partners ("TH Lee"). The BAWAG Global Settlement was sponsored by the Austrian and U.S. governments, and various regulatory agencies, and was designed to restore almost $1 billion in value to U.S. claimants. The Austrian government and several
44 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. Austrian banks have provided financial assistance to BAWAG to facilitate BAWAG's performance under the BAWAG Global Settlement.
Pursuant to the BAWAG Global Settlement, BAWAG agreed to make at least $683 million in payments and release approximately $470 million in claims against Refco and others in exchange for a release of civil claims and avoidance of criminal charges against BAWAG relating to Refco. Specifically, BAWAG agreed to provide the following substantial consideration:
• Guaranteed payments of $675 million, which would be divided equally between the Debtors' creditors and the USAO. The USAO, in turn, would distribute not less than half of these funds to the Debtors for distribution to their prepetition creditors, and would make payments to the Lead Plaintiffs and TH Lee.
• A guaranteed payment of $108 million to the Lead Plaintiffs, $100 million of which would be provided by the USAO out of BAWAG's payments and $8 million of which would be provided directly by BAWAG.
• A guaranteed payment of $84 million to TH Lee, to be provided by the USAO.
• Contingent payments of up to $200 million in the aggregate to the Committee, the USAO, the Lead Plaintiffs and TH Lee in the event that BAWAG is sold for an amount in excess of EUR 1.8 billion.
• A release of all claims against the Debtors, including the $430 million claim asserted in the Adversary Proceeding, and an additional claim of $50 million related to a BAWAG guarantee of the claim of a third party against one or more of the Debtors.
The Settlement Approval Order was appealed by VR Global Partners, L.P. and its affiliates in July 2006, but such appeal subsequently was settled by the parties and the Settlement Approval Order became a final, non-appealable order on or about September 11, 2006.
On September 21, 2006, BAWAG wired $337.5 million to the Debtors and $337.5 to the U.S. governmentUSAO. In addition to amount received by the Debtors directly from BAWAG, the Debtors expect to receivereceived $168.7 of the amount transferred by BAWAG to the U.S. government prior to confirmation of the PlanGovernment in the near future. The BAWAG Settlement Agreement contains a creditor release provision that provides that (i) any creditor who voluntarily elects to receive any portion of such settlement proceeds must release BAWAG and its Affiliates (as defined in the BAWAG Settlement Agreement) from all claims or actions arising from or related to the Debtors; and (ii) any portion of the BAWAG settlement proceeds that would have been allocated to any creditor that elects not to provide the required release must be returned to BAWAG. See Section XIII.C –"Ballot Elections." Pursuant to a Stipulation and Agreement of Settlement entered into on September 7, 2006 between BAWAG and the lead plaintiffs in the securities class action (see Section IV.D.4 –"Securities Class Action"), BAWAG agreed, on the condition that the settlement in the securities class action is approved, to carve the lead plaintiffs and the class members they represent out from the BAWAG Settlement Agreement's release provisions. Accordingly, any Senior Subordinated Noteholder that also is a member of securities class action class may, assuming approval of the securities class action settlement, elect to receive BAWAG Senior Subordinated Noteholder Proceeds without releasing BAWAG and its Affiliates from all Securities Class Action claims or actions arising from or related to the Debtors.
2. SPhinX Settlement
On December 16, 2005, acting on behalf of RCM as authorized by the Bankruptcy Court by order of the same date, the Creditors' Committee commenced an adversary proceeding against SPhinX Managed Futures Fund SPC ("SPhinX") and certain other entities. The complaint sought to avoid and recover, in accordance with Bankruptcy Code sections 547 and 550, transfers from RCM to SPhinX totaling more than $312 million made at the direction of the Chairman of PlusFunds Group, Inc., the investment manager to SPhinX. On December 16, 2005, the Bankruptcy Court issued an order of attachment and temporary restraining order freezing assets of SPhinX valued at $282 million, pending a resolution of the adversary proceeding. On January 9, 2006, the Creditors' Committee filed a motion for
45 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. summary judgment in the adversary proceeding. The Creditors' Committee and SPhinX engaged in extensive discovery and contested motion practice with respect to resolution of the summary judgment motion.
On April 21, 2006, the Creditors' Committee and SPhinX, after arm's-length, good faith negotiations, reached a settlement of the SPhinX adversary proceeding (the "SPhinX Settlement") whereby SPhinX agreed to make a settlement payment of $263 million. The settlement was approved by order of the Bankruptcy Court on June 9, 2006, over the objections of several investors in SPhinX. Appeals of the settlement order by those investors were noticed in late June, 2006 and currently are proceeding.
The various SPhinX funds entered into voluntary liquidation in the Cayman Islands in late July 2006, and filed chapter 15 cases in the United States in August 2006, which cases remain pending. On September 6, 2006, the Bankruptcy Court ruled that the Cayman Islands liquidation was a "foreign nonmain proceeding" for purposes of section 1517(b) of the Bankruptcy Code. The Court also held, however, that this ruling was subject to later modification upon the presentation of evidence requiring a different result.
Chapter 15 of the Bankruptcy Code was enacted with the express purpose of providing an effective mechanism for dealing with cross-border insolvencies. See 11 U.S.C. § 1501. Pursuant to section 1517(b) of the Bankruptcy Code, the court is to recognize foreign insolvency proceedings as either "foreign main" or "foreign nonmain" proceedings. A proceeding is recognized a "foreign main" if it is "pending in the country where the debtor has the center of its main interests." See 11 U.S.C. § 1517(b)(1). If a proceeding is recognized as "foreign main": (i) the automatic stay applies to the debtor and its property within the territorial jurisdiction of the United States and (ii) sections 363, 549, and 552 of the Bankruptcy Code apply to restrict the ability to transfer such property absent court approval. See id. at § 1520(a). According to the Court, because several objective factors suggested that the Cayman Islands were not the SPhinX debtors' center of main interests and there was some evidence that the Cayman proceedings had been commenced for an improper purpose, it concluded that the Cayman Islands proceeding was "foreign nonmain," and the Court declined to grant any discretionary relief, beyond the turnover of corporate records, to the SPhinX joint provisional liquidators.
On September 18, 2006, the SPhinX joint provisional liquidators filed a motion to alter or amend the Bankruptcy Court's September 6, 2006 decision on the chapter 15 petition. On October 9, 2006, they filed an appeal from that decision and, on October 10, 2006 –immediately prior to the Bankruptcy Court's issuance of a decision on the relief it requested –they withdrew the motion to alter or amend. On September 20, 2006, the SPhinX joint provisional liquidators filed a motion seeking broad-based discovery under Bankruptcy Rule 2004 from the Debtors, the RCM Trustee, Refco LLC, the Creditors' Committee, and RAI. On October 10, 2006, the Bankruptcy Court issued a ruling, granting limited discovery as to a single issue and denying the rest of the relief requested in the Bankruptcy Rule 2004 Motion.
3. Advanced Currency Markets Litigation
The Debtors received an offer of interest and negotiated a stock purchase agreement with respect to a potential sale of the estates' 51% equity interests in Advanced Currency Markets S.A. ("ACM"), held by RCM and FXA, to ACM's minority shareholders. In late November 2005, however, the Debtors learned that the minority shareholders of ACM had, unbeknownst to the Debtors, initiated and purportedly effected a capital increase. The capital increase purportedly reduced the Debtors' equity interest in ACM to approximately 25% of the outstanding shares and permitted the minority shareholders to purchase the newly-issued shares at below-market par value, thereby diluting the value of the estates' existing shares. RCM and FXA prosecuted a challenge to the purported capital increase under Swiss law in the Swiss courts and under U.S. bankruptcy law in the Bankruptcy Court. RCM and FXA filed an adversary complaint against ACM and four minority shareholders for violations of the Bankruptcy Code and obtained a preliminary injunction against ACM only. The Bankruptcy Court subsequently granted a motion to dismiss the adversary proceeding as to three of the four minority shareholders. RCM and FXA also obtained a preliminary injunction in the Swiss courts based on violations of Swiss law. The parties have agreed to stay further proceedings in both countries while they pursue settlement negotiations.
4. Securities Class Action
Beginning in October 2005, a number of complaints asserting claims under federal securities laws were filed against, among others, Refco, certain of Refco's affiliates, certain of Refco's officers and directors, Refco's auditor and
46 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. certain underwriters in the United States District Court for the Southern District of New York. In or about February 2006, lead plaintiffs were appointed and the various actions were consolidated. On April 3, 2006, a Consolidated Class Action Complaint was filed (in which Refco was not named as a defendant). See In re Refco Inc. Securities Litig., 05 Civ. 8626 (GEL) (S.D.N.Y.). The Consolidated Class Action Complaint, which was brought on behalf of a putative class of persons who purchased or acquired publicly traded shares, bonds or notes of the Debtors, their predecessors and affiliates between August 5, 2004 and October 17, 2005, asserts claims under both the Securities Act of 1933 and the Securities Exchange Act of 1934. On May 5, 2006, the plaintiffs filed a First Amended Consolidated Class Action Complaint. The amended complaint added, among other things, claims against BAWAG. Responses to the amended complaint, including several motions to dismiss the amended complaint, were filed on or about July 10, 2006. Papers in opposition to the motions to dismiss were filed on September 15, 2006; and replies to any opposing papers must be filed by October 6, 2006.
In addition, on or about May 17, 2006, lead plaintiffs moved for a partial lifting of the Private Securities Litigation Reform Act's (PSLRA) automatic discovery stay. On June 8, 2006, the Bankruptcy Court entered an Agreed Order permitting the lead plaintiffs to seek relief in the District Court from the PSLRA Stay. By motion to the District Court, the lead plaintiffs specifically sought: (i) all documents that defendants have produced, or will be producing, to the SEC, the United States Attorney's Office, the Examiner, the Creditors' Committee, the Ad Hoc Committee of Senior Subordinated Noteholders, "and any other regulatory, governmental or investigative agencies or other private parties involved in reviewing the facts and circumstances giving rise to Refco's demise"; (ii) all documents that defendants have produced, or will be producing, in any other related litigation; and (iii) all documents that various non-parties have produced, or will be producing, related to the first two categories of documents. On August 8, 2006, the District Court issued an Opinion and Order denying the motion to modify the PSLRA stay to obtain document discovery from defendants but granting plaintiffs' request to serve document-preservation subpoenas on third parties.
5. Arch Lift Stay Motion
Beginning on or about October 12, 2005, various lawsuits were filed against former directors and officers of the Debtors, alleging, among other things, that the registration statement and prospectus filed in respect of the IPO were materially false and misleading, in that they failed to disclose the existence of the Undisclosed Receivable, as well as related-party transactions between Refco and RGHI (the "Underlying Litigations"). Defendants in the Underlying Litigations include Mr. Bennett, Leo R. Breitman, Nathan Gantcher, David V. Harkins, Scott L. Jaeckel, Thomas H. Lee, Ronald L. O'Kelley, Scott A. Schoen, Tone Grant, Santo C. Maggio, Joseph Murphy, William M. Sexton and Gerald Sherer (collectively, the "Underlying Defendants"), none of whom are currently directors or officers of the Debtors. Many of these suits subsequently were tendered to the Debtors' insurance carriers for coverage. On March 9, 2006, Arch Insurance Company ("Arch"), one of the Debtors' excess carriers, filed a complaint against the Underlying Defendants in the Underlying Litigations (the "Coverage Litigation") in the Supreme Court of the State of New York, County of New York, seeking to deny coverage to the defendants on, among other grounds, alleged misrepresentations they had made in connection with obtaining the insurance coverage.
On May 1, 2006, Arch filed a motion for relief from the automatic stay imposed by section 362 of the Bankruptcy Code to enable it to prosecute the Coverage Litigation, which the Debtors and the Creditors' Committee opposed on the ground that the requested relief could impair the Debtors' other insurance policies. On June 20, 2006, the Bankruptcy Court entered an order granting Arch's motion to lift the automatic stay, thereby permitting Arch to prosecute the Coverage Litigation against the Underlying Defendants, but not against the Debtors.
6. Refco Securities, LLC (RSL)
RSL, a regulated broker-dealer, is a non-Debtor affiliate of the Debtors and currently is winding down its operations. VR Global Partners, L.P., Paton Holdings Ltd., VR Capital Group Ltd. and VR Argentina Recovery Fund, Ltd. (collectively, the "VR Entities"), all of which have accounts at RCM, filed a complaint (the "VR State Court Action") against RSL in New York Supreme Court seeking the return from RSL of approximately $500 million in investment assets allegedly belonging to the VR Entities (the "Purported VR Assets"). In particular, the VR Entities asserted in the VR State Court Action counts for (i) declaratory relief; (ii) return of the Purported VR Assets pursuant to N.Y. U.C.C. §§ 8-503 and 8-508; (iii) replevin; (iv) conversion; (v) constructive trust; and (vi) accounting of the Purported VR Assets.
47 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. The VR Entities also filed a motion in the Bankruptcy Court (the "VR Motion") seeking entry of an order confirming that prosecution of the VR State Court Action would not violate the automatic stay of section 362 of the Bankruptcy Code or, alternatively, annulling or modifying the automatic stay to allow the VR State Court Action to proceed. Specifically, the VR Entities argued that the automatic stay was not implicated because the VR State Court Action sought a turnover of funds from a non-Debtor entity. On December 5, 2005 and January 3, 2006, the Debtors filed a response and supplemental response, respectively, objecting to the requested relief and related discovery. The Bankruptcy Court has stayed the VR Motion pending resolution of the RCM Conversion Motion, and it remains stayed as of the date hereof.
7. Sberbank Litigation
On June 16, 2006, non-Debtor RSL executed a certain payment agreement (the "Payment Agreement") with the Savings Bank of the Russian Federation ("Sberbank"). The Payment Agreement arose from RSL's failure to repay amounts due to Sberbank under a 2005 securities loan agreement. In response to RSL's failure to repay the amounts at issue, Sberbank obtained a judgment in the principal amount of $121,680,171.68 plus costs against RSL in December 2005, in a civil action filed in the U.K. High Court of Justice in London. Sberbank subsequently commenced an action in the United States District Court for the Southern District of New York seeking recognition of the English judgment. On June 2, 2006, a final judgment was granted in favor of Sberbank in the New York action in the amount of $123,733,732.93.
In order to mitigate the costs of immediate enforcement of the New York judgment, Sberbank entered into the Payment Agreement with RSL, under which RSL must satisfy the New York judgment in three scheduled payments. The first payment of $61,866,867 was made by RSL on June 20, 2006, and the second payment of $37,120,120 was made on June 28, 2006. The third payment of $24,746,745.93 is due to be paid on or before December 22, 2006.
Additionally, pursuant to the Payment Agreement, in the event that RSL's "Available Cash" (as defined in the Payment Agreement) exceeds $2 million prior to any of the scheduled repayment dates, RSL is required to make a pro rata distribution of excess cash to Sberbank. The distribution is calculated based on the amount of the New York judgment compared to the claims of all other RSL creditors (excluding customers).
8. Cargill, Incorporated
Cargill, Incorporated ("Cargill"), and certain of its affiliates have filed six proofs of claim (the "Cargill Proofs of Claim") in these Chapter 11 Cases. The Cargill Proofs of Claim assert claims against (i) Refco Group allegedly arising out of transactions contemplated by a Purchase and Sale Agreement dated June 21, 2005 (as amended in August 2005, the "PSA"), a Services Agreement dated August 31, 2005 (the "Services Agreement"), and an Exclusivity Agreement dated August 31, 2005 (the "Exclusivity Agreement"), each of which was entered into between Refco Group and Cargill, and (ii) RCM arising out of foreign exchange transactions with Cargill and its affiliates or guaranteed by Cargill. Specifically, (x) Cargill has asserted claims against Refco Group in an amount ranging from $162,573,189.20 to $287,573,189.20, of which $67 million to $192 million is attributable to a post-closing payment amount under the PSA (the "Post-Closing Payment Amount"), discussed below, and (y) Cargill and its affiliates have asserted claims against RCM in the aggregate amount of $58,134,753.99 and reserved the right to amend the Cargill Proofs of Claim to include a subrogation claim of $27 million on account of a payment Cargill allegedly made under a guarantee to Leuthold Weeden. The amounts represented by the claims asserted against RCM are also included in the claims Cargill filed against Refco Group. The Debtors intend to object to the Cargill Proofs of Claim and to assert counterclaims and defenses against Cargill on various grounds. The Debtors expect that Cargill will oppose such objections, counterclaims and defenses.
On June 21, 2005, and August 31, 2005, Cargill and Refco Group entered into the PSA, pursuant to which Refco Group paid Cargill over $208 million in cash at the closing and assumed approximately $3.98 billion in liabilities (including customer liabilities, in exchange for which Cargill asserts Refco Group received an equivalent value of customer assets). The PSA also contemplated an additional Post-Closing Payment Amount to Cargill of between $67 million and $192 million, payable after the second anniversary of the closing date on the PSA (the "Post-Closing Payment Amount Due Date"), based on future performance. In return, Refco Group received all of the issued and outstanding shares of capital stock of each of CIS Investments, Inc., CIS Managed Assets, Inc., and Cargill Investor Services Limited, and all of the assets of Cargill Investor Services (Singapore) Pte. Ltd., CIS Financial Services, Inc., CIS Management Inc., and CIS Securities Inc. used or held for use in the business of (a) clearing or
48 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. executing futures, options on futures, and securities, (b) acting as broker/dealer of foreign exchange transactions, (c) operating collective investment vehicles principally engaged in the trading of futures, options on futures, and foreign exchange, (d) financing of futures, options on futures, and foreign exchange transactions for unaffiliated Persons, and (e) operating cash management programs.
The Debtors assert that the stock and assets purchased by Refco Group (the "Purchased Business") were valued at approximately $149.7 million on the date of the execution and delivery of the PSA and that a significant portion of that value was attributed to the accounts and business that Cargill and/or its affiliates (collectively with Cargill, the "Cargill Parties") maintained as customers of the Purchased Business. Cargill disputes the Debtors' valuation and asserts that the actual value of the Purchased Business was at least $400 million.
For assurances that the Cargill Parties would continue to maintain their accounts at, and use various services of, Refco Group and/or its affiliates (collectively with Refco Group, the "Refco Parties") following the sale of the Purchased Business to Refco Group, Article 10.2(k) of the PSA required, as a condition to Refco Group's obligation to close on the PSA, that Cargill execute the Exclusivity Agreement. Under the Exclusivity Agreement, Cargill agreed that it would cause each of the Cargill Parties to utilize on an exclusive basis the futures and options on futures clearance services, to the extent offered by one of the Refco Parties (collectively, the "Services"), for all options and futures transactions conducted by one of the Cargill Parties. In Section 1(a) of the Exclusivity Agreement, Cargill further agreed that it would, and would cause the other Cargill Parties to, utilize the Services of the Refco Parties to the same extent to which the Cargill Parties utilized Cargill Investor Services, Inc., Cargill Investor Services Limited (UK), and CIS Financial Services, Inc., prior to August 31, 2005. Pursuant to Section 1(b) of the Exclusivity Agreement, Cargill additionally agreed that it would use its reasonable best efforts to cause any Cargill Party to utilize the execution, clearance, and related services of a Refco Party in securities transactions and other transactions not required to be cleared through a Refco Party under the Exclusivity Agreement. The Exclusivity Agreement had a term of five (5) years after closing, or through August 2010. Pursuant to the PSA, Cargill and Refco Group also entered into the Services Agreement, under which Refco Group obtained transition services from Cargill and its affiliates following the closing of the Purchased Business.
In connection with the Sale by the Debtors of the Acquired Business to Man Financial under the Acquisition Agreement (which included the accounts of the Cargill Parties), see Section IV.B.1 above, Man Financial identified the Exclusivity Agreement as an asset for assignment from the Debtors to Man Financial under the Acquisition Agreement. On November 22, 2005, the Debtors filed a Notice of Assumption and Assignment of, and Amounts Necessary to Cure Defaults Under, Contracts and Leases to be Assumed and Assigned to Man Financial. Exhibit B to the notice listed the Exclusivity Agreement as a contract to be assumed and assigned, and listed $0.00 as the cure amount. On December 9, 2005, Cargill filed an Objection to the Notice ("Objection"), in which it objected to: (i) the assumption and assignment of the Exclusivity Agreement absent assumption and assignment of the PSA and the Services Agreement, asserting that the Exclusivity Agreement, the Services Agreement, and the PSA are "integrated" agreements that constitute a single agreement and, therefore, must be assumed and assigned (or rejected) as one; (ii) the cure amount listed, asserting that it was entitled to $59.5 million in cure payments and adequate assurance of Man Financial's future performance of the Post-Closing Payment Amount under the PSA of between $67 million and $192 million; and (iii) the proposed effective date. Cargill asked the Court to deny the assumption and assignment of the Exclusivity Agreement.
Before the Bankruptcy Court had an opportunity to rule on the Objection and before the closing of the Sale of the Acquired Business to Man Financial, the Cargill Parties instructed Refco to transfer to a third party futures commission merchant all of their accounts at the Refco Parties, an instruction which the Debtors contend violated and breached the Exclusivity Agreement. Subsequently, the Cargill Parties rescinded their transfer instructions, but only until after the closing of the sale of the Acquired Business to Man Financial, when they once again instructed that Man Financial transfer to the third party futures commission merchant all of their accounts at Man Financial. Man Financial effected the transfer of the Cargill Parties' accounts but withheld in a segregated cash collateral account approximately $66 million as security for the damages caused by Cargill's alleged breaches of the Exclusivity Agreement. On January 4, 2006, Cargill commenced a lawsuit in the District Court of the State of Minnesota for Hennepin County against Man Financial asserting that Man Financial is not entitled to enforce the Exclusivity Agreement and thus cannot legally withhold the cash collateral. The Minnesota state court litigation between Man Financial and Cargill is currently pending.
49 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. On January 6, 2006, the Debtors replied to Cargill's Objection, disputing Cargill's contentions and asserting that the Exclusivity Agreement, on the one hand, and the PSA and the Services Agreement, on the other hand, are separate stand-alone agreements. Both the Creditors' Committee and Man Financial filed joinders to the Debtors' reply.
On January 31, 2006, the Bankruptcy Court issued a bench ruling providing that an unconditional assignment of the Exclusivity Agreement to Man Financial had occurred, effective as of the closing of the Sale of the Acquired Business to Man Financial. On February 14, 2006, the Bankruptcy Court entered an order overruling Cargill's Objection. On February 24, 2006, Cargill filed a notice of appeal, seeking a reversal of the order and a remand to the Bankruptcy Court for an evidentiary hearing. Oral argument on the appeal was held on August 29, 2006. On September 13, 2006, the United States District Court for the Southern District of New York (the "District Court") issued a Memorandum and Order affirming the Bankruptcy Court order. Cargill has indicated that it intends to appeal the District Court's order to the United States Court of Appeals for the Second Circuit.
If, contrary to the decisions of both the Bankruptcy Court and the District Court, it ultimately is determined that the PSA, the Services Agreement, and the Exclusivity Agreement are integrated agreements such that assignment of the Exclusivity Agreement requires the assumption and assignment of the PSA and Services Agreement as well, the Debtors would then need to consider whether it is in the best interests of the Estates to assume and assign the PSA and Services Agreement along with the Exclusivity Agreement to Man Financial or to reject the three agreements.
If the Debtors elect to assume and assign such agreements, based on the Cargill Proofs of Claim, Cargill would assert cure claims of approximately $95.6 million, which includes (i) approximately $55.8 million relating to amounts due under the PSA on account of indemnification and certain alleged breaches, (ii) approximately $39 million relating to foreign exchange transactions under the Exclusivity Agreement, (iii) $639,016.03 relating to unpaid prepetition transition services under the Services Agreement, and (iv) additional amounts relating to unpaid postpetition services provided by Cargill under the Services Agreement. Cargill has advised the Debtors that it will file a request for payment of the unpaid postpetition services as an administrative expense. Any such cure claims as determined by the Bankruptcy Court would have to be paid in full as administrative claims and would be payable by Refco Group. Cargill would also assert that it is entitled to adequate assurance that the Post-Closing Payment Amount will be paid in full by the Post-Closing Payment Amount Due Date, either by Man Financial or by Refco Group. Man Financial likely would assert that Refco Group, not Man Financial, must pay this amount. Refco Group disagrees. Moreover, Refco Group believes that it would have valid counterclaims and defenses against Cargill for the Post-Closing Payment Amount and certain cure claims as a result of, inter alia, Cargill's breaches of the Exclusivity Agreement. Cargill disagrees.
If, on the other hand, the Debtors elect to reject the PSA, the Services Agreement, and the Exclusivity Agreement or are unable to transfer to Man Financial their rights under the Exclusivity Agreement, the claims set forth in the Cargill Proofs of Claim, including the claim for the Post-Closing Payment Amount, would constitute general, unsecured, prepetition claims and would not be payable in full as administrative claims. However, Man Financial likely would assert that it is entitled to an administrative claim against the Debtors for indemnification of the resulting damages in the amount of at least $66 million under Section 11.2(a)(a) of the Acquisition Agreement (providing for indemnity for damages, including lost profits, from breach of Sellers' covenant to deliver the Acquired Assets). The Debtors believe that they would have defenses against Man Financial's potential indemnification claim.
E. Other Events During the Chapter 11 Cases
1. Joint Administration, Bank Accounts and Cash Management System
Pursuant to an order dated October 19, 2005, the Bankruptcy Court granted the Initial Debtors' request to consolidate, for procedural purposes only, the Debtors' Chapter 11 Cases under a single case name and in a single docket. In accordance with the order, the Debtors' Chapter 11 Cases, including the chapter 11 case of RCM, are being jointly administered under the case name "Refco Inc., et al." and case number "05-60006 (RDD)," and have been consolidated for procedural purposes only.
On June 9, 2006, the Court entered an order authorizing the joint administration of the Additional Debtors' cases with those of the Initial Debtors. The Bankruptcy Court also required that certain orders entered in the chapter 11 cases of Refco Inc., et al. be made applicable to the Additional Debtors to obviate the need for duplicative notices,
50 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. motions and applications, and enable the Debtors to file a joint plan of reorganization. Such orders include, among others, orders (i) authorizing the retention and compensation of certain professionals; (ii) authorizing the continued use of existing bank accounts, cash management and case management procedures; (iii) establishing the deadline for filing certain proofs of claim; and (iv) maintaining similar deadlines and timelines as those applicable in the Refco Inc., et al. cases.
2. Cash Management System
On November 28, 2005, the Bankruptcy Court entered an order authorizing the Debtors' continued use of existing bank accounts and cash management systems and, if necessary, the opening of new accounts, and required the Debtors to maintain detailed records reflecting all transfers of funds, including intercompany transfers among intercompany accounts. The Cash Management Order authorized intercompany transfers in the ordinary course of the Debtors' businesses; however, estate property transferred between Debtors is required to be held in trust by the transferee Debtor's estate in the event repayment or reallocation becomes necessary.
The Cash Management Order also authorized Refco Capital LLC to make an initial allocation of expenses and disbursements among Debtor and non-Debtor affiliates using a reasonable method of allocation. Subsequent orders authorized the final overhead allocation methodology with respect to expenses and disbursements which could not be allocated to a specific Debtor entity (the "Overhead Allocation Methodology"). Whereas expenses attributable to a particular entity are allocated to that entity (e.g., if there is only one Refco entity using a particular space, then that entity is charged for the space's rent; and if a utility bill identifies specific business units as users, then those users are allocated the costs appropriately identified on the bill), the Overhead Allocation Methodology is applied in situations where expenses cannot be tied to a particular entity.
In addition, pursuant to an agreed order subsequently entered by the Bankruptcy Court on February 14, 2006, the Debtors agreed to (and did in fact) bring all of their cash management policies with respect to cash and cash equivalents into compliance with the requirements of section 345 of the Bankruptcy Code, on or before March 14, 2006, as to domestic accounts, and March 31, 2006, as to foreign accounts.
3. Cash Collateral
Immediately after the Petition Date, on October 18, 2005, Bank of America, N.A., as Administrative Agent for the Secured Lenders, filed a motion seeking the entry of an order conditioning the use by the Debtors of the Secured Lenders' collateral upon the provision of adequate protection for any diminution in value of such collateral (the "Adequate Protection Motion"). Under interim orders entered on October 21, 2005, November 10, 2005, July 24, 2006 and September 27, 2006, the Bankruptcy Court granted the Adequate Protection Motion, authorizing the Debtors to use or transfer up to $10.811.15 million of the Secured Lenders' cash collateral and requiring the Debtors to use all reasonable efforts to preserve the value of such collateral. Pursuant to the interim orders, adequate protection has been provided for any diminution in value.
The proposed final adequate protection order (the "Proposed Adequate Protection Order"), which is scheduled to be considered by the Bankruptcy Court on October 16,November 14, 2006, provides, among other things, that the Debtors are permitted to use or distribute up to $200 million of Available Cash (as defined in the Proposed Adequate Protection Order) in the aggregate on specified Distribution Dates (as defined in the Proposed Adequate Protection Order), provided that (i) with respect to the first $100 million so used or distributed, one-half of the Available Cash used or distributed on each Distribution Date is paid to the Secured Lender Agent, on such Distribution Date, as adequate protection in respect of the Credit Agreement (each such payment to the Secured Lender Agent, an "Adequate Protection Payment"), and (ii) with respect to the next $100 million, two-thirds of the Available Cash used or distributed on each Distribution Date is paid to the Secured Lender Agent on such Distribution Date, as an Adequate Protection Payment. Pursuant to paragraphs 13(b) and (c) of the Early Payment Order, upon the Secured Lender Payment Date, (i) the hearing on the Proposed Adequate Protection Order will be postponed to the date of the Confirmation Hearing and (ii) so long as any plan proposed or confirmed and consummated in any of these cases is a Qualifying Plan, and such plan (and the order confirming such plan) remains in full force and effect, the Secured Lender Agent and the Secured Lenders will not seek any additional adequate protection."
The balance of the Available Cash used or distributed on each Distribution Date (i) may be applied to the payment of Non-Lender Other Estate Expenses (as defined in the Proposed Adequate Protection Order), to the extent
51 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. accrued and payable in accordance with the Interim Compensation Order (as defined in the Proposed Adequate Protection Order) and the Payment Allocation Methodology (as defined below), or (ii) reserved for the payment of future Non-Lender Other Estate Expenses through the Termination Date (as defined in the Proposed Adequate Protection Order), subject to the proviso contained in paragraph 4(d) of the Proposed Adequate Protection Order.
In addition, from October 18, 2005 through the Termination Date, the Debtors (other than RCM, Refco Inc. and Refco Global Finance Ltd.) are permitted to use up to $12 million of Cash Collateral (as defined in the Proposed Adequate Protection Order) for the payment of administrative expenses other than Non-Lender Other Estate Expenses. The Proposed Adequate Protection Order provides that no additional recordation of filings are necessary and certain security interests and liens (as provided for in the Proposed Adequate Protection Order ) are granted to the Secured Lenders as adequate protection for, and only to the extent of, the aggregate Diminution (as defined in the Proposed Adequate Protection Order). To the extent of any Diminution (as defined in the Proposed Adequate Protection Order), the Secured Lender Agent and the Secured Lenders will have superpriority allowed claims pursuant to section 507(b) of the Bankruptcy Code, with priority over administrative expenses and other claims allowable under section 507(a)(2) of the Bankruptcy Code. Furthermore, the Cash Collateral, Collateral and Collateral Proceeds (each as defined in the Proposed Adequate Protection Order) are prohibited from being used to investigate, object to, contest or raise any defense to, the validity, perfection, priority, extent or enforceability of the Obligations under and as defined in the Credit Agreement or the liens securing the Secured Lender Claims.
Pursuant to the Proposed Adequate Protection Order, the professional expenses of the Debtors, the Committees and other parties with Bankruptcy Court retained professionals required to be compensated from the Debtors' estates (other than RCM's professionals) are to be allocated in accordance with the Proposed Adequate Protection Order (or as otherwise ordered by the Court). Additionally, it is understood that the Committees' professional expenses relating to non-Debtors are to be payable by the Debtor entities holding the equity of such non-Debtor entities, or if the professional services are provided with respect to intercompany claims, such fees are to be paid by (i) the Debtor entities holding the intercompany claims or (ii) the Debtor entities obligated in respect of such intercompany claims (the "Payment Allocation Methodology"). The Committees' professional expenses are to be otherwise allocated in accordance with the Proposed Adequate Protection Order.
4. Filing of Schedules and Statements
On December 30, 2005 and June 5, 2006, respectively, the Debtors and the Additional Debtors filed their schedules of assets and liabilities, schedules of executory contracts and unexpired leases, and statements of financial affairs (collectively, the "Schedules"). On April 12, 2006, June 16, 2006 and August 16, 2006, the Debtors filed certain amendments to the Schedules.
5. Establishment of Bar Date
By order dated March 27, 2006, the Bankruptcy Court established July 17, 2006 as the deadline for filing proofs of claim against the Debtors and Refco, LLC, and established procedures for filing such proofs of claim with the Bankruptcy Court. Notice of the bar date and proof of claim forms were mailed to known actual and potential creditors in these cases, shareholders and certain other parties in interest. In addition, the Debtors published notice of the bar date in the national and global editions of USA Today, The Wall Street Journal, The Financial Times, the national edition of The New York Times, the Times of London and the Singapore Straits Times.
As of September 29, 2006, the Debtors' claims agent had received approximately 14,000 timely-filed proofs of claim in the Debtors' chapter 11 cases asserting in excess of $140 billion in the aggregate (not including claims asserted in unliquidated amounts). The Debtors and their professionals have been engaged in the process of evaluating these proofs of claim to determine whether objections seeking disallowance, reclassification or reduction of certain asserted claims should be filed. As a result of this review, the Debtors anticipate filing one or more omnibus objections to claims (the "Omnibus Objections"). By the Omnibus Objections, the Debtors expect to disallow and expunge approximately $130 billion of the claims filed in these chapter 11 cases. A majority of the claims that are expected to be subject to the Omnibus Objections fall into one of the following categories: (i) duplicative claims, (ii) amended and superseded claims, (iii) claims filed against the wrong debtor, (iv) claims filed redundantly against multiple debtors, and (v) claims filed under an incorrect priority class.
52 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. 6. Extension of Time to Assume or Reject Unexpired Leases of Nonresidential Real Property
Pursuant to an order dated January 17, 2006, the Bankruptcy Court granted the Debtors' request to extend the time within which to assume or reject unexpired leases of nonresidential real property (the "Leases") through and including May 15, 2006. Prior to this date, in consultation with the Creditors' Committee, the Debtors and their professionals analyzed the Leases and determined that in light of the wind-down of the Debtors, certain Leases were no longer necessary. As a result, the Debtors rejected certain of the Leases and/or assumed others on modified terms.
7. Extension of Exclusivity
On January 17, 2006, the Debtors filed a motion (the "Exclusivity Motion") seeking the entry of an order extending the Debtors' exclusive periods within which to file and solicit acceptances of a plan (collectively, the "Exclusive Periods") through and including September 1, 2006 and October 31, 2006, respectively. On January 31, 2006, the Bankruptcy Court entered a bridge order extending the Debtors' exclusive period for filing a reorganization plan through the date of entry of a final order on the Exclusivity Motion, and the period for soliciting acceptances of a plan until sixty (60) days after entry of such order. On August 23, 2006, the Debtors filed a proposed bridge order seeking to extend the period within which to file a reorganization plan through September 12, 2006.
On August 30, 2006, the Debtors filed a motion (the "Second Exclusivity Motion") seeking to further extend the Debtors' exclusive plan filing and solicitation periods through and including December 5, 2006 and February 3, 2007, respectively. On September 11, 2006, the Bankruptcy Court entered a bridge order extending the Debtors' exclusive period for filing a reorganization plan through the date of entry of an order disposing of the Second Exclusivity Motion, and the period for soliciting acceptances of a plan until sixty (60) days after entry of such order. The Second Exclusivity Motion is scheduled to be heard by the Bankruptcy Court on October 5, 2006.
8. Extension of Time to File Notices of Removal
By orders dated January 13, 2006, April 19, 2006, June 29, 2006, and September 12, 2006, the Bankruptcy Court extended the Chapter 11 Debtors' time to file notices of removal under Fed. R. Bankr. P. 9027 (the "Removal Deadline"). Currently, the Chapter 11 Debtors' Removal Deadline expires on December 12, 2006.
9. Key Employee Compensation Program
By motion dated December 21, 2005, the Debtors sought authorization from the Bankruptcy Court to implement the first phase of a key employee compensation plan (the "First Phase Compensation Program") that covered the period commencing December 1, 2005 through March 31, 2006. On January 18, 2006, the Bankruptcy Court entered an order approving the First Phase Compensation Program. By motion dated March 10, 2006, the Debtors sought authorization from the Bankruptcy Court to implement the second phase of a key employee compensation plan (the "Second Phase Compensation Program") that covered the period commencing April 1, 2006 through February 28, 2007. On March 31, 2006, the Bankruptcy Court entered an order approving the Second Phase Compensation Program. The First and Second Phase Compensation Programs are standard programs designed to address the Debtors' retention needs during the pendency of the Chapter 11 Cases, and serve the purpose of incentivizing continued employment and combating the negative employee morale and turnover problems that typically result from the uncertainties and increased burdens imposed on employees in a chapter 11 case.
a. First Phase Compensation Program
Under the First Phase Compensation Program, certain of the Debtors' key employees (excluding the Debtors' officers and directors) (the "First Phase Key Employees") were eligible to receive (a) a year-end bonus, consistent with the Debtors' historical policy of paying such bonuses, payable in two installments after January 1, 2006, and (b) a performance bonus based on the successful and timely sale and wind-down of the Debtors' businesses. In addition, the First Phase Key Employees remained eligible for severance benefits consistent with the Debtors' severance policy, which provided for two weeks' salary per year of service, capped at six months' salary.
The First Phase Compensation Program divided the First Phase Key Employees into two tiers. The first tier included those First Phase Key Employees who possessed the knowledge and expertise necessary to lead the wind-down of the Debtors' estates while maximizing their value. The second tier included those First Phase Key
53 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. Employees with the institutional knowledge and experience necessary to support and assist the first-tier employees in their wind-down efforts.
Under the First Phase Compensation Program, the first tier employees received (i) a year end bonus equal to four months' salary and (ii) a performance bonus equal to one month of their base salary for each month employed by the Debtors during the period commencing December 1, 2005 through March 31, 2006.
The second tier employees received (i) a year end bonus equal to two months' salary and (ii) a performance bonus equal to one-half month of their base salary for each month employed by the Debtors during the period commencing December 1, 2005 through March 31, 2006.
The year end bonus was payable as follows: if the covered employee did not resign before January 1, 2006, one-half on January 15, 2006, and one-half on the earlier of April 15, 2006 or within 15 days of the employee's separation date. The performance bonus was paid on April 15, 2006 or within 15 days of the date on which the covered employee's services were no longer needed by the Debtors.
There were thirty-two (32) First Phase Key Employees, including eleven (11) employees of RCM, six (6) employees of FXA, and fifteen (15) employees whose work benefited both Debtor and non-Debtor entities. The cost of the First Phase Compensation Program for these fifteen employees was allocated equally among FXA, RCM, Refco, LLC, each a debtor, and Refco Securities, LLC, a non-debtor.
The total estimated cost of the First Phase Compensation Program was approximately $1.4 million.
b. Second Phase Compensation Program
Certain of the Debtors' key employees (excluding the Debtors' officers and directors) (the "Second Phase Key Employees") were eligible to participate, and continue to participate, in the Second Phase Compensation Program. The Program consists of (i) a performance bonus and salary increase program (the "Performance Bonus and Salary Increase Program"), which is implemented through one of three plans depending on an employee's anticipated length service, and role and responsibility, as determined by the Debtors, (ii) a discretionary bonus program (the "Discretionary Bonus Program), and (iii) a severance program (the "Severance Program").
The Performance Bonus and Salary Increase Program applies to three groups of employees: (i) employees whose services were no longer needed by the Debtors after June 30, 2006 ("Plan One"), (ii) employees whose services were estimated to be needed by the Debtors after June 30, 2006 ("Plan Two"), and (iii) employees whose services will be needed by the Debtors after February 28, 2007 ("Plan Three").
Under Plans One and Two, the Second Phase Key Employees are divided into two tiers. The first tier includes those Second Phase Key Employees who possess the knowledge and expertise necessary to lead the wind-down of the Debtors' estates while maximizing their value. The second tier includes those Second Phase Key Employees with the institutional knowledge and experience necessary to support and assist the first-tier employees in their wind-down efforts.
Subject to certain conditions, the first tier employees are eligible to receive a performance bonus equal to one month of their base salary for each month worked for the Debtors during the period commencing April 1, 2006 through the earlier of termination by the Debtors without cause or June 30, 2006 (Plan One) or their individual "Commitment Date" (Plan Two).
Also subject to certain conditions, the second tier employees are eligible to receive a performance bonus equal to one-half month of their base salary for each month worked for the Debtors during the period commencing April 1, 2006 through the earlier of termination by the Debtors without cause or June 30, 2006 (Plan One) or their individual "Commitment Date" (Plan Two).
The Plan One performance bonus is payable upon execution by the covered employee of a separation and release agreement provided to such employee at or about the last day of employment. Under Plan Two, one-half of the bonus accrual for each quarter is payable on the last payroll date of each calendar quarter, with the remaining bonus
54 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. payable upon execution by the employee of a separation and release agreement provided at or about the last day of employment.
Under Plan Three, covered employees received an eleven-month employment contract by and among the employee and Refco Group Ltd., LLC, jointly and severally with its subsidiaries and affiliates, for the period commencing April 1, 2006 through February 28, 2007. Such employees were guaranteed payment of salary and bonus for the term of the contract so long as they did not voluntarily resign or were terminated for cause during the contract period and were eligible to receive a 35% salary increase effective April 1, 2006 and a bonus of 65% of their former salary (calculated as of March 2006), prorated for an 11-month period, to be paid after February 28, 2007 (following the execution of a separation and release agreement.)
The Discretionary Bonus Program is available to all Second Phase Key Employees. Under the Program, the Debtors' management, subject to officer approval, may periodically reward exceptional work efforts with a discretionary bonus, to be paid from a bonus pool equal to 10% of the aggregate employee salaries of the entity to which the eligible employee is charged. At no time can the amount of the pool exceed $375,000 for all Debtor and non-Debtor entities.
The Severance Program provided for two weeks' salary per year of service, capped at six months' salary. On or about March 31, 2006, all employees who participated in the First Phase Compensation Program, regardless of whether they participated in the Second Phase Compensation Program, were offered their severance payments in exchange for a signed release (after which severance no longer accrued for such employees). Other employees who did not participate in the First Phase Compensation Program, but who remained with the Debtors after March 31, 2006 and were eligible for severance payments upon termination, were also paid their severance in exchange for a signed release.
There are thirty-eight Second Phase Key Employees, including fourteen (14) employees of RCM, five (5) employees of FXA, and nineteen (19) employees whose work benefited both Debtor and non-Debtor entities. The cost of the Second Phase Compensation Program for these nineteen participants was allocated equally among FXA, RCM, Refco, LLC, each a debtor, and Refco Securities, LLC, a non-debtor, except that no non-RCM Debtor would be jointly and severally liable for services rendered to RCM and RCM would not be jointly and severally for services rendered to any non-RCM Debtor.
The total estimated cost of the Second Phase Compensation Program was approximately $4.1 million.
10. Motion for Appointment of Equity Committee
On February 2, 2006, JMB Capital Partners, LP, Lonestar Capital Management, LLC, Mason Capital Management, Smith Management LLC and Triage Management LLC, each a holder of shares of Refco Inc. (collectively, the "Equity Committee Movants"), submitted a written request (the "Letter Request") to the United States Trustee seeking the appointment an official equity committee to investigate and pursue claims on behalf of Refco, Inc. for the benefit of its shareholders. The Equity Committee Movants acquired their equity stake in Refco, Inc. at distressed prices in the few days before and after the commencement of the Debtors' Chapter 11 Cases. The Equity Committee Movants' hold approximately 26.5% of outstanding shares of Refco common stock held by non-insiders of the Debtors.
Shortly after receiving the Equity Committee Movants' request, the United States Trustee inquired as to the Debtors' position regarding the Equity Committee Movants' request. After careful consideration, the Debtors determined that the formation of an equity committee was unwarranted at that time, and informed the United States Trustee and counsel to the Equity Committee Movants, by letter dated March 3, 2006, of their position. The United States Trustee declined to appoint an official equity committee and, thereafter, on May 1, 2006, the Equity Committee Movants filed a motion seeking entry of an order pursuant to section 1102(a)(2) of the Bankruptcy Code compelling the United States Trustee to appoint an equity committee. At a hearing on June 8, 2006, the Bankruptcy Court denied the motion to compel. In its bench ruling, the Bankruptcy Court found that the appointment of a separate equity committee was not necessary to protect the interests of the shareholders of Refco Inc. and, thus, chose not to exercise the Bankruptcy Court's discretion to appoint an equity committee. The Bankruptcy Court, applying factors relied upon by various circuits in determining whether an equity committee should be appointed, found that Refco Inc. was
55 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. not "hopelessly insolvent," and that the interests of the Equity Committee Movants were adequately represented by able counsel and third-party fiduciaries.
On August 15, 2006, the Equity Committee Movants renewed their request to the United States Trustee for the appointment of an official equity committee. By letter dated August 31, 2006, the United States Trustee declined to appoint such a committee.
11. Appointment of Committees
On October 28, 2005, the United States Trustee, pursuant to section 1102(a) of the Bankruptcy Code, appointed the following entities to an official committee of unsecured creditors in these cases (the "Original Creditors' Committee"): (i) Cargill, Incorporated; (ii) Everest Asset Management, Inc.; (iii) Fimex International Ltd.; (iv) Markwood Investments; (v) Premier Bank International, N.V.; (vii) VR Global Partners, L.P.; and (viii) Wells Fargo Bank, N.A. ("Wells Fargo") The Original Creditors' Committee retained Milbank, Tweed, Hadley & McCloy LLP ("Milbank") as its legal counsel; Houlihan Lokey Howard & Zukin ("Houlihan") as its financial advisor; and Kasowtiz, Benson, Torres & Friedman LLP ("Kasowitz") as its conflicts counsel.
On March 29, 2006, the United States Trustee appointed two additional members to the Original Creditors Committee: D.E. Shaw Laminar Portfolios, L.L.C. ("D.E. Shaw") and Esopus Creek Advisors LLC ("Esopus"). On July 21, 2006, the United States Trustee reconstituted the Original Creditors' Committee, removing all of its members except for D.E. Shaw, Esopus and Wells Fargo (the "Reconstituted Committee"). On August 3, 2006, the United States Trustee filed notices bifurcating the Original Creditors' Committee into: (i) the Official Committee of Unsecured Creditors of Refco Inc., et al. (the "Creditors' Committee"), the members of which are Cargill, Incorporated; D.E. Shaw; Esopus; and Wells Fargo; and (ii) the Additional Committee of Unsecured Creditors of Refco Inc., et al. (the "Additional Committee" and, together with the Creditors' Committee, the "Committees"), the members of which are Everest Asset Management, Inc.; Markwood Investments Ltd.; Premier Bank International N.V.; and VR Global Partners, L.P.
On August 15, 2006, the Bankruptcy Court entered the Joint Creditor Committee Protocol Stipulation and Order under which the Committees created a joint subcommittee (the "Joint Subcommittee") comprised of the then serving members of the Committees. The Joint Subcommittee represents the interests of all unsecured creditors in the Debtors' Chapter 11 Cases, except with respect to asset allocation, intercompany claims and chapter 11 plan issues between RCM and the Debtors.
The Committees and the Joint Subcommittee are permitted to utilize the services of all professionals previously retained by the Original Creditors' Committee, including Milbank, Kasowitz and Houlihan. In addition, by application dated August 25, 2006, the Additional Committee sought to retain Kasowitz as its general counsel. The Bankruptcy Court approved the Kasowitz retention application on September 12, 2006.
By letter dated August 30, 2006, the Additional Committee notified the United States Trustee that Leuthold Funds, Inc., Lyxor Estlander & Ronnlund Ltd., Inter Financial Services Ltd. and Capital Management Select Fund, LTD had been permitted to participate as ex officio members of the Additional Committee (the "Ex Officio Members"). The Ex Officio Members serve at the pleasure of the Additional Committee, and generally have access to confidential information and participate in Additional Committee meetings. However, such Ex Officio Members do not have voting rights and are not entitled to expense reimbursement.
12. PlusFunds
In March 2005, Refco Capital LLC, through a series of transactions, made loans totaling approximately $200 million to Suffolk LLC, Suffolk-SUG LLC, Suffolk-KAV LLC and Suffolk-MKK LLC (the "Suffolk Entities"), for which stock of PlusFunds Group, Inc. ("PlusFunds") was pledged as collateral. On March 6, 2006, PlusFunds filed a voluntary petition in the Bankruptcy Court for reorganization relief under chapter 11 of the Bankruptcy Code, thereby creating a default under the loan agreements between Refco Capital LLC and the Suffolk Entities. In March 2006, PlusFunds entered into an Asset Purchase Agreement with Hedge Fund Index Group, Inc./ Financial Technology Ventures II which contemplated a purchase price of approximately $2 million in cash and $3 million in assumed liabilities. The sale ultimately failed to close.
56 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. In May 2006, following the unsuccessful sale, PlusFunds began winding down its operations and liquidating its remaining assets, a process which is ongoing. As a result of these developments, Refco Capital LLC anticipates no recovery of the Suffolk Entities' loan debt from the pledged collateral. Default has been noticed to the Suffolk Entities for the outstanding debt totaling approximately $200 million.
13. Wind Down of Funds
Prior to the Petition Date, certain non-Debtor subsidiaries or affiliates of the Debtors (the "Non-Debtors") were general partners in or managing owners of various investment funds, business trusts and other investment structures (collectively, the "Funds"). The Debtors or the Non-Debtors also may have equity or other investment interests in certain of the Funds that ultimately may provide value to the Debtors or Non-Debtors. After the commencement of the Chapter 11 Cases, the Company reviewed and analyzed, among other things, the formation and structures of the various Funds and the Debtors' and the Non-Debtors' relationships to and with the Funds as well as the respective contractual, legal, regulatory, administrative and other rights, duties and obligations upon the Funds, the Debtors and the Non-Debtors. The Company then determined the appropriate strategies, processes and timetables for marketing and selling the Debtors' or the Non-Debtors' interests in the Funds, as well as winding down, liquidating or transferring responsibility for managing or administering the Funds. The Non-Debtors are in the process of, or in certain instances have completed, marketing and selling, winding down, liquidating or transferring responsibility for managing or administering the Funds. Although the Non-Debtors are seeking to recover as much value as possible for the Non-Debtors and ultimately the Debtors, their actions also are intended to preserve as much value as possible for investors in the Funds. The amount of value, if any, that the Debtors may realize from the Funds as a result of such actions has not yet been fully determined, but is not expected to be material relative to the claims asserted against the Debtors in the Chapter 11 Cases.
F. Effects of Chapter 11 Filing on FXA Creditors
The Debtors operated an online retail foreign exchange trading business through their subsidiary Refco F/X Associates, LLC (as defined above, "FXA"), a debtor and debtor-in-possession in the Chapter 11 Cases, including under the trade name RefcoFX.com. The RefcoFX.com business operated under a Facilities Management Agreement (as amended) between (i) Refco Group and its designated subsidiaries, including FXA, and (ii) FXCM (as defined in Section IV.C.1, the "FMA"), on a web-based trading platform created and maintained by FXCM. As of October 17, 2005, FXCM was supporting over 15,000 RefcoFX.com retail accounts pursuant to the FMA. FXA also had an additional foreign exchange trading business, not conducted on the FXCM platform, involving a smaller number of accounts, which are referred to as the "Legacy Clients."
Under the FMA, FXCM provided most of the operational services in connection with the business, including maintenance of the software platform and live telephone representatives to answer clients' calls. FXA was responsible primarily for obtaining customers and for cash management. The FMA provides for a monthly sharing of foreign exchange trading spreads (whether negative or positive in any particular month) between FXCM and FXA.
FXA was to maintain or manage all cash associated with the business. In particular, FXA would accept (or direct) customer deposits and, prior to the commencement of the Chapter 11 Cases, issue disbursements to customers who wished to withdraw funds. Customer deposits were not required to be, and were not, segregated by FXA.
Clients that trade in foreign currencies are not protected in the same manner as customers that engage in securities transactions with a stockbroker and are not granted a statutory priority in the event of the liquidation of the foreign exchange dealer. Customer account balances of FXA's customers merely represented a liability of FXA to the customer but did not reflect the currencies or investments actually held by FXA.
Based on a preliminary review of filed claims, the Debtors estimate that claims of FXA clients holding these accounts approximate $140FXA clients and introducing brokers held claims of approximately $140 million. As set forth above, in addition to unliquidated claims, FXCM has filed a general unsecured claim against FXA in the amount of $8,481,529.63 related to obligations arising under the FMA. The Debtors estimate that the claims of Holders of other General Unsecured Claims against FXA aggregate to less than $1 million.
57 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. 1. Postpetition Customer Trading Activity
After FXA filed for chapter 11 protection on October 17, 2005, FXA was stayed from making payments to its customers or other creditors. However, contemporaneous with the commencement of bankruptcy proceedings the Debtors began negotiations respecting the sale of FXA's business as a going concern to FXCM. See Section IV.C.1 – "Proposed FXCM Sale." That sale would have been highly favorable to customers of FXA and would have included assumption of all account liabilities of customers of FXA who conducted business on the RefcoFX.com web-based trading platform (the "Website Customers").
To facilitate the FXCM sale transaction, the Website Customers were authorized to continue trading on the RefcoFX.com web-based platform, based on the balances shown in their accounts as of October 17, 20052005. Because of the uncertainty associated with the Chapter 11 Cases, however, FXA stopped accepting deposits on the Petition Date (although it appears that a very few, inadvertent deposits actually were made). The decision to allow trading activity to continue after FXA's chapter 11 filing was made to preserve the value of FXA's assets and facilitate a possible sale transaction for FXA accounts and assets, which would have included assumption of all Website Customer account liabilities, thereby benefiting FXA customers and creditors.
Ultimately, however, when no sale of the FXCM Equity Stake or FXA's customer accounts was consummated and it appeared that a sale was not likely to occur, trading was halted on July 31, 2006. See Sections IV.C.1 –"Proposed FXCM Sale" and IV.C.2 –"Proposed GAIN Transaction."
FXA has taken the position that postpetition trading gains and losses of Website Customers should be netted against prepetition Website Customer account balances to arrive at a prepetition claim amount for purposes of distributions under the Plan. Trading activity after FXA's chapter 11 filing was based solely on prepetition account balances –rather than on any additional funds invested –and such account balances entitled Website Customers to only a partial recovery, the amount of which would depend on distributions to be provided under a reorganization plan. Were gains and losses treated differently, some customers (those with gains) would receive windfalls in the form of Administrative Claims against FXA, while others (those with losses) would have their real-dollar losses offset by small recoveries on prepetition claims and might end up owing money to FXA. Although the Debtors believe that this resolution of postpetition trading gains and losses is supported by law and equity, there can be no assurance that the Bankruptcy Court would reach the same conclusion. The resolution of this issue could significantly affect recoveries of various groups of FXA creditorsDebtors estimate that certain customers had postpetition net gains that aggregate approximately $10 million in the aggregate. If these customers are granted an administrative expense claim for postpetition gains, the recoveries to Holders of General Unsecured Claims against FXA will be materially reduced.
In addition to postpetition losses generated by postpetition trading activity, certain customers have alleged that they were injured by FXA's refusal to accept deposits after the Petition Date. Specifically, FXA customers who traded on margin were required to maintain minimum account balances necessary to support the corresponding margin level of their account. Certain customers have alleged that since they were not able to deposit funds during the postpetition period they were forced to close open positions or their open positions were closed automatically by FXA when their account balances neared or fell below the corresponding minimum account balance. These customers allege that they incurred losses that they otherwise would not have incurred had they been able to deposit funds into their accounts.
2. FXA Japan Clients
Due to Japanese regulatory concerns, FXCM incorporatedApproximately 30% of FXA's retail customer account balances are attributable to customers in Japan ("FXA Japan Clients"). In order to facilitate the ability of FXA Japan Clients to make deposits and withdrawals to and from their foreign exchange trading account with FXA, FXA determined that it was desirable to open a Japanese yen denominated bank account. Because FXA was not domiciled in Japan, FXA determined that it could not directly open a bank account in Japan. Principals of FXA and FXCM agreed that FXCM would form a Japanese entity, RefcoFX Japan KK ("Refco Japan") to serve FXA's retail clients in Japan trading on the FXCM web-based platform (the "FXA Japan Clients"). FXCM also established, tohold title to a Japanese yen denominated account at Hong Kong Shanghai Banking Corp. ("HSBC") in the name of Refco Japan to hold FXA Japan Client related funds. While the FXA Japan Clients entered into customerclient agreements with FXA rather than with Refco Japan, the funds of the FXA Japan Clients were deposited into the HSBC account. Although FXAthe Debtors believe that the parties intended that the shares of Refco Japan would be transferred to Refco Group
58 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. or FXA, the shares of Refco Japan were never transferred, and FXCM remains the sole shareholder of Refco Japan. Nevertheless, the Debtors believe that as a matter of law and equity, the shares of Refco Japan are property of the FXA Estate. Moreover, even if the shares of Refco Japan are not the property of Refco, the Debtors believe that the funds in the HSBC account, which came from FXA customers, are property of FXA.
Refco Japan's account at HSBC currently holds Japanese yen valued at approximately $32 million (which amount fluctuates with the dollar-yen exchange rate). The Debtors currently estimate that claims filed by FXA Japan Clients total approximately $40 million. Approximately twenty-four48 FXA Japan Clients have commenced three separate civil actions in Japan against Refco Japan asserting claims against Refco Japan for damages in the amount of funds deposited by such customers and have obtained provisional attachment orders against the funds in the HSBC account. The attachment orders have restricted FXA's and Refco Japan's ability to transfer the funds in the HSBC account under Japanese law.
On October 5, 2006, FXA commenced an action in the Bankruptcy Court against FXCM, Refco Japan, HSBC and the FX Japan Clients that had both filed a proof of claim against FXA and commenced legal actions in Japan, seeking declaratory judgment that the funds in the HSBC account are property of FXA's estate and for turnover of such funds. In the alternative, FXA is seeking declaratory relief that the shares in Refco Japan held by FXCM are property of the FXA estate and for turnover of such shares. Although the Debtors believe that all General Unsecured Creditors of FXA should be treated equally and share pro rata in the funds held in the HSBC account, and that this position is supported in both law and equity, there can be no assurance that either the Bankruptcy Court or the Japanese courts would reach the same conclusion. In the event the Bankruptcy Court or the Japanese courts disagree with the Debtors' position, cash available for distribution to FXA creditors through the FXA Estate could be reduced by as much as $32 million, which would have a significant impact on the recoveries of FXA creditors.
3. Claim of Saeed Abdulraham Alqahtani
Mr. Saeed Abdulraham Alqahtani has asserted that an approximately $3 million transfer from Mr. Alqahtani was received by FXA after the commencement of FXA's Chapter 11 Case. As a result of the timing of this transfer and postpetition gains, Mr. Alqahtani has asserted an approximately $5.8 million administrative expense claim against FXA's estate. The Debtors disagree with Mr. Alqahtani's position and believe that the transfer was made prepetition and that Mr. Alqahantani holds a prepetition general unsecured claim for the entire amount of his FXA account balance. If the Bankruptcy Court disagrees with the Debtors' position and grants Mr. Alqahtani an administrative claim for all or any material portion of his account balance, recoveries to Holders of General Unsecured Claims against FXA would be reduced.
4. Client Claims for Constructive Trust and Other Related Claims
On or about September 26, 2006, Forex Trading, LLC and an ad hoc committee purporting to represent approximately 300 FXA clients with claims of approximately $10 million filed an adversary proceeding styled Forex Trading, LLC and The Ad Hoc Refco F/X Customer Committee v. Refco F/X Associates, LLC and Refco Capital Markets, Ltd., Adv. Pro. No. 06-01748 (the "Constructive Trust Action"), against FXA and RCM alleging that these customers' deposits do not constitute the property of FXA or RCM or their respective bankruptcy estates, that FXA and RCM have been unjustly enriched by these customer deposits, and that the plaintiffs are entitled to the value of the customer deposits. A trial on the Constructive Trust Action is currently scheduled to be held in December, 2006.
Neither the Plan nor any contract, instrument, release, agreement or document executed or delivered in connection therewith, nor the occurrence of the Effective Date (i) will release, waive or discharge any of the claims or causes of action asserted in the Constructive Trust Action against FXA and RCM, their successors and assigns, including Reorganized FXA and Post Confirmation RCM, and/or any of their property, and/or (ii) will permanently or preliminarily enjoin, prohibit or prevent in any way the continuation and/or prosecution of the Constructive Trust Action and the claims and causes of action asserted therein against FXA and RCM, their successors and assigns, including Reorganized FXA and Post Confirmation RCM, and/or any of their property; and all such claims and causes of action, as well as any and all defenses and counterclaims of FXA and RCM (including, without limitiation, FXA's right to argue that the constructive trust claim asserted against RCM in the Constructive Trust Action belongs to FXA and not Forex Trading LLC or the Ad Hoc Refco F/X Customer Committee), are expressly preserved under the Plan. Further, the Debtors will reserve an amount equal to $10.6 million pending resolution of the Constructive Trust Action to safeguard plaintiffs' potential recovery.
59 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. In addition to the Constructive Trust Action, numerous clients have filed proofs of claim alleging that they are secured creditors or otherwise entitled to priority treatment on account of their status as a client of FXA. The Debtors dispute the allegations in the Constructive Trust Action and all other assertions that customers of FXA are other than prepetition nonpriority general unsecured creditors of FXA. If the Court disagrees with the Debtors' position and determines that some or all customers of FXA are entitled to an elevated priority on constructive trust or other grounds, the recovery to all other general unsecured creditors of FXA that do not receive similar treatment would be adversely affected.
5. 3. Treatment of FXA Clients Under the Plan
As set forth in Section II.9 –"Treatment of FXA Under the Plan," pursuant to the Settlements implemented under the Plan, the Secured Lenders (who assert claims against FXA as a guarantor of Refco Group's obligations under the Credit Agreement) and the Noteholders (who assert claims against FXA as a guarantor of the Notes Issuers' obligations under the Senior Subordinated Notes) have agreed to forgo any distribution from the assets of FXA on account of their claims against FXA, and the Contributing Debtors and RCM have agreed to pay amounts incurred by FXA for professional services (other than those related to FXA's claims resolution process and issues unique to FXA after the initial date of the filing of the Plan) and overhead allocable to FXA in the period between the Plan Filing Date and the Plan Effective Date. In return, FXA has agreed to release its claims against the Secured Lenders and Noteholders, and has agreed to the deemed resolution and satisfaction of Intercompany Claims among the Debtors. See Section VIII.A.9 –"Classification and Treatment of Intercompany Claims." Further, FXA has agreed that it will receive no distribution on account of its Intercompany Claim against RCM. See Section VIII.A.10 –"Claims of Debtors Against RCM."
Aside from FXA's receivable owing from RCM in the approximate amount of $83.7 million that will be resolved as discussed above, FXA's assets consist primarily of approximately $52.3 million in cash, including the approximately $32 million held in Refco Japan's HSBC account and $13 million in accounts against which the Secured Lenders are releasing liens. Because, as set forth above, trading activity does not affect FXA's assets, these assets have remained constant (other than fluctuations related to the fluctuation of the dollar-yen exchange rate) throughout the Chapter 11 Cases, and have not been affected by postpetition trading. If all Holders of General Unsecured Claims against FXA are treated equally, the return to all Holders of FXA General Unsecured Claims likely would be approximately 35-40%. However, in the event that the FXA Japan Clients were determined to be entitled to direct claims against the funds held in Refco Japan's HSBC account, those customers would receive a much larger return on their claims (possibly exceeding 9080%), while other Holders of General Unsecured Claims against FXA likely would recover 10-11%. The pool of assets available for distribution to Holders of General Unsecured Claims against FXA also may be materially reduced if the Constructive Trust Action or other similar claims for preferential recovery asserted by certain clients are successful. Although the Debtors believe that all Holders of General Unsecured Creditors ofClaims against FXA should be treated equally, and that this position is supported in both law and equity, there can be no assurance that either the Bankruptcy Court or the Japanese courts wouldwill reach the same conclusion. Litigation involving this issue could be lengthy and could delay distributions to all creditors of FXA for a considerable time.
Distributions to Holders of General Unsecured Claims against FXA also may be materially reduced by Allowed Administrative Claims asserted against FXA. Under the Plan, FXA is responsible for payment of its Allowed Administrative Claims (see Section VIII.B.16 –"Allocation of Administrative Claims, Priority Tax Claims and Non-Priority Tax Claims"), and such payment will reduce the pool of assets available for payment of Holders of General Unsecured Claims against FXA. If the Bankruptcy Court ultimately determines that postpetition gains of Website cCustomers are properly treated as Administrative Claims (see Section IV.F.1 –"Postpetition Customer Trading Activity"), the dollar amount of Administrative Claims may significantly increase, thereby reducing Distributions to Holders of General Unsecured Claims against FXA.
Litigation involving these issues could be lengthy and could delay distributions to all creditors of FXA for a considerable time. In the event that the Debtors are not successful in prosecuting their position on these issues before the Bankruptcy Court, Holders of General Unsecured Claims against FXA theoretically could receive only a nominal or no distribution under the Plan.
Convenience Class Treatment. The Plan provides that Class 5(a) FXA General Unsecured Claims in an amount less than or equal to $10,000, or greater than $10,000 but, with respect to which, the Holder thereof voluntarily 60 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. reduces such Claim to $10,000 on the applicable Ballot, will be treated as Class 6 FXA Convenience Claims. See Section 1.86 of the Plan. Under the Plan, Holders of Class 6 FXA Convenience Claims are entitled to receive Cash equal to 40% of their Allowed Class 6 FXA Convenience Claims.
For purposes of the Plan and the Distributions to be made thereunder, the aggregate amount of Distributions to Class 6 FXA Convenience Claims is limited to $5 million. See Section 1.86 of the Plan. To the extent that the amount of Class 5(a) FXA General Unsecured Claims electing to receive a Class 6 FXA Convenience Claim causes the aggregate amount of Class 6 FXA Convenience Claims to exceed $5 million, the Holders of Claims permitted to elect such treatment will be determined by reference to the amount of the Claim, with the Claim in the lowest amount being selected first and the next largest claim being selected thereafter until the $5 million cap is reached.
V. CORPORATE STRUCTURE AND MANAGEMENT OF THE REORGANIZED DEBTORS
A. The Board of Directors and Executive Officers of Refco Inc.
Prior to the Petition Date, the following individuals were officers or members of the Board of Directors of Refco:
Name Position Phillip R. Bennett Former President, Chief Executive Officer and Chairman Joseph J. Murphy Former Executive Vice President; President and Chief Executive Officer of Refco Global Futures, LLC; Former President of Refco, LLC Gerald M. Sherer Former Executive Vice President and Chief Financial Officer William M. Sexton Former Executive Vice President and Chief Operating Officer; Interim Chief Executive Officer Santo C. Maggio Former Executive Vice President; President and Chief Executive Officer of Refco Securities, LLC and Refco Capital Markets, Ltd. Dennis A. Klejna Former Executive Vice President and General Counsel Tone Grant Former President and Chief Executive Officer Peter J. McCarthy Former President of Refco Securities, LLC Leo R. Breitman Former Director Nathan Gantcher Former Director David V. Harkins Former Director Scott L. Jaeckel Former Director Thomas H. Lee Former Director Ronald L. O'Kelley Former Director Scott A. Schoen Former Director
On or about October 12, 2005, Bennett was arrested and, on November 10, 2005, he was indicted by a federal grand jury. See Section III.C.5 –"Governmental Investigations." After being arrested, Bennett took a leave of absence at the request of Refco's Board of Directors. Bennett has not participated in the Board's activities and deliberations since the Petition Date and, on January 25, 2006, he voluntarily resigned from the Refco Board and all positions he held at Refco.
After Bennett's arrest, William Sexton became interim Chief Executive Officer of the Company. On November 13, 2005, Robert N. Dangremond, a Managing Director of AlixPartners LLC ("AlixPartners"), a leading global turnaround and restructuring management company, who had been serving as Refco's Chief Restructuring Officer, was named as interim Chief Executive Officer of the Company following Mr. Sexton's resignation. Eric A. Simonsen, a Managing Director with AlixPartners, served as Refco's Chief Administrative Officer until his resignation in July 2006.
On December 19, 2005, Harrison J. Goldin replaced Mr. Dangremond as Chief Executive Officer of Refco. On January 12, 2006, Stephen M. Brecher joined Refco's Board of Directors, and all of the Company's existing directors resigned. On February 3, 2006, Refco announced that Stephen J. Friedman, Bradley Eric Scher and Wallace O. Sellers had been appointed to Refco's Board of Directors.
61 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. The following table sets forth the names and positions of the current management of Refco:
Name Position Stephen M. Brecher Director Stephen J. Friedman Director Bradley Eric Scher Director Wallace O. Sellers Director Harrison J. Goldin Chief Executive Officer and President David Pauker Chief Restructuring Officer and Executive Vice President Jerry Lombardo Chief Financial Officer, Vice President and Secretary
Directors:
Stephen M. Brecher. Mr. Brecher is presently a Managing Director of Greenwich Corporate Strategy Group LLC. Previously, he served as a Principal at XRoads Solutions Group, an international consulting firm. Mr. Brecher was with KPMG (and its predecessor Peat Marwick) from June 1967 to June 2000, where he was the partner-in-charge of the firm's International Bank Practice. Mr. Brecher will serve on the Executive Committee of Refco's Board of Directors.
Stephen J. Friedman. Mr. Friedman has been Dean of Pace University School of Law since July 2004. Prior to that, he was a senior partner at Debevoise & Plimpton LLP, where he was co-chairman of the firm's corporate department from 1993 to 2000. He has also served as Executive Vice President and General Counsel of The Equitable Companies Incorporated and its subsidiary, The Equitable Life Assurance Society of the United States, and was an Executive Vice President of the E.F. Hutton Group Inc. Mr. Friedman was a Commissioner of the SEC from 1980 to 1981 and Deputy Assistant Secretary of the Treasury for Capital Markets Policy from 1978-1979.
Bradley Eric Scher. Mr. Scher is the Managing Member of Ocean Ridge Capital Advisors, LLC, a financial advisory company established to assist investors, managements and boards of directors of financially and/or operationally underperforming companies. From 1990 to 1996 and 1996 to 2002, he managed portfolios of distressed investments at Teachers Insurance and Annuity Association of America and PPM America, Inc., respectively.
Wallace O. Sellers. Mr. Sellers is the retired President, Chief Executive Officer and a founder of Enhance Financial Services Group, Inc., the first monoline reinsurer for the financial guarantee industry. He previously had held various management positions, including Senior Director of Securities Research at Merrill Lynch & Co. Following his retirement from Enhance, Mr. Sellers was a founder of Natural Gas Services, Inc., where he was Chairman of the Board from 2001 until 2004. He currently is a trustee of the Hudson Institute of Washington, D.C. and a member of the board of overseers of Roger Williams University.
Officers:
Harrison J. Goldin. Mr. Goldin succeeded Robert Dangremond, who served as interim Chief Executive Officer of Refco following the resignation of William Sexton in December 2005. Mr. Goldin is Senior Managing Director of Goldin Associates, LLC, an entity he founded in 1990, which provides financial advisory, interim management, forensic investigation and strategic and risk management consulting services. Mr. Goldin has played a leading role in the restructurings of numerous multi-billion dollar firms undergoing complex financial or operational change, serving as chief executive officer, advisor, trustee or examiner during some of the largest and most complicated bankruptcies of the past two decades. In addition, Mr. Goldin was for 16 years the elected Comptroller of the City of New York, and played a major role in New York City's financial restructuring in the mid-1970s.
David Pauker. Mr. Pauker is a Managing Director of Goldin Associates, LLC, and has acted as chief restructuring officer or interim CEO, COO or CRO for numerous underperforming or distressed companies, including Vlasic Foods International, Pharmacy Fund, Grand Court Lifestyles, PSINet Consulting Solutions, Monarch Capital Corporation, Tuttle Papock and First Interregional Advisors Corp. Mr. Pauker has also overseen many of Goldin's investigations of troubled companies, including those involving allegations of fraud or improper conduct. He has served as court-appointed examiner or mediator in a number of significant matters. Before joining Goldin Associates, Mr. Pauker was a senior aide to Harrison J. Goldin, then Comptroller of the City of New York. He was formerly
62 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. Executive Vice President of Barclay Knitwear Company, Inc., a New York-based company with interests in soft goods, manufacturing and importing, retailing and real estate.
Jerry Lombardo. Mr. Lombardo is a Managing Director of Goldin Associates, LLC, and is a career restructuring and turnaround advisor with extensive experience advising debtors, creditors and investors in formal bankruptcy proceedings and out-of-court restructurings. He has also provided strategic and business direction to healthy companies looking to divest non-core operations. Before joining Goldin Associates, Mr. Lombardo was a Managing Director with FTI Consulting. Earlier, he was a project manager with Zolfo Cooper, LLC. Prior to advising troubled companies, he served in the treasury group of Wyeth Laboratories. Mr. Lombardo began his career at Deloitte & Touche where he provided advisory, accounting and auditing services to a wide variety of clients in the manufacturing and retail sectors. He is a Certified Public Accountant, Certified Turnaround Professional and a Certified Insolvency & Restructuring Advisor.
VI. REASONS FOR THE SOLICITATION; RECOMMENDATION
Chapter 11 of the Bankruptcy Code provides that, in order for the Bankruptcy Court to confirm the Plan as a consensual plan, the Holders of Impaired Claims against, and Impaired Interests in, the Debtors that are entitled to vote must accept the Plan. Under the Plan, no Classes of Interests are entitled to vote.
An Impaired Class of Claims will have accepted the Plan if (i) the Holders of at least two-thirds in amount of the Allowed Claims actually voting in the Class have voted to accept the Plan and (ii) the Holders of more than one-half in number of the Allowed Claims actually voting in the Class have voted to accept the Plan, not counting the vote of any Holder designated under section 1126(e) of the Bankruptcy Code or any insider.
In light of the significant benefits to be attained by the Holders of Impaired Claims entitled to vote on the Plan pursuant to consummation of the transactions contemplated by the Plan, the Plan Proponents recommend that such Holders of Impaired Claims vote to accept the Plan. The Plan Proponents have reached this decision after considering the alternatives to the Plan that are available to the Chapter 11 Debtors and their likely effect on the Chapter 11 Debtors' business operations, creditors and shareholders. These alternatives include liquidation of the Chapter 11 Debtors under chapter 7 of the Bankruptcy Code. The Plan Proponents determined, after consulting with financial and legal advisors, that the Plan would result in a larger distribution to creditors than would any other realistic chapter 11 reorganization or a liquidation under chapter 7. For a discussion of estimated distributions under chapter 7 of the Bankruptcy Code, see Section XI.C –"Liquidation Analysis." For all of these reasons, the Plan Proponents support the Plan and urge all Holders of Impaired Claims to accept and support the Plan.
VII. SUMMARY OF VOTING PROCEDURES
The Disclosure Statement, including all Exhibits hereto, together with the related materials included herewith, are being furnished to Holders of: (i) Class 4 Senior Subordinated Note Claims, Class 5(a) Contributing Debtors General Unsecured Claims, Class 5(b) Related Claims and Class 6 RCM Intercompany Claims, against one or more of the Contributing Debtors; (ii) Class 4 FXA Senior Subordinated Note Claims, Class 5(a) FXA General Unsecured Claims, Class 5(b) Related Claims and Class 6 FXA Convenience Claims, against FXA; and (iii) Class 3 RCM FX/Unsecured Claims, Class 4 RCM Securities Customer Claims, Class 5 Leuthold Metals Claims, Class 6 RCM FX/Unsecured Convenience Claims, Class 7 RCM Securities Customer Convenience Claims and Class 68 Related Claims, against RCM. With respect to the beneficial owners of Senior Subordinated Note Claims (the "Beneficial Owners"), the Disclosure Statement, the beneficial owner ballot for Senior Subordinated Note Claims enclosed with the Disclosure Statement (the "Beneficial Owner Ballot") and related materials will be furnished to a broker, commercial bank, transfer agent, trust company, dealer, or other intermediary or nominee (the "Nominee") for each Beneficial Owner. NOMINEES SHOULDMUST PROVIDE COPIES OF THE DISCLOSURE STATEMENT, THE BENEFICIAL OWNER BALLOT AND RELATED MATERIALS TO THE BENEFICIAL OWNERS FOR WHOM THEY HOLD INTERESTS AS SOON AS POSSIBLE, AND NO LATER THAN THE FIFTH BUSINESS DAY AFTER RECEIPT OF THE SOLICITATION MATERIALS.
All votes to accept or reject the Plan must be cast by using the ballot enclosed with the Disclosure Statement (the "Ballot") or, in the case of a Nominee, the master ballot provided to such Nominee (the "Master Ballot") or a
63 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. pre-validated ballot (see Section XIII.D –"Special Procedures for Holders of Senior Subordinated Notes"). No other votes will be counted. Consistent with the provisions of Fed. R. Bankr. P. 3018, the date for the determination of Holders of record of Impaired Claims entitled to receive a copy of the Disclosure Statement and related materials and to vote to accept or reject the Plan has been set as October 16, 2006 (the "Voting Record Date"). Ballots and Master Ballots must be RECEIVED by the Debtors' Voting Agent no later than 5:00 p.m. (Eastern Time) on December 8, 2006, unless the Plan Proponents extend, by oral or written notice to the Voting Agent, the Voting Deadline. Holders of Senior Subordinated Notes whose Beneficial Ballots are not pre-validated (see Section XIII.D.2) must provide their Beneficial Owner Ballots to their Nominees sufficiently in advance of the Voting Deadline, so that Master Ballots can be prepared by their Nominees and received by the Debtors' Voting Agent by the Voting Deadline. Unless permitted by the Bankruptcy Court, Ballots and Master Ballots received after the Voting Deadline (as extended by the Plan Proponents) will not be counted or otherwise used in connection with the Plan Proponents' request for confirmation of the Plan (or any permitted modification thereof). All votes to accept the Plan will be deemed to constitute consents to the matters identified in the Disclosure Statement.
The Plan Proponents reserve the absolute right to amend the Plan. Amendments to the Plan that do not materially and adversely affect the treatment of Claims and Interests may be approved by the Bankruptcy Court at the Confirmation Hearing without the necessity of resoliciting votes. In the event resolicitation is required, the Plan Proponents will furnish new Ballots and/or Master Ballots to be used to vote to accept or reject the Plan, as amended.
The Plan Proponents expressly reserve the right to extend, by oral or written notice to the Voting Agent, the Voting Deadline for any reason, including to ensure that the requisite acceptances have been received. The Plan Proponents may extend the Voting Deadline for one or more creditors or Classes of creditors.
VIII. SUMMARY OF THE PLAN
Chapter 11 is the principal business reorganization chapter of the Bankruptcy Code. Under chapter 11, a debtor is authorized to reorganize its business for the benefit of itself and its creditors and shareholders. In addition, chapter 11 promotes equality of treatment of creditors and equity security holders who hold substantially similar claims against or interests in a debtor and its assets. In furtherance of this goal, upon the filing of a petition for relief under chapter 11, section 362 of the Bankruptcy Code provides for an automatic stay of substantially all acts and proceedings against the debtor and its property, including all attempts to collect claims or enforce liens that arose prior to the commencement of the chapter 11 case.
The consummation of a plan of reorganization is the principal objective of a chapter 11 case. A plan of reorganization sets forth the means for satisfying claims against and interests in a debtor. Confirmation of a plan of reorganization by the Bankruptcy Court makes the plan binding upon the debtor, any person or entity acquiring property under the plan, and any creditor of or equity security holder in the debtor, whether or not such creditor or equity security holder (i) is impaired under or has accepted the plan or (ii) receives or retains any property under the plan. Subject to certain limited exceptions and other than as provided in the plan itself or the confirmation order, the confirmation order substitutes the obligations specified under the confirmed plan for the obligations of the debtor that arose prior to the date of confirmation of the plan.
THE REMAINDER OF THIS SECTION PROVIDES A SUMMARY OF THE STRUCTURE AND MEANS FOR IMPLEMENTATION OF THE PLAN, AND OF THE CLASSIFICATION AND TREATMENT OF CLAIMS AND INTERESTS UNDER THE PLAN, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE PLAN (AS WELL AS THE EXHIBITS THERETO AND DEFINITIONS THEREIN), WHICH IS ANNEXED TO THE DISCLOSURE STATEMENT AS EXHIBIT A.
THE STATEMENTS CONTAINED IN THE DISCLOSURE STATEMENT INCLUDE SUMMARIES OF THE PROVISIONS CONTAINED IN THE PLAN AND IN DOCUMENTS REFERRED TO THEREIN. THE STATEMENTS CONTAINED IN THE DISCLOSURE STATEMENT DO NOT PURPORT TO BE PRECISE OR COMPLETE STATEMENTS OF ALL THE TERMS AND PROVISIONS OF THE PLAN OR DOCUMENTS REFERRED TO THEREIN, AND REFERENCE IS MADE TO THE PLAN AND TO SUCH DOCUMENTS FOR THE FULL AND COMPLETE STATEMENTS OF SUCH TERMS AND PROVISIONS.
64 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. THE PLAN ITSELF AND THE DOCUMENTS REFERRED TO THEREIN CONTROL THE ACTUAL TREATMENT OF CLAIMS AGAINST AND INTERESTS IN THE CHAPTER 11 DEBTORS UNDER THE PLAN AND WILL, UPON OCCURRENCE OF THE EFFECTIVE DATE, BE BINDING UPON ALL HOLDERS OF CLAIMS AGAINST AND INTERESTS IN THE CHAPTER 11 DEBTORS, THEIR ESTATES, THE REORGANIZED DEBTORS, POST-CONFIRMATION RCM, ALL PARTIES RECEIVING PROPERTY UNDER THE PLAN AND OTHER PARTIES IN INTEREST. IN THE EVENT OF ANY CONFLICT BETWEEN THE DISCLOSURE STATEMENT, ON THE ONE HAND, AND THE PLAN OR ANY OTHER OPERATIVE DOCUMENT, ON THE OTHER HAND, THE TERMS OF THE PLAN AND/OR SUCH OTHER OPERATIVE DOCUMENT WILL CONTROL.
A. Classification and Treatment of Claims and Interests
Pursuant to section 1122 of the Bankruptcy Code, set forth below is a designation of Classes of Claims against and Interests in the Chapter 11 Debtors. In accordance with section 1123(a)(1) of the Bankruptcy Code, Administrative Claims and Priority Tax Claims, as described below, have not been classified and are not entitled to vote on the Plan. A Claim or Interest is placed in a particular Class only to the extent that the Claim or Interest falls within the description of that Class and is classified in other Classes to the extent that any portion of the Claim or Interest falls within the description of such other Classes. A Claim or Interest also is placed in a particular Class for the purpose of receiving Distributions pursuant to the Plan only to the extent that such Claim or Interest is an Allowed Claim or an Allowed Interest in that Class and such Claim or Interest has not been paid, released or otherwise settled prior to the Effective Date.
The provisions set forth below also describe the classification of RCM Claims, but the provisions applicable to the RCM Claims and Interests are qualified in their entirety by reference to the RCM Settlement Agreement with respect to the Claims against RCM. To the extent that the summary below differs from the provisions of the RCM Settlement Agreement, the terms and conditions set forth in the RCM Settlement Agreement and applicable provisions of the Bankruptcy Code will govern. The Plan contemplates that on or prior to the Effective Date, the RCM Chapter 11 Case will be converted to a case under subchapter III of chapter 7 of the Bankruptcy Code unless the Debtors and the RCM Trustee agree that there is a compelling reason for the RCM Estate to be administered under Chapter 11 of the Bankruptcy Code. Upon conversion of RCM's Chapter 11 Case to a case under chapter 7 of the Bankruptcy Code, the Plan will proceed as a chapter 11 plan for the Debtors and will constitute a settlement and compromise of claims between the Estate of RCM and the Debtors, for which RCM and the Debtors seek approval simultaneously with the confirmation of the Plan.
The provisions set forth below also describe the classification of Secured Lender Claims, but the provisions applicable to the Secured Lender Claims are qualified in their entirety by reference to the Early Payment Order with respect to such Claims.
The Plan is premised on a consensual pooling of assets and liabilities by the Contributing Debtors, solely to implement the settlements and compromises reached by the primary constituencies in the Chapter 11 Cases, including the Debtors, the RCM Trustee, the Committees, the Secured Lenders and certain of the Holders of Senior Subordinated Notes. If for any reason the Bankruptcy Court determines that such compromises and settlements as embodied in the Plan should not be implemented as set forth in the Plan, the Plan Proponents may seek confirmation of the Plan on the basis of complete or partial substantive consolidation or on a Debtor-by-Debtor basis identifying subclasses of each of the listed Classes of Claims of the Contributing Debtors for each Contributing Debtor.
1. Treatment of Claims and Interests of the Contributing Debtors
a. Unclassified Claims –Contributing Debtors
(i) Administrative Claims. On the later of (a) the Effective Date, (b) the date on which its Administrative Claim becomes Allowed, or (c) the date on which its Administrative Claim becomes payable under any agreement relating thereto, each Holder of an Allowed Administrative Claim will receive, in full and final satisfaction, settlement, release and discharge of, and in exchange for, such Allowed Administrative Claim against the Contributing Debtors, Cash equal to the unpaid portion of such Administrative Claim in accordance with the allocation set forth in Section 5.16 of the Plan. Notwithstanding the foregoing, (i) any Administrative Claim based on a liability incurred by a Contributing Debtor in the ordinary course of business during the Chapter 11 Cases may be
65 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. paid in the ordinary course of business in accordance with the terms and conditions of any agreement relating thereto and (ii) any Administrative Claim may be paid on such other terms as may be agreed on between the Holder of such Claim and the Contributing Debtors or the Plan Administrator. Subsection (ii) of the second sentence in this section will not be construed to avoid the need for Court approval of an Administrative Claim when such Court approval is otherwise required by the Bankruptcy Code.
(ii) Priority Tax Claims. On the later of (a) the Effective Date or (b) the date on which its Priority Tax Claim becomes an Allowed Priority Tax Claim, in the sole discretion of the Contributing Debtors, each Holder of an Allowed Priority Tax Claim will receive, in full and final satisfaction, settlement, release and discharge of, and in exchange for, such Allowed Priority Tax Claim against the Contributing Debtors, (i) Cash equal to the unpaid portion of such Allowed Priority Tax Claim in accordance with the allocation set forth in Section 5.16 of the Plan, (ii) treatment in any other manner such that its Allowed Priority Tax Claims will not be impaired pursuant to section 1124 of the Bankruptcy Code, including payment in accordance with the provisions of section 1129(a)(9)(C) of the Bankruptcy Code, or (iii) such other treatment as to which the Contributing Debtors or the Plan Administrator and such Holder have agreed upon in writing. Clause (iii) of the preceding sentence will not be construed to avoid the need for Bankruptcy Court approval of a Priority Tax Claim when such Bankruptcy Court approval is otherwise required by the Bankruptcy Code.
b. Unimpaired Classes of Claims –Contributing Debtors
(i) Class 1 - Non-Tax Priority Claims. On (a) the Effective Date if such Non-Tax Priority Claim is an Allowed Non-Tax Priority Claim on the Effective Date or (b) the Quarterly Distribution Date following the date on which such Non-Tax Priority Claim becomes an Allowed Non-Tax Priority Claim against the Contributing Debtors, each Holder of an Allowed Class 1 Non-Tax Priority Claim will receive, in full and final satisfaction, release and discharge of, and in exchange for, such Allowed Non-Tax Priority Claim, Cash equal to the unpaid portion of such Allowed Non-Tax Priority Claim in accordance with the allocation set forth in Section 5.16 of the Plan.
(ii) Class 2 - Other Secured Claims. On the Effective Date, each Holder of an Allowed Class 2 Other Secured Claim against the Contributing Debtors will receive, in full and final satisfaction, settlement, release and discharge of, and in exchange for, such Allowed Other Secured Claim, one of the following Distributions: (i) the payment of such Holder's Allowed Other Secured Claim in full, in Cash; (ii) the sale or disposition proceeds of the property securing such Allowed Other Secured Claim to the extent of the lesser of the amount of such Allowed Other Secured Claim and the value of the interests in such property; (iii) the surrender to the Holder or Holders of such Allowed Other Secured Claim of the property securing such Claim; or (iv) such other Distributions as will be necessary to satisfy the requirements of chapter 11 of the Bankruptcy Code.
(iii) Class 3 - Secured Lender Claims. The Secured Lender Claims against the Contributing Debtors will be allowed to the extent provided in the Early Payment Order, the terms and conditions of which are incorporated by reference in the Plan, and such Allowed Secured Lender Claims, to the extent not paid in cash prior to the Effective Date or estimated at zero pursuant to the Early Payment Order, will be paid the full amount set forth in and required to be paid by the Early Payment Order. In addition, the Secured Lenders will have the benefit of the releases to the full extent contemplated by paragraph 8 of the Early Payment Order and Section 10.2 of the Plan.
c. Impaired Classes of Claims –Contributing Debtors
(i) Class 4 - Senior Subordinated Note Claims. On the Effective Date, each Holder of an Allowed Class 4 Senior Subordinated Note Claim against the Contributing Debtors will receive, to the extent not previously paid, in full and final satisfaction, settlement, release and discharge of, and in exchange for, such Allowed Class 4 Senior Subordinated Note Claim and any and all Claims against the Refco Entities, its Pro Rata share of the Senior Subordinated Note Holder Distribution (subject to the Senior Subordinated Note Indenture Trustee Charging Lien); and the Debtors will pay the Senior Subordinated Note Holder Fee Distribution; provided, however, to the extent that a Holder of an Allowed Class 4 Senior Subordinated Note Claim against the Contributing Debtors elects to not receive the Senior Subordinated Note Holder BAWAG Proceeds, such Holder's Distribution will consist of its Pro Rata share of the Senior Subordinated Note Holder Distribution less such Holder's portion of the Senior Subordinated Note Holder BAWAG Proceeds.
66 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. (ii) Class 5(a) - Contributing Debtors General Unsecured Claims. Subject to section 6.4 of the Plan, on the Effective Date (but in no case prior to payment in full of the Senior Subordinated Note Holder Distribution and the Senior Subordinated Note Holder Fee Distribution), each Holder of an Allowed Class 5(a) Contributing Debtors General Unsecured Claim will receive, in full and final satisfaction, settlement, release and discharge of, and in exchange for, such Allowed Class 5(a) Contributing Debtors General Unsecured Claim and any and all Other Related Claims, its Pro Rata share of the Contributing Debtors General Unsecured Distribution; provided, however, to the extent that a Holder of an Allowed Class 5(a) General Unsecured Claim against the Contributing Debtors elects to not receive the Contributing Debtors General Unsecured BAWAG Proceeds, if any, such Holder's Distribution will consist of its Pro Rata share of the Contributing Debtors General Unsecured Distribution less such Holder's portion of the Contributing Debtors General Unsecured BAWAG Proceeds.
(iii) Class 5(b) –Related Claims. On the Effective Date, pursuant to Section 6.4 of the Plan, each Allowed Class 5(b) Related Claim against any Contributing Debtor will be subordinated and will receive no Distribution from the Contributing Debtors Distributive Assets unless and until such time as all Holders of Allowed Contributing Debtors General Unsecured Claims and Allowed RCM Intercompany Claims have been paid in full; provided, however, that any hHolder of an RCM Related Claim that provides an RCM Related Claim Subordination Form in accordance with Section 6.6(c) of the Plan will, on account of its RCM Securities Customer Claim or RCM FX/Unsecured Claim (if Allowed), receive its applicable share of the RCM Distribution Reserve as more fully set forth in Section 6.6(c) of the Plan.
(iv) Class 6 - RCM Intercompany Claims. On the Effective Date (but in no case prior to payment in full of the Senior Subordinated Note Holder Distribution and the Senior Subordinated Note Holder Fee Distribution), the RCM Trustee, on behalf of RCM, will receive the RCM Intercompany Claim Distribution.
(v) Class 7 - Subordinated Claims. On the Effective Date (but in no case prior to payment in full of the Senior Subordinated Note Holder Distribution and the Senior Subordinated Note Holder Fee Distribution), each Holder of an Allowed Class 7 Subordinated Claim against the Contributing Debtors will receive, in full and final satisfaction, settlement, release and discharge of, and in exchange for, such Allowed Class 7 Subordinated Claim, its Pro Rata share of the Tranche B Litigation Trust Preferred Interests as more particularly set forth in Section 5.7(c) of the Plan.
d. Impaired Classes of Interests –Contributing Debtors
(i) Class 8 - Old Equity Interests. On the Effective Date, each Holder of an Allowed Class 8 Old Equity Interest will receive, in full and final satisfaction, settlement, release and discharge of, and in exchange for, such Allowed Class 8 Old Equity Interest, the greater of (a) a Pro Rata share of 10% of the IPO Underwriter Claims Recovery or (b) a Pro Rata share of Tranche B Litigation Trust Common Interests as more particularly set forth in Section 5.7(c) of the Plan; provided, however, that the Contributing Debtors and all parties in interest reserve the right to assert that the Interests of insider Refco Inc. shareholders should not be entitled to any distribution under the Plan.
2. Treatment of Claims of FXA
a. Unclassified Claims –FXA
(i) Administrative Claims. On the later of (a) the Effective Date, (b) the date on which its Administrative Claim becomes Allowed, or (c) the date on which its Allowed Administrative Claim becomes payable under any agreement relating thereto, each Holder of an Administrative Claim against FXA will receive, in full and final satisfaction, settlement, release and discharge of, and in exchange for, such Allowed Administrative Claim, Cash equal to the unpaid portion of such Administrative Claim in accordance with the allocation set forth in Section 5.16 of the Plan. Notwithstanding the foregoing, (i) any Administrative Claim based on a liability incurred by FXA in the ordinary course of business during the Chapter 11 Cases may be paid in the ordinary course of business in accordance with the terms and conditions of any agreement relating thereto and (ii) any Administrative Claim may be paid on such other terms as may be agreed on between the Holder of such Claim and FXA or the Plan Administrator. Subsection (ii) of the second sentence in this section will not be construed to avoid the
67 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. need for Bankruptcy Court approval of an Administrative Claim when such Bankruptcy Court approval is otherwise required by the Bankruptcy Code.
(ii) Priority Tax Claims. On the later of (a) the Effective Date or (b) the date on which its Priority Tax Claim becomes an Allowed Priority Tax Claim, in the sole discretion of FXA, each Holder of an Allowed Priority Tax Claim against FXA will receive, in full and final satisfaction, settlement, release and discharge of, and in exchange for, such Allowed Priority Tax Claim, (i) Cash equal to the unpaid portion of such Allowed Priority Tax Claim in accordance with the allocation set forth in Section 5.16 of the Plan, (ii) treatment in any other manner such that its Allowed Priority Tax Claims will not be impaired pursuant to section 1124 of the Bankruptcy Code, including payment in accordance with the provisions of section 1129(a)(9)(C) of the Bankruptcy Code, or (iii) such other treatment as to which FXA or the Plan Administrator and such Holder have agreed upon in writing. Clause (iii) of the preceding sentence will not be construed to avoid the need for Bankruptcy Court approval of a Priority Tax Claim when such Bankruptcy Court approval is otherwise required by the Bankruptcy Code.
b. Unimpaired Classes of Claims –FXA
(i) Class 1 - FXA Non-Tax Priority Claims. On (a) the Effective Date if such Non-Tax Priority Claim against FXA is an Allowed Non-Tax Priority Claim on the Effective Date or (b) the Quarterly Distribution Date following the date on which such Non-Tax Priority Claim becomes an Allowed Non-Tax Priority Claim, each Holder of an Allowed Class 1 Non-Tax Priority Claim against FXA will receive, in full and final satisfaction, release and discharge of, and in exchange for, such Allowed Class 1 Non-Tax Priority Claim, Cash equal to the unpaid portion of such Allowed Class 1 Non-Tax Priority Claim in accordance with the allocation set forth in Section 5.16 of the Plan.
(ii) Class 2 - FXA Other Secured Claims. On the Effective Date, each Holder of an Allowed Class 2 Other Secured Claim against FXA will receive, in full and final satisfaction, settlement, release and discharge of, and in exchange for, such Allowed Class 2 Other Secured Claim, one of the following Distributions: (i) the payment of such Holder's Allowed Class 2 Other Secured Claim in full, in Cash; (ii) the sale or disposition proceeds of the property securing such Allowed Class 2 Other Secured Claim to the extent of the lesser of the amount of such Allowed Other Secured Claim and the value of the interests in such property; (iii) the surrender to the Holder or Holders of such Allowed Class 2 Other Secured Claim of the property securing such Claim; or (iv) such other Distributions as will be necessary to satisfy the requirements of chapter 11 of the Bankruptcy Code.
(iii) Class 3 - FXA Secured Lender Claims. The Secured Lender Claims against FXA will be allowed to the extent provided in the Early Payment Order, the terms and conditions of which are incorporated by reference in the Plan, and such Allowed Secured Lender Claims against FXA, to the extent not paid in cash prior to the Effective Date or estimated at zero pursuant to the Early Payment Order, will be paid the full amount set forth in and required to be paid by the Early Payment Order. In addition, the Secured Lenders will have the benefit of the releases to the full extent contemplated by paragraph 8 of the Early Payment Order and Section 10.2 of the Plan.
c. Impaired Classes of Claims –FXA
(i) Class 4 - FXA Senior Subordinated Note Claims. On the Effective Date, based on the agreements and settlement set forth in the Plan, each Holder of an Allowed Class 4 FXA Senior Subordinated Note Claim will waive its share of the FXA General Unsecured Claims Distribution in return for the releases set forth in Sections 10.2(a) and (b) of the Plan.
(ii) Class 5(a) - FXA General Unsecured Claims. On the Effective Date, each Holder of an Allowed Class 5(a) FXA General Unsecured Claim will receive, in full and final satisfaction, settlement, release and discharge of, and in exchange for, such Allowed Class 5(a) FXA General Unsecured Claim and any and all Other Related Claims, its Pro Rata share of the FXA General Unsecured Claim Distribution.
(iii) Class 5(b) - Related Claims. On the Effective Date, pursuant to Section 6.4 of the Plan, each Allowed Class 5(b) Related Claim against FXA will be subordinated and will receive no Distribution from the FXA Distributive Assets unless and until such time as all Holders of Allowed FXA General Unsecured Claims have been paid in full; provided, however, that any hHolder of an RCM Related Claim that provides an RCM Related
68 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. Claim Subordination Form in accordance with Section 6.6(c) of the Plan will, on account of its RCM Securities Customer Claim or RCM FX/Unsecured Claim (if Allowed), receive its applicable share of the RCM Distribution Reserve as more fully set forth in Section 6.6(c) of the Plan.
(iv) Class 6 - FXA Convenience Claims. On the Effective Date, each Holder of an Allowed Class 6 FXA Convenience Claim will receive, in full and final satisfaction, settlement, release and discharge of, and in exchange for, such Allowed Class 6 FXA Convenience Claim, Cash equal to 40% of its Allowed Class 6 FXA Convenience Claim. Holders of Allowed Class 6 FXA Convenience Claims will not receive any interest in the Litigation Trust described in section 5.7 of the Plan.
(v) Class 7 - FXA Subordinated Claims. No Holder of a Class 7 Subordinated Claim against FXA will be entitled to, nor will it receive or retain, any property or interest in property on account of such Class 7 Subordinated Claim.
3. Treatment of Claims of RCM
The following section is a summary of the treatment of RCM Claims set forth in the RCM Settlement Agreement and applicable provisions of the Bankruptcy Code. This summary of the treatment of RCM Claims is qualified in its entirety by reference to the RCM Settlement Agreement. To the extent that the summary treatment below differs from the treatment afforded in the RCM Settlement Agreement, the terms and conditions set forth in the RCM Settlement Agreement will govern the treatment of RCM Claims.
a. Unclassified Claims –RCM
(i) Administrative Claims. As is more fully set forth in and governed by the RCM Settlement Agreement and applicable provisions of the Bankruptcy Code, on the later of (a) the Effective Date, (b) the date on which its Administrative Claim becomes Allowed, or (c) the date on which its Administrative Claim becomes payable under any agreement relating thereto, each Holder of an Allowed Administrative Claim will receive, in full and final satisfaction, settlement, release and discharge of, and in exchange for, such Administrative Claim, Cash equal to the unpaid portion of such Allowed Administrative Claim in accordance with the allocation set forth in Section 5.16 of the Plan. Notwithstanding the foregoing, (i) any Administrative Claim based on a liability incurred by RCM in the ordinary course of business during the Chapter 11 Cases may be paid in the ordinary course of business in accordance with the terms and conditions of any agreement relating thereto and (ii) any Administrative Claim may be paid on such other terms as may be agreed on between the Holder of such Claim and the RCM Trustee. Subsection (ii) of the second sentence in this section will not be construed to avoid the need for Bankruptcy Court approval of an Administrative Claim when such Bankruptcy Court approval is otherwise required by the Bankruptcy Code.
(ii) Priority Tax Claims. As is more fully set forth in and governed by the RCM Settlement Agreement and applicable provisions of the Bankruptcy Code, on the later of (a) the Effective Date or (b) the date on which its Priority Tax Claim becomes an Allowed Priority Tax Claim, in the sole discretion of the RCM Trustee, each Holder of an Allowed Priority Tax Claim against RCM will receive, in full and final satisfaction, settlement, release and discharge of, and in exchange for, such Allowed Priority Tax Claim, (i) Cash equal to the unpaid portion of such Allowed Priority Tax Claim in accordance with the allocation set forth in Section 5.16 of the Plan, (ii) treatment in any other manner such that its Allowed Priority Tax Claims will not be impaired pursuant to section 1124 of the Bankruptcy Code, including payment in accordance with the provisions of section 1129(a)(9)(C) of the Bankruptcy Code, or (iii) such other treatment as to which the RCM Trustee and such Holder have agreed upon in writing. Clause (iii) of the preceding sentence will not be construed to avoid the need for Bankruptcy Court approval of a Priority Tax Claim when such Bankruptcy Court approval is otherwise required by the Bankruptcy Code.
b. Unimpaired Classes of Claims –RCM
(i) Class 1 - RCM Non-Tax Priority Claims. As is more fully set forth in and governed by the RCM Settlement Agreement and applicable provisions of the Bankruptcy Code, on (a) the Effective Date if such Class 1 Non-Tax Priority Claim is an Allowed Class 1 Non-Tax Priority Claim against RCM on the Effective Date or (b) the Quarterly Distribution Date following the date on which such Class 1 Non-Tax Priority Claim becomes an Allowed Class 1 Non-Tax Priority Claim, each Holder of an Allowed Class 1 Non-Tax Priority Claim 69 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. against RCM will receive, in full and final satisfaction, release and discharge of, and in exchange for, such Allowed Class 1 Non-Tax Priority Claim, Cash equal to the unpaid portion of such Allowed Class 1 Non-Tax Priority Claim in accordance with the allocation set forth in Section 5.16 of the Plan.
(ii) Class 2 - RCM Other Secured Claims. As is more fully set forth in and governed by the RCM Settlement Agreement and applicable provisions of the Bankruptcy Code, on the Effective Date, each Holder of an Allowed Class 2 Other Secured Claim against RCM will receive, in full and final satisfaction, settlement, release and discharge of, and in exchange for, such Allowed Other Secured Claim, one of the following Distributions: (i) the payment of such Holder's Allowed Other Secured Claim in full, in Cash; (ii) the sale or disposition proceeds of the property securing such Allowed Other Secured Claim to the extent of the value of the interests in such property; (iii) the surrender to the Holder or Holders of such Allowed Other Secured Claim of the property securing such Claim; or (iv) such other Distributions as will be necessary to satisfy the requirements of chapter 11 of the Bankruptcy Code.
c. Impaired Classes of Claims –RCM
(i) Class 3 - RCM FX/Unsecured Claims. Subject to section 6.4 of the Plan, as is more fully set forth in and governed by the RCM Settlement Agreement, on the Effective Date, each Holder of an Allowed Class 3 RCM FX/Unsecured Claim will receive, in full and final satisfaction, settlement, release and discharge of, and in exchange for, such Allowed RCM FX/Unsecured Claim, its applicable share (as more fully set forth in the RCM Settlement Agreement) of (A) the RCM FX/Unsecured Claims Distribution and (B) unless the Holder elects not to assign its RCM Related Claim to the Litigation Trust and release its RCM Related Claims against any Refco Entity that is not a Debtor in these Chapter 11 cases, its applicable share of the RCM Cash Distribution in the sum of approximately $460 million (subject to adjustment as set forth in the Plan), which will include, unless such Holder affirmatively elects otherwisenot to receive RCM BAWAG Proceeds prior to the Vvoting Deadline, the RCM BAWAG Proceeds, plus 50% of the RGL FXCM Distribution, plus payment to RCM of any amounts available for the Contribution Debtors General Unsecured Distribution to the extent that such amounts are not paid to Holders of Allowed Contributing Debtors General Unsecured Claims as a result of recoveries of Holders of Allowed Contribution Debtors General Unsecured claims having reached 40%. See Sections VIII. C.6.c. –"RCM Distribution Reserve" and XIII.C.4. –"Ballot Election."; provided, however, that Claims against RCM held by any Debtor will receive no distribution consistent with the settlement among RCM and the Debtors contained in and implemented by the Plan. See Section VIII.A.10 –"Claims of Debtors Against RCM."
(ii) Class 4 - RCM Securities Customer Claims. Subject to section 6.4 of the Plan, as is more fully set forth in and governed by the RCM Settlement Agreement, on, or as soon as reasonably practicable after the Effective Date, each Holder of an Allowed Class 4 RCM Customer Claim will receive, in full and final satisfaction, settlement, release and discharge of, and in exchange for, such Allowed RCM Customer Claim, its applicable share (as more fully set forth in the RCM Settlement Agreement) of (A) the RCM Securities Customer Claims Distribution and (B) unless the Holder elects not to assign its RCM Related Claim to the Litigation Trust and release its RCM Related Claims against any Refco Entity that is not a Debtor in these Chapter 11 cases, its applicable share of the RCM Cash Distribution in the sum of approximately $460 million (subject to adjustment as set forth in the Plan), which will include, unless such Holder affirmatively elects otherwisenot to receive RCM BAWAG Proceeds prior to the Voting Deadline, the RCM BAWAG Proceeds., plus 50% of the RGL FXCM Distribution, plus payment to RCM of any amounts available for the Contribution Debtors General Unsecured Distribution to the extent that such amounts are not paid to Holders of Allowed Contributing Debtors General Unsecured Claims as a result of recoveries of Holders of Allowed Contribution Debtors General Unsecured claims having reached 40%. See Sections VIII.C.6.c. –"RCM Distribution Reserve" and XIII.C.4. –"Ballot Election."
(iii) Class 5 –RCM Leuthold Metals Claims. Subject to Section 6.4 of the Plan, as is more fully set forth in and governed by the RCM Settlement Agreement, on the Effective Date, each Holder of an Allowed Class 5 RCM Leuthold Metals Claim will receive, in full and final satisfaction, settlement, release and discharge of, and in exchange for, such Allowed Class 5 RCM Leuthold Metals Claim, its Pro Rata share of the RCM Leuthold Metals Claim Distribution.
(iv) Class 6 –RelatedRCM FX/Unsecured Convenience Claims. On the Effective Date, pursuant to Section 6.4 of the Plan, each Allowed Class 6each Holder of an Allowed Class 6 RCM FX/Unsecured Convenience Claim will receive, in full and final satisfaction, settlement, release and discharge of, and
70 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. in exchange for, such Allowed Class 6 RCM FX/Unsecured Convenience Claim, Cash equal to 60% of its Allowed Class 6 RCM FX/Unsecured Convenience Claim. Holders of Allowed Class 6 RCM FX/Unsecured Convenience Claims will not receive any interest in the Litigation Trust described in Section 5.7 of the Plan.
(v) Class 7 –RCM Securities Customer Convenience Claims. On the Effective Date, each Holder of an Allowed Class 7 RCM Securities Customer Convenience Claim will receive, in full and final satisfaction, settlement, release and discharge of, and in exchange for, such Allowed Class 7 RCM Securities Customer Convenience Claim, Cash equal to 100% of its Allowed Class 7 RCM Securities Customer Convenience Claim. Holders of Allowed Class 7 RCM Securities Customer Convenience Claims will not receive anyinterest in the Litigation Trust described in Section 5.7 of the Plan.
(vi) Class 8 –Related Claims. On the Effective Date, pursuant to Section 6.4 of the Plan, each Allowed Class 8 Other Related Claim against RCM will be subordinated and will receive no Distribution from RCM unless and until such time as all Holders of Allowed RCM FX/Unsecured Claims, Allowed RCM Securities Customer Claims and Allowed RCM Leuthold Metals Claims have been paid in full.
(v) (vii) Class 79 –RCM Subordinated Claims. No Holder of a Class 79 Subordinated Claim against RCM will be entitled to, nor will it receive or retain, any property or interest in property on account of such Class 79 RCM Subordinated Claim. On the Effective Date, all Class 79 RCM Subordinated Claims will be cancelled and extinguished.
4. Allowed Claims and Interests
Except as provided in the Early Payment Order, the Disbursing Agent, on behalf of the Reorganized Debtors, and the RCM Trustee, on behalf of RCM, will make Distributions only to Holders of Allowed Claims and Interests. A Holder of a Disputed Claim or Disputed Interest will receive a Distribution on account thereof only when and to the extent that its Disputed Claim or Disputed Interest becomes an Allowed Claim or Allowed Interest, as applicable.
5. Alternative Treatment
Any Holder of an Allowed Claim or Interest may receive, instead of the Distribution or treatment to which it is entitled under the Plan, any other less favorable Distribution or treatment to which it, the Plan Proponents and FXA (in respect of FXA), the Plan Administrator (in respect of the Contributing Debtors) or the RCM Trustee (in respect of RCM) may agree in writing.
6. Limitation on Recoveries
In the event that the sum of the distributions toeach Holder of an Allowed Claim in any Class of Claims is equal to orreceive Distributions in excess of one hundred percent (100%) of sucheach Holder's Allowed Claim in such Class, then, any amounts remaining to be distributed to such Holders in excess of such one hundred percent (100%) will be redistributed to Holders of Allowed Claims or Interests immediately junior to such Cclass as set forth in Article III of the Plan and will be distributed in accordance with the provisions of the documents, instruments and agreements governing such Cclaims or Iinterests, including, without limitation, the RCM Settlement Agreement and the Bankruptcy Code.
7. Special Provision Regarding Unimpaired Claims
Except as otherwise provided in the Plan, the RCM Settlement Agreement or a Final Order of the Bankruptcy Court (including, without limitation, the Early Payment Order), nothing will affect the Debtors', RCM's, the Reorganized Debtors' or Post-Confirmation RCM's rights and defenses, both legal and equitable, with respect to any Unimpaired Claims, including, but not limited to, all rights with respect to legal and equitable defenses to, setoffs against, or recoupments of, Unimpaired Claims.
71 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. 8. Classification and Treatment of Non-Debtor Subsidiary Claims and Interests
Claims of Non-Debtor Affiliates against the Debtors or RCM will be classified and treated as General Unsecured Claims against the applicable Debtor or RCM. Interests of Non-Debtor Affiliates will be treated in accordance with the provisions of the Plan, including, but not limited to, Sections 5.1 and 5.20 of the Plan.
9. Classification and Treatment of Intercompany Claims
Except as otherwise provided in the Plan, Intercompany Claims among the Debtors or RCM are deemed to be resolved and satisfied by the provisions of and in accordance with the Plan. Notwithstanding the compromises and settlements set forth in the Plan, each such Intercompany Claim will be deemed to be an unsatisfied liability of each of the Debtors and RCM immediately prior to their contribution of Contributed Claims to the Litigation Trust.
10. Claims of Debtors against RCM
Claims against RCM held by any other Debtor will receive no distribution consistent with the settlement among RCM and the Debtors contained in and implemented by the Plan.
11. Non-Debtor Affiliates' Intercompany Claims Against RCM
To the extent that a Non-Debtor Affiliate has an Intercompany Claim against RCM, such Claim will be resolved by (a) the netting of such Claim against any Claim held by the Contributing Debtors or RCM against such Non-Debtor Affiliate or (b) to the extent that a distribution is made by RCM on account of such Claim, the Contributing Debtors will reimburse RCM for such payments from any amounts the Contributing Debtors receive directly or indirectly from any Non-Debtor Affiliate.
B. Means for Implementation of the Plan
1. Merger of Subsidiaries Into Refco Inc.
On the Effective Date or as soon thereafter as practicable, (a) the members of the board of directors of each of the Affiliate Debtors, other than FXA, will be deemed to have resigned and (b) each of the Affiliate Debtors will be deemed to have merged with and into Refco Inc., with Refco Inc. as the surviving entity. Further, mergers in fact of each of the Affiliate Debtors, other than FXA, with and into Refco Inc. will occur on the Effective Date. As soon as reasonably practicable after the Effective Date, the Plan Administrator on behalf of the Reorganized Debtors will file all appropriate and required documentation with applicable state governmental agencies to reflect the occurrence of such mergers.
2. Continued Corporate Existence and Dissolution of Reorganized Debtors
(a) Refco Inc. and FXA will continue to exist as Reorganized Refco and Reorganized FXA, respectively, after the Effective Date pursuant to the certificate of incorporation, certificate of formation or other corporate governance documents as applicable, and by-laws, operating agreement or other corporate governance document in effect prior to the Effective Date, except to the extent that such corporate governance documents are amended under the Plan, for the limited purposes of liquidating all of the assets of the Estates, and making Distributions in accordance with the Plan.
(b) As soon as practicable after the Plan Administrator liquidates or otherwise disposes of assets of the Estates of the Reorganized Debtors and makes the final Distribution under the Plan, the Plan Administrator will, at the expense of the Estates of the Reorganized Debtors and in consultation with the Plan Committee, (i) provide for the retention and storage of the books, records and files that have been delivered to or created by the Plan Administrator until such time as all such books, records and files are no longer required to be retained under applicable law, and file a certificate informing the Bankruptcy Court of the location at which such books, records and files are being stored, (ii) file a certification stating that the Plan Administrator has liquidated or otherwise disposed of the assets of the Estates of the Reorganized Debtors and made a final Distribution under the Plan, (iii) file the necessary paperwork with the Office of the Secretary of State for the State of Delaware to effectuate the dissolution of the Reorganized Debtors in accordance with the laws of the State of Delaware, and (iv) resign as the sole
72 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. officer and the sole director or manager, as applicable, of the Reorganized Debtors. Upon the filing of the certificates described in sub-section (ii) of the preceding sentence, the Reorganized Debtors will be deemed dissolved for all purposes without the necessity for any other or further actions to be taken by or on behalf of the Reorganized Debtors or payments to be made in connection therewith.
(c) The RCM Trustee will have sole discretion with respect to determining the timing and manner of dissolution of Post-Confirmation RCM in accordance with the RCM Settlement Agreement and applicable provisions of the Bankruptcy Code.
3. Corporate Governance Documentation
The certificate of incorporation of Reorganized Refco will be restated to, among other things: (a) authorize issuance of one share of new common stock, $0.01 par value per share that will be held by the Plan Administrator; (b) provide, pursuant to section 1123(a)(6) of the Bankruptcy Code, for a provision prohibiting the issuance of non-voting equity securities; and (c) limit the activities of the Reorganized Refco to matters related to the implementation of the Plan and to matters reasonably incidental thereto. The corporate governance documents of Reorganized FXA will be restated to, among other things: (a) provide, pursuant to section 1123(a)(6) of the Bankruptcy Code, for a provision prohibiting the issuance of non-voting equity securities; and (b) limit the activities of the Reorganized FXA to matters related to the implementation of the Plan and to matters reasonably incidental thereto. The form of each restated corporate governance document is attached to the Plan as Exhibit C.
4. Directors, Managers and Officers: Effectuating Documents; Further Transactions
From and after the Effective Date, the Plan Administrator will serve as the sole officer and director or manager, as applicable, of each of the Reorganized Debtors, and the RCM Trustee will serve as the sole representative of RCM. The Plan Administrator on behalf of the Reorganized Debtors, and the RCM Trustee on behalf of RCM, will be authorized to execute, deliver, file or record such documents, instruments, releases and other agreements and to take such actions as may be necessary or appropriate to effectuate and further evidence the terms and conditions of the Plan.
5. The Plan Administrator
a. Appointment
From and after the Effective Date, a person or entity designated by the Joint Sub-Committee (inclusive of its ex-officio members, but exclusive of Holders of Senior Subordinated Note Claims and the Senior Subordinated Note Indenture Trustee) prior to the Confirmation Date, will serve as the Plan Administrator for both Reorganized Refco and Reorganized FXA pursuant to the Plan Administrator Agreement and the Plan, until the resignation or discharge and the appointment of a successor Plan Administrator in accordance with the Plan Administrator Agreement and the Plan.
b. Plan Administrator Agreement
Prior to or on the Effective Date, the Debtors will execute a Plan Administrator Agreement in substantially the same form as Exhibit E to the Plan with the Plan Administrator. The form of Plan Administrator Agreement will be approved pursuant to the Plan and Confirmation Order. The Plan Administrator Agreement will contain provisions permitting the amendment or modification of the Plan Administrator Agreement necessary to implement the provisions of the Plan. Among other things, nonmaterial modifications to the Plan Administrator Agreement by the Debtors prior to the Effective Date will be authorized.
c. Separate Administration of the RCM Estates
All references in the Plan and Disclosure Statement to the Plan Administrator refer exclusively to the administration of the Estates of the Debtors. The RCM Estate will be administered separately by the RCM Trustee and the RCM Trustee will wind down the RCM Estate in accordance with the terms and conditions set forth in the RCM Settlement Agreement and applicable provisions of the Bankruptcy Code.
73 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. d. Rights, Powers and Duties of the Reorganized Debtors and Plan Administrator
The Reorganized Debtors will retain and have all the rights, powers and duties necessary to carry out their responsibilities under the Plan. Such rights, powers and duties, which will be exercisable by the Plan Administrator on behalf of the Reorganized Debtors and the Estates pursuant to the Plan and the Plan Administrator Agreement, will include, among others:
(i) liquidating the Reorganized Debtors' assets;
(ii) investing the Cash of the Estates of the Reorganized Debtors, including, but not limited to the Cash held in the Reserves, in (A) direct obligations of the United States of America or obligations of any agency or instrumentality thereof that are backed by the full faith and credit of the United States of America, including funds consisting solely or predominantly of such securities, (B) money market deposit accounts, checking accounts, savings accounts or certificates of deposit, or other time deposit accounts that are issued by a commercial bank or savings institution organized under the laws of the United States of America or any state thereof, or (C) any other investments that may be permissible under section 345 of the Bankruptcy Code or as otherwise ordered by the Bankruptcy Court;
(iii) calculating and paying all Distributions in accordance with the terms of the Plan, the Plan Administrator Agreement, and other orders of the Bankruptcy Court by the Plan Administrator to Holders of Allowed Claims;
(iv) employing, supervising and compensating professionals retained to represent the interests of and serve on behalf of the Reorganized Debtors and their Estates;
(v) making and filing tax returns for any of the Debtors or the Reorganized Debtors;
(vi) objecting to Claims or Interests filed against the Estates of any of the Contributing Debtors, FXA or the Reorganized Debtors on any basis except to the extent such Claims or Interests have previously been allowed by a Final Order;
(vii) seeking estimation of contingent or unliquidated Claims against the Contributing Debtors, FXA or the Reorganized Debtors under section 502(c) of the Bankruptcy Code;
(viii) seeking determination of tax liability for the Contributing Debtors, FXA and the Reorganized Debtors under section 505 of the Bankruptcy Code;
(ix) closing the Chapter 11 Cases of the Reorganized Debtors;
(x) dissolving and winding up the Reorganized Debtors;
(xi) exercising all powers and rights and taking all actions contemplated by or provided for in the Plan Administrator Agreement; and
(xii) taking any and all other actions necessary or appropriate to implement or consummate the Plan and the provisions of the Plan Administrator Agreement.
e. Compensation of the Plan Administrator
The Plan Administrator will be compensated from the Wind-Down Reserve pursuant to the terms and conditions of the Plan Administrator Agreement. Any professionals retained by the Plan Administrator will be entitled to reasonable compensation for services rendered and reimbursement of expenses incurred from the Wind-Down Reserve. The payment of the reasonable fees and expenses of the Plan Administrator and its retained professionals will be made in the ordinary course of business and will not be subject to the approval of the Bankruptcy Court; provided, however, that any disputes related to such fees and expenses will be brought before the Bankruptcy Court.
74 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. f. Indemnification
The Reorganized Debtors will indemnify and hold harmless (i) the Plan Administrator (in its capacity as such and as officer, director or manager, as applicable, of the Reorganized Debtors), (ii) such individuals as may serve as officers, directors or managers, as applicable, of the Reorganized Debtors, if any, and (iii) the Administrative Professionals (collectively, the "Indemnified Parties"), from and against, and with respect to any and all liabilities, losses, damages, claims, costs and expenses, including, but not limited to attorneys' fees, arising out of or due to their actions or omissions, or consequences of such actions or omissions, other than acts or omissions resulting from such Indemnified Party's willful misconduct or gross negligence, with respect to the Reorganized Debtors or the implementation or administration of the Plan or Plan Administration Agreement. To the extent an Indemnified Party asserts a claim for indemnification as provided above, the legal fees and related costs incurred by counsel to the Indemnified Party in the defense of such claims giving rise to the asserted right of indemnification will be advanced to such Indemnified Party (and such Indemnified Party undertakes to repay such amounts if it ultimately is determined that such Indemnified Party is not entitled to be indemnified therefor) out of the Wind-Down Reserve or any insurance purchased using the Wind-Down Reserve. The indemnification provisions of the Plan Administrator Agreement will remain available to and be binding upon any former Plan Administrator or the estate of any decedent Plan Administrator and will survive the termination of the Plan Administrator Agreement.
g. Insurance
The Plan Administrator will be authorized to obtain and pay for out of the Wind-Down Reserve all reasonably necessary insurance coverage for itself, its agents, representatives, employees or independent contractors, and the Reorganized Debtors, including, but not limited to, coverage with respect to (i) any property that is or may in the future become the property of the Reorganized Debtors or the Estates and (ii) the liabilities, duties and obligations of the Plan Administrator and its agents, representatives, employees or independent contractors under the Plan Administrator Agreement (in the form of an errors and omissions policy or otherwise), the latter of which insurance coverage may, at the sole option of the Plan Administrator, remain in effect for a reasonable period (not to exceed seven years) after the termination of the Plan Administrator Agreement.
h. Authority to Object to Claims and Interests and to Settle Disputed Claims
From and after the Effective Date, the Plan Administrator, on behalf of the Reorganized Debtors, will be authorized, with respect to those Claims or Interests which are not Allowed under the Plan or by Court order, after consultation with the Plan Committee, (i) to object to any Claims or Interests filed against any of the Debtors' Estates and (ii) pursuant to Bankruptcy Rule 9019(b) and section 105(a) of the Bankruptcy Code, to compromise and settle Disputed Claims against any of the Contributing Debtors' or FXA's Estates, in accordance with the following procedures, which will constitute sufficient notice in accordance with the Bankruptcy Code and the Bankruptcy Rules for compromises and settlements of claims:
(i) If the proposed face amount at which the Disputed Claim is to be allowed is less than or equal to $500,000, the Plan Administrator will be authorized and empowered to settle the Disputed Claim and execute necessary documents, including a stipulation of settlement or release, in its sole discretion and without notice to any party or Bankruptcy Court approval and the Plan Administrator will have no liability to any party for the reasonableness of such settlement, except to the extent such settlement is determined by a Final Order to have been the product of the Plan Administrator's gross negligence or willful misconduct.
(ii) If the proposed face amount at which the Disputed Claim is to be allowed is greater than $500,000, but less than or equal to $10 million, the Plan Administrator, on behalf of the Reorganized Debtors, will be authorized and empowered to settle such Disputed Claim and execute necessary documents, including a stipulation of settlement or release, only upon receipt of Plan Committee orapproval or, if such approval of the Plan Committee is not forthcoming, upon Bankruptcy Court approval of such settlement.
(iii) If the proposed face amount at which the Disputed Claim is to be allowed is greater than $10 million, the Plan Administrator will be authorized and empowered to settle the Disputed Claim and execute necessary documents, including a stipulation of settlement or release, only upon receipt of Plan Committee and Bankruptcy Court approval of such settlement.
75 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. Other than as set forth in Section 5.21 of the Plan, parties in interest (other than the Reorganized Debtors and Plan Administrator, whose objection deadlines are set forth in Section 8.1 of the Plan) will have ninety (90) days following the Effective Date to object to any Claims or Interests filed against any of the Debtors' Estates to the extent that under the Bankruptcy Code such parties are permitted (to the extent not previously allowed pursuant to the Plan or by order of the Bankruptcy Court), and have standing, to assert such objections. Notwithstanding anything to the contrary in this section, Disputed Claims may not be resolved absent Bankruptcy Court approval under the procedures set forth in this section until the date that is on or after ninety (90) days following the Effective Date.
6. Administration of Post-Confirmation RCM
a. Potential Conversion of RCM
The Plan provides that on or prior to the Effective Date, the RCM Chapter 11 Case will be converted to a case under subchapter III of chapter 7 of the Bankruptcy Code unless the Debtors and the RCM Trustee agree that the RCM Estate should be administered under chapter 11 of the Bankruptcy Code. The decision in respect of conversion of the RCM Chapter 11 Case is a complex one and has not yet been made by the RCM Trustee or the Debtors. Issues relevant to the determination include, among others, effects on the ability of the RCM Trustee to administer the RCM portfolio, effects on the timing of distributions, effects on potential recovery of avoidable transfers and effects on any continuing litigation over the ownership of the RCM Assets in Place. Regardless of the chapter under which RCM ultimately is administered, the underlying distribution mechanics and economic terms of the Plan are intended to remain unchanged, and the RCM Trustee and the Debtors will choose the chapter they believe most likely to facilitate distributions in accordance with the Plan and the RCM Settlement Agreement. All results of elections on the ballots applicable to the Plan are intended to apply with full force and effect regardless of the chapter under which RCM ultimately is administered.
b. a. Rights, Powers and Duties of the RCM Trustee
The RCM Trustee will retain and have all the rights, powers and duties necessary to carry out his responsibilities under the Plan, the RCM Settlement Agreement or applicable law. Such rights, powers and duties, which will be exercisable by the RCM Trustee on behalf of Post-Confirmation RCM and the RCM Estate pursuant to the Plan and the RCM Settlement Agreement, will include, among others:
(i) liquidating Post-Confirmation RCM's assets;
(ii) investing Post-Confirmation RCM's Cash, including, but not limited to the Cash held in any reserves, in (A) direct obligations of the United States of America or obligations of any agency or instrumentality thereof that are backed by the full faith and credit of the United States of America, including funds consisting solely or predominantly of such securities, (B) money market deposit accounts, checking accounts, savings accounts or certificates of deposit, or other time deposit accounts that are issued by a commercial bank or savings institution organized under the laws of the United States of America or any state thereof, or (C) any other investments that may be permissible under section 345 of the Bankruptcy Code or as otherwise ordered by the Bankruptcy Court;
(iii) calculating and paying all Distributions to be made under the Plan, the RCM Settlement Agreement and other orders of the Bankruptcy Court to Holders of Allowed Claims against RCM;
(iv) employing, supervising and compensating professionals retained to represent the interests of and serve on behalf of the Post-Confirmation RCM including professionals engaged for the valuation, sale or other disposition of Post-Confirmation RCM's assets or proceeds thereof;
(v) making and filing tax returns, if any are required, for Post-Confirmation RCM;
(vi) objecting to Claims or Interests filed against RCM or Post-Confirmation RCM on any basis except to the extent such Claims or Interests previously have been Allowed;
(vii) seeking estimation of contingent or unliquidated Claims against RCM or Post-Confirmation RCM under section 502(c) of the Bankruptcy Code;
76 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. (viii) seeking determination of tax liability, if any, for RCM and Post-Confirmation RCM under section 505 of the Bankruptcy Code;
(ix) closing the RCM Chapter 11 Case or chapter 7 case;
(x) dissolving and winding up Post-Confirmation RCM;
(xi) exercising all powers and rights, and taking all actions, contemplated by or provided for in the RCM Settlement Agreement or applicable law; and
(xii) taking any and all other actions necessary or appropriate to implement or consummate the Plan and the provisions of the RCM Settlement Agreement or to administer the RCM Estate.
c. b. Authority to Object to Claims and Interests and to Settle Disputed Claims
From and after the Effective Date, the RCM Trustee, on behalf of Post-Confirmation RCM, will be authorized, with respect to those Claims or Interests which are not Allowed under the Plan, the RCM Settlement Agreement or by Court order (i) to object to any Claims or Interests filed against the RCM Estate and (ii) pursuant to Bankruptcy Rule 9019(b) and section 105(a) of the Bankruptcy Code, to compromise and settle any such Disputed Claims asserted against RCM.
7. Litigation Trust
a. Establishment of the Litigation Trust
The Litigation Trust will be established for pursuit of the Contributed Claims and will become effective on the Effective Date in accordance with the terms and conditions set forth in more detail in the Litigation Trust Agreement attached to the Plan as Exhibit F. The Litigation Trustee will be selected by the Joint Sub-Committee (inclusive of its ex-officio members, but exclusive of Holders of Senior Subordinated Note Claims and the Senior Subordinated Note Indenture Trustee), identified by the Exhibit Filing Deadline and approved by the Bankruptcy Court at the Confirmation Hearing.
b. Transfer of Assets
The transfer of the Contributed Claims to the Litigation Trust will be made for the ratable benefit of the Litigation Trust Beneficiaries as set forth in the Plan. On the Effective Date, the Contributed Claims held by the Chapter 11 Debtors on behalf of the Litigation Trust Beneficiaries will be transferred to the Litigation Trust in exchange for Litigation Trust Interests for the ratable benefit of the Litigation Trust Beneficiaries. Upon transfer of the Contributed Claims to the Litigation Trust, the Chapter 11 Debtors and the Plan Administrator will have no interest in or with respect to the Contributed Claims or the Litigation Trust.
c. Structure of the Litigation Trust and Trust Distributions
The Litigation Trust will be structured in a manner that provides for a senior Tranche A and a junior Tranche B. No Distributions of Litigation Trust Interests will be made in respect of Tranche B until Tranche A has been fully and indefeasibly paid; provided that Holders of Allowed Old Equity Interests may receive recoveries directly from 10% of the IPO Underwriter Claims Recovery in Tranche A as more fully set forth in Section 5.7(c)(iii) of the Plan. Tranche A will have a fluctuating balance equal to the amount necessary to cause Holders of Allowed RCM Implied Deficiency Claims, RCM FX/Unsecured Claims, Contributing Debtors General Unsecured Claims and FXA General Unsecured Claims to be paid in full, plus simple interest at the rate of 10% on the unpaid balance of such Claims from the Petition Date through the date of final payment. All Contributed Claims Recoveries, whether applicable to Tranche A or Tranche B, will be distributed Pro Rata according to the beneficial interests in Tranche A and Tranche B. The Litigation Trustee (in consultation with the Litigation Trust Committee) may establish further separate sub-Tranches, as necessary, in respect of the beneficial interests of the Litigation Trust Beneficiaries in Tranche A and Tranche B. To the extent deemed "securities," the Litigation Trust Interests (or any redistribution of such interests or related interests by the RCM Trustee to the Holders of Allowed RCM Securities Customer Claims and Allowed RCM FX/Unsecured Claims) will be exempt from registration pursuant to section 1145 of the Bankruptcy Code.
77 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. (i) Tranche A Litigation Trust Interests. Beneficiaries of Tranche A Litigation Trust Interests will be the RCM Estate (for distribution in accordance with the RCM Settlement Agreement), Holders of Allowed Contributing Debtors General Unsecured Claims (which for the sake of clarity, will not include the Secured Lenders, the Senior Subordinated Note Indenture Trustee or the Holders of Senior Subordinated Notes) and Holders of Allowed FXA General Unsecured Claims (which for the sake of clarity, will not include Holders of FXA Convenience Class Claims, RCM Securities Customer Convenience Claims or RCM FX/General Unsecured Convenience Claims), and such beneficiaries will share the Tranche A Litigation Trust Interests Pro Rata based on (i) in the case of the RCM Estate, the aggregate amount of Allowed RCM Implied Deficiency Claims and the Allowed RCM FX/Unsecured Claims, and (ii) in the case of Holders of Contributing Debtors General Unsecured Claims and the Holders of FXA General Unsecured Claims, the amount of each such Holder's Allowed Claim.
(ii) Tranche B Litigation Trust Preferred Interests. Beneficiaries of Tranche B Litigation Trust Preferred Interests will be the Holders of Allowed Contributing Debtors Class 7 Subordinated Claims who will receive their Pro Rata share of the Contributed Claims Recoveries after the beneficiaries of the Tranche A Litigation Trust Interests have been paid in full; provided, however, that the Debtors, the RCM Trustee and all parties in interest reserve the right to assert that any creditor whose claim is equitably subordinated pursuant to section 510(c) of the Bankruptcy Code, should not be entitled to any distribution under the Plan.
(iii) Tranche B Litigation Trust Common Interests. Beneficiaries of Tranche B Litigation Trust Common Interests will be the Holders of Old Equity Interests who will receive their Pro Rata share of the Contributed Claims Recoveries after the beneficiaries of the Tranche B Litigation Trust Preferred Interests have been paid in full; provided, however, that to the extent the value of recoveries from 10% of the IPO Underwriter Claim Recovery would exceed the value obtained from Tranche B Litigation Trust Common Interests, the Holders of Old Equity Interests will receive a Pro Rata share of 10% of the IPO Underwriter Claims Recovery.
d. Management of the Litigation Trust
The Litigation Trust will be managed and operated by the Litigation Trustee. A committee composed of VR and four Holders of Claims against RCM that do not assert Claims against any Contributing Debtor based on guarantees or other direct contractual undertakings will have certain approval rights on key issues relating to the operation and management of the Litigation Trust until Tranche A has been fully and indefeasibly paid. The Four members (other than VR) will be selected by the Joint Sub-Committee (inclusive of its ex-officio members, but exclusive of Holders of Senior Subordinated Note Claims and the Senior Subordinated Note Indenture Trustee). Tranche B beneficiaries will have no such approval rights in respect of management and operation of the Litigation Trust, unless and until Tranche A has been fully and indefeasibly paid. Once Tranche A has been paid in full, a committee of the five largest Tranche B beneficiaries will have like approval rights.
e. Funding the Litigation Trust
The Litigation Trust may be funded (i) from a loan that is non-recourse to RCM, the Debtors or the Estates, secured only by the proceeds of the Contributed Claims from one or more lenders who agree to make such loan on terms acceptable to the RCM Trustee, the Committees and the Super Majority (as defined in the RCM Settlement Agreement) or (ii) with up to $25 million drawn from the Contributing Debtors Distributive Assets, deducted on a Pro Rata basis from the Distributions that otherwise would be made to (x) Holders of Contributing Debtors General Unsecured Claims in accordance with the calculation of the Contributing Debtors General Unsecured Distribution and (y) to the RCM Estate in accordance with the calculation of the RCM Intercompany Claims Distribution in Section 3.1 of the Plan. Any failure or inability of the Litigation Trust to obtain funding will not affect the consummation of the Plan.
f. Distributions by the Litigation Trust
Any Contributed Claims Recoveries will first be used to repay the Litigation Trust funding described above and then will be transferred to the Disbursing Agent or the RCM Trustee, as applicable, for Distribution to the Litigation Trust Beneficiaries as set forth in the Plan. In addition, to the extent that the Reorganized Debtors or Post-Confirmation RCM become liable for the payment of any Claims arising under section 502(h) of the Bankruptcy Code by reason of the Litigation Trustee's prosecution of the Litigation Claims, the Litigation Trustee will be responsible for making Distributions on account of such Claims from the assets of the Litigation Trust. 78 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. g. Cash-Out Option
As set forth more fully in the Cash-Out Option Agreement, if any, the form of which would be attached as an exhibit to the Litigation Trust Agreement, one or more third parties may offer, to Purchase Litigation Trust Interests from the Litigation Trust Beneficiaries.
h. Duration of Trust
The Litigation Trust will have an initial term of five (5) years, provided that if reasonably necessary to realize maximum value with respect to the assets in the Litigation Trust and following Bankruptcy Court approval, the term of the Litigation Trust may be extended for one or more one-year terms. The Litigation Trust may be terminated earlier than its scheduled termination if (i) the Bankruptcy Court has entered a Final Order closing all of or the last of the Chapter 11 Cases pursuant to section 350(a) of the Bankruptcy Code and the RCM Chapter 11 Case to the extent the RCM Chapter 11 Case was converted to chapter 7; and (ii) the Litigation Trustee has administered all assets of the Litigation Trust and performed all other duties required by the Plan and the Litigation Trust Agreement.
i. Certain Federal Income Tax Matters
For federal income tax purposes, the Debtors, RCM, the Litigation Trustee and the Effective Beneficiaries will treat the transfer of assets to the Litigation Trust and issuance of Litigation Trust Interests as a transfer by the Debtors and RCM of the assets to the Effective Beneficiaries, followed by a transfer of such assets by the Effective Beneficiaries to the Litigation Trust in exchange for direct or indirect beneficial interests in the Litigation Trust. For federal income tax purposes, the Effective Beneficiaries will be treated as the grantors, deemed owners and beneficiaries of the Litigation Trust.
The Litigation Trustee, the Debtors and RCM will determine the fair market value as of the Effective Date of all assets transferred to the Litigation Trust, and such determined fair market value will be used by the Debtors, RCM, the Litigation Trust, the Litigation Trustee and the Effective Beneficiaries for all federal income tax purposes.
8. Private Actions Trust
On the Effective Date, the Private Actions Trust will be established on the terms set forth in the Private Actions Trust Agreement attached to the Plan as Exhibit G. Under the Plan Support Agreement (if approved), each RCM Creditor Party will, upon tender to it of a certificate or certificates evidencing its interest or interests in the Private Actions Trust, contribute its private Refco-related causes of action to the Private Actions Trust.
9. No Revesting of Assets
Other than as set forth in the Plan, the remaining property of the respective Estates, other than the Contributed Claims, which will be transferred to and vest in the Litigation Trust, will not revest in the Chapter 11 Debtors on or following the Confirmation Date or Effective Date, but will remain property of the respective Estates and continue to be subject to the jurisdiction of the Bankruptcy Court until distributed to Holders of Allowed Claims in accordance with the provisions of the Plan, the Confirmation Order and the RCM Settlement Agreement. From and after the Effective Date, all such property will be distributed in accordance with the provisions of the Plan, the Confirmation Order and the RCM Settlement Agreement, without further order of the Court (except as specifically required). For the avoidance of doubt, the Chapter 11 Debtors' insurance policies will remain property of their respective Estates, and will not be subject to the rejection provisions of Section 7.1 of the Plan.
10. Preservation of Rights of Action; Settlement of Litigation
a. Preservation of Rights of Action
Except as otherwise provided in the Plan, the Confirmation Order, the RCM Settlement Agreement or in any other Plan Document, in accordance with section 1123(b) of the Bankruptcy Code, the Reorganized Debtors' and RCM's rights in the Litigation Claims will be retained and transferred to the Litigation Trust on the Effective Date; provided, however, the RCM Estate will retain all of its causes of action (excluding Released Claims) arising under
79 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. sections 547, 550 and 749 of the Bankruptcy Code and will pursue such causes of action in the sole discretion of the RCM Trustee.
b. Settlement of Litigation Claims Prior to the Effective Date
At any time prior to the Effective Date, the Debtors (and the RCM Trustee on behalf of RCM with respect to Litigation Claims of RCM) may settle any or all of the Litigation Claims with Bankruptcy Court approval pursuant to Bankruptcy Rule 9019, following notice to parties in interest and a hearing. Any net proceeds obtained in respect of Litigation Claims prior to the Effective Date will be contributed to the Litigation Trust.
11. The Committees and the Plan Committee
a. Dissolution of Committees
The Committees will continue in existence until the Effective Date to exercise those powers and perform those duties specified in section 1103 of the Bankruptcy Code and such other duties as they may have been assigned by the Bankruptcy Court prior to the Effective Date. On the Effective Date, the Committees will be dissolved and their members will be deemed released of all their duties, responsibilities and obligations in connection with the Chapter 11 Cases and the Plan and its implementation, and the retention or employment of the Committees' attorneys, accountants, professionals and other agents will terminate, except with respect to (i) all Professional Fees, (ii) any appeals of the Confirmation Order and (iii) the continuation and completion of any litigation to which the Creditors' Committee or the Additional Committee, as applicable, is a party as of the Effective Date. All expenses of members of the Committees and the fees and expenses of the Committees' professionals through the Effective Date will be paid in accordance with any applicable orders of the Bankruptcy Court. Counsel to the Committees will be entitled to reasonable compensation and reimbursement of actual, necessary expenses for post-Effective Date activities authorized under the Plan without further Bankruptcy Court approval upon the submission of invoices to the Reorganized Debtors. Following the Effective Date, subject to actual conflicts of interest, none of the Committees' professionals will be precluded from representing any entity acting for any successor fiduciaries or other entities created by the Plan, including the Plan Administrator, Plan Committee, Litigation Trustee or any of the Reorganized Debtors.
b. Creation of Plan Committee; Procedures
(i) Unless there are no parties in interest willing to serve, on the Effective Date, the Plan Committee will be formed and constituted. The Plan Committee will be of a size determined by and composed of members chosen by the Joint Sub-Committee (exclusive of the Senior Subordinated Note Indenture Trustee and any Holder of a Senior Subordinated Note Claim); provided, however, that the Plan Committee will include VR, Leuthold and Cargill and will include the Senior Subordinated Note Indenture Trustee until such time as all payments in respect of the Senior Subordinated Note Holder Distribution have been made. All proposed members of the Plan Committee will be disclosed to the Bankruptcy Court on or before the Confirmation Hearing. Membership on the Plan Committee will be on an institutional and not on an individual basis. In the event that a member of the Plan Committee resigns from its position on the Plan Committee, the remaining members will have the right to designate its successor on the Plan Committee as set forth in the Plan Administrator Agreement. The Plan Committee will, absent further order of the Bankruptcy Court, have not fewer than three members.
(ii) In the event that there are fewer than three members of the Plan Committee for a period of sixty (60) consecutive days, then the Plan Administrator may, during such vacancy and thereafter, in its sole discretion, ignore any reference in the Plan, the Plan Administrator Agreement or the Confirmation Order to the Plan Committee, and all references to the Plan Committee's ongoing duties and rights in the Plan, the Plan Administrator Agreement and the Confirmation Order will be null and void.
c. Standing of Plan Committee
The Plan Committee will have independent standing to appear and be heard in the Bankruptcy Court as to any matter relating to the Plan, the Plan Administrator, the Estates or the Reorganized Debtors, including any matter as to which the Bankruptcy Court has retained jurisdiction pursuant to Article XI of the Plan.
80 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. d. Function and Duration; Compensation and Expenses
The Plan Committee will have ultimate supervisory authority over the Plan Administrator (but will have no authority over the RCM Trustee, the RCM Estate or the Litigation Trustee, in such capacity). The Plan Administrator will report to the Plan Committee and the Plan Committee will have the power to remove the Plan Administrator with or without cause. The Plan Committee (i) will be responsible for (A) instructing and supervising the Reorganized Debtors and the Plan Administrator with respect to their responsibilities under the Plan and the Plan Administrator Agreement, (B) reviewing and approving the prosecution of adversary and other proceedings, if any, including approving proposed settlements thereof, (C) reviewing and approving objections to and proposed settlements of Disputed Claims against the Contributing Debtors, FXA or the Reorganized Debtors, (D) performing such other duties that may be necessary and proper to assist the Plan Administrator and its retained professionals, and (ii) will remain in existence until such time as the final Distributions under the Plan have been made by the Disbursing Agent, on behalf of the Reorganized Debtors. The members of the Plan Committee will serve without compensation for their performance of services as members of the Plan Committee, except that they will be entitled to reimbursement of reasonable expenses by the Reorganized Debtors to be paid from the Wind-Down Reserve. The Plan Committee may retain counsel or other professionals who will be entitled to reasonable compensation and reimbursement of actual, necessary expenses to be paid from the Wind-Down Reserve upon the submission of invoices to the Reorganized Debtors; provided, however, that any disputes related to such fees and expenses may be brought before the Bankruptcy Court.
e. Liability; Indemnification
Neither the Plan Committee, nor any of its members or designees, nor any duly designated agent or representative of the Plan Committee, or their respective employees, will be liable for the act or omission of any other member, designee, agent or representative of the Plan Committee, nor will any member be liable for any act or omission taken or omitted to be taken in its capacity as a member of the Plan Committee, other than acts or omissions resulting from such member's willful misconduct or gross negligence. The Reorganized Debtors will indemnify and hold harmless the Plan Committee and its members and designees, and any duly designated agent or representative thereof (in their capacity as such), from and against and with respect to any and all liabilities, losses, damages, claims, costs and expenses, including, but not limited to, attorneys' fees arising out of or due to their actions or omissions, or consequences of such actions or omissions, other than as a result of their willful misconduct or gross negligence, with respect to the Reorganized Debtors or the implementation or administration of the Plan. To the extent the Reorganized Debtors indemnify and holds harmless the Plan Committee and its members and designees, or any duly designated agent or representative thereof (in their capacity as such), as provided above, the legal fees and related costs incurred by counsel to the Plan Committee in monitoring and participating in the defense of such claims giving rise to the right of indemnification will be paid out of the Wind-Down Reserve or any applicable insurance.
12. Fee Committee
From and after the Confirmation Date, the members of the Fee Committee (including the RCM Trustee) and the Fee Committee's professionals will continue to serve and be authorized to continue, in a manner consistent with practice before the Confirmation Date, to review, analyze and prepare advisory reports with respect to applications for the payment of fees and the reimbursement of expenses of professionals retained in the Chapter 11 Cases pursuant to an order of the Bankruptcy Court during the period up to and including the Confirmation Date, including, without limitation, final fee applications in accordance with sections 328, 330, 331 and 503 of the Bankruptcy Code. From and after the Confirmation Date, the Reorganized Debtors will pay the reasonable fees and expenses of the members of the Fee Committee to satisfy their duties and responsibilities. Notwithstanding the foregoing, unless otherwise provided by the Bankruptcy Court, the Fee Committee will be dissolved and the members thereof and the professionals retained by the Fee Committee will be released and discharged from their respective obligations upon the earlier to occur of (i) the date which is six (6) months after the Confirmation Date and (ii) resolution of all duties of the Fee Committee set forth in Section 5.12 of the Plan.
13. Cancellation of Securities, Instruments and Agreements Evidencing Claims and Interests
With the exception of the common shares of Refco Inc. and the LLC Interests of FXA and RCM, except as otherwise provided in the Plan and in any other Plan Documents, on the Effective Date and concurrently with the applicable Distributions made pursuant to Article VI of the Plan, the promissory notes, share certificates (including
81 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. treasury stock), other instruments evidencing any Claims or Interests, and all options, warrants, calls, rights, puts, awards, commitments or any other agreements of any character to acquire such Interests will be deemed canceled and of no further force and effect, without any further act or action under any applicable agreement, law, regulation, order or rule, and the obligations of the Chapter 11 Debtors under the notes, share certificates and other agreements and instruments governing such Claims and Interests will be discharged; provided, however, that the Senior Subordinated Note Indenture will continue in effect solely for the purposes of allowing the Senior Note Indenture Trustee to enforce the indemnity provisions of the Senior Subordinated Note Indenture on account of the Senior Subordinated Note Indenture Trustee's service on the Plan Committee, to make the Distributions to be made on account of Senior Subordinated Note Claims under the Plan and, to the extent necessary, enforce the Senior Subordinated Note Indenture Trustee Charging Lien, after which point the Senior Subordinated Note Indenture will be cancelled and discharged. The Holders of or parties to such canceled notes, share certificates and other agreements and instruments will have no rights arising from or relating to such notes, share certificates and other agreements and instruments, or the cancellation thereof, except the rights provided pursuant to the Plan.
14. Sources of Cash for Plan Distributions
Except as otherwise provided in the Plan or the Confirmation Order, all Cash necessary for the Reorganized Debtors and the Plan Administrator to make payments pursuant to the Plan will be obtained from the Reorganized Debtors' Cash balances and the liquidation of the Reorganized Debtors' and the Reorganized Debtors' remaining non-Cash assets, if any, including the Contributing Debtors BAWAG Proceeds. Cash payments to be made pursuant to the Plan to Holders of Allowed Claims and to the Senior Subordinated Note Indenture Trustee for the benefit of the Holders of Senior Subordinates Note Claims will be made by the Reorganized Debtors (or any successor thereto) or, if the Disbursing Agent is an entity other than the Reorganized Debtors, the Disbursing Agent, which may be the Senior Subordinated Note Indenture Trustee. Distributions to be made on behalf of the RCM Estate pursuant to the Plan or the RCM Settlement Agreement will be made by the RCM Trustee in accordance with the Plan and the RCM Settlement Agreement and applicable law.
15. Risk Sharing in Respect of Cargill Administrative Claim
In the event that Cargill receives a Cargill Administrative Claim, the amount of such Claim will be borne by RCM and the Contributing Debtors as follows: (i) to the extent the allowance of the Cargill Administrative Claim reduces the Allowed amount of any RCM FX/Unsecured Claim held by Cargill, RCM will bear for the benefit of the Contributing Debtors a portion of the Cargill Administrative Claim equal to forty percent (40%) of the amount of the RCM Difference; (ii) the Contributing Debtors will next pay an amount up to the remainder of the Cargill Administrative Claim Amount; provided, however, that such payment pursuant to this subsection (ii) will be capped at the amount that would cause recoveries of Holders of Allowed Contributing Debtors General Unsecured Claims from Contributing Debtors Distributive Assets plus the Contributing Debtors portion of the RGL FXCM Distribution to fall below 30% of the face amount of such Allowed Contributing Debtors General Unsecured Claims; and (iii) if not yet paid in full, the remainder of the Cargill Administrative Claim will be borne by the Contributing Debtors and RCM equally. For the avoidance of doubt, amounts to be borne by the Contributing Debtors will be deducted from the amounts available for the Contributing Debtors General Unsecured Distribution and amounts to be borne by RCM will be deducted from the amounts available for the RCM Cash Distribution.
16. Allocation of Administrative Claims, Priority Tax Claims and Non-Tax Priority Claims
Payment of Allowed Priority Tax Claims and Allowed Non-Tax Priority Claims of the Contributing Debtors and of the RCM Estate and Allowed Administrative Claims of the Contributing Debtors and of the RCM Estate, other than amounts in respect of the RCM Advance, accrued through the Effective Date (excluding any amounts paid as of August 31, 2006) will be allocated such that RCM will first provide up to $60 million, the Contributing Debtors will next provide up to $120 million and to the extent that such Claims exceed $180 million in the aggregate, RCM and the Contributing Debtors will bear the cost of such excess (the "Excess Priority Claims") equally. Notwithstanding the preceding sentence, the Contributing Debtors may fund the payment of any Pre-Conversion Administrative Claim Amounts if and to the extent that the RCM Trustee and the Contributing Debtors determine such funding necessary to facilitate Distributions in respect of such amounts on the Effective Date; provided, however, that any amounts so paid by the Contributing Debtors will be deducted from the RCM Cash Distribution in a manner that causes RCM to ultimately bear the cost of the Pre-Conversion Administrative Claim Amounts. FXA will be responsible for all of its Allowed Administrative Claims, Allowed Priority Tax Claims and Allowed Non-Tax Priority Claims; provided, 82 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. however, that professional services (other than those related to FXA's claims resolution process and issues unique to FXA after the initial date of the filing of the Plan) and overhead allocable to FXA in the period between the Plan Filing Date and the Plan Effective Date will be borne by RCM and the Contributing Debtors as set forth in the preceding sentence. Only Allowed Administrative Claims accrued from the Petition Date through the Plan Effective Date that were paid or are paid after August 31, 2006 will be counted toward the sharing allocation of the preceding two sentences; provided that the Contributing Debtors will alone bear the cost of repaying the RCM Advance. To the extent RCM is responsible for bearing amounts in respect of Excess Priority Claims, payment of such amounts will be made from Cash otherwise available for the RCM Cash Distribution. Allowed Administrative Claims incurred by the Contributing Debtors after the Effective Date will be borne by the Contributing Debtors out of the Cash or value that would otherwise be paid to Holders of Allowed Contributing Debtors General Unsecured Claims. Allowed Administrative Claims incurred by RCM after the Effective Date will be borne by RCM from the RCM Wind-Down Reserve and, to the extent the RCM Wind-Down Reserve is not sufficient to pay such Allowed Administrative Claims, such Claims will be paid directly by RCM out of the Cash or value that would otherwise be paid to Holders of Allowed Securities Customer Claims and RCM FX/Unsecured Claims as more particularly set forth in the RCM Settlement Agreement. Allowed Administrative Claims incurred by FXA after the Effective Date will be borne by the FXA out of the Cash or value that would otherwise be paid to Holders of Allowed FXA General Unsecured Claims. All costs and expenses of administering the Litigation Trust described in Section 5.7 of the Plan will be separately funded by the Litigation Trust and will not be included in the calculation of the allocations of Administrative Claims, Priority Tax Claims and Non-Tax Priority Claims above.
17. Additional RCM Claim
If, at the conclusion of the claims reconciliation process, (x) the total Allowed Contributing Debtors General Unsecured Claims are less than $394 million, and (y) the Distributions to be made to Holders of Allowed Contributing Debtors General Unsecured Claims would result in a recovery for such Holders in excess of 35% from the sum of the Contributing Debtors Distributive Assets and the Contributing Debtors' portion of the RGL FXCM Distribution, RCM will be entitled to an additional Claim. Specifically, RCM will be entitled to an additional Claim equal to the positive difference between $394 million minus the amount of the Allowed Contributing Debtors General Unsecured Claims. This "Additional RCM Claim" will participate pro rata in all Distributions from Contributing Debtors Distributive Assets and the Contributing Debtors' portion of the RGL FXCM Distribution to Holders of Allowed Contributing Debtors General Unsecured Claims that exceed the 35% recovery threshold set forth in clause (y) above; provided, however, that thesuch Additional RCM Claim will not be subject to the 40% limit on Distributions set forth in the Contributing Debtors General Unsecured Claim Distribution.
18. Contributing Debtors BAWAG Proceeds
Notwithstanding the actual timing and source of any payments under the Plan, so long as not inconsistent with the BAWAG Allocation Order, (i) a portion of BAWAG Guaranteed Proceeds equal to $100 million will be deemed to have been received by the Contributing Debtors and paid to the Secured Lenders under the Early Payment Order, (ii) a portion of BAWAG Guaranteed Proceeds equal to $150 million will be deemed to have been received by the Contributing Debtors and made available for Distribution to Holders of Allowed Senior Subordinated Note Claims, (iii) a portion of BAWAG Guaranteed Proceeds equal to $56.25 million plus an applicable share of BAWAG Contingent Proceeds (if any) will be deemed to have been received by the Contributing Debtors and made available for Distribution to Holders of Allowed Contributing Debtors General Unsecured Claims, and (iv) a portion of BAWAG Guaranteed Proceeds equal to $200 million plus an applicable share of BAWAG Contingent Proceeds (if any) will be deemed to have been received by Holders of RCM Customer Claims and RCM FX/Unsecured Claims and made available for Distribution to Holders of RCM Customer Claims and RCM FX/Unsecured Claims. To the extent that a Holder of an Allowed Senior Subordinated Note Claim against the Contributing Debtors, a Holder of an Allowed Contributing Debtors General Unsecured Claim, a Holder of an Allowed RCM Securities Customer Claim or a Holder of an Allowed RCM FX/Unsecured Claim elects not to receive its allocable share of the Senior Subordinated Note Holder BAWAG Proceeds, the Contributing Debtors General Unsecured BAWAG Proceeds or the RCM BAWAG Proceeds, as applicable, such portion of BAWAG Proceeds will be returned to BAWAG in accordance with the BAWAG Settlement.
83 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. 19. Exemption From Transfer Taxes
Pursuant to section 1146 of the Bankruptcy Code, (a) the issuance, transfer or exchange of notes or equity securities under the Plan, (b) the creation of any mortgage, deed of trust, lien, pledge or other security interest, (c) the making or assignment of any contract, lease or sublease, or (d) the making or delivery of any deed or other instrument of transfer under, in furtherance of, or in connection with, the Plan, any merger agreements; agreements of consolidation, restructuring, disposition, liquidation or dissolution; deeds; bills of sale; and transfers of tangible property, will not be subject to any stamp tax, recording tax, transfer tax or other similar tax. Unless the Bankruptcy Court orders otherwise, all sales, transfers and assignments of owned and leased property, approved by the Bankruptcy Court on or prior to the Effective Date, will be deemed to have been in furtherance of, or in connection with, the Plan. The exemption from taxes will only be to the extent permitted under section 1146 of the Bankruptcy Code.
20. RCM Settlement Agreement and Conversion
The Plan incorporates the RCM Settlement Agreement in its entirety. On or prior to the Effective Date, the RCM Chapter 11 Case will be converted to a case under subchapter III of chapter 7 of the Bankruptcy Code unless the Debtors and the RCM Trustee agree that there is a compelling reason for the RCM Estate to be administered under Chapter 11 of the Bankruptcy Code. Upon conversion of RCM's Chapter 11 Case to a case under chapter 7 of the Bankruptcy Code, the Plan will proceed as a chapter 11 plan for the Debtors and will constitute a settlement and compromise of claims between the chapter 7 Estate of RCM and the Debtors, for which RCM and the Debtors seek approval simultaneously with the confirmation of the Plan. In the event that the RCM Estate does not convert to chapter 7, the Distributions to RCM's creditors will be governed by the terms of the RCM Settlement Agreement and the Plan.
21. Allowance of VR/Leuthold Guarantee Claims
The VR/Leuthold Guarantee Claims will be Allowed Contributing Debtors General Unsecured Claims (subject, however, to allowance of the underlying Claims against RCM) unless objected to by the Contributing Debtors prior to entry of the Confirmation Order. No party other than the Contributing Debtors will be authorized to object to or otherwise challenge the VR and Leuthold Claims against Refco Group (the "Guarantee Claims"). The Contributing Debtors will not object to or otherwise challenge the VR/Leuthold Guarantee Claims based on or related to any of the following theories or issues: the corporate structure or business practices of any of the Contributing Debtors; alter ego; substantive consolidation; fraud; or any other theories or causes of action similar to the foregoing. The Contributing Debtors, however, may object to the VR/Leuthold Guarantee Claims based on facts specific to a particular VR/Leuthold Guarantee Claim, including, but not limited to, objections based on Bankruptcy Code avoidance theories or challenges to the purported dollar amount of the asserted claims.
22. Wind-Up of Non-Debtor Refco Entities
All Non-Debtor Affiliates, other than the direct or indirect subsidiaries of RCM and Refco, LLC, will be wound up and dissolved as soon as practicable and all available Cash, after appropriate wind-up activities, will be distributed to the Contributing Debtors and Refco LLC on account of intercompany balances (or equity dividends where applicable). All Non-Debtor Affiliates that are direct or indirect subsidiaries of RCM will be wound up as soon as practicable and all available Cash, after appropriate wind-up activities, will be distributed to RCM on account of intercompany balances (or equity dividends where appropriate). The direct and indirect subsidiaries of RCM will be wound up and dissolved by the RCM Trustee and the remainder of the Non-Debtor Affiliates will be wound up and dissolved by the Plan Administrator.
23. FXCM
If not liquidated in advance of the Effective Date, Refco Group's 35% interest in FXCM will become an interest of and be held by Reorganized Refco upon the merger of Refco Group into Reorganized Refco pursuant to section 5.1 of the Plan. The Plan Administrator will exercise all rights of Reorganized Refco in respect of the 35% interest in FXCM. Notwithstanding the above, the FXCM Committee will be formed to coordinate on all matters relating to the disposition or distribution of the 35% interest in FXCM. If not formed as of the Effective Date pursuant to the Plan Support Agreement, the members of the FXCM Committee, other than the RCM Trustee, will be selected by the Joint Sub-Committee (inclusive of its ex-officio members, but exclusive of Holders of Senior Subordinated
84 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. Note Claims and the Senior Subordinated Note Indenture Trustee). All decisions in respect of the disposition or distribution of the 35% interest in FXCM will be made by Reorganized Refco; provided, however, that no such decision will be made by Reorganized Refco without first consulting with the FXCM Committee and, to the extent permitted by applicable law, obtaining the consent of the FXCM Committee. Bylaws of the FXCM Committee will be established by the FXCM Committee after its formation and will be substantially in the form attached to the Plan as Exhibit J.
24. Examiner
No provision of the Plan will be construed as impairing the Examiner's investigation, and his authority to file his report in accordance with the provisions of the Examiner Order and the additional directions given by the Bankruptcy Court at the Hearing held on June 21, 2006, even if such investigation concludes, and such filing occurs, after the occurrence of the Effective Date. Unless otherwise ordered by the Bankruptcy Court prior to the Effective Date, the procedures with respect to the filing and consideration of the Examiner's Fee Applications and Requests for Reimbursements of Expenses will continue after the Effective Date in the same manner as prior to the Effective Date as provided in the Examiner Order.
C. Provisions Governing Distributions
1. RCM Rights Distribution
On the Effective Date the Plan Administrator will be deemed to have made the RCM Rights Distribution to the RCM Trustee and the Plan Administrator or the RCM Trustee, as the case may be, will establish the RCM Distribution Reserve. Unless a Holder of an RCM FX/Unsecured Claim or RCM Securities Customer Claim has decided to not participate in the RCM Rights Distribution by electing not to agree to (i) assign those RCM Related Claims, if any, to the Litigation Trust; (ii) release their RCM Related Claims against any Refco Entity that is not a Debtor, and (iii) release the Secured Lenders (in such capacities) from the Secured Lender Released Claims held by such Holders, if any, such Holder will receive their Pro Rata share of the RCM Cash Distribution. Upon contribution of the RCM Related Claims to the Litigation Trust, such claims will be deemed Allowed.
2. Distributions for Claims Allowed as of the Effective Date
Except as otherwise provided herein or as ordered by the Bankruptcy Court, Distributions to be made on account of Claims against FXA, the Contributing Debtors or RCM that are Allowed Claims as of the Effective Date will be made on the Effective Date or as soon thereafter as is practicable; provided, however, that the Disbursing Agent, on behalf of the Reorganized Debtors, will not be required to make Distributions to Holders of Allowed Claims (other than Allowed Secured Lender Claims) that are not Senior Subordinated Note Claims until all Reserves have been established and adequately funded in accordance with the terms of the Plan and the Senior Subordinated Note Holder Distribution and the Senior Subordinated Note Holder Fee Distribution have been paid in full; provided further, however, that the RCM Trustee will not be required to make Distributions until all RCM Reserves have been established and adequately funded in accordance with the terms of the Plan and the RCM Settlement Agreement. Any Distribution to be made on the Effective Date pursuant to the Plan will be deemed as having been made on the Effective Date if such Distribution is made on the Effective Date or as soon thereafter as is practicable. Any payment or Distribution required to be made under the Plan on a day other than a Business Day will be made on the next succeeding Business Day.
3. Distributions of Proceeds of the Litigation Trust
Pursuant to the terms and conditions set forth in the Litigation Trust Agreement, the Litigation Trustee will transfer all the Contributed Claims Recoveries to the Disbursing Agent or the RCM Trustee for Distribution in accordance with the provisions of the Plan and the RCM Settlement Agreement.
4. Single Distribution
Except with respect to Allowed Secured Lender Claims and Senior Subordinated Note Claims, any Holder of a Claim asserted against more than one Debtor (or a Debtor and RCM), will be entitled to a Distribution from only its primary obligor (whether that results in a Distribution from RCM, FXA, or the Contributing Debtors), and all RCM
85 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. Related Claims and Other Related Claims will be subordinated and will receive no Distribution from the assets of the applicable Debtor or RCM, as the case may be, unless and until such time as all Allowed General Unsecured Claims (or in the case of RCM, all Allowed RCM Securities Customer Claims, Allowed RCM FX/Unsecured Claims and Allowed Leuthold Metals Claims) against the applicable Debtor or RCM, as the case may be, have been paid in full; provided, however, that (A) any Holder of an RCM Securities Customer Claim or an RCM FX/Unsecured Claim with a separatean independent Claim against any Contributing Debtor based on contractual guarantee or other direct contractual undertaking may also recover once from the Contributing Debtors on such Claim based on the full underlying Claim amount owed by RCM, as of the Petition Date, for which such guarantee or other direct contractual undertaking was provided (and such Claim against the Contributing Debtors will not be limited to the amount remaining after recovery from RCM under the Plan), and (CB) any Holder of a Claim against FXA with a separatean independent Claim against the Contributing Debtors or RCM based on contractual guarantee or other direct contractual undertaking may also recover once from the Contributing Debtors on such Claim based on the full underlying Claim amount owed by FXA, as of the Petition Date, for which such guarantee or other direct contractual undertaking was provided (and such Claim against the Contributing Debtors will not be limited to the amount remaining after recovery from FXA under the Plan). In addition, subject to the earning of interest in respect of the Litigation Trust as set forth in Section 5.7 of the Plan no Holder of a Claim against one or more Debtors (or a Debtor and RCM) will receive a Distribution under the Plan that results in greater than a 100% recovery on such Holder's Claim (which, in the case of a Holder of both a primary Claim against a Debtor or RCM and a contractual guarantee from another Debtor or RCM, will mean no more than a cumulative 100% recovery on the underlying Claim amount owed by the primary obligor).
5. Accounts; Escrows; Reserves for the Reorganized Debtors
The Plan Administrator, on behalf of the Reorganized Debtors, in accordance with the provisions of the Plan Administrator Agreement, will (a) establish one or more general accounts into which will be deposited all funds not required to be deposited into any other account, Reserve or escrow and (b) create, fund and withdraw funds from, as appropriate, such general accounts in order to comply with and implement the provisions of the Plan. The Plan Administrator will dispose of non-Cash assets of the Estates of the Reorganized Debtors, if any, in accordance with the provisions of the Plan and the Plan Administrator Agreement.
a. Administrative/Priority Claims Reserve
On the Effective Date (or as soon thereafter as is practicable), the Plan Administrator will, subject to the provisions of Section 5.16 of the Plan, create and fund the Administrative/Priority Claims Reserve with Cash equal to one hundred percent (100%) of the Distributions to which Holders of Administrative and Allowed Priority Claims of the Debtors, not otherwise paid in full on the Effective Date, would be entitled under the Plan if such Claims were Allowed in full. The Plan Administrator may increase the amount of the Administrative/Priority Claims Reserve to satisfy Allowed contingent or unliquidated Administrative and Priority Claims (not previously estimated or allowed as of the Effective Date) with funds held in the Claims Distribution Account.
b. Disputed Claims Reserve
(i) The Plan Administrator will create and fund the Disputed Claims Reserve with Cash and Litigation Trust Interests equal to the aggregate Pro Rata share of the Contributing Debtors General Unsecured Distribution or the FXA General Unsecured Distribution , as applicable, that would have been made to each hHolder of a Disputed Claim against the Contributing Debtors or FXA if such Claim were an Allowed Contributing Debtors General Unsecured Claim or an Allowed FXA General Unsecured Claim for the Disputed Claim Amount or such other amount established by the Bankruptcy Court prior to the Effective Date; provided, however, that the Debtors, the Plan Administrator or the Reorganized Debtors may within 90 days after the Effective Date (or such other date as the Bankruptcy Court may order) file a motion(s) seeking to estimate any contingent or unliquidated Claims asserted on or before the Effective Date, with notice and an opportunity to be heard to be given to the affected Holders of such Disputed Claims.
(ii) The Disputed Claims Reserve will be funded with Cash and Litigation Trust Interests equal to such percentage amounts approved by the Bankruptcy Court at the Confirmation Hearing and will be reduced following each Quarterly Distribution Date by any amounts in the Disputed Claims Reserve that exceed the
86 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. amounts required to be reserved by section (i) above, with such amounts being distributed to the Holders of Disputed Claims against the Debtors whose Claims have become Allowed Claims.
(iii) If any Cash remains in the Disputed Claims Reserve after all Disputed Claims against the Debtors have been resolved, such remaining amounts will be transferred to Reorganized Refco or Reorganized FXA, as applicable, for Distribution in accordance with the terms of the Plan. Unless otherwise provided in an order of the Bankruptcy Court, in the event that the Bankruptcy Court estimates any contingent, unliquidated or Disputed Claim, the estimated amount will constitute either the Allowed amount of such Claim or a maximum limitation on such Claim, as determined by the Bankruptcy Court; provided, however, that, if the estimate constitutes the maximum limitation on such Claim, the Reorganized Debtors may elect to pursue supplemental proceedings to object to any ultimate allowance of such Claim.
(iv) The Plan Administrator will maintain two sub-accounts within the Disputed Claims Reserve for (i) the Contributing Debtors and (ii) FXA.
c. Wind-Down Reserve
On the Effective Date (or as soon thereafter as is practicable), the Plan Administrator, on behalf of the Reorganized Debtors, will create and fund the Wind-Down Reserve with sufficient Cash to administer the Plan, including, but not limited to compensation of the Plan Administrator and Administrative Professionals. The Plan Administrator may make reasonable adjustments to the Wind-Down Reserve as necessary. Any Cash in the Wind-Down Reserve which is unnecessary for the administration of the Plan will be transferred to Reorganized Refco or Reorganized FXA, as applicable, for distribution to Holders of Allowed Claims against the Contributing Debtors or FXA, as applicable, in accordance with the terms of the Plan.
6. Accounts; Escrows; Reserves for Post-Confirmation RCM
The RCM Trustee, on behalf of Post-Confirmation RCM, in accordance with the provisions of the RCM Settlement Agreement, will (a) establish one or more general accounts into which will be deposited all funds not required to be deposited into any other account, RCM Reserve or escrow, and (b) create, fund and withdraw funds from, as appropriate, such general accounts in order to comply with and implement the provisions of the Plan. The RCM Trustee will dispose of non-Cash assets of the RCM Estate, if any, in accordance with the provisions of the Plan and the RCM Settlement Agreement and applicable law.
a. RCM Administrative/Priority Claims Reserve
On the Effective Date (or as soon thereafter as is practicable), the RCM Trustee will, subject to the provisions of Section 5.16 of the Plan, create and fund the RCM Administrative/Priority Claims Reserve with Cash equal to one hundred percent (100%) of the Distributions to which Holders of Administrative and Allowed Priority Claims of RCM, not otherwise paid in full on the Effective Date, would be entitled under the Plan if such Claims were Allowed in full. The RCM Trustee may increase the amount of the RCM Administrative/Priority Claims Reserve to satisfy disputed, contingent or unliquidated Administrative and Priority Claims (not previously estimated or allowed as of the Effective Date) with funds held in the RCM Claims Distribution Account. If the Chapter 11 Case of RCM is converted to a case under chapter 7, prior to any conversion the RCM Trustee will be entitled to set aside appropriate reserves for Administrative Claims incurred or to be incurred prior to conversion, with the amounts of such Administrative Claims to be payable from the reserves upon allowance of the Claims therefor so long as the RCM Trustee has determined that there are or will be sufficient funds available to pay all Administrative Claims of the chapter 7 case.
b. RCM Disputed Claims Reserve
(i) The RCM Trustee will create and fund the RCM Disputed Claims Reserve with Cash and Litigation Trust Interests equal to the aggregate Pro Rata share of the Distribution that would have been made to each Holder of a Disputed Claim against RCM if such Claim were an Allowed RCM Securities Customer Claim or RCM FX/Unsecured Claim for the Disputed Claim Amount or such other amount established by the Bankruptcy Court prior to the Effective Date; provided, however, that RCM, Post-Confirmation RCM or the RCM Trustee may within 90 days after the Effective Date (or such other date as the Bankruptcy Court may order) file a
87 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. motion(s) seeking to estimate any contingent or unliquidated Claims asserted on or before the Effective Date, with notice and an opportunity to be heard to be given to the affected Holders of such Disputed Claims.
(ii) The RCM Disputed Claims Reserve will be funded with Cash and Litigation Trust Interests equal to such percentage amounts approved by the Bankruptcy Court at the Confirmation Hearing and will be reduced following each Quarterly Distribution Date by any amounts in the RCM Disputed Claims Reserve that exceed the amounts required to be reserved by section (i) above, with such amounts being distributed to the Holders of Disputed Claims whose Claims against RCM have become Allowed Claims.
(iii) If any Cash or Litigation Trust Interests remain in the RCM Disputed Claims Reserve after all Disputed Claims against RCM have been resolved, such remaining amounts will be transferred to Post-Confirmation RCM for Distribution in accordance with the terms of the Plan and the RCM Settlement Agreement. Unless otherwise provided in an order of the Bankruptcy Court, in the event that the Bankruptcy Court estimates any contingent, unliquidated or Disputed Claim against RCM, the estimated amount will constitute either the Allowed amount of such Claim or a maximum limitation on such Claim, as determined by the Bankruptcy Court; provided, however, that if the estimate constitutes the maximum limitation on such Claim, the RCM Trustee may elect to pursue supplemental proceedings to object to any ultimate allowance of such Claim.
(iv) The RCM Trustee will maintain sub-accounts within the RCM Disputed Claims Reserve for RCM Securities Customer Claims and RCM FX/Unsecured Claims. Each sub-account will be further subdivided for Assets in Place and Additional Property (each as defined in the RCM Settlement Agreement). The RCM Trustee may maintain such other reserves as are permitted by the RCM Settlement Agreement.
(v) Distributions of Additional Property under the RCM Settlement Agreement on behalf of RCM Securities Customer Claims and RCM FX/Unsecured Claims will be made Pro Rata (as such term is defined in the RCM Settlement Agreement). True up Distributions (as defined in the RCM Settlement Agreement) will be made from time to time from Additional Property as determined by the RCM Trustee. The RCM Reserves will take into account the requirement to true up with respect to Pro Rata (as defined in the RCM Settlement Agreement) shares of Additional Property.
c. RCM Distribution Reserve
On the Effective Date, the Plan Administrator will create and fund the RCM Distribution Reserve. Each Holder of an Allowed RCM Securities Customer Claim or Allowed RCM FX/Unsecured Claim that has provided the Plan Administrator with an RCM Related Claim Subordination Form will receive from the Plan Administrator on the next available Distribution Date its allocable share (as determined by the RCM Trustee consistent with their elections) of the RCM Distribution Reserve (net of costs, if any, with respect to obtaining such RCM Related Claim Subordination Form if such form has been provided after the Voting Deadline and the election was not made in a ballot); provided, however, if the RCM Settlement Agreement is amended prior to the Confirmation Hearing so as to permit the RCM Trustee to receive conditional distributions of Additional Property (as defined in the RCM Settlement Agreement) and to not require an immediate distribution of all assets received by the RCM Trustee to Holders of Allowed Claims against RCM, any amounts that would have been held in the RCM Distribution Reserve will be transferred to the RCM Trustee who will then distribute such funds on the next available Distribution Date to each Holder of an Allowed RCM Securities Customer Claim or Allowed RCM FX/Unsecured Claim that has provided the RCM Trustee with an RCM Related Claim Subordination Form (net of costs, if any, with respect to obtaining such RCM Related Claim Subordination Form if such form has been provided after the Voting Deadline and the election was not made in a ballot). In the event that any Holder of an RCM Related Claim has not provided an RCM Related Claim Subordination Form, but the RCM Related Claim of such Holder is subsequently expunged by objection of the Plan Administrator, the reserve in respect of such Claim will be distributed (net of costs of expunging the RCM Related Claim) by the RCM Trustee or the Plan Administrator, as applicable, Pro Rata (as defined in the RCM Settlement Agreement) to such Holder and to those Holders of Allowed RCM Securities Customer Claims and Allowed RCM FX/Unsecured Claims that provided the Plan Administrator or the RCM Trustee, as applicable, with an RCM Related Claim Subordination Form. In the event that any RCM Related Claim becomes an Allowed Claim, the reserve in respect of such Claim will be deposited in the Claims Distribution Account for Distribution in accordance with the terms of the Plan.
88 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. d. RCM Wind-Down Reserve
On the Effective Date (or as soon thereafter as is practicable), the RCM Trustee or the Plan Administrator, as the case may be, on behalf of Post-Confirmation RCM, will create and fund the RCM Wind-Down Reserve with sufficient Cash from the RCM Cash Distribution to administer the Plan and the RCM Settlement Agreement, including, but not limited to, compensation of the RCM Trustee and RCM Administrative Professionals. The RCM Trustee may make reasonable adjustments to the RCM Wind-Down Reserve as necessary. Any Cash in the RCM Wind-Down Reserve which is unnecessary for the administration of the Plan and the RCM Settlement Agreement will be transferred to Post-Confirmation RCM for distribution to Holders of Allowed Claims against RCM in accordance with the terms hereof.
7. Interest and Penalties on Claims
Unless otherwise specifically provided for in the Plan, the Confirmation Order or another order of the Court (including, without limitation, the Early Payment Order), or if required by applicable bankruptcy law, postpetition interest and penalties will not accrue or be paid on any Claims and no Holder of a Claim will be entitled to interest and penalties accruing on or after the Petition Date through the date such Claim is satisfied in accordance with the terms of the Plan.
8. Distributions by Disbursing Agent and RCM Trustee
All Distributions under the Plan on behalf of the Reorganized Debtors will be made by the Disbursing Agent at the direction of the Plan Administrator and all Distributions under the Plan and the RCM Settlement Agreement on behalf of RCM will be made by the RCM Trustee. The Disbursing Agent and the RCM Trustee will be deemed to hold all property to be distributed by each under the Plan in trust for Persons entitled to receive the same. The Disbursing Agent and the RCM Trustee will not hold an economic or beneficial interest in such property.
9. Delivery of Distributions and Undeliverable or Unclaimed Distributions
a. Delivery of Distributions in General
Distributions to Holders of Allowed Claims will be made at the addresses set forth in the Debtors' or RCM's records unless such addresses are superseded by proofs of claim or transfers of claim filed pursuant to Bankruptcy Rule 3001; provided, however, Distributions on account of Senior Subordinated Note Claims will be made to the Senior Subordinated Note Indenture Trustee who will, in turn, administer such Distributions to the Holders of Senior Subordinated Note Claims in accordance with the terms of the Senior Subordinated Note Indenture. The Senior Subordinated Note Indenture Trustee will be authorized to effect any distribution under the Plan through the book entry transfer facilities of The Depositary Trust Company pursuant to the procedures used for effecting distributions thereunder on the date of any such distribution. Distributions on account of Secured Lender Claims will be made to the Secured Lender Agent, who will in turn administer such Distributions in accordance with the terms of the Credit Agreement.
b. Undeliverable and Unclaimed Distributions
(i) Holding and Investment of Undeliverable and Unclaimed Distributions. If the Distribution to any Holder of an Allowed Claim is returned to the Disbursing Agent or the RCM Trustee, as applicable, as undeliverable or is otherwise unclaimed, no further Distributions will be made to such Holder unless and until the Disbursing Agent or the RCM Trustee, as applicable, is notified in writing of such Holder's then current address. Undeliverable and unclaimed Distributions will be deposited in the Unclaimed Distribution Reserve or the RCM Unclaimed Distribution Reserve, as the case may be, until such time as a Distribution becomes deliverable or is unclaimed in accordance with Section 6.9 of the Plan. The accounts for the Unclaimed Distribution Reserve and RCM Unclaimed Distribution Reserve may be interest-bearing accounts, provided that any interest accruing on funds in the Unclaimed Distribution Reserve will be transferred to Reorganized Refco or Reorganized FXA, as applicable, for Distribution in accordance with the terms of the Plan and any interest accruing on funds in the RCM Unclaimed Distribution Reserve will be transferred to the RCM Trustee for Distribution in accordance with the terms of the Plan and the RCM Settlement Agreement.
89 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. (ii) After Distributions Become Deliverable. The Disbursing Agent or the Disbursing Agent, as applicable, will make all Distributions that have become deliverable or have been claimed since the Effective Date or the next Quarterly Distribution Date as soon as practicable after such Distribution has become deliverable.
(iii) Failure to Claim Undeliverable Distributions. Any Holder of an Allowed Claim that does not assert a claim pursuant to the Plan for an undeliverable or unclaimed Distribution within one year after the applicable Date of Distribution will be deemed to have forfeited its claim for such undeliverable or unclaimed Distribution and will be forever barred and enjoined from asserting any such claim for an undeliverable or unclaimed Distribution against the Debtors, RCM or their Estates, the Reorganized Debtors, the Plan Administrator, Post-Confirmation RCM, the RCM Trustee or their property. In such cases, any Cash in the Unclaimed Distribution Reserve or the RCM Unclaimed Distribution Reserve, as applicable, for Distribution on account of such Claims for undeliverable or unclaimed Distributions will become the property of the applicable Estate free of any restrictions thereon. Such unclaimed or undeliverable funds will be transferred to the Reorganized Debtors or Post-Confirmation RCM, as applicable, to be distributed in accordance with the terms of the Plan or the RCM Settlement Agreement. Nothing contained in the Plan, the Plan Administrator Agreement or the RCM Settlement Agreement will require the Disbursing Agent or the RCM Trustee to attempt to locate any Holder of an Allowed Claim.
c. Time Bar to Cash Payments
Checks issued by the Disbursing Agent or the RCM Trustee, as applicable, on account of Allowed Claims will be null and void if not negotiated within ninety (90) days from and after the date of issuance thereof. Requests for reissuance of any check will be made directly to the Disbursing Agent or the RCM Trustee, as applicable, by the Holder of the Allowed Claim with respect to which such check originally was issued. Any claim in respect of such a voided check will be made on or before the later of (a) the second anniversary of the Effective Date or (b) ninety (90) days after the date of issuance of such check, if such check represents a final Distribution under the Plan on account of such Claim. After such date, all Claims in respect of voided checks will be discharged and forever barred and the Reorganized Debtors or RCM, as the case may be, will retain all monies related thereto for the sole purpose of redistribution to Holders of Allowed Claims or Interests in accordance with the terms of the Plan and the RCM Settlement Agreement, as applicable.
10. Record Date For Distributions
With respect to all Claims except Senior Subordinated Note Claims, the Disbursing Agent or the Plan Administrator or the RCM Trustee, as applicable, will have no obligation to recognize the transfer of, or the sale of any participation in, any Claim that occurs after the close of business on the Distribution Record Date, and will be entitled for all purposes to recognize and distribute only to those Holders of Claims who are Holders of such Claims, or participants therein, as of the close of business on the Distribution Record Date. The Disbursing Agent, the Plan Administrator or the RCM Trustee, as applicable, will instead be entitled to recognize and deal for all purposes under the Plan with only those record holders stated on the official claims register as of the close of business on the Distribution Record Date. No Distribution Record Date will be established for Distributions on account of Senior Subordinated Note Claims.
11. Distributions to Holders of Senior Subordinated Note Claims
As a condition precedent to receiving any Distribution under the Plan on account of an Allowed Senior Subordinated Note Claim, the registered Holders (as defined in the Senior Subordinated Note Indenture) of such Senior Subordinated Note Claims must surrender any certificate(s) evidencing such Senior Subordinated Note Claims in accordance with written instructions to be provided to such registered Holders (as defined in the Senior Subordinated Note Indenture) and the Senior Subordinated Note Indenture Trustee by the Plan Administrator (in consultation with the Senior Subordinated Note Indenture Trustee, and consistent with customary market practice), unless waived in writing by the Debtors or the Plan Administrator.
12. Senior Subordinated Note Indenture Trustee as Claim Holder
Consistent with Bankruptcy Rule 3003(c), the Debtors or the Plan Administrator, as the case may be, will recognize a proof of claim filed by the Senior Subordinated Note Indenture Trustee in respect of the Senior
90 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. Subordinated Notes Claims. Accordingly, any Senior Subordinated Note Claim, proof of which is filed by the registered or beneficial Holder of a Senior Subordinated Note Claim, may be disallowed as duplicative of any Senior Subordinated Note Claim of the Senior Subordinated Note Indenture Trustee, without need for any further action or Bankruptcy Court order. For the avoidance of doubt, the Senior Subordinated Note Indenture Trustee will be authorized to distribute amounts received in respect of Senior Subordinated Note Holder Distributions.
13. Allocation of Plan Distributions Between Principal and Interest
Except for distributions made in respect of Allowed Secured Lender Claims, which will be made in accordance with the Credit Agreement, to the extent that any Allowed Claim entitled to a Distribution under the Plan is comprised of indebtedness and accrued but unpaid interest thereon, such Distribution will, for all income tax purposes, be allocated to the principal amount of the Claim first and then, to the extent that the consideration exceeds the principal amount of the Claim, to the portion of such Claim representing accrued but unpaid interest.
14. Means of Cash Payment
Payments of Cash made pursuant to the Plan will be in U.S. dollars and will be made, at the option and in the sole discretion of the Plan Administrator or the RCM Trustee, as applicable, by (a) checks drawn on or (b) wire transfer from a domestic bank selected by the Plan Administrator or the RCM Trustee, as applicable. Cash payments to foreign creditors may be made, at the option of the Plan Administrator or the RCM Trustee, as applicable, in such funds and by such means as are necessary or customary in a particular foreign jurisdiction.
15. Withholding and Reporting Requirements
In connection with the Plan and all Distributions thereunder, the Disbursing Agent, the Plan Administrator or the RCM Trustee, as applicable, on behalf of the Reorganized Debtors, will comply with all withholding and reporting requirements imposed by any federal, state, local or foreign taxing authority, and all Distributions under the Plan will be subject to any such withholding and reporting requirements. The Disbursing Agent, the Plan Administrator and the RCM Trustee, on behalf of the Reorganized Debtors and RCM, as applicable, will be authorized to take any and all actions that may be necessary or appropriate to comply with such withholding and reporting requirements.
16. Setoffs
Unless prohibited by the terms of the Plan or any other Plan Document, the Plan Administrator on behalf of the Reorganized Debtors or the RCM Trustee on behalf of Post-Confirmation RCM, may, pursuant to section 553 of the Bankruptcy Code or applicable nonbankruptcy laws, but will not be required to, set off against any Claim, the payments or other Distributions to be made pursuant to the Plan in respect of such Claim, or claims of any nature whatsoever (other than the Released Claims) that the Chapter 11 Debtors, the Reorganized Debtors or Post-Confirmation RCM may have against the Holder of such Claim; provided, however, that neither the failure to do so nor the allowance of any Claim under the Plan will constitute a waiver or release by the Reorganized Debtors or Post-Confirmation RCM of any such claim that the Chapter 11 Debtors, the Reorganized Debtors or Post-Confirmation RCM may have against such Holder.
17. Fractional Dollars
None of the Plan Administrator, the Reorganized Debtors, the RCM Trustee or RCM, as applicable, will be required to make Distributions or payments of fractions of dollars, and whenever any payment of a fraction of a dollar under the Plan would otherwise be called for, the actual payment made will reflect a rounding of such fraction to the nearest whole dollar (up or down), with half dollars being rounded down.
18. Release of Liens
Except as otherwise provided in the Plan or in any other Plan Document, on the Effective Date and concurrently with the applicable distributions made pursuant to the Plan, all mortgages, deeds of trust, liens, pledges or other security interests (collectively, the "Mortgages") in and against the property of any Estate automatically will be fully released and discharged, and all such property will be free and clear of all such Mortgages. Nothing in the Plan will be deemed, asserted or construed to affect the Senior Subordinated Note Indenture Trustee Charging Lien.
91 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. D. Treatment of Executory Contracts and Unexpired Leases
1. Rejected Contracts and Leases
Except as otherwise provided in the Confirmation Order, the Plan or in any other Plan Document, the Confirmation Order will constitute an order under section 365 of the Bankruptcy Code rejecting all prepetition executory contracts and unexpired leases to which any Debtor is a party, to the extent such contracts or leases are executory contracts or unexpired leases, on and subject to the occurrence of the Effective Date, unless such contract or lease (a) previously will have been assumed, assumed and assigned, or rejected by the Debtors, (b) previously will have expired or terminated pursuant to its own terms before the Effective Date, (c) is the subject of a pending motion to assume or reject on the Confirmation Date, or (d) is identified in Exhibit D to the Plan as a contract or lease to be assumed; provided, however, that the Debtors may amend such exhibit of assumed and assigned executory contracts and unexpired leases at any time prior to the Confirmation Date.
2. Bar to Rejection Damages
If the rejection of an executory contract or unexpired lease pursuant to Section 7.1 of the Plan gives rise to a Claim by the other party or parties to such contract or lease, such Claim will be forever barred and will not be enforceable against the applicable Debtor or its Estate, the Reorganized Debtors, the Plan Administrator or their respective successors or properties unless a proof of Claim is filed and served on the Reorganized Debtors and counsel for the Reorganized Debtors within thirty (30) days after service of a notice of the Effective Date or such other date as is prescribed by the Bankruptcy Court.
3. Assumed and Assigned Contracts and Leases
Except as otherwise provided in the Confirmation Order, the Plan or any other Plan Document entered into after the Petition Date or in connection with the Plan, the Confirmation Order will constitute an order under section 365 of the Bankruptcy Code assuming, as of the Effective Date, those executory contracts and unexpired leases listed on Exhibit D to the Plan; provided, however, that the Debtors may amend such Exhibit of assumed and assigned executory contracts and unexpired leases at any time prior to the Confirmation Date.
4. Compensation and Benefit Programs
All Employee Benefit Plans, including programs subject to sections 1114 and 1129(a)(13) of the Bankruptcy Code, entered into before or after the Petition Date will be deemed to be, and will be treated as if they were, executory contracts that are subject to rejection in accordance with Section 7.1 of the Plan (to the extent such rejection does not violate sections 1114 and 1129(a)(13) of the Bankruptcy Code).
5. Treatment of RCM Executory Contracts and Unexpired Leases
The RCM Trustee will determine the appropriate treatment for the executory contracts and unexpired leases of RCM in accordance with applicable law and the RCM Settlement Agreement.
E. Procedures for Resolving Disputed, Contingent and Unliquidated Claims and Interests
1. Objection Deadline; Prosecution of Objections
NoSubject to Section 5.21 of the Plan, no later than the Claims Objection Deadline or the Administrative Claims Objection Deadline, as applicable, the Plan Administrator on behalf of the Reorganized Debtors, after consultation with the Plan Committee, may file objections to Claims or Interests against FXA and the Contributing Debtors that are not yet Allowed with the Bankruptcy Court and serve such objections upon the Holders of each of the Claims or Interests to which objections are made. No later than the Claims Objection Deadline or the Administrative Claims Objection Deadline, as applicable, the RCM Trustee on behalf of Post-Confirmation RCM may file objections to Claims or Interests against RCM that are not yet Allowed with the Bankruptcy Court and serve such objections upon the Holders of each of the Claims or Interests to which objections are made. Nothing in the Plan, however, will limit the ability of the Plan Administrator or the RCM Trustee, as applicable, to object to Claims or Interests, if any, filed or amended after the Claims Objection Deadline or the Administrative Claims Objection Deadline, as applicable. Subject to limitations set forth in the Plan Administrator Agreement and the Plan, as applicable, the Plan 92 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. Administrator will dispose of all Disputed Claims or Interests by withdrawing or settling such objections thereto, or by litigating to judgment in the Bankruptcy Court or such other court as may have jurisdiction the validity, nature and/or amount thereof. The RCM Trustee will have sole discretion and authority to object to any RCM Claims or Interests in accordance with the RCM Settlement Agreement and applicable provisions of the Bankruptcy Code.
2. No Distributions Pending Allowance
No payments or Distributions will be made with respect to any disputed portion of a Disputed Claim or Interest unless and until all objections to such Disputed Claim or Interest have been settled or withdrawn or have been determined by Final Order and the Disputed Claim or Interest, or some portion thereof, has become an Allowed Claim or Interest.
3. Distributions After Allowance
The Disbursing Agent on behalf of the Reorganized Debtors and the RCM Trustee on behalf of RCM will make payments and Distributions from the Disputed Claims Reserve and the RCM Disputed Claims Reserve, as applicable, to the Holder of any Disputed Claim or Interest that has become an Allowed Claim or Interest, or any portion of which has become Allowed, on the first Quarterly Distribution Date following the date that such Disputed Claim or Interest becomes an Allowed Claim. Such Distributions will be made in accordance with the Plan, the Plan Administrator Agreement and the RCM Settlement Agreement, as applicable.
F. Confirmation and Consummation of the Plan
1. Conditions to Confirmation
a. The Confirmation Order is reasonably acceptable in form and substance to the Plan Proponents (and with respect to any matter affecting the Secured Lender Agent and/or the Secured Lenders, the Secured Lender Agent);
b. The Confirmation Date of the Plan occurs on or before December 15, 2006;
c. The Plan Proponents determine, and file with the Bankruptcy Court a notice confirming, that the Allotted Administrative Claims are not reasonably expected to exceed, in the aggregate, $180 million;
d. Houlihan and Capstone each have filed with the Bankruptcy Court in advance of the Voting Deadline, its respective RCM Projection and Contributing Debtors Projection;
e. Either (i) both of the Houlihan and Capstone RCM Projections are equal to or exceed $430 million, or (ii) in the event that one such RCM Projection is less than $430 million and the other is equal to or exceeds $430 million, the Bankruptcy Court (after reviewing both RCM Projections and the assumptions therein) determines that the appropriate RCM Projection is equal to or exceeds $430 million; and
f. Either (i) both of the Houlihan and Capstone Contributing Debtors Projections are equal to or exceed $64 million, or (ii) in the event that one such Contributing Debtors Projection is less than $64 million and the other is equal to or exceeds $64 million, the Bankruptcy Court (after reviewing both RCM Projections and the assumptions therein) determines that the appropriate Contributing Debtors Projection is equal to or exceeds $64 million.
2. Conditions to Effective Date
The Plan Proponents will request that the Confirmation Order include a finding by the Bankruptcy Court that, notwithstanding Bankruptcy Rule 3020(e), the Confirmation Order will take effect immediately upon its entry. The following are conditions precedent to the occurrence of the Effective Date, each of which must be satisfied or waived by the Plan Proponents in accordance with the terms of the Plan prior to December 31, 2006:
a. The Confirmation Order, in form and substance reasonably satisfactory to the Plan Proponents, has been entered and not thereafter stayed, reversed or vacated, and provides that, among other things:
93 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. (i) the Debtors, the Plan Administrator on behalf of the Reorganized Debtors, and the RCM Trustee on behalf of Post-Confirmation RCM are authorized to take all actions necessary or appropriate to enter into, implement and consummate the contracts, instruments, releases, leases, indentures and other agreements or documents created in connection with the Plan; and
(ii) the provisions of the Confirmation Order are non severable and mutually dependent; and
b. Unless the condition set forth in paragraph 1015(a) of the Early Payment Order that the Early Payment Order has become a Final Order in full force and effect has been waived in accordance therewith, the Early Payment Order has become a Final Order and is in full force and effect;
c. The RCM Settlement Agreement has been approved by the Bankruptcy Court and has become effective by satisfaction of all conditions to effectiveness therein.
d. All other actions, documents and agreements necessary to implement the Plan have been effected or executed;
e. The Secured Lender Payment Date has occurred; and
f. The Debtors have sufficient Cash to make all required payments to be made on the Effective Date.
g. All amounts owed, as of the Effective Date, to the Secured Lender Agent and/or any Secured Lender pursuant to paragraph 12 of the Early Payment Order have been paid in full.
3. Waiver of Conditions
Each of the conditions to the Effective Date set forth in the Plan may be waived in whole or in part by the Plan Proponents by agreement, without any notice to parties in interest or the Bankruptcy Court and without a hearing; provided, however, in the event that such waiver is not unanimous, the waiving Plan Proponents will be required to obtain approval of the Bankruptcy Court to effect such waiver, following notice and a hearing and; provided further, the conditions set forth in the parenthetical of section 9.1(a) and sections 9.2(b), (e) and (g) of the Plan will not be waived without the consent of the Secured Lender Agent and Secured Lenders that hold the number and amount of Secured Lender Claims required to accept a plan pursuant to section 1126(c) of the Bankruptcy Code (as if, for purposes of this paragraph, such Secured Lender Claims were impaired). The failure to satisfy or waive any condition to the Effective Date may be asserted by the Plan Proponents regardless of the circumstances giving rise to the failure of such condition to be satisfied, including any action or inaction by the Plan Proponents. The failure of the Plan Proponents to exercise any of the foregoing rights will not be deemed a waiver of any other rights, and each such right will be deemed an ongoing right that may be asserted at any time.
4. Consequences of Non-Occurrence of Effective Date
In the event that the Effective Date does not timely occur, the Plan Proponents reserve all rights to seek an order from the Bankruptcy Court directing that the Confirmation Order be vacated, that the Plan be null and void in all respects, and/or that any settlement of Claims provided for in the Plan, other than those contained in the RCM Settlement Agreement, be null and void. In the event that the Bankruptcy Court enters an order vacating the Confirmation Order, the time within which the Debtors may assume and assign, or reject all executory contracts and unexpired leases not previously assumed, assumed and assigned, or rejected, will be extended for a period of 60 days after the date the Confirmation Order is vacated, without prejudice to further extensions.
G. Effect of Plan Confirmation
1. Binding Effect
The Plan, and all compromises and settlements contemplated thereby or incorporated by reference therein, will be binding upon and inure to the benefit of the Debtors, all present and former Holders of Claims and Interests,
94 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. and their respective successors and assigns, including but not limited to the Reorganized Debtors and any chapter 7 trustee appointed to administer any of the Estates.
2. Releases
a. Releases by the Debtors and RCM
The Plan provides for certain releases to be granted by the Chapter 11 Debtors in favor of the following persons and entities (collectively, the "Released Parties"): acting in such capacity, (i) the directors and officers of certain foreign Non-Debtor Affiliates set forth on Schedule 1.1491.177 to the Plan and the Post-Petition Management; (ii) RCM; (iii) the RCM Trustee; (iv) the Chapter 7 Trustee; (v) the Committees and their members; (vi) the Debtors; (vii) the Secured Lender Releasees; (viii) the Senior Subordinated Note Indenture Trustee, and its directors, officers and employees; (ix) present and former holders of the Senior Subordinated Notes in their capacity as Holders of the Senior Subordinated Notes; and (x) the respective current professionals (as of the Petition Date and thereafter) of the entities released under subclauses (i) - (ix), acting in such capacity for such entity.
Specifically, except with respect to those Intercompany Claims allowed or otherwise resolved pursuant to the Plan, including, but not limited to, the RCM Intercompany Claim and Intercompany Claims of Non-Debtor Affiliates against the Debtors or RCM, as of the Effective Date, for good and valuable consideration, the adequacy of which is hereby confirmed, the Chapter 11 Debtors (in their individual capacities and as debtors and debtors-in-possession (if applicable)) will be deemed to release forever, waive and discharge all claims, obligations, suits, judgments, damages, demands, debts, rights, causes of action and liabilities (other than the rights of the Chapter 11 Debtors, the Reorganized Debtors or Post-Confirmation RCM to enforce the Plan and the contracts, instruments, releases, indentures and other agreements or documents delivered under the Plan, and liabilities arising after the Effective Date in the ordinary course of business) whether liquidated or unliquidated, fixed or contingent, matured or unmatured, known or unknown, foreseen or unforeseen, then existing or thereafter arising, in law, equity or otherwise that are based in whole or part on any act, omission, transaction, event or other occurrences taking place on or prior to the Effective Date in any way relating to the Chapter 11 Debtors, the Reorganized Debtors, Post-Confirmation RCM, the Chapter 11 Cases, the Plan, the Disclosure Statement or the RCM Settlement Agreement and that could have been asserted by or on behalf of the Chapter 11 Debtors, the Estates, the Reorganized Debtors or Post-Confirmation RCM, including pursuant to principles of substantive consolidation, piercing the corporate veil, alter ego, domination, constructive trust and similar principles of state or federal creditors' rights laws, in any such case, against the Released Parties. The Released Claims include any and all claims and causes of action against the Released Parties, acting in such capacity, arising from or relating to (i) the Chapter 11 Debtors' centralized cash management system and intercompany transfers other than the RCM Intercompany Claims and Intercompany Claims with respect to Non-Debtor Affiliates, (ii) the leveraged recapitalization in August 2004, (iii) the initial public offering and any related transactions effectuated in August 2005/September 2005, and (iv) any transfer or payment made in respect of the Credit Agreement or the Senior Subordinated Note Indenture, including any redemption of Senior Subordinated Notes, which will include any Claim or cause of action arising therefrom pursuant to sections 541, 544, 545, 547, 548, 549, 550, 551 and 553 of the Bankruptcy Code.
b. Releases by Holders of Claims and Interests
The Plan provides for certain releases to be granted by Holders of Impaired Claims that voted to accept the Plan in favor of the Released Parties. Specifically, on the Effective Date, each Holder of an Impaired Claim, including, but not limited to all Holders of an Impaired Claim against RCM, that voted to accept the Plan or receives a Distribution, in consideration for the obligations of the Chapter 11 Debtors, the Reorganized Debtors and Post-Confirmation RCM under the Plan and the Cash and other contracts, instruments, releases, agreements or documents to be delivered in connection with the Plan, will be deemed to forever release, waive and discharge all claims, demands, debts, rights, causes of action or liabilities (other than the right to enforce the Chapter 11 Debtors', the Reorganized Debtors' and Post-Confirmation RCM's obligations under the Plan, the Confirmation Order, and the contracts, instruments, releases, agreements and documents delivered under the Plan), whether liquidated or unliquidated, fixed or contingent, matured or unmatured, known or unknown, foreseen or unforeseen, then existing or thereafter arising, in law, equity or otherwise that are based in whole 95 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. or in part on any act or omission, transaction, event or other occurrence taking place on or prior to the Effective Date in any way relating to the Chapter 11 Debtors, the Chapter 11 Cases, the Plan or the Disclosure Statement, in any such case, against the Released Parties.
c. Qualifying Plan Releases
In order to obtain for the estates of the Debtors the full benefits of the Early Payment Order, including the final allowance of Secured Lender Indemnification Claims at zero for purposes of the Chapter 11 Cases pursuant to paragraphs 9(a) and (b) of the Early Payment Order, all Secured Lender Released Claims are fully, finally and forever released by the Planunder the Plan on the Effective Date; provided, however, if RCM is converted to a case under chapter 7 prior to the Effective Date, the Secured Lender Released Claims, with respect to RCM, will be effective on the first to occur of the date of such conversion to chapter 7 or the Effective Date. For the avoidance of doubt, the releases provided under Section 10.2(c) of the Plan will be interpreted such that their scope will satisfy the requirements under the Early Payment Order for the Plan to be a Qualifying Plan thereunder.
d. Releases by Recipients of BAWAG Proceeds
On the Effective Date, each Holder (i) of a Secured Lender Claim or (ii) each Holder, that has not affirmatively exercised its option to be excluded from any Distribution of BAWAG Proceeds prior to the Voting Deadline, of (A) a Senior Subordinated Note Claim, (B) an RCM Securities Customer Claim, (C) an RCM FX/Unsecured Claim or (D) a Contributing Debtors General Unsecured Claim will be deemed to forever release, waive and discharge all claims, demands, debts, rights, causes of action or liabilities, whether liquidated or unliquidated, fixed or contingent, matured or unmatured, known or unknown, foreseen or unforeseen, then existing or thereafter arising, in law, equity or otherwise that are based in whole or in part on any act or omission, transaction, event or other occurrence taking place on or prior to the Effective Date in any way relating to the Refco Entities or the RGHI Entities (as defined in the BAWAG Settlement), and any transactions involving such parties, including but not limited to claims or actions arising from or related to (a) the allegations set forth in the Complaint and the Counterclaim (each as defined in the BAWAG Settlement), (b) the allegations set forth in the Adversary Proceeding (as defined in the BAWAG Settlement), or (c) any allegations that could have been made by any of the Refco Entities against BAWAG; provided, however, that, pursuant to the Securities Class Action Stipulation, any Holder of a Senior Subordinated Note Claim that is also a member of securities class action class described in the Securities Class Action Stipulation may, assuming approval of the Securities Class Action Stipulation (and the settlement contained therein), elect to receive BAWAG Proceeds without releasing BAWAG of its Securities Class Action Claims as set forth in this subparagraph.
e. Injunction Related to Releases
The Confirmation Order will permanently enjoin the commencement or prosecution by any entity, whether directly, derivatively or otherwise, of any claims, obligations, suits, judgments, damages, demands, debts, rights, causes of action or liabilities released pursuant to the Plan or the Early Payment Order, including, but not limited to, the claims, obligations, suits, judgments, damages, demands, debts, rights, causes of action or liabilities released pursuant to Section 10.2 of the Plan. For the avoidance of doubt, neither the Litigation Trust nor the Private Actions Trust will bring any action to recover on any Released Claims. Nothing in the Plan or the transactions approved thereby is intended to or will release any non-Debtor of any liabilities or obligations to the United States of America or its agencies or subdivisions (the "United States"), nor will it enjoin or bar any claim by the United States against any Non-Debtor Affiliate.
3. Exculpation and Limitation of Liability
To the maximum extent permitted by the Bankruptcy Code and applicable law, none of the (a) Debtors, (b) RCM, (c) the Reorganized Debtors, (d) the Plan Administrator, (e) any professionals retained by the Debtors or the RCM Trustee pursuant to an order of the Bankruptcy Court, (f) the Committees (including any present and former members thereof), (g) the RCM Trustee, (h) the parties to the RCM Settlement Agreement and the Plan Support Agreement (in such capacities), (i) the Post-Petition Management, (j) Post-Confirmation RCM, (k) the Chapter 7 Trustee, (l) AlixPartners, (m) the members of the Portfolio Management Advisory Committee and the Plan,
96 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. Negotiation, and Litigation Advisory Committee, in each case, established under the RCM Settlement Agreement and in each case acting in such capacities nor (n) any of their respective representatives, agents, officers, directors, employees, advisors or attorneys will have or incur any liability to, or be subject to any right of action by, any Holder of a Claim or an Interest, or any other party in interest, or any of their respective agents, employees, representatives, financial advisors, attorneys or agents acting in such capacity, or affiliates, or any of their successors or assigns, for any act or omission in connection with, relating to, or arising out of, the Chapter 11 Cases, the RCM Settlement Agreement or, if on or prior to the Effective Date, RCM's chapter 11 case is converted to a chapter 7 case to be administered under subchapter III of chapter 7, related to, or arising out of, the chapter 7 case, formulating, negotiating or implementing the Plan, the solicitation of acceptances of the Plan, the pursuit of confirmation of the Plan, the confirmation of the Plan, the consummation of the Plan, or the administration of the Plan or the property to be distributed under the Plan, except for gross negligence or willful misconduct, and in all respects will be entitled to reasonably rely upon the advice of counsel with respect to their duties and responsibilities under the Plan.
4. No Discharge of Claims; Injunction
Pursuant to section 1141(d)(3) of the Bankruptcy Code, confirmation will not discharge Claims against the Chapter 11 Debtors; provided, however, that no Holder of a Claim against or Interest in any Chapter 11 Debtor may, on account of such Claim or Interest, seek or receive any payment or other Distribution from, or seek recourse against the Estates of the Chapter 11 Debtors, the Reorganized Debtors, Post-Confirmation RCM or their respective successors or their respective properties, except as expressly provided in the Plan. Accordingly, except as otherwise provided in the Plan, the Confirmation Order will provide, among other things, that from and after the Confirmation Date all Persons who have held, hold or may hold Claims against or Interests in the Chapter 11 Debtors are (i) permanently enjoined from taking any of the following actions against the Estate(s) of the Chapter 11 Debtors, the Plan Administrator, the RCM Trustee, the Reorganized Debtors, Post-Confirmation RCM or any of their property on account of any such Claims or Interests and (ii) preliminarily enjoined from taking any of the following actions against any of the Chapter 11 Debtors, the Reorganized Debtors, Post-Confirmation RCM or their property on account of such Claims or Interests: (A) commencing or continuing, in any manner or in any place, any action or other proceeding; (B) enforcing, attaching, collecting or recovering in any manner any judgment, award, decree or order; (C) creating, perfecting or enforcing any lien or encumbrance; and (D) commencing or continuing, in any manner or in any place, any action that does not comply with or is inconsistent with the provisions of the Plan; provided, however, that (x) nothing contained in the Plan will preclude such Persons from exercising their rights pursuant to and consistent with the terms of the Plan and (y) the preliminary injunction of actions against the Chapter 11 Debtors, the Reorganized Debtors, Post-Confirmation RCM and their property (if any) will be dissolved and terminate one (1) day following the dissolution of the Reorganized Debtors and Post-Confirmation RCM and completion of the winding up of their affairs. Creditors' rights of setoff and recoupment are preserved, and the injunctions referenced in this section will not enjoin the valid exercise of such rights of setoff and recoupment.
5. Consent to Injunctions
By accepting Distributions pursuant to the Plan, each Holder of an Allowed Claim or Allowed Interest will be deemed to have specifically consented to the injunctions set forth in Article X of the Plan.
6. Term of Bankruptcy Injunction or Stays
All injunctions or stays provided for in the Chapter 11 Cases under sections 105 or 362 of the Bankruptcy Code, or otherwise, and in existence on the Confirmation Date, will remain in full force and effect until all of the property of the Estates of the Debtors, the Reorganized Debtors and Post-Confirmation RCM has been distributed and the Contributing Debtors and the Reorganized Debtors have been merged into the Reorganized Debtors, dissolved or otherwise liquidated, as the case may be, in accordance with the terms of the Plan or any Plan Document, and the Estate of Post-Confirmation RCM will have been fully administered and the RCM Trustee discharged from his duties; provided, however, that any injunction that by its terms is permanent or otherwise is intended to survive the Effective Date and distributions under the Plan (whether by law or pursuant to order of the Court), will be continued without modification.
97 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. H. Retention of Jurisdiction
1. Exclusive Jurisdiction of the Bankruptcy Court
Pursuant to sections 105(c) and 1142 of the Bankruptcy Code and notwithstanding entry of the Confirmation Order and the occurrence of the Effective Date, the Bankruptcy Court will retain exclusive jurisdiction (unless otherwise indicated) over all matters arising out of, and related to, the Chapter 11 Cases, the Plan and the RCM Settlement Agreement to the fullest extent permitted by law, including, among other things, jurisdiction to:
(a) Allow, disallow, determine, liquidate, classify, estimate or establish the priority or secured or unsecured status of any Claim or Interest, including the resolution of any request for payment of any Administrative Claim and the resolution of any objections to the allowance or priority of Claims or Interests;
(b) Grant or deny any applications for allowance of compensation or reimbursement of expenses authorized pursuant to the Bankruptcy Code or the Plan for periods ending on or before the Effective Date;
(c) Resolve any matters related to the assumption, assumption and assignment, or rejection of any executory contract or unexpired lease to which any Chapter 11 Debtor is a party or with respect to which any Chapter 11 Debtor may be liable and to hear, determine, and, if necessary, liquidate any Claims arising therefrom;
(d) Ensure that Distributions to Holders of Allowed Claims are accomplished pursuant to the provisions of the Plan and the RCM Settlement Agreement, as applicable;
(e) Decide or resolve any motions, adversary proceedings, contested or litigated matters, and any other matters and grant or deny any applications involving the Chapter 11 Debtors that may be pending on the Effective Date (which jurisdiction will be non-exclusive as to any such non-core matters);
(f) Enter such orders as may be necessary or appropriate to implement or consummate the provisions of the Plan, the RCM Settlement Agreement and all contracts, instruments, releases and other agreements or documents created in connection with the Plan, the RCM Settlement Agreement, the Disclosure Statement or the Confirmation Order;
(g) Resolve any cases, controversies, suits or disputes that may arise in connection with the consummation, interpretation or enforcement of the Plan or the RCM Settlement Agreement or any contract, instrument, release or other agreement or document that is executed or created pursuant to the Plan the RCM Settlement Agreement or any entity's rights arising from or obligations incurred in connection with the Plan the RCM Settlement Agreement;
(h) Modify the Plan before or after the Effective Date pursuant to section 1127 of the Bankruptcy Code or modify the Disclosure Statement, the Confirmation Order or any other Plan Document, or remedy any defect or omission or reconcile any inconsistency in any Bankruptcy Court order, the Plan, the Disclosure Statement, the Confirmation Order, or any contract, instrument, release or other agreement or document created in connection with the Plan, the Disclosure Statement or the Confirmation Order, in such manner as may be necessary or appropriate to consummate the Plan;
(i) Hear and determine all applications for compensation and reimbursement of expenses of Professionals under the Plan or under sections 330, 331, 503(b), 1103 and 1129(a)(4) of the Bankruptcy Code; provided, however, that from and after the Confirmation Date the payment of fees and expenses of the Reorganized Debtors and the Plan Administrator, including professional fees, will be made in the ordinary course of business and will not be subject to the approval of the Bankruptcy Court;
(j) Issue injunctions, enter and implement other orders, or take such other actions as may be necessary or appropriate to restrain interference by any entity with consummation, implementation or enforcement of the Plan or the Confirmation Order;
98 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. (k) Hear and determine causes of action by or on behalf of the Chapter 11 Debtors, the Reorganized Debtors, Post-Confirmation RCM, the Litigation Trustee or the Private Action Trustee;
(l) Hear and determine matters concerning state, local and federal taxes in accordance with sections 346, 505 and 1146 of the Bankruptcy Code;
(m) Enter and implement such orders as are necessary or appropriate if the Confirmation Order is for any reason or in any respect modified, stayed, reversed, revoked or vacated, or Distributions pursuant to the Plan are enjoined or stayed;
(n) Determine any other matters that may arise in connection with or relate to the Plan, the RCM Settlement Agreement, the Disclosure Statement, the Confirmation Order or any other Plan Document;
(o) Enforce all orders, judgments, injunctions, releases, exculpations, indemnifications and rulings entered in connection with the Chapter 11 Cases or any subsequent chapter 7 case, as applicable (which jurisdiction will be non-exclusive except as otherwise provided by Titles 11 and 28 of the United States Code);
(p) Hear and determine all matters related to (i) the property of the Estates of the Reorganized Debtors and Post-Confirmation RCM from and after the Confirmation Date, (ii) the winding up of the Chapter 11 Debtors' affairs, and (iii) the activities of the Plan Administrator and the RCM Trustee, including (A) challenges to or approvals of the Reorganized Debtors', Post-Confirmation RCM's, the Plan Administrator's or the RCM Trustee's activities, (B) resignation, incapacity or removal of the Plan Administrator or the RCM Trustee and selection of a successor, (C) reporting by, termination of, and accounting by the Reorganized Debtors, the Plan Administrator, Post-Confirmation RCM and the RCM Trustee, and (D) release of the Plan Administrator and RCM Trustee from their duties;
(q) Hear and determine disputes with respect to compensation of (i) the Reorganized Debtors' and Post-Confirmation RCM's professional advisors and (ii) the Plan Administrator, the RCM Trustee, the Litigation Trustee, the Private Actions Trustee and their professional advisors;
(r) Hear and determine such other matters as may be provided in the Confirmation Order or as may be authorized under the Bankruptcy Code; and
(s) Enter an order closing the Chapter 11 Cases or chapter 7 case of RCM, if any, as applicable.
I. Miscellaneous Provisions
1. Effectuating Documents and Further Transactions
Each of the Chapter 11 Debtors, the Plan Administrator on behalf of the Reorganized Debtors, and the RCM Trustee on behalf of Post-Confirmation RCM will be authorized to execute, deliver, file or record such contracts, instruments, releases and other agreements or documents and take such actions as may be necessary or appropriate to effectuate, implement and further evidence the terms and conditions of the Plan and any notes or securities issued pursuant to the Plan.
2. Corporate Action
Prior to, on or after the Effective Date (as appropriate), all matters expressly provided for under the Plan that would otherwise require approval of the stockholders, members, directors or managers of one or more of the Chapter 11 Debtors, the Reorganized Debtors or Post-Confirmation RCM will be deemed to have occurred and will be in effect prior to, on, or after the Effective Date (as appropriate) pursuant to the applicable law of the states in which the Chapter 11 Debtors, the Reorganized Debtors or Post-Confirmation RCM are incorporated without any requirement of further action by the stockholders, members, directors or managers, as applicable, of the Chapter 11 Debtors, the Reorganized Debtors or Post-Confirmation RCM.
99 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. 3. Bar Dates for Certain Claims
a. Administrative Claims
The Confirmation Order will establish an Administrative Claims Bar Date for filing Administrative Claims against all Chapter 11 Debtors which date will be thirty (30) days after the Effective Date. Holders of asserted Administrative Claims not paid prior to the Confirmation Date will submit requests for the payment of administrative expenses on or before such Administrative Claims Bar Date or forever be barred from doing so. The notice of Confirmation to be delivered pursuant to Bankruptcy Rules 3020(c) and 2002(f) will set forth such date and constitute notice of this Administrative Claims Bar Date. The Reorganized Debtors and the RCM Trustee will have until the Administrative Claims Objection Deadline to object to such claims.
b. Professional Fee Claims
All Professionals and other entities requesting compensation or reimbursement of Professional Fee Claims pursuant to sections 327, 328, 330, 331 or 503(b) of the Bankruptcy Code for services rendered prior to the Confirmation Date will file and serve on the Reorganized Debtors and counsel for the Reorganized Debtors and on the RCM Trustee and counsel for the RCM Trustee an application for final allowance of compensation and reimbursement of expenses no later than sixty (60) days after the Effective Date, unless otherwise ordered by the Bankruptcy Court. Objections to applications of such Professionals or other entities for compensation or reimbursement of expenses must be filed and served on the Reorganized Debtors, counsel for the Reorganized Debtors, the RCM Trustee, counsel for the RCM Trustee and the requesting Professional or other entity no later than thirty (30) days (or such longer period as may be allowed by order of the Bankruptcy Court) after the date on which the applicable request for compensation or reimbursement was served. Upon the Confirmation Date, any requirement that Professionals comply with sections 328, 330 or 331 of the Bankruptcy Code in seeking retention or compensation for services rendered after such date will terminate. Professional Fee Claims relating to fees and expenses incurred after the Effective Date will be paid in the ordinary course of business.
c. Professional Fee Holdback
Within 10 calendar days prior to the Confirmation Hearing, each Professional must provide to the Plan Proponents (with a copy to the Fee Committee) a notice of Professional Fee Claim containing (i) a disclosure of fees and expenses incurred, unbilled and unpaid in the Chapter 11 Cases and (ii) an estimate of additional fees and expenses expected to be incurred by each such Professional through the Effective Date (in the aggregate, the "Professional Fee Claims"). On the Effective Date, the Reorganized Debtors and Post-Confirmation RCM, as applicable, will pay 80% of the Professional Fee Claims. In addition, on the Effective Date, the Reorganized Debtors and Post-Confirmation RCM will fund an escrow account consisting of 110% of (x) the amount of any holdbacks on previously billed and paid amounts and (y) the remaining 20% of the amount of the Professional Fee Claims that were not paid on the Effective Date. Amounts held in such escrow account will be used to pay amounts not previously paid and subsequently allowed by the Bankruptcy Court following a hearing on the Professionals' final fee applications. When all Professional Fee Claims have been paid in full, amounts remaining in such escrow account, if any, will be returned to the Reorganized Debtors and Post-Confirmation RCM.
4. Payment of Statutory Fees
All fees payable pursuant to section 1930 of title 28, United States Code, as determined by the Bankruptcy Court at the Confirmation Hearing, will be paid on the Effective Date. The Chapter 11 Debtors, the Reorganized Debtors and Post-Confirmation RCM will remain liable for any quarterly fees validly due and owing to the United States Trustee under 28 U.S.C. § 1930 through and including such dates that their respective Chapter 11 Cases are converted to cases under Chapter 7, dismissed or closed.
5. Amendment or Modification of the Plan
Subject to section 1127 of the Bankruptcy Code and, to the extent applicable, sections 1122, 1123 and 1125 of the Bankruptcy Code, the Plan Proponents reserve the right to alter, amend or modify the Plan at any time prior to or after the Confirmation Date but prior to the substantial consummation of the Plan; provided, however, that no such alteration, amendment or modification will conflict with any Final Order (including, without limitation, the Early
100 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. Payment Order). A Holder of a Claim that has accepted the Plan will be deemed to have accepted the Plan, as altered, amended or modified, if the proposed alteration, amendment or modification does not materially and adversely change the treatment of the Claim of such Holder.
6. Severability of Plan Provisions
If, prior to the Confirmation Date, any term or provision of the Plan is determined by the Bankruptcy Court to be invalid, void or unenforceable, the Bankruptcy Court will have the power to alter and interpret such term or provision to make it valid or enforceable to the maximum extent practicable, consistent with the original purpose of the term or provision held to be invalid, void or unenforceable, and such term or provision will then be applicable as altered or interpreted. Notwithstanding any such holding, alteration or interpretation, the remainder of the terms and provisions of the Plan will remain in full force and effect and will in no way be affected, impaired or invalidated by such holding, alteration or interpretation. The Confirmation Order will constitute a judicial determination and will provide that each term and provision of the Plan, as it may have been altered or interpreted in accordance with the foregoing, is valid and enforceable pursuant to its terms.
7. Successors and Assigns
The Plan will be binding upon and inure to the benefit of the Chapter 11 Debtors, and their respective successors and assigns, including, without limitation, any chapter 7 trustee subsequently appointed. The rights, benefits and obligations of any entity named or referred to in the Plan will be binding on, and will inure to the benefit of, any heir, executor, administrator, successor or assign of such entity.
8. Revocation, Withdrawal or Non-Consummation
The Plan Proponents reserve the right to revoke or withdraw the Plan at any time prior to the Confirmation Date and to file other plans of reorganization. If the Plan Proponents revoke or withdraw the Plan, or if Confirmation or consummation of the Plan does not occur, then (i) the Plan will be null and void in all respects, (ii) except as provided in sections 12.15 and 12.16 of the Plan, any settlement or compromise embodied in the Plan (including the fixing or limiting to an amount any Claim or Class of Claims), assumption or rejection of executory contracts or leases effected by the Plan, and any document or agreement executed pursuant to the Plan will be deemed null and void, and (iii) nothing contained in the Plan, and no acts taken in preparation for consummation of the Plan, will (a) constitute or be deemed to constitute a waiver or release of any Claims by or against, or any Interests in, the Plan Proponents or any other Person, (b) prejudice in any manner the rights of the Plan Proponents or any Person in any further proceedings involving the Plan Proponents, or (c) constitute an admission of any sort by the Plan Proponents or any other Person.
9. Notice
All notices, requests and demands to or upon the Reorganized Debtors or Post-Confirmation RCM to be effective will be in writing and, unless otherwise expressly provided in the Plan, will be deemed to have been duly given or made when actually delivered or, in the case of notice by facsimile transmission, when received and telephonically confirmed, addressed as set forth in Section 12.9 of the Plan.
10. Governing Law
Except to the extent that the Bankruptcy Code, the Bankruptcy Rules or other federal law is applicable, or to the extent that an exhibit or schedule to the Plan provides otherwise, the rights and obligations arising under the Plan will be governed by, and construed and enforced in accordance with, the laws of Delaware without giving effect to the principles of conflicts of law of such jurisdiction.
11. Tax Reporting and Compliance
The Reorganized Debtors are hereby authorized, on behalf of each of the Debtors, to request an expedited determination under section 505(b) of the Bankruptcy Code of the tax liability of the Debtors for all taxable periods ending after the Petition Date through, and including, the Effective Date.
101 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. 12. Filing of Additional Documents
On or before substantial consummation of the Plan, the Plan Proponents will file such agreements and other documents as may be necessary or appropriate to effectuate and further evidence the terms and conditions of the Plan.
13. Limit on Precedential Effect
The structure of the Plan and the classification of creditors or groups of creditors within one Class contained in the Plan will have no evidentiary or precedential effect if the Plan is not confirmed and consummated.
14. Claims Preserved Pending Consummation
Except as provided in the Early Payment Order and the RCM Settlement Agreement, in the event the Plan is not consummated, all parties in interest expressly reserve their claims and rights, as well as all defenses to such claims and rights and causes of action against such other parties, including, without limitation, (i) the subrogation claim of any Debtor that is a Guarantor under the Credit Agreement against any other Debtor that is a Loan Party under the Credit Agreement, arising out of the payment to the Secured Lenders, (ii) all claims of RCM and Holders of RCM Securities Customer Claims and RCM FX/Unsecured Claims against the Contributing Debtors, Refco, LLC and other third parties, (iii) all claims of the Contributing Debtors and Refco, LLC, and their respective creditors, against RCM and other third parties and (iv) avoidance actions and other causes of action against creditors of RCM and the Contributing Debtors.
15. Continuation of RCM Settlement
Neither any term or provision of the Plan, nor any failure of such Plan to proceed or be confirmed or consummated nor any conversion of the RCM Chapter 11 Case to a case under chapter 7 of the Bankruptcy Code, will in any way affect the terms or effectiveness of the RCM Settlement Agreement, which will at all times operate and be binding in accordance with its terms.
16. Continuation of Early Payment Order
Neither any term or provision of the Plan or the Confirmation Order, nor any failure of the Plan to proceed or be confirmed or consummated nor any conversion of the RCM Chapter 11 Case to a case under Chapter 7 of the Bankruptcy Code, will in any way affect the terms or effectiveness of the Early Payment Order, which will at all times operate and be binding in accordance with its terms.
IX. RISK FACTORS RELATING TO THE CHAPTER 11 CASES
A. Failure to Receive Requisite Acceptances
If the requisite acceptances of the Plan are received, the Plan Proponents intend to seek confirmation of the Plan by the Bankruptcy Court. If the requisite acceptances are not received, the Plan Proponents may nevertheless seek confirmation of a modified Plan notwithstanding the dissent of certain Classes of Claims. The Bankruptcy Court may confirm a modified Plan pursuant to the "cramdown" provisions of the Bankruptcy Code, which allow the Bankruptcy Court to confirm a plan that has been rejected by an impaired class of claims if it determines that the rejecting class is being treated appropriately given the relative priority of the claims in such class. In order to confirm a plan against a dissenting class, the Bankruptcy Court also must find that at least one impaired class has accepted the plan, with such acceptance being determined without including the acceptance of any "insider" in such class.
B. Failure of Bankruptcy Court to Confirm the Plan
Even if the requisite acceptances of the Plan are received and, with respect to those Classes deemed to have rejected the Plan the requirements for "cramdown" are met, the Bankruptcy Court, which as a court of equity may exercise substantial discretion, may choose not to confirm the Plan. Section 1129 of the Bankruptcy Code requires, among other things, a showing that confirmation of the Plan will not be followed by liquidation or the need for further financial reorganization of the Debtors (see Section XI.A –"Feasibility of the Plan") and that the value of Distributions to dissenting Holders of Claims and Interests may not be less than the value such Holders would receive
102 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. if the Debtors were liquidated under chapter 7 of the Bankruptcy Code (see Section XI.B –"Best Interests Test"). Although the Debtors believe that the Plan will meet such tests, there can be no assurance that the Bankruptcy Court will reach the same conclusion.
The Debtors' ability to propose and confirm an alternative reorganization plan is uncertain. Confirmation of any alternative reorganization plan under chapter 11 of the Bankruptcy Code likely would take significantly more time and result in delays in the ultimate Distributions. If confirmation of an alternative plan of reorganization was not possible, the Debtors likely would be liquidated under chapter 7 of the Bankruptcy Code. Based upon the Debtors' analysis, liquidation under chapter 7 would result in reduced Distributions. See Section XI.C –"Liquidation Analysis."
C. Failure to Satisfy Conditions to Confirmation or Effective Date
The Plan provides for certain conditions that must be satisfied (or waived) prior to the Confirmation Date and for certain other conditions that must be satisfied (or waived) prior to the Effective Date. See Section VIII.F.1 – "Conditions to Confirmation" and Section VIII.F.2 –"Conditions to Effective Date." As of the date of this Disclosure Statement, there can be no assurance that any or all of the conditions in the Plan will be satisfied (or waived). Accordingly, even if the Plan is confirmed by the Bankruptcy Court, there can be no assurance that the Plan will be consummated and the restructuring completed.
X. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN
Subject to the limitations noted below, the following discussion is a summary of certain U.S. federal income tax consequences expected to result from the implementation of the Plan relevant to Holders of Claims entitled to vote with respect to adoption of the Plan. This discussion is based on the Internal Revenue Code of 1986, as amended (the "Tax Code"), in effect on the date of this Disclosure Statement, on U.S. Treasury Regulations in effect (or in certain cases, proposed) on the date of this Disclosure Statement, and on judicial and administrative interpretations thereof available on or before such date. All of the foregoing is subject to change, which change could apply retroactively and could affect the tax consequences described below. There can be no assurance that the Internal Revenue Service (the "IRS") will not take a contrary view with respect to one or more of the issues discussed below, and no ruling from the IRS or opinion of counsel has been or will be sought with respect to any issues that may arise under the Plan.
The following summary is for general information only and does not purport to address all of the U.S. federal income tax consequences that may be applicable to any particular Holder. The tax treatment of a Holder of an Allowed Claim may vary depending upon such Holder's particular situation. The following discussion does not address state, local or foreign tax considerations that may be applicable to the Debtors and Holders of an Allowed Claim. This summary does not address tax considerations applicable to Holders that may be subject to special tax rules, such as financial institutions, insurance companies, real estate investment trusts, regulated investment companies, grantor trusts, dealers or traders in securities or currencies, tax-exempt entities, persons that hold an Allowed Claim as a position in a "straddle" or as part of a "hedging," "conversion" or "integrated" transaction for U.S. federal income tax purposes, persons that have a "functional currency" other than the U.S. dollar, and persons who are not U.S. persons (as defined in the Tax Code).
EACH HOLDER OF AN ALLOWEDA CLAIM IS URGED TO CONSULT ITS OWN TAX ADVISOR WITH RESPECT TO THE U.S. FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE IMPLEMENTATION OF THE PLAN.
TREASURY DEPARTMENT CIRCULAR 230 DISCLOSURE
TO ENSURE COMPLIANCE WITH TREASURY DEPARTMENT CIRCULAR 230, HOLDERS OF ALLOWED CLAIMS ARE HEREBY NOTIFIED THAT: (A) ANY DISCUSSION OF FEDERAL TAX ISSUES IN THIS DISCLOSURE STATEMENT IS NOT INTENDED OR WRITTEN TO BE RELIED UPON, AND CANNOT BE RELIED UPON, BY HOLDERS OF ALLOWED CLAIMS FOR THE PURPOSE OF AVOIDING PENALTIES THAT MAY BE IMPOSED ON HOLDERS OF ALLOWED CLAIMS UNDER THE INTERNAL REVENUE CODE; (B) SUCH DISCUSSION IS BEING USED IN CONNECTION WITH THE PROMOTION OR MARKETING (WITHIN THE MEANING OF CIRCULAR 230) BY THE DEBTORS OF THE PLAN OF
103 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. REORGANIZATION; AND (C) HOLDERS OF ALLOWED CLAIMS SHOULD SEEK ADVICE BASED ON THEIR PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.
A. Certain Material U.S. Federal Income Tax Consequences to the Debtors
Based upon the October 2005 discovery and announcement that Refco's Audit Committee and its independent accountants had determined that the audited financial statements relating to the business conducted by Refco should no longer be relied upon, as more fully described in Refco's press release dated October 10, 2005, the tax posture of the Debtors is uncertain. Consummation of the Plan, including the cancellation of indebtedness of Refco and the Affiliated Debtors, the disposition of the assets of Refco and the Affiliated Debtors (including the transfer of assets to the Litigation Trust), the sale of securities by RCM, the receipt of settlement proceeds by the Debtors, and other actions may result in recognition of income, deductions, gain or loss to Refco and the Affiliated Debtors and possibly the incurrence of tax on the part of Refco and the Affiliated Debtors. Even if the Affiliated Debtors are not liable for regular federal income tax, they may be liable for alternative minimum tax. Any such tax would constitute an administrative expense of the relevant Affiliated Debtors. There can be no assurance that the amounts available for distributions with respect to Allowed Claims would not be reduced, perhaps substantially, by any such tax payments required to be made by Refco and the Affiliated Debtors.
B. U.S. Federal Income Tax Consequences of Receipt of Plan Consideration to Holders of Allowed Claims
1. General Tax Considerations for Holders of Allowed Claims
The U.S. federal income tax consequences to Holders of Allowed Claims arising from the distributions to be made in satisfaction of their Claims pursuant to the Plan may vary, depending upon, among other things: (a) the manner in which a Holder acquired an Allowed Claim; (b) the type of consideration received by the Holder of an Allowed Claim in exchange for the interest it holds; (c) the nature of the indebtedness owed to it; (d) whether the Holder previously claimed a bad debt or worthless securities deduction in respect of the Allowed Claim; (e) whether the Holder of the Allowed Claim is a citizen or a resident of the U.S. for tax purposes; (f) whether the Holder of the Allowed Claim reports income on the accrual or cash basis; and (g) whether the Holder receives distributions in more than one taxable year. In addition, where gain or loss is recognized by a Holder, the character of such gain or loss as long-term or short-term capital gain or loss or as ordinary income or loss will be determined by a number of factors, including the tax status of the Holder, whether the Allowed Claim constitutes a capital asset in the hands of the Holder and how long it has been held or is treated as having been held, and whether the Allowed Claim was acquired at a market discount.
2. Accrued but Unpaid Interest
In general, to the extent that a holder of a debt instrument receives property in satisfaction of interest accrued during the holding period of such instrument, such amount will be taxable to the holder as interest income (if not previously included in the holder's gross income). Conversely, such holder may recognize a deductible loss to the extent that any accrued interest claimed or amortized original issue discount ("OID") previously was included in its gross income and is not paid in full.
The extent to which property received by a holder of a debt instrument will be attributable to accrued but unpaid interest is unclear. Pursuant to the Plan, all distributions in respect of any Allowed Claim will be allocated first to the principal amount of such Allowed Claim, and thereafter to accrued but unpaid interest, if any. Certain legislative history indicates that an allocation of consideration between principal and interest provided in a bankruptcy plan of reorganization generally is binding for U.S. federal income tax purposes. However, there is no assurance that such allocation will be respected by the IRS for U.S. federal income tax purposes.
Each Holder of an Allowed Claim is urged to consult its tax advisor regarding the inclusion in income of amounts received in satisfaction of accrued but unpaid interest, the allocation of consideration between principal and interest, and the deductibility of previously included unpaid interest and OID for U.S. federal income tax purposes.
104 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. 3. Bad Debt Deduction and Worthless Securities Deduction
A Holder of an Allowed Claim that is not a security for purposes of section 165(g) of the Tax Code and who receives, pursuant to the Plan, an amount of consideration that is less than such Holder's tax basis in the Allowed Claim in exchange for that Claim, may be entitled in the year of receipt (or in an earlier year) to a bad debt deduction under section 166(a) of the Tax Code, or may be entitled to a loss under section 165(a) in the year of receipt. A Holder of an Allowed Claim that is a security and which is wholly worthless may be entitled to a worthless securities deduction under sections 165(g) and 165(a) of the Tax Code. The rules governing the timing and amount of such deductions place considerable emphasis on the facts and circumstances of the holder, the obligor, and the instrument with respect to which a deduction is claimed. Any such loss would be limited to the Holder's tax basis in the indebtedness underlying its Claim. Holders of Allowed Claims, therefore, are urged to consult their tax advisors with respect to their ability to claim such deductions.
4. Market Discount
If a Holder of an Allowed Claim purchased the underlying debt obligation at a price less than its adjusted issue price, the difference would constitute "market discount" for U.S. federal income tax purposes. Any gain recognized by a holder of a debt obligation with market discount should be treated as ordinary income to the extent of any market discount accrued on the underlying debt obligation by the holder on or prior to the date of the exchange.
5. Receipt of Cash and/or Litigation Trust Interests in Exchange for Allowed Claim
In general, the receipt of Cash and/or Litigation Trust Interests in exchange for an Allowed Claim willshould result in the recognition of gain or loss in an amount equal to the difference between (i) the sum of the amount of any Cash and the fair market value of any Litigation Trust Interests received (other than any Cash or Litigation Trust Interests attributable to accrued but unpaid interest) and (ii) the Holder's tax basis in its Allowed Claim (other than any Claim for accrued but unpaid interest). Because Holders of Allowed Claims may receive additional consideration from the Disputed Claims Reserve, it may be that losses with respect to their claims will be deferred until all assets are distributed by the Disputed Claims Reserve. If amounts are received by a Holder in more than one taxable year, a portion of such amounts may be characterized as interest.
6. Treatment of Litigation Trust
From and after the Effective Date, Holders of Contributing Debtors General Unsecured Claims and Holders of FXA General Unsecured Claims will have rights to the Litigation Trust. Under the Tax Code, amounts earned by an escrow account, settlement fund or similar fund must be subject to current tax. Although certain Treasury Regulations have been issued, no Treasury Regulations have been promulgated to address the tax treatment of such funds in a bankruptcy context. Accordingly, the proper tax treatment of such funds is uncertain. Depending on the facts and the relevant law, such funds possibly could be treated as grantor trusts, separately taxable trusts, or otherwise. Litigation Trust Beneficiaries will have rights in the Litigation Trust. The Debtors believe that the Litigation Trust should qualify as a liquidating trust, as defined in Treasury Regulation section 301.7701-4(d). The Debtors therefore intend to treat the assets held therein, as held by a grantor trust with respect to which the Litigation Trust Beneficiaries are treated as the grantors. Accordingly, the Debtors and the Litigation Trustee will treat the transfer of assets to the Litigation Trust as a transfer of such assets directly from the Debtors to the Litigation Trust Beneficiaries followed by the transfer by such persons of such assets to the Litigation Trust, in exchange for beneficial interests in the Litigation Trust. Consistent with this treatment, Litigation Trust Beneficiaries will be treated for federal income tax purposes as the grantors and owners of their share of the assets held by the Litigation Trust. No tax should be imposed on the Debtors or Litigation Trust on earnings generated by the assets held by the Litigation Trust. Instead, the Litigation Trust Beneficiaries will be taxed on their allocable shares of such earnings in each taxable year, whether or not they receive any distributions from the Litigation Trust. The Plan Administrator will report each year to each such Holder that is Litigation Trust Beneficiary the amount of items of income, gain, loss, deduction or credit of the Litigation Trust allocable to such Holder. The amount of distributions a Holder ultimately receives pursuant to the Plan may be less than the amount of earnings generated that are allocated and taxable to such Holder.
There can be no assurance that the IRS will respect the foregoing treatment. For example, the IRS may characterize some or all of the Litigation Trust as a grantor trust for the benefit of the Debtors or as otherwise owned by and taxable to the Debtors. Alternatively, the IRS could characterize the Litigation Trust as a so-called "complex
105 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. trust" subject to a separate entity-level tax on its earnings, except to the extent that such earnings are distributed during the taxable year. Moreover, because the amount received by Holders of Contributing Debtors General Unsecured Claims and Holders of FXA General Unsecured Claims in satisfaction of its Allowed Claim may increase or decrease, depending upon whether the Litigation Trust is treated as a grantor trust, such Holder could be prevented from recognizing a loss until the time at which there are no assets at all remaining in the Litigation Trust against which such Holder has a Claim. Finally, even if the IRS respects the characterization of the Litigation Trust, it may disagree with the allocation of income to the holders of interests therein.
Holders of Allowed Claims that receive Litigation Trust Interests are urged to consult their tax advisors regarding the potential U.S. federal income tax treatment of the Litigation Trust and the consequences to them of such treatment (including the effect of the computation of a Holder's gain or loss in respect of its Allowed Claim and the possibility of taxable income without a corresponding receipt of cash or property with which to satisfy the liability).
7. Treatment of Disputed Claims Reserve
Pursuant to the Plan, the Plan Administrator will create and fund the Disputed Claims Reserve with cash and Litigation Trust Interests, which will be distributed to Holders of Disputed Claims whose claims become Allowed Claims in accordance with the Plan. The tax consequences to such Holders of such distributions should be determined in accordance with the principles discussed above, and will be subject to the uncertainty described above.
Under section 468B(g) of the Tax Code, amounts earned by an escrow agent, settlement fund or similar fund must be subject to current tax. The IRS recently promulgated regulations under this provision that govern the taxation of so-called "disputed ownership funds." While the matter is not free from doubt, the Debtors do not believe that the Disputed Claims Reserve should be characterized as a disputed ownership fund under current law, but rather that the Disputed Claims Reserve should qualify as a trust. The Debtors intend to treat the cash and the Litigation Trust Interests held therein as held by a grantor trust with respect to which the Debtors are treated as the grantorsso-called complex trust. Any taxable income with respect to the cash and the Litigation Trust Interests held in the Disputed Claims Reserve should be attributable to the Reorganized Debtorsgenerally be taxable to the Disputed Claims Reserve as a separate entity. Under certain circumstances, earnings or income distributed within a taxable year or shortly thereafter may be allowed as a deduction to the Disputed Claim Reserve and such amounts taxed directly to the distributees.
There can be no assurance that the IRS will respect the foregoing treatment. For example, the IRS may characterize some or all of the Disputed Claims Reserve as a grantor trust for the benefit of the Holders of Disputed Claims in which case a Holder of a Disputed Claim may have taxable gain on the Effective Date measured by reference to the value of property set aside for such Holder and the Holder may be required to include earnings of the Disputed Claims Reserve in income. Alternatively, the IRS could characterize the Disputed Claims Reserve as a so-called "complex trust" subject to a separate entity-level tax on its earnings, except to the extent that such earnings are distributed during the taxable yeargrantor trust for the benefit of the Debtors. Moreover, because the amount received by Holders of Disputed Claims may increase or decrease, depending upon whether the Disputed Claims Reserve is treated as a grantor trust, such Holder could be prevented from recognizing a loss until the time at which there are no assets at all remaining in the Disputed Claims Reserve against which such Holder has a Claim. Each Holder of a Disputed Claim is urged to consult its tax advisor regarding the potential tax treatment of the Disputed Claim Reserve, distributions therefrom, and any tax consequences to such Holder relating thereto.
8. Backup Withholding Tax and Information Reporting Requirements
U.S. federal backup withholding tax and information reporting requirements generally apply to certain payments to certain noncorporate Holders. Information reporting generally will apply to payments under the Plan, other than payments to an exempt recipient. A payor will be required to withhold backup withholding tax from any payments made under the Plan, other than payments to an exempt recipient, if such Holder fails to furnish its correct taxpayer identification number or otherwise fails to comply with, or establish an exemption from, such backup withholding tax requirements.
THE ABOVE SUMMARY HAS BEEN PROVIDED FOR INFORMATIONAL PURPOSES ONLY. ALL HOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE
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XI. FEASIBILITY OF THE PLAN AND THE BEST INTERESTS OF CREDITORS
A. Feasibility of the Plan
The Debtors believe that the Reorganized Debtors will be able to perform their obligations under the Plan. In connection with confirmation of the Plan, the Bankruptcy Court will determine if the Plan is feasible pursuant to section 1129(a)(11) of the Bankruptcy Code, which requires that confirmation of the Plan is not likely to be followed by the liquidation or the need for further financial reorganization of the Debtors.
B. Best Interests Test
Section 1129(a)(7) of the Bankruptcy Code requires that any holder of an impaired claim or interest voting against a proposed plan of reorganization must be provided in the plan with a value, as of the effective date of the plan, at least equal to the value that the holder would receive if the debtor's operations were terminated and its assets liquidated under chapter 7 of the Bankruptcy Code. To determine what the holders of claims and interests in each impaired class would receive if a debtor were liquidated, the Bankruptcy Court must determine the dollar amount that would be generated from a liquidation of the debtor's assets in the context of a hypothetical liquidation. Such a determination must take into account the fact that secured claims, and any administrative claims resulting from the chapter 11 cases or from the hypothetical chapter 7 cases, would be paid in full from the liquidation proceeds before the balance of those proceeds would be made available to pay unsecured creditors and make distributions to holders of preferred interests or equity interests.
C. Liquidation Analysis
Set forth in Exhibit B attached hereto is a liquidation analysis developed by the Chapter 11 Debtors (the "Liquidation Analysis") that assumes the Chapter 11 Cases are converted to chapter 7 cases and the Chapter 11 Debtors' assets are liquidated under the direction of a Bankruptcy Court appointed trustee. THE LIQUIDATION VALUATIONS HAVE BEEN PREPARED SOLELY FOR USE IN THE DISCLOSURE STATEMENT AND DO NOT REPRESENT VALUES THAT ARE APPROPRIATE FOR ANY OTHER PURPOSE. NOTHING CONTAINED IN THIS ANALYSIS IS INTENDED TO BE OR CONSTITUTES A CONCESSION BY OR ADMISSION OF ANY PARTY FOR ANY PURPOSE. The assumptions used in developing this analysis are inherently subject to significant uncertainties and contingencies, many of which would be beyond the control of the Chapter 11 Debtors or a chapter 7 trustee. Accordingly, there can be no assurances that the values assumed in the Liquidation Analysis would be realized if the Chapter 11 Debtors were actually liquidated. In addition, any liquidation would take place in the future at which time circumstances may exist which cannot presently be predicted. A description of the procedures followed and the assumptions and qualifications made by the Chapter 11 Debtors in connection with the Liquidation Analysis are set forth in the notes thereto.
After consideration of the effect that a chapter 7 liquidation would have on the ultimate proceeds available for distribution to the Chapter 11 Debtors' creditors and Interest Holders, including (i) the increased cost and expenses of liquidation under chapter 7 arising from fees payable to the chapter 7 trustee and the attorneys and other professional advisors to such trustee, (ii) additional expenses and claims, some of which would be entitled to priority, which would be generated during the liquidation, (iii) the erosion of the value of the Chapter 11 Debtors' assets in the context of an expedited liquidation required under chapter 7 and the "forced sale" atmosphere that would prevail, (iv) the cost and expense attributable to the time value of money resulting from what is likely to be a more protracted proceeding and (v) the application of the rule of absolute priority to distributions in a chapter 7 liquidation, the Chapter 11 Debtors have determined that confirmation of the Plan will provide each Holder of a Claim or Interest entitled to vote with an equal or greater recovery than such Holder would have received under a chapter 7 liquidation of the Chapter 11 Debtors.
107 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. XII. ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE PLAN
The Debtors believe that the Plan affords Holders of Impaired Claims and Impaired Interests the potential for the greatest realization on the Debtors' assets and the RCM Trustee believes that the Plan affords Holders of RCM Securities Customer Claims and RCM FX/Unsecured Claims the potential for the greatest realizations on RCM's assets and, therefore, is in the best interests of such Holders. If, however, the requisite acceptances of the Plan are not received, or the requisite acceptances are received and the Plan is not subsequently confirmed and consummated, the theoretical alternatives include: (a) formulation of an alternative plan or plans of reorganization or (b) liquidation of the Chapter 11 Debtors under chapter 7 of the Bankruptcy Code.
XIII. THE SOLICITATION; VOTING PROCEDURES
A. Voting Deadline
The period during which Ballots and Master Ballots with respect to the Plan will be accepted by the Debtors (and may be withdrawn or revoked unless the Bankruptcy Court issues an order to the contrary) will terminate at 5:00 p.m. (Eastern Time) on December 8, 2006, unless and until the Plan Proponents extend such deadline. Except as permitted by the Bankruptcy Court, Ballots or Master Ballots that are received after the Voting Deadline (as extended by the Plan Proponents) will not be counted or otherwise used in connection with the Plan Proponents' request for confirmation of the Plan (or any permitted modification thereof).
The Plan Proponents reserve the absolute right, at any time or from time to time, to extend, by oral or written notice to the Voting Agent, the period of time during which Ballots will be accepted for any reason including, but not limited to, determining whether or not the requisite acceptances have been received. There can be no assurance that the Plan Proponents will exercise their right to extend the Solicitation period for the receipt of Ballots and Master Ballots. The Plan Proponents may extend the Voting Deadline for one or more creditors or Classes of creditors.
B. Voting Procedures
Under the Bankruptcy Code, for purposes of determining whether the requisite acceptances have been received, only Holders of Impaired Claims and Impaired Interests who actually vote will be counted. The failure of a Holder to deliver a duly executed Ballot will be deemed to constitute an abstention by such holder with respect to voting on the Plan and such abstentions will not be counted as votes for or against the Plan.
The Debtors and the Committees are providing copies of the Disclosure Statement (including all Exhibits) and related materials and, where appropriate, Ballots, Beneficial Owner Ballots or Master Ballots (in either case, a "Solicitation Package"), to Holders of: (i) Class 4 Senior Subordinated Note Claims, Class 5(a) Contributing Debtors General Unsecured Claims, Class 5(b) Related Claims and Class 6 RCM Intercompany Claims, against one or more of the Contributing Debtors; (ii) Class 4 FXA Senior Subordinated Note Claims, Class 5 FXA(a) General Unsecured Claims, Class 5(b) Related Claims and Class 6 FXA Convenience Claims, against FXA; and (iii) Class 3 RCM FX/Unsecured Claims, Class 4 RCM Securities Customer Claims, Class 5 Leuthold Metals Claims, Class 6 RCM FX/Unsecured Convenience Claims, Class 7 RCM Securities Customer Convenience Claims and Class 68 Related Claims, against RCM. Solicitation Packages will be provided to Nominees for Beneficial Owners of Senior Subordinated Notes, who will in turn provide Solicitation Packages to the Beneficial Owners for whom they hold interests as soon as possible, but in no event later than five business days after receipt by such Nominees of the Solicitation Packages. Any Beneficial Owner who has not received a Beneficial Owner Ballot should contact its Nominee or the Voting Agent.
You should provide all of the information requested by the Ballots you receive. You should complete and return all Ballots that you receive in the return envelope provided with each such Ballot. If you hold Claims in more than one class, you must use a separate ballot with respect to each class of Claims that you hold. If you have questions regarding voting or need a Ballot, you may contact the Voting Agent as set forth in Section XIII.M.
C. Ballot Elections
108 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. Certain of the Ballots distributed to Holders of Claims against the Chapter 11 Debtors contain elections to permit such Holders to opt in or opt out of particular treatment. The various Ballot elections are discussed below.
1. Ballot Elections to Opt Out of BAWAG Settlement
a. Consequences of Declining to Accept BAWAG Proceeds
Under the BAWAG Settlement Agreement, any Holder that is offered, as part of its Distribution, BAWAG Proceeds, has the option of (i) accepting such proceeds and being deemed to have given a release of all Refco-related claims or (ii) affirmatively choosing not to receive BAWAG Proceeds, thereby preserving the right to sue BAWAG directly, while forfeiting its share of BAWAG Proceeds. The following table describes the estimated impact on recoveries by Holders opting out of the BAWAG settlement, subject to approval by the Bankruptcy Court:
Consequences of Opting Out of BAWAG Settlement Creditor Class Estimated Plan Recovery if Estimated Plan Recovery if Accepting BAWAG Proceeds Rejecting BAWAG Proceeds Senior Subordinated Note Claims 83.4% 45.7% Contributing Debtors General 23.0% 12.2% Unsecured Claims RCM Securities Customer Claims 85.4% 80.6% RCM FX/Unsecured Claims 37.6% 30.9%
Upon a Holder accepting its share of BAWAG Proceeds, such Holder will be deemed to have given broad releases to BAWAG and its affiliates in accordance with the conditions of distribution set forth in the BAWAG Settlement Agreement. See Section VIII.G.2.d. –"Releases by Recipients of BAWAG Proceeds." However, pursuant to a Stipulation and Agreement of Settlement entered into on September 7, 2006 between BAWAG and the lead plaintiffs in the securities class action (see Section IV.D.4 –"Securities Class Action"), BAWAG agreed, on the condition that the settlement in the securities class action is approved, to carve the lead plaintiffs and the class members they represent out from the BAWAG Settlement Agreement's release provisions. Accordingly, any Holder of a Senior Subordinated Noteholder Claim that is also a member of securities class action class may, assuming approval of the securities class action settlement, elect to receive BAWAG Senior Subordinated Noteholder Proceeds without releasing BAWAG and its Affiliates from all Securities Class Action claims or actions arising from or related to the Debtors.
b. Ballot Election to Decline Senior Subordinated Note Holder BAWAG Proceeds
Under the Plan, Holders of Senior Subordinated Note Claims against the Debtors will receive Senior Subordinated Note Holder BAWAG Proceeds as a component of their Pro Rata share of the Senior Subordinated Note Holder Distribution, unless such Holders elect not to receive Senior Subordinated Note Holder BAWAG Proceeds by checking theproviding appropriate box on Form Ballot D-1.instructions to their Nominee as described in more detail in the following paragraph. Only Holders of Senior Subordinated Note Claims that vote to reject the Plan may make such an election, and such an election by any Holder of Senior Subordinated Note Claims voting to accept the Plan will be disregarded. Further, Holders of Senior Subordinated Note Claims that fail to vote their claims (or whose votes are not counted pursuant to the solicitation procedures approved by the Bankruptcy Court) will be deemed to accept the receipt of Senior Subordinated Note Holder BAWAG Proceeds as a component of their Pro Rata share of the Senior Subordinated Note Holder Distribution.
In order to effect the Noteholder Election, each Beneficial Owner must: (i) provide instructions to its Nominee with respect to its Noteholder Election (by returning to its Nominee a duly-completed BAWAG Opt-Out Election Form or by such other means specified by its Nominee) sufficiently far in advance of the Voting Deadline to permit its Nominee to effectuate such holder's Noteholder Election by electronically tendering such holder's Senior Subordinated Notes to The Depository Trust Company ("DTC"); and (ii) vote to reject the Plan, and ensure that such vote is received by the Special Voting Agent by the Voting Deadline, pursuant to the procedures described herein. If
109 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. a Beneficial Owner (x) fails to cause its Nominee to effectuate such Beneficial Owner's Noteholder Election by electronically tendering such holder's Senior Subordinated Notes to DTC; or (y) the Special Voting Agent for any reason does not timely receive the corresponding vote to reject the Plan, such Noteholder Election will not be valid.
On the Effective Date, each Holder of a Senior Subordinated Note Claim that has not affirmatively exercised its option to be excluded from any Distribution of BAWAG Proceeds prior to the Voting Deadline will be deemed to forever release, waive and discharge all claims, demands, debts, rights, causes of action or liabilities, whether liquidated or unliquidated, fixed or contingent, matured or unmatured, known or unknown, foreseen or unforeseen, then existing or thereafter arising, in law, equity or otherwise that are based in whole or in part on any act or omission, transaction, event or other occurrence taking place on or prior to the Effective Date in any way relating to the Refco Entities or the RGHI Entities (as defined in the BAWAG Settlement), and any transactions involving such parties, including but not limited to claims or actions arising from or related to (a) the allegations set forth in the Complaint and the Counterclaim (each as defined in the BAWAG Settlement), (b) the allegations set forth in the Adversary Proceeding (as defined in the BAWAG Settlement), or (c) any allegations that could have been made by any of the Refco Entities against BAWAG; provided, however, that, pursuant to the Securities Class Action Stipulation (as defined below), any Holder of a Senior Subordinated Note Claim that is also a member of securities class action class described in the Securities Class Action Stipulation may, assuming approval of the Securities Class Action Stipulation (and the settlement contained therein), elect to receive BAWAG Proceeds without releasing BAWAG of its Securities Class Action claims as set forth in this paragraph.
"Securities Class Action Stipulation" means that certain Stipulation and Agreement of Settlement entered into on September 7, 2006 between BAWAG and the lead plaintiffs in the securities class action entitled In re Refco Inc. Securities Litigation, Case No. 05 Civ. 8626 (GEL), filed in the United States District Court for the Southern District of New York. See Section IV.D.4 –"Securities Class Action."
c. Ballot Election to Decline Contributing Debtors General Unsecured BAWAG Proceeds
Under the Plan, Holders of Contributing Debtors General Unsecured Claims will receive Contributing Debtors General Unsecured BAWAG Proceeds as a component of their Distribution from the Contributing Debtors, unless such Holders elect not to receive Contributing Debtors General Unsecured BAWAG Proceeds by checking the appropriate box on Form Ballot D-2. Holders of Contributing Debtors General Unsecured Claims that fail to vote their claims (or whose votes are not counted pursuant to the solicitation procedures approved by the Bankruptcy Court), will be deemed to accept the receipt of Contributing Debtors General Unsecured BAWAG Proceeds as a component of their Distribution from the Contributing Debtors.
On the Effective Date, each Holder of a Contributing Debtors General Unsecured Claim that has not affirmatively exercised its option to be excluded from any Distribution of BAWAG Proceeds prior to the Voting Deadline will be deemed to forever release, waive and discharge all claims, demands, debts, rights, causes of action or liabilities, whether liquidated or unliquidated, fixed or contingent, matured or unmatured, known or unknown, foreseen or unforeseen, then existing or thereafter arising, in law, equity or otherwise that are based in whole or in part on any act or omission, transaction, event or other occurrence taking place on or prior to the Effective Date in any way relating to the Refco Entities or the RGHI Entities (as defined in the BAWAG Settlement), and any transactions involving such parties, including but not limited to claims or actions arising from or related to (a) the allegations set forth in the Complaint and the Counterclaim (each as defined in the BAWAG Settlement), (b) the allegations set forth in the Adversary Proceeding (as defined in the BAWAG Settlement), or (c) any allegations that could have been made by any of the Refco Entities against BAWAG.
d. Ballot Election to Decline RCM BAWAG Proceeds
Under the Plan, Holders of RCM FX/Unsecured Claims and RCM Securities Customer Claims will receive RCM BAWAG Proceeds as a component of their Distribution from RCM, unless such Holders elect not to receive RCM BAWAG Proceeds by checking the appropriate box on Form Ballot D-6 or D-7, as applicable. Holders of RCM FX/Unsecured Claims and RCM Securities Customer Claims that fail to vote their claims (or whose votes are not
110 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. counted pursuant to the solicitation procedures approved by the Bankruptcy Court), will be deemed to accept the receipt of RCM BAWAG Proceeds as a component of their Distribution from RCM.
On the Effective Date, each Holder of a RCM FX/Unsecured Claim or RCM Securities Customer Claim that has not affirmatively exercised its option to be excluded from any Distribution of BAWAG Proceeds prior to the Voting Deadline will be deemed to forever release, waive and discharge all claims, demands, debts, rights, causes of action or liabilities, whether liquidated or unliquidated, fixed or contingent, matured or unmatured, known or unknown, foreseen or unforeseen, then existing or thereafter arising, in law, equity or otherwise that are based in whole or in part on any act or omission, transaction, event or other occurrence taking place on or prior to the Effective Date in any way relating to the Refco Entities or the RGHI Entities (as defined in the BAWAG Settlement), and any transactions involving such parties, including but not limited to claims or actions arising from or related to (a) the allegations set forth in the Complaint and the Counterclaim (each as defined in the BAWAG Settlement), (b) the allegations set forth in the Adversary Proceeding (as defined in the BAWAG Settlement), or (c) any allegations that could have been made by any of the Refco Entities against BAWAG.
2. Ballot Election Not to Contribute Non-Estate Refco Claims to Private Actions Trust
Holders of Contributing Debtors General Unsecured Claims, FXA General Unsecured Claims, RCM FX/Unsecured Claims and RCM Securities Customer Claims that contribute their Non-Estate Refco Claims (as defined in the following paragraph) to the Private Action Trust will receive in exchange for their claims the right to receive their Pro Rata share of the proceeds of the Private Actions Trust; provided, however, consistent with the Private Actions Trust Agreement, that a secondary purchaser of Contributing Debtors General Unsecured Claims, FXA General Unsecured Claims, RCM FX/Unsecured Claims or RCM Securities Customer Claims may participate in the Private Actions Trust only if such purchaser has received an assignment of Non-Estate Refco Claims from the original holder of such Claims and has elected to assign such Non-Estate Refco Claims to the Private Actions Trust. Each Holder of a Contributing Debtors General Unsecured Claim, FXA General Unsecured Claim, RCM FX/Unsecured Claim or RCM Securities Customer Claim who does not check the appropriate box on Form Ballot D-2, D-4, D-6 or D-7, as appropriate, will be deemed to have agreed to contribute its Non-Estate Refco Claims to the Private Action Trust. Holders of Contributing Debtors General Unsecured Claims, FXA General Unsecured Claims, RCM FX/Unsecured Claims or RCM Securities Customer Claims that fail to vote their claims (or whose votes are not counted pursuant to the solicitation procedures approved by the Bankruptcy Court) will be excluded from participation in the Private Actions Trust.
"Non-Estate Refco Claims" are non-Estate causes of action arising from any matter involving the Refco Entities, excluding contract claims against third parties. Non-Estate Refco Claims include, without limitation, causes of action against: (i) all current and former officers, directors or employees of the Refco Entities; (ii) all persons or entities that conducted transactions with the Refco Entities; and (iii) all persons or entities that provided services to the Refco Entities, including, without limitation, all attorneys, accountants, financial advisors and parties providing services to the Refco Entities in connection with the public issuance of debt or equity, including, without limitation, all underwriters.
3. Ballot Election for Treatment as FXA Convenience Claim
Under the Plan, each Holder of a Class 5(a) FXA General Unsecured Claim in an amount greater than $10,000 may elect to have its Class 5(a) FXA General Unsecured Claim reduced in amount to $10,000 and treated as a Class 6 FXA Convenience Claim under the Plan. Form Ballot D-4, which Ballot will be distributed to all Holders of Class 5(a) FXA General Unsecured Claims in an amount greater than $10,000, provides Holders of Class 5(a) FXA General Unsecured Claims the option to make the foregoing election. Holders of Class 5(a) FXA General Unsecured Claims electing treatment as Class 6 FXA Convenience Claims will be deemed to have voted their Class 6 FXA Convenience Claims (as reduced) to accept the Plan.
As set forth in Section VIII.A.2, Holders of Class 6 FXA Convenience Claims are entitled to receive cash equal to 40% of their allowed Class 6 FXA Convenience Claims. While the distribution to hHolders of a Class 5(a) FXA General Unsecured Claims includes Tranche A Litigation Trust Interests, hHolders of Allowed Class 6 FXA Convenience Claims do not receive any interest in the Litigation Trust on account of their Claims.
111 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. For purposes of the Plan and the Distributions to be made thereunder, the aggregate amount of Distributions to Class 6 FXA Convenience Claims is limited to $5 million. See Section 1.86 of the Plan. To the extent that the amount of Class 5(a) FXA General Unsecured Claims electing to receive a Class 6 FXA Convenience Claims causes the aggregate amount of Class 6 FXA Convenience Claims to exceed $5 million, the Holders of Claims permitted to elect such treatment will be determined by reference to the amount of the Claim, with the Claim in the lowest amount being selected first and the next largest claim being selected thereafter until the $5 million cap is reached. To the extent any Holder of a Class 5(a) FXA General Unsecured Claim elects treatment as a Class 6 FXA Convenience Claim, but such Holder is excluded from Class 6 due to oversubscription of such Class, the Class 5(a) vote initially cast by such Holder will be counted in the tabulation of votes.
4. Ballot Election Not to Assign RCM Related Debtor Claims to Litigation Trust and Not to Release RCM Related Claims Against Non-Debtor Entities
Under the Plan, Holders of Class 3 RCM FX/Unsecured Claims and Class 4 RCM Securities Customer Claims must agree (i) to assign their RCM Related Claims against the Debtors (the "RCM Related Debtor Claims"), if any, to the Litigation Trust, and (ii) to release their RCM Related Claims against any Refco Entity that is not a Debtor in these Chapter 11 Cases, in order to receive their pro rata share of the RCM Cash Distribution and certain other property. Form Ballots D-6 and D-7 permit Holders of Class 3 RCM FX/Unsecured Claims and Class 4 RCM Securities Customer Claims, respectively, to elect not to receive such treatment. Unless such Holders make the appropriate Ballot election, such Holders will be deemed to have agreed (i) to assign their RCM Related Debtor Claims to the Litigation Trust, and (ii) to release their RCM Related Claims against any Refco Entity that is not a Debtor in these Chapter 11 Cases. Further, Holders of Class 3 RCM FX/Unsecured Claims and Class 4 RCM Securities Customer Claims that fail to vote their claims (or whose votes are not counted pursuant to the solicitation procedures approved by the Bankruptcy Court), will be deemed not to have (x) assigned their RCM Related Debtor Claims to the Litigation Trust or (y) released their RCM Related Claims against non-debtor entities and accordingly will not receive their pro rata share of the RCM Cash Distribution and certain other property.
5. Ballot Election for Treatment as RCM FX/Unsecured Convenience Claim
Under the Plan, each Holder of a Class 3 RCM FX/Unsecured Claim in an amount greater than $10,000 may elect to have its Class 3 RCM FX/Unsecured Claim reduced in amount to $10,000 and treated as a Class 6 RCM FX/Unsecured Convenience Claim under the Plan. Form Ballot D-6, which Ballot will be distributed to all Holders of Class 3 RCM FX/Unsecured Claims in an amount greater than $10,000, provides Holders of Class 3 RCM FX/Unsecured Claims the option to make the foregoing election. Holders of Class 3 RCM FX/Unsecured Claims electing treatment as Class 6 RCM FX/Unsecured Convenience Claims will be deemed to have voted their Class 6 RCM FX/Unsecured Convenience Claims (as reduced) to accept the Plan.
As set forth in Section VIII.A.3, Holders of Class 6 RCM FX/Unsecured Convenience Claims are entitled to receive cash equal to 60% of their allowed Class 6 RCM FX/Unsecured Convenience Claims. While the distribution to Holders of Class 3 RCM FX/Unsecured Claims includes Tranche A Litigation Trust Interests, Holders of Allowed Class 6 RCM FX/Unsecured Convenience Claims do not receive any interest in the Litigation Trust on account of their Claims.
For purposes of the Plan and the Distributions to be made thereunder, the aggregate amount of Distributions to Class 6 RCM FX/Unsecured Convenience Claims is limited to $1.458 million. See Section 1.153 of the Plan. To the extent that the amount of Class 3 RCM FX/Unsecured Claims electing to receive Class 6 RCM FX/Unsecured Convenience Claims causes the aggregate amount of Class 6 RCM FX/Unsecured Convenience Claims to exceed $1.458 million, the Holders of Claims permitted to elect such treatment will be determined by reference to the amount of the Claim, with the Claim in the lowest amount being selected first and the next largest claim being selected thereafter until the $1.458 million cap is reached. To the extent any Holder of a Class 3 RCM FX/Unsecured Claim elects treatment as a Class 6 RCM FX/Unsecured Convenience Claim, but such Holder is excluded from Class 6 due to oversubscription of such Class, the Class 3 vote initially cast by such Holder will be counted in the tabulation of votes.
6. Ballot Election for Treatment as RCM Securities Customer Convenience Claim
Under the Plan, each Holder of a Class 4 RCM Securities Customer Claim in an amount greater than $10,000 may elect to have its Class 4 RCM Securities Customer Claim reduced in amount to $10,000 and treated as a Class 7
112 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. RCM Securities Customer Convenience Claim under the Plan. Form Ballot D-7, which Ballot will be distributed to all Holders of Class 4 RCM Securities Customer Claims in an amount greater than $10,000, provides Holders of Class 4 RCM Securities Customer Claims the option to make the foregoing election. Holders of Class 4 RCM Securities Customer Claims electing treatment as Class 7 RCM Securities Customer Convenience Claims will be deemed to have voted their Class 7 RCM Securities Customer Convenience Claims (as reduced) to accept the Plan.
As set forth in Section VIII.A.3, Holders of Class 7 RCM Securities Customer Convenience Claims are entitled to receive cash equal to 100% of their allowed Class 7 RCM Securities Customer Convenience Claims. While the distribution to Holders of Class 4 RCM Securities Customer Claims includes Tranche A Litigation Trust Interests, Holders of Allowed Class 7 RCM Securities Customer Convenience Claims do not receive any interest in the Litigation Trust on account of their Claims.
For purposes of the Plan and the Distributions to be made thereunder, the aggregate amount of Distributions to Class 7 RCM Securities Customer Convenience Claims is limited to $0.333 million. See Section 1.165 of the Plan. To the extent that the amount of Class 4 RCM Securities Customer Claims electing to receive Class 7 RCM Securities Customer Convenience Claims causes the aggregate amount of Class 7 RCM Securities Customer Convenience Claims to exceed $0.333 million, the Holders of Claims permitted to elect such treatment will be determined by reference to the amount of the Claim, with the Claim in the lowest amount being selected first and the next largest claim being selected thereafter until the $0.333 million cap is reached. To the extent any Holder of a Class 4 RCM Securities Customer Claim elects treatment as a Class 7 RCM Securities Customer Convenience Claim, but such Holder is excluded from Class 7 due to oversubscription of such Class, the Class 4 vote initially cast by such Holder will be counted in the tabulation of votes.
D. Special Procedures for Holders of Senior Subordinated Notes
The Voting Record Date for determining which holders of Senior Subordinated Notes are entitled to vote on the Plan is October 16, 2006. The Senior Subordinated Note Indenture Trustee will not vote on behalf of the holders of such notes. Holders must submit their own Beneficial Owner Ballots.
1. Beneficial Owners
a. A Beneficial Owner holding Senior Subordinated Notes as record holder in its own name should vote on the Plan by completing and signing the enclosed Beneficial Owner Ballot and returning it directly to the Voting Agent so as to be received by the Voting Deadline using the enclosed self-addressed, postage-paid envelope.
b. A Beneficial Owner holding Senior Subordinated Notes in "street name" through a Nominee should vote on the Plan by one of the following two methods (as selected by such Beneficial Owner's Nominee):
• Complete and sign the enclosed Beneficial Owner Ballot. Return the Beneficial Owner Ballot to your Nominee as promptly as possible and in sufficient time to allow your Nominee to process the Ballot and return it to the Voting Agent by the Voting Deadline. If no self-addressed, postage-paid envelope was enclosed for this purpose, contact the Voting Agent for instructions; or
• Complete and sign the pre-validated Beneficial Owner Ballot (as described below) provided to you by your Nominee. Return the pre-validated Beneficial Owner Ballot to the Voting Agent by the Voting Deadline using the return envelope provided in the solicitation package.
Any Beneficial Owner Ballot returned to a Nominee by a Beneficial Owner will not be counted for purposes of acceptance or rejection of the Plan until such Nominee properly completes and delivers to the Voting Agent a Master Ballot that reflects the vote of such Beneficial Owner. The Plan Proponents assume no responsibility for a Nominee's failure to timely and accurately transmit to the Voting Agent a Beneficial Owner's instructions.
If any Beneficial Owner owns Senior Subordinated Notes through more than one Nominee, such Beneficial Owner may receive multiple mailings containing Beneficial Owner Ballots. The Beneficial Owner should execute a separate Beneficial Owner Ballot for each block of Senior Subordinated Notes that it holds through any particular Nominee and return each Beneficial Owner Ballot to the respective Nominee in the return envelope provided
113 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. therewith. Beneficial Owners who execute multiple Beneficial Owner Ballots with respect to Senior Subordinated Notes held through more than one Nominee must indicate on each Beneficial Owner Ballot the names of ALL such other Nominees and the additional amounts of such Senior Subordinated Notes so held and voted, and must vote all Beneficial Owner Ballots in the same fashion (i.e., all "Accepts" or all "Rejects"). If a Beneficial Owner holds a portion of the Senior Subordinated Notes through a Nominee and another portion as a record holder, the Beneficial Owner should follow the procedures described in subparagraph (1)(a) above to vote the portion held of record and the procedures described in subparagraph (1)(b) above to vote the portion held through a Nominee or Nominees.
All Beneficial Owners should carefully review and follow the instructions appended to the Beneficial Owner Ballot before returning their completed Beneficial Owner Ballots to their Nominees.
2. Nominees
A Nominee that on the Record Date is the registered holder of Senior Subordinated Notes for a Beneficial Owner can obtain the votes of the Beneficial Owners of such Senior Subordinated Notes, consistent with customary practices for obtaining the votes of securities held in "street name," in one of the following two ways:
a. Pre-Validated Ballots
The Nominee may "pre-validate" a Beneficial Owner Ballot by (i) signing the Beneficial Owner Ballot; (ii) indicating on the Beneficial Owner Ballot the name of the registered holder, the amount of Senior Subordinated Notes held by the Nominee for the Beneficial Owner and the account numbers for the accounts in which such Senior Subordinated Notes are held by the Nominee; and (iii) forwarding such Beneficial Owner Ballot, together with the Disclosure Statement, return envelope provided in the Solicitation Package and other materials requested to be forwarded, to the Beneficial Owner for voting. The Beneficial Owner must then complete the information requested in the Beneficial Owner Ballot, review the certifications contained in the Beneficial Owner Ballot, and return the Beneficial Owner Ballot directly to the Voting Agent in the pre-addressed, postage-paid envelope so that it is RECEIVED by the Voting Agent on or before the Voting Deadline. A list of the Beneficial Owners to whom "pre-validated" Beneficial Owner Ballots were delivered should be maintained by Nominees for inspection for at least one year from the Voting Deadline.
b. Master Ballots
If the Nominee elects not to prevalidatepre-validate Beneficial Owner Ballots, the Nominee may obtain the votes of Beneficial Owners by forwarding to the Beneficial Owners the unsigned Beneficial Owner Ballots, together with the Disclosure Statement, a return envelope provided by, and addressed to, the Nominee, and other materials requested to be forwarded. Each such Beneficial Owner must then indicate its vote on the Beneficial Owner Ballot, complete the information requested in the Beneficial Owner Ballot, review the certifications contained in the Beneficial Owner Ballot, execute the Beneficial Owner Ballot and return the Beneficial Owner Ballot to the Nominee. After collecting the Beneficial Owner Ballots, the Nominee should, in turn, complete a Master Ballot compiling the votes and other information from the Beneficial Owner Ballots, execute the Master Ballot, and deliver the Master Ballot to the Voting Agent so that it is RECEIVED by the Voting Agent on or before the Voting Deadline. Nominees are required to retain Beneficial Owner Ballots for inspection by the Court for one year following the Voting Deadline. EACH NOMINEE SHOULD ADVISE ITS BENEFICIAL OWNERS TO RETURN THEIR BENEFICIAL OWNER BALLOTS TO THE NOMINEE BY A DATE CALCULATED BY SUCH NOMINEE TO ALLOW SUCH NOMINEE TO PREPARE AND RETURN THE MASTER BALLOT TO THE VOTING AGENT SO THAT IT IS RECEIVED BY THE VOTING AGENT ON OR BEFORE THE VOTING DEADLINE.
No fees, commissions or other remuneration will be payable to any Nominee in connection with this solicitation. Upon written request, however, the Debtors will reimburse Nominees for reasonable and customary out-of-pocket expenses incurred in forwarding Solicitation Materials to Beneficial Owners.
All Nominees should carefully review and follow the instructions appended to the Master Ballot before returning their completed Master Ballots to the Voting Agent.
114 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. 3. Miscellaneous
For purposes of voting to accept or reject the Plan, the Beneficial Owners of Senior Subordinated Notes will be deemed to be the "holders" of the Claims represented by such Senior Subordinated Notes. Unless otherwise ordered by the Bankruptcy Court, Beneficial Owner Ballots or Master Ballots that are signed, dated and timely received, but on which a vote to accept or reject the Plan has not been indicated, will not be counted. The Plan Proponents may request that the Voting Agent attempt to contact such voters to cure any such defects in the Beneficial Owner Ballots or Master Ballots.
In the event of a dispute with respect to any Senior Subordinated Note Claim, any vote to accept or reject the Plan cast with respect to such Claim will not be counted for purposes of determining whether the Plan has been accepted or rejected, unless the Bankruptcy Court orders otherwise.
E. Fiduciaries and other Representatives
If a Ballot is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation, or another acting in a fiduciary or representative capacity, such person should indicate such capacity when signing and, unless otherwise determined by the Debtors, must submit proper evidence satisfactory to the Debtors of authority to so act. Authorized signatories should submit the separate Ballot of each beneficial owner for whom they are voting.
UNLESS THE BALLOT OR MASTER BALLOT BEING FURNISHED IS TIMELY SUBMITTED TO THE VOTING AGENT ON OR BEFORE THE VOTING DEADLINE, SUCH BALLOT WILL BE REJECTED AS INVALID AND WILL NOT BE COUNTED AS AN ACCEPTANCE OR REJECTION OF THE PLAN; PROVIDED, HOWEVER, THAT THE PLAN PROPONENTS RESERVE THE RIGHT TO REQUEST OF THE BANKRUPTCY COURT THAT ANY SUCH BALLOT OR MASTER BALLOT BE COUNTED. IN NO CASE SHOULD A BALLOT OR MASTER BALLOT BE DELIVERED TO ANY ENTITY OTHER THAN THE NOMINEE OR THE VOTING AGENT, AS APPROPRIATE, AND IN NO CASE SHOULD ANY SENIOR SUBORDINATED NOTES BE DELIVERED TO THE DEBTORS OR ANY OF THEIR ADVISORS, INCLUDING THE VOTING AGENT.
F. Parties Entitled to Vote
Under section 1124 of the Bankruptcy Code, a class of claims or interests is deemed to be "Impaired" under a plan unless (i) the plan leaves unaltered the legal, equitable and contractual rights to which such claim or interest entitles the holder thereof or (ii) notwithstanding any legal right to an accelerated payment of such claim or interest, the plan cures all existing defaults (other than defaults resulting from the occurrence of events of bankruptcy) and reinstates the maturity of such claim or interest as it existed before the default.
In general, a holder of a claim or interest may vote to accept or to reject a plan if (i) the claim or interest is "allowed," which means generally that no party in interest has objected to such claim or interest, and (ii) the claim or interest is impaired by the plan. If, however, the holder of an impaired claim or interest will not receive or retain any distribution under the plan on account of such claim or interest, the Bankruptcy Code deems such holder to have rejected the plan and, accordingly, holders of such claims and interests do not actually vote on the plan. If a claim or interest is not impaired by the plan, the Bankruptcy Code deems the holder of such claim or interest to have accepted the plan and, accordingly, holders of such claims and interests are not entitled to vote on the plan.
A vote may be disregarded if the Bankruptcy Court determines, pursuant to section 1126(e) of the Bankruptcy Code, that it was not solicited or procured in good faith or in accordance with the provisions of the Bankruptcy Code.
G. Classes Impaired Under the Plan
The only Classes of Claims and Interests that are Impaired under the Plan and entitled to vote are: (i) with respect to the Contributing Debtors, Class 4 Senior Subordinated Note Claims, Class 5(a) Contributing Debtors General Unsecured Claims, Class 5(b) Related Claims and Class 6 RCM Intercompany Claims; (ii) with respect to FXA, Class 4 FXA Senior Subordinated Note Claims, Class 5(a) FXA General Unsecured Claims, Class 5(b) Related Claims and Class 6 FXA Convenience Claims; and (iii) with respect to RCM, Class 3 RCM FX/Unsecured Claims,
115 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. Class 4 RCM Securities Customer Claims, Class 5 Leuthold Metals Claims, Class 6 RCM FX/Unsecured Convenience Claims, Class 7 RCM Securities Customer Convenience Claims and Class 68 Related Claims.
Holders of Class 7 Subordinated Claims and Class 8 Old Equity Interests against one or more of the Contributing Debtors will receive property or an interest in property under the Plan, but nonetheless will be deemed to reject the Plan because such Holders are not entitled to receive or retain any Distribution or property under the Plan on account of such Claims or Interests. Holders of Class 7 FXA Subordinated Claims against FXA and Class 79 RCM Subordinated Claims against RCM neither receive or retain, nor are entitled to receive or retain, any Distribution or property under the Plan on account of their Claims or Interests. Accordingly, under section 1126(g) of the Bankruptcy Code, such Holders are presumed to have rejected the Plan and are not entitled to vote in respect of the Plan.
All other Classes of Claims and Interests are Unimpaired under the Plan. Accordingly, under section 1126(f) of the Bankruptcy Code, all such Classes of Claims and Interests are deemed to have accepted the Plan and are not entitled to vote in respect of the Plan.
H. Elimination Of Classes
Any Class that does not contain any Allowed Claims or any Claims temporarily Allowed for voting purposes under Bankruptcy Rule 3018, as of the date of the commencement of the Confirmation Hearing, will be deemed to have been deleted from the Plan for purposes of (a) voting to accept or reject the Plan and (b) determining whether it has accepted or rejected the Plan under section 1129(a)(8) of the Bankruptcy Code.
I. Confirmation Pursuant to Section 1129(b) of the Bankruptcy Code
To the extent that any Impaired Class votes to reject the Plan or is deemed to have rejected it, the Plan Proponents may request Confirmation of the Plan under the "cramdown" provisions of section 1129(b) of the Bankruptcy Code.
J. Agreements Upon Furnishing Ballots
The delivery of an accepting Ballot (or Master Ballot) to the Voting Agent by a Holder of: (i) Class 4 Senior Subordinated Note Claims, Class 5(a) Contributing Debtors General Unsecured Claims or Class 6 RCM Intercompany Claims, against one or more of the Contributing Debtors; (ii) Class 4 FXA Senior Subordinated Note Claims, Class 5(a) FXA General Unsecured Claims or Class 6 FXA Convenience Claims, against FXA; or (iii) Class 3 RCM FX/Unsecured Claims, Class 4 RCM Securities Customer Claims or, Class 5 Leuthold Metals Claims, Class 6 RCM FX/Unsecured Convenience Claims or Class 7 RCM Securities Customer Convenience Claims against RCM, pursuant to one of the procedures set forth above, will constitute the agreement of such Holder to accept (x) all of the terms of, and conditions to, this solicitation; and (y) the terms of the Plan; provided, however, that all parties in interest retain their right to object to confirmation of the Plan pursuant to section 1128 of the Bankruptcy Code.
K. Waivers of Defects, Irregularities, Etc.
Unless otherwise directed by the Bankruptcy Court, all questions as to the validity, form, eligibility (including time of receipt), acceptance, and revocation or withdrawal of Ballots will be determined by the Voting Agent and the Plan Proponents, which determination will be final and binding. As indicated below under "Withdrawal of Ballots; Revocation," effective withdrawals of Ballots must be delivered to the Voting Agent prior to the Voting Deadline. The Plan Proponents reserve the absolute right to contest the validity of any such withdrawal. The Plan Proponents also reserve the right to reject any and all Ballots not in proper form, the acceptance of which would, in the opinion of the Plan Proponents or their counsel, be unlawful. The Plan Proponents further reserve the right to waive any defects or irregularities or conditions of delivery as to any particular Ballot. The interpretation (including the Ballot and the respective instructions thereto) by the Debtors, unless otherwise directed by the Bankruptcy Court, will be final and binding on all parties. Unless waived, any defects or irregularities in connection with deliveries of Ballots must be cured within such time as the Debtors (or the Bankruptcy Court) determine. Neither the Debtors nor any other person will be under any duty to provide notification of defects or irregularities with respect to deliveries of Ballots nor will any of them incur any liabilities for failure to provide such notification. Unless otherwise directed by the Bankruptcy Court, delivery of such Ballots will not be deemed to have been made until such irregularities have been
116 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. cured or waived. Ballots previously furnished (and as to which any irregularities have not theretofore been cured or waived) will be invalidated.
L. Withdrawal of Ballots; Revocation
Any party who has delivered a valid Ballot for the acceptance or rejection of the Plan may withdraw such acceptance or rejection by delivering a written notice of withdrawal to the Voting Agent at any time prior to the Voting Deadline. A notice of withdrawal, to be valid, must (i) contain the description of the Claim(s) to which it relates and the aggregate principal amount represented by such Claim(s), (ii) be signed by the withdrawing party in the same manner as the Ballot being withdrawn, (iii) contain a certification that the withdrawing party owns the Claim(s) and possesses the right to withdraw the vote sought to be withdrawn and (iv) be received by the Voting Agent in a timely manner at the address set forth below. Prior to the Confirmation Hearing, the Plan Proponents intend to consult with the Voting Agent to determine whether any withdrawals of Ballots were received and whether the requisite acceptances of the Plan have been received. As stated above, the Plan Proponents expressly reserve the absolute right to contest the validity of any such withdrawals of Ballots.
Unless otherwise directed by the Bankruptcy Court, a purported notice of withdrawal of Ballots which is not received in a timely manner by the Voting Agent will not be effective to withdraw a previously cast Ballot.
Any party who has previously submitted to the Voting Agent prior to the Voting Deadline a properly completed Ballot may revoke such Ballot and change its vote by submitting to the Voting Agent prior to the Voting Deadline a subsequent properly completed Ballot for acceptance or rejection of the Plan. In the case where more than one timely, properly completed Ballot is received, only the Ballot which bears the latest date will be counted for purposes of determining whether the requisite acceptances of the Plan have been received.
M. Further Information; Additional Copies
If you have any questions or require further information about the voting procedure for voting your Claim or about the packet of material you received, or if you wish to obtain an additional copy of the Plan, the Disclosure Statement, or any exhibits to such documents (at your own expense, unless otherwise specifically required by Fed. R. Bankr. P. 3017(d)), please contact the Voting Agent as specified below.
1. Voting Agent for Holders of the Debtors' Securities
For (i) Holders of Senior Subordinated Note Claims and their respective Nominees and (ii) holders of the common stock of Refco Inc., the Debtors' Voting Agent is Financial Balloting Group LLC:
Financial Balloting Group LLC 757 Third Avenue, 3rd Floor New York, NY 10017 Tel: (646) 282-1800
2. Voting Agent for All Other Holders of Claims Against and Interests In the Chapter 11 Debtors
For Holders of Claims against and Interests in the Chapter 11 Debtors, except for (i) Holders of Senior Subordinated Note Claims and their respective Nominees and (ii) holders of the common stock of Refco Inc., the Debtors' Voting Agent is Omni Management Group, LLC:
Omni Management Group, LLC 16501 Ventura Blvd., Suite 440 Encino, CA 91436-2068 Tel: (818) 906-8300
117 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. XIV. PROFESSIONALS
1. Debtors' Professionals
The Debtors requested and obtained Bankruptcy Court authorization to retain certain professionals to represent them and assist them in connection with the Chapter 11 Cases. Certain of these professionals have been intimately involved with the negotiation and development of the Plan and the Disclosure Statement.
a. Skadden, Arps, Slate, Meagher & Flom LLP. Pursuant to an engagement agreement dated October 16, 2005, Refco retained Skadden, Arps, Slate, Meagher & Flom LLP ("Skadden, Arps") as counsel to the Debtors and their affiliates in connection with the Company's restructuring. On December 12, 2005, the Bankruptcy Court entered an order authorizing the retention of Skadden, Arps as counsel to the Debtors in their respective Chapter 11 Cases, effective as of the Petition Date.
b. Goldin Associates, LLC. Pursuant to an engagement agreement dated January 5, 2006, Refco retained Goldin Associates, LLC ("Goldin") as crisis managers for the Debtors. On March 17, 2006, the Bankruptcy Court entered an order authorizing the retention of Goldin as crisis managers to the Debtors in their respective Chapter 11 Cases.
c. AP Services, LLC. Pursuant to an engagement agreement dated October 18, 2005, Refco retained AP Services, LLC ("APS") as crisis managers for the Debtors. On December 12, 2005, the Bankruptcy Court entered an order authorizing the retention of APS. Among the services to be provided, APS agreed to furnish the services of certain individuals. Working collaboratively with the senior management team, members of APS are assisting the Company in evaluating and implementing strategic and tactical options through the restructuring process.
d. Omni Management Group, LLC. On January 19, 2006, the Bankruptcy Court entered an order authorizing the retention and appointment of Omni Management Group, LLC ("Omni") as claims, noticing and balloting agent (the "Claims Agent") of the Clerk of the Bankruptcy Court, effective as of November 2, 2005. Omni was retained to mail certain notices and other documents, maintain claims files and a claims and voting register, act as balloting agent with respect to certain creditors, assist with preparation the Debtors' schedules and statements of financial affairs and serve motions and orders. In consideration for such services, Omni is paid its reasonable and customary fees for such services, and is reimbursed for its reasonable out-of-pocket expenses upon submission of monthly invoices.
e. Other Professionals. In light of the complexity of the Chapter 11 Cases, the Debtors have retained the following other professionals: (i) Christies, Inc. (auctioneer); (ii) Conyers Dill & Pearman (special counsel for the Debtors in Bermuda proceedings); (iii) DJM Asset Management (real estate advisors); (iv) FTI Consulting, Inc. (forensic accountant and electronic evidence consultant); (v) Greenhill & Co., LLC (financial advisor and investment banker); (vi) Latham & Watkins LLP (special investigation counsel); (vii) Lenz & Staehelin (special counsel for the Debtors in Swiss proceedings); (viii) UHY Advisors NY, Inc. and affiliated entities (tax advisors); (ix) Williams, Barristers & Attorneys (special counsel for the Debtors in Bermuda proceedings); and (x) Pride Capital Group, LLC (d/b/a Great American Group) (liquidation consultant).; and (xi) and certain professionals for the Chapter 11 Debtors that are subject to the Order Authorizing Debtors to Retain and Compensate Professionals Used in the Ordinary Course of Business, entered by the Bankruptcy Court on December 15, 2005.
2. The Committees and Related Professionals
The Committees in the Chapter 11 Cases have retained various legal and financial professionals, as described below.
a. Milbank, Tweed, Hadley & McCloy LLP. On November 21, 2005, the Bankruptcy Court entered an order (which became final on December 7, 2005) authorizing the retention of Milbank, Tweed, Hadley & McCloy LLP as counsel to the Creditors' Committee, effective as of October 28, 2005.
b. Kasowitz, Benson, Torres & Friedman LLP. On December 10, 2005, the Creditors' Committee engaged Kasowitz, Benson, Torres & Friedman LLP as its conflicts counsel, and Kasowitz immediately began work on behalf of the Creditors' Committee. On January 9, 2006, the Creditors' Committee filed an application
118 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. to retain and employ Kasowitz as special conflicts counsel, effective December 10, 2005, to represent the Creditors' Committee on matters with respect to which Milbank cannot provide representation because of a conflict, adverse interest or other connection between Milbank and such matters. On January 31, 2006, the Bankruptcy Court entered an order approving the retention of Kasowitz. On August 25, 2006, the Additional Committee filed an application seeking to retain and employ Kasowitz, effective as of August 16, 2006, as general counsel to the Additional Committee. The Court approved the Kasowitz retention application on September 13, 2006.
c. Houlihan Lokey Howard & Zukin Capital. On December 12, 2005, the Bankruptcy Court entered an order (which became final, after notice to all creditors, on February 1, 2006) authorizing the retention of Houlihan Lokey Howard & Zukin Capital, Inc. as investment bankers to the Creditors' Committee, effective as of October 18, 2005.
d. Trott & Duncan. On January 11, 2006, the Bankruptcy Court entered an order authorizing the retention of Trott & Duncan as Bermuda counsel to the Creditors' Committee, effective as of November 2, 2005.
e. Other Professionals. In light of the complexity of the Chapter 11 Cases, the Creditors' Committee has retained the following other professionals: (i) Campbells (Cayman Islands counsel); (ii) Fiebinger, Polak, Leon & Partners Rechtsanwalte GmbH (Austrian counsel); (iii) Wildman Harrold Allen & Dixon, LLP (Illinois local counsel); and (iv) FTI Consulting, Inc. (forensic accountant and electronic evidence consultant) (joint retention with the Debtors).
3. RCM Trustee's Professionals
TheIn addition to the professionals retained by RCM prior to the appointment of the RCM Trustee, which professionals continue to perform services for the RCM Trustee, the RCM Trustee has retained various legal and financial professionals, as described below.
a. Bingham McCutchen LLP. On April 25, 2006, the Bankruptcy Court entered an order authorizing the retention of Bingham McCutchen LLP ("Bingham") as counsel to the RCM Trustee, effective as of April 10, 2006. On May 5, 2006, the Bankruptcy Court entered an amended order granting the RCM Trustee's application to retain Bingham.
b. Skadden, Arps, Slate, Meagher & Flom LLP. On July 17, 2006, the Bankruptcy Court entered an order authorizing the retention of Skadden, Arps as special counsel to the RCM Trustee.
c. Goldin Associates LLC. On July 17, 2006, the Bankruptcy Court entered an order authorizing the retention of Goldin as crisis managers to RCM, pursuant to the terms of an engagement letter between the RCM Trustee and Goldin, dated May 19, 2006.
d. AP Services, LLC. On July 17, 2006, the Bankruptcy Court entered an order authorizing the retention of APS as crisis managers to RCM, pursuant to the terms of an engagement letter between the RCM Trustee and APS, dated May 22, 2006.
e. Conyers Dill & Pearman. On July 17, 2006, the Bankruptcy Court entered an order authorizing the retention of Conyers Dill & Pearman as special Bermuda counsel to the RCM Trustee, effective as of April 28, 2006.
f. Capstone Advisory Group, LLC. On July 17, 2006, the Bankruptcy Court entered an order authorizing the retention of Capstone Advisory Group, LLC as RCM's financial advisor with respect to intercompany and intercreditor interests.
g. Omni Management Group, LLC. On August 10, 2006, the Bankruptcy Court entered an order authorizing the retention of Omni as Claims Agent.
4. Examiner's Professionals
a. McKenna Long & Aldridge LLP: On June 19, 2006, the Bankruptcy Court entered an order authorizing the employment of McKenna Long & Aldridge LLP as counsel to the Examiner.
119 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. 5. Interim Compensation
Pursuant to an order dated December 13, 2005, the Bankruptcy Court granted the Debtors' request to establish procedures by which Court-approved professionals retained by the Debtors may be compensated, and their expenses reimbursed, on a monthly basis. Pursuant to such order, each Court-approved professional may deliver to the Debtors and certain parties in interest a monthly statement of fees and expenses incurred for the prior month, and after a thirty-five day objection period, the Debtors may pay 80% of the fees and 100% of the expenses requested in such statement. Each Court-approved professional also must file an interim fee application with the Bankruptcy Court approximately every 120 days, but no less frequently than every 150 days.
120 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. XV. RECOMMENDATION AND CONCLUSION
For all of the reasons set forth in the Disclosure Statement, the Plan Proponents believe that confirmation and consummation of the Plan is preferable to all other alternatives. Consequently, the Plan Proponents urge all eligible Holders of Impaired Claims and Interests to vote to ACCEPT the Plan, and to complete and return their ballots so that they will be RECEIVED by the Voting Agent on or before 5:00 p.m. (Eastern Time) on December 8, 2006.
Dated: New York, New York October 6,13, 2006
REFCO INC. (for itself and on behalf of the Affiliate Debtors, other than Refco Finance Inc. and Refco Global Finance Limited)
By: Name: Title:
REFCO FINANCE INC.
By: Name: Title:
REFCO GLOBAL FINANCE LIMITED
By: Name: Title:
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP Attorneys for Refco Inc. and the Affiliate Debtors
By: J. Gregory Milmoe (JGM 0919) Sally McDonald Henry (SMH 0839) J. Gregory St. Clair (GS 8344) Four Times Square New York, New York 10036-6522 (212) 735-3000
121 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. MILBANK, TWEED, HADLEY & McCLOY LLP Attorneys for the Official Committee of Unsecured Creditors of Refco Inc., et al.
By: Luc A. Despins Susheel Kirpalani Dennis C. O'Donnell One Chase Manhattan Plaza New York, New York 10005 (212) 530-5000
KASOWITZ, BENSON, TORRES & FRIEDMAN LLP Attorneys for the Additional Committee of Unsecured Creditors of Refco Inc., et al.
By: David S. Rosner Andrew K. Glenn Jeffrey R. Gleit 1633 Broadway New York, New York 10019 (212) 506-1700
122 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. EXHIBIT A
TO DISCLOSURE STATEMENT WITH RESPECT TO AMENDED JOINT CHAPTER 11 PLAN OF REFCO INC. AND CERTAIN OF ITS DIRECT AND INDIRECT SUBSIDIARIES ______
AMENDED JOINT CHAPTER 11 PLAN OF REFCO INC. AND CERTAIN OF ITS DIRECT AND INDIRECT SUBSIDIARIES
A-1 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK
------x : In re: : Chapter 11 : Refco Inc., et al., : Case No. 05-60006 (RDD) : Debtors. : (Jointly Administered) : ------x
AMENDED JOINT CHAPTER 11 PLAN OF REFCO INC. AND CERTAIN OF ITS DIRECT AND INDIRECT SUBSIDIARIES
J. Gregory Milmoe Tina L. Brozman Sally McDonald Henry Timothy B. DeSieno J. Gregory St. Clair Mark W. Deveno SKADDEN, ARPS, SLATE, MEAGHER BINGHAM McCUTCHEN LLP & FLOM LLP 399 Park Avenue Four Times Square New York, NY 10022 New York, New York 10036-6522 (212) 705-7000 (212) 735-3000 Attorneys for Marc S. Kirschner, the Chapter 11 Trustee Attorneys for Refco Inc., et al. for Refco Capital Markets, Ltd.
Luc A. Despins David S. Rosner Susheel Kirpalani Andrew K. Glenn Dennis C. O’Donnell Jeffrey R. Gleit MILBANK, TWEED, HADLEY & McCLOY LLP KASOWITZ, BENSON, TORRES & FRIEDMAN LLP One Chase Manhattan Plaza 1633 Broadway New York, New York 10005 New York, New York 10019 (212) 530-5000 (212) 506-1700
Attorneys for the Official Committee of Unsecured Attorneys for the Additional Committee of Unsecured Creditors of Refco Inc., et al. Creditors of Refco Inc., et al.
Dated: New York, New York October 6,13, 2006 TABLE OF CONTENTS
Page
INTRODUCTION ...... 1
ARTICLE I DEFINED TERMS AND RULES OF INTERPRETATION ...... 1 1.1 Additional Committee...... 1 1.2 Additional RCM Claim ...... 1 1.3 Adjusted Contributing Debtors Distributive Assets ...... 1 1.4 Administrative Claim...... 1 1.5 Administrative/Priority Claims Reserve...... 2 1.6 Administrative Claims Adjustment...... 2 1.7 Administrative Claims Objection Deadline...... 2 1.8 Administrative Professionals...... 2 1.9 Affiliate Debtor(s)...... 2 1.10 AlixPartners...... 2 1.11 Allotted Administrative Claims...... 2 1.12 Allowed...... 2 1.13 "Allowed ... Claim"...... 3 1.14 Asset Schedule...... 3 1.15 Ballot...... 3 1.16 Bankruptcy Code ...... 3 1.17 Bankruptcy Court...... 3 1.18 Bankruptcy Rules...... 3 1.19 Bar Date ...... 3 1.20 BAWAG...... 3 1.21 BAWAG Allocation Order...... 3 1.22 BAWAG Contingent Proceeds ...... 3 1.23 BAWAG Guaranteed Proceeds ...... 3 1.24 BAWAG Proceeds...... 3 1.25 BAWAG Settlement ...... 3 1.26 Business Day...... 3 1.27 Capstone...... 3 1.28 Cargill ...... 4 1.29 Cargill Administrative Claim ...... 4 1.30 Cash ...... 4 1.31 Cash-Out Option Agreement...... 4 1.32 Chapter 11 Case(s)...... 4 1.33 Claim...... 4 1.34 Claims Distribution Account ...... 4 1.35 Claims Objection Deadline...... 4 1.36 Class...... 4 1.37 Committees...... 4 1.38 Confirmation ...... 4 1.39 Confirmation Date ...... 4 1.40 Confirmation Hearing ...... 4 1.41 Confirmation Order...... 4 1.42 Contributed Claims...... 5 1.43 Contributed Claims Recoveries ...... 5 1.44 Contributing Debtors...... 5 1.45 Contributing Debtors BAWAG Proceeds...... 5 1.46 Contributing Debtors Cash Distribution...... 5 1.47 Contributing Debtors Distributive Assets...... 5 1.48 Contributing Debtors Effective Date Claims...... 5 i DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. 1.49 Contributing Debtors General Unsecured BAWAG Proceeds...... 5 1.50 Contributing Debtors General Unsecured Claim ...... 5 1.51 Contributing Debtors General Unsecured Distribution ...... 5 1.52 Contributing Debtors Post-Effective Date Claims ...... 6 1.53 Contributing Debtors Projection ...... 6 1.54 Convenience Claims ...... 6 1.55 Credit Agreement...... 6 1.551.56Creditors' Committee ...... 6 1.561.57Debtor ...... 6 1.57 Debtors...... 6 1.58 Debtors...... 6 1.59 Disbursing Agent...... 6 1.591.60Disclosure Statement...... 6 1.60 Disputed Claim...... 6 1.61 "Disputed ... Claim"...... 6 1.62 "Disputed ... Claim Amount"...... 6 1.63 Disputed Claims Reserve Amount...... 6 1.64 DistributionDisputed Claims Reserve ...... 6 1.65 Distribution Date ...... 7 6 1.66 Distribution Record Date...... 7 1.67 Distribution Record Date...... 7 1.68 Early Payment Order...... 7 1.68 Effective Date...... 7 1.69 Effective BeneficiariesDate...... 7 1.70 Effective Beneficiaries...... 7 1.71 Employee Benefit Plans ...... 7 1.711.72ERISA...... 7 1.721.73Estate(s)...... 7 1.731.74Estimated Unsatisfied Credit Agreement Claims...... 7 1.74 Examiner ...... 7 1.75 Examiner Order ...... 7 1.76 Excess Priority ClaimsExaminer Order...... 7 1.77 ExhibitExcess Priority Claims...... 7 1.78 Exhibit Filing Date...... 7 1.79 Fee CommitteeExhibit Filing Date ...... 7 1.80 Fee Committee...... 7 1.81 Final Order ...... 8 1.81 FXA ...... 8 1.82 FXA 8 1.83 FXA Cash Accounts ...... 8 1.83 FXA Convenience Claims...... 8 1.84 FXA Convenience Claims...... 8 1.85 FXA Distributive Assets ...... 8 1.85 FXA General Unsecured Claim...... 8 1.86 FXA General Unsecured Claim Distribution...... 8 1.87 FXCM ...... 8 1.87 FXA General Unsecured Claim Distribution...... 8 1.88 General Unsecured ClaimFXCM...... 8 1.89 HolderFXCM Committee...... 8 1.90 HoulihanGeneral Unsecured Claim ...... 8 1.91 ImpairedHolder...... 8 1.92 Intercompany ClaimHoulihan ...... 8 1.93 Impaired ...... 9 1.94 Intercompany Claim...... 9 1.95 Interest ...... 9 1.941.96IPO Underwriter Claims Recovery...... 9 ii DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. 1.951.97Joinder Parties ...... 9 1.961.98Joint Sub-Committee...... 9 1.971.99KK Japan...... 9 1.98 Lien...... 9 1.99 Litigation Claims ...... 9 1.100 Litigation TrustLien...... 9 1.101 Litigation Trust AgreementClaims ...... 9 1.102 Litigation Trust Beneficiaries...... 9 1.103 Litigation Trust CommitteeAgreement ...... 9 1.104 Litigation TrusteeTrust Beneficiaries...... 9 1.105 Litigation Trust Committee ...... 9 1.106 Litigation Trustee...... 9 1.107 Litigation Trust Interests ...... 910 1.1061.108 ...... Loan Documents 910 1.1071.109 ...... Loans 910 1.1081.110 ...... MAC Contributing Debtors Assets 910 1.1091.111 ...... MAC RCM Assets 10 1.1101.112 ...... MCG Members 10 1.1111.113 ...... Master Ballot 10 1.1121.114 ...... Non-Debtor Affiliates 10 1.1131.115 ...... Non-Tax Priority Claim 10 1.1141.116 ...... Old Equity Interests 10 1.115 Other Related Claim ...... 10 1.116 Other Secured Claim...... 11 1.117 PersonOther Related Claim ...... 11 1.118 Petition DateOther Secured Claim...... 11 1.119 PlanPerson...... 11 1.120 Plan AdministratorPetition Date...... 11 1.121 Plan Administrator Agreement ...... 11 1.122 Plan CommitteeAdministrator ...... 11 1.123 Plan DocumentAdministrator Agreement ...... 11 1.124 Plan Filing DateCommittee ...... 11 1.125 Plan Document ...... 11 1.126 Plan Filing Date...... 11 1.127 Plan Proponents...... 11 1.128 Plan Support Agreement ...... 11 1.1261.129 ...... Post-Confirmation RCM 1112 1.1271.130 ...... Post-Petition Management 1112 1.1281.131 ...... Pre-Conversion Administrative Claim Amount 1112 1.1291.132 ...... Priority Claims 12 1.1301.133 ...... Priority Tax Claim 12 1.131 Private Actions Trust ...... 12 1.132 Private Actions Trust Agreement...... 12 1.133 Private Actions Trustee ...... 12 1.134 ProfessionalPrivate Actions Trust...... 12 1.135 Professional Fee ClaimPrivate Actions Trust Agreement ...... 12 1.136 Private Actions Trustee ...... 12 1.137 Professional...... 12 1.138 Professional Fee Claim ...... 12 1.139 Pro Rata...... 12 1.1371.140 ...... Qualifying Plan 12 1.1381.141 ...... Quarterly Distribution Date 12 1.139 RCM ...... 12 1.140 RCM Administrative/Priority Claims Reserve ...... 12 1.141 RCM Administrative Professional ...... 12 1.142 RCM Advance...... 12 iii DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. 1.143 RCM BAWAG Proceeds...... 12Administrative/Priority Claims Reserve 13 1.144 RCM BAWAG ProceedsAdministrative Professional ...... 13 1.145 RCM Advance...... 13 1.146 RCM BAWAG Proceeds...... 13 1.147 RCM Cash Distribution...... 13 1.1461.148 ...... RCM Difference 13 1.1471.149 ...... RCM Claims Distribution Account 13 1.148 RCM Distribution Reserve ...... 13 1.149 RCM Excess Priority Claims...... 13 1.150 RCM FX/Unsecured ClaimsDistribution Reserve ...... 13 1.151 RCM FX/UnsecuredExcess Priority Claims Distribution ...... 13 1.152 RCM Implied DeficiencyFX/Unsecured Claims ...... 13 1.153 RCM IntercompanyFX/Unsecured Claims Distribution ...... 13 1.154 RCM Intercompany Claim DistributionFX/Unsecured Convenience Claims ...... 13 1.155 RCM Leuthold MetalsImplied Deficiency Claim...... 1314 1.156 RCM Leuthold Metals Claim Distribution ...... 13Intercompany Claims 14 1.157 RCM ProjectionIntercompany Claim Distribution ...... 14 1.158 RCM Related ClaimsLeuthold Metals Claim ...... 14 1.159 RCM RelatedLeuthold Metals Claim Subordination FormDistribution...... 14 1.160 RCM ReservesProjection ...... 14 1.161 RCM Rights DistributionRelated Claims...... 14 1.162 RCM Securities Customer ClaimsRelated Claim Subordination Form...... 14 1.163 RCM Securities Customer Claims DistributionReserves ...... 14 1.164 RCM Settlement AgreementRights Distribution ...... 14 1.165 RCM Substantial Contribution Fees 14Securities Customer Claims ...... 15 1.166 RCM TrusteeSecurities Customer Convenience Claims...... 15 1.167 RCM UnclaimedSecurities Customer Claims Distribution Reserve ...... 15 1.168 RCM Wind-Down ReserveSettlement Agreement ...... 15 1.169 ReinstatedRCM Substantial Contribution Fees ...... 15 1.170 Refco EntitiesRCM Trustee...... 15 1.171 Related ClaimsRCM Unclaimed Distribution Reserve ...... 15 1.172 Released ClaimsRCM Wind-Down Reserve ...... 15 1.173 Released PartiesReinstated...... 15 1.174 Reorganized DebtorsRefco Entities ...... 15 1.175 Reorganized FXARelated Claims...... 15 1.176 Released Claims ...... 16 1.177 Released Parties...... 16 1.178 Reorganized Debtors...... 16 1.179 Reorganized FXA ...... 16 1.180 Reorganized Refco...... 1516 1.1771.181 ...... Reserves 1516 1.1781.182 ...... Restated Corporate Governance Documents 15 1.179 RGL ...... 15 1.180 RGL FXCM Distribution ...... 16 1.181 Rogers Funds...... 16 1.182 Scheduled...... 16 1.183 SchedulesRetained Causes of Action...... 16 1.184 Secured Lender(s)RGL ...... 16 1.185 Secured Lender AgentRGL FXCM Distribution ...... 16 1.186 Secured Lender BAWAG ProceedsRogers Funds ...... 16 1.187 Secured Lender ClaimsScheduled ...... 16 1.188 Secured Lender Indemnification ClaimsSchedules...... 16 1.189 Secured Lender Payment Date(s)...... 16 1.190 Secured Lender Released ClaimsAgent ...... 16 1.191 Secured Lender Releasee...... 16BAWAG Proceeds 17 1.192 Secured Lender’s CollateralClaims...... 17 iv DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. 1.193 Senior Subordinated Note Allocation...... 17 1.193 Secured Lender Indemnification Claims 17 1.194 Senior Subordinated Note ClaimsSecured Lender Payment Date...... 17 1.195 Senior Subordinated Note Holder Ad Hoc Committee Fees and Expenses...... 17 1.196 Senior Subordinated Note Holder BAWAG Proceeds ...... 17 1.197 Senior Subordinated Note Holder Distribution...... 17 1.198 Senior Subordinated Note Holder Fee Distribution ...... 17 1.195 Secured Lender Released Claims...... 17 1.196 Secured Lender Releasee...... 17 1.197 Secured Lender’s Collateral...... 17 1.198 Securities Class Action Stipulation...... 17 1.199 Senior Subordinated Note IndentureAllocation...... 17 1.200 Senior Subordinated Note Indenture TrusteeClaims...... 17 1.201 Senior Subordinated Note Holder Ad Hoc Committee Fees and Expenses...... 17 1.202 Senior Subordinated Note Holder BAWAG Proceeds ...... 18 1.203 Senior Subordinated Note Holder Distribution...... 18 1.204 Senior Subordinated Note Holder Fee Distribution ...... 18 1.205 Senior Subordinated Note Indenture...... 18 1.206 Senior Subordinated Note Indenture Trustee...... 18 1.207 Senior Subordinate Note Indenture Trustee Charging Lien...... 1718 1.2021.208 ...... Senior Subordinated Note Indenture Trustee Fees 18 1.2031.209 ...... Senior Subordinated Notes 18 1.2041.210 ...... Specified Difference 18 1.2051.211 ...... Subordinated Claim 1819 1.2061.212 ...... Subsidiary Claims and Interests 1819 1.2071.213 ...... Tranche A Litigation Trust Interests 1819 1.2081.214 ...... Tranche B Litigation Trust Common Interests 1819 1.2091.215 ...... Tranche B Litigation Trust Preferred Interests 1819 1.2101.216 ...... Unclaimed Distribution Reserve 1819 1.2111.217 ...... Unclassified Claims 1819 1.2121.218 ...... Unimpaired 1819 1.2131.219 ...... Voting Deadline 1819 1.2141.220 ...... Voting Record Date 1819 1.2151.221 ...... VR 1819 1.2161.222 ...... VR/Leuthold Guarantee Claims 1819 1.2171.223 ...... Wind-Down Reserves 19
ARTICLE II CLASSIFICATION OF CLAIMS AND INTERESTS...... 1920 2.1 Introduction ...... 1920 2.2 Classification of Claims and Interests of the Contributing Debtors ...... 2021 2.3 Classification of Claims of FXA...... 21 2.4 Classification of Claims of RCM...... 2122
ARTICLE III TREATMENT OF CLAIMS AND INTERESTS ...... 2223 3.1 Treatment of Claims and Interests of the Contributing Debtors ...... 2223 3.2 Treatment of Claims of FXA...... 2425 3.3 Treatment of Claims of RCM ...... 2627 3.4 Allowed Claims and Interests...... 2829 3.5 Alternative Treatment ...... 2829 3.6 Limitation on Recoveries ...... 2829 3.7 Special Provision Regarding Unimpaired Claims...... 2829 3.8 Classification and Treatment of Claims and Interests of Non-Debtor Affiliates...... 2829 3.9 Classification and Treatment of Intercompany Claims ...... 2829 3.10 Claims of Debtors against RCM...... 2830 3.11 Non-Debtor Affiliates' Intercompany Claims Against RCM...... 2830 v DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. ARTICLE IV ACCEPTANCE OR REJECTION OF THE PLAN ...... 2930 4.1 Classes Entitled To Vote ...... 2930 4.2 Acceptance By Impaired Classes...... 2930 4.3 Presumed Acceptance by Unimpaired Classes ...... 2930 4.4 Classes Deemed to Reject the Plan ...... 2930 4.5 Summary of Classes Voting on the Plan ...... 2930 4.6 Elimination Of Classes...... 2930 4.7 Confirmation Pursuant to Section 1129(b) of the Bankruptcy Code...... 2930
ARTICLE V MEANS FOR IMPLEMENTATION OF THE PLAN ...... 2931 5.1 Merger Of Subsidiaries Into Refco Inc ...... 2931 5.2 Continued Corporate Existence And Dissolution Of Reorganized Debtors ...... 3031 5.3 Corporate Governance Documentation ...... 3031 5.4 Directors, Managers And Officers: Effectuating Documents; Further Transactions...... 3031 5.5 The Plan Administrator ...... 3032 5.6 Administration of Post-Confirmation RCM ...... 3334 5.7 Litigation Trust...... 3436 5.8 Private Actions Trust ...... 3738 5.9 No Revesting Of Assets ...... 3738 5.10 Preservation Of Rights Of Action; Settlement Of Litigation...... 3738 5.11 The Committees and the Plan Committee ...... 3738 5.12 Fee Committee...... 3940 5.13 Cancellation Of Securities, Instruments, And Agreements Evidencing Claims And Interests...... 3940 5.14 Sources Of Cash For Plan Distributions...... 3941 5.15 Risk Sharing in Respect of Cargill Administrative Claim...... 3941 5.16 Allocation of Administrative Claims, Priority Tax Claims and Non-Tax Priority Claims ...... 4041 5.17 Additional RCM Claim ...... 4042 5.18 Contributing Debtors BAWAG Proceeds...... 4142 5.19 Exemption From Transfer Taxes ...... 4142 5.20 RCM Settlement Agreement and Conversion...... 4142 5.21 Allowance of VR/Leuthold Guarantee Claims ...... 4143 5.22 Wind-Up of Non-Debtor Affiliates...... 4143 5.23 FXCM ...... 43 5.24 Examiner ...... 43
ARTICLE VI PROVISIONS GOVERNING DISTRIBUTIONS...... 4243 6.1 RCM Rights Distribution ...... 4243 6.2 Distributions For Claims Allowed As Of The Effective Date ...... 4244 6.3 Distributions of Proceeds of the Litigation Trust...... 4244 6.4 Single Distribution...... 4244 6.5 Accounts; Escrows; Reserves for the Reorganized Debtors...... 4244 6.6 Accounts; Escrows; Reserves for the Post-Confirmation RCM...... 4446 6.7 Interest And Penalties On Claims ...... 4547 6.8 Distributions By Disbursing Agent and RCM Trustee...... 4647 6.9 Delivery Of Distributions And Undeliverable Or Unclaimed Distributions...... 4648 6.10 Record Date For Distributions...... 4749 6.11 Distributions To Holders Of Senior Subordinated Note Claims ...... 4749 6.12 Senior Subordinated Notes Indenture Trustee As Claim Holder ...... 4749 6.13 Allocation Of Plan Distributions Between Principal And Interest...... 4749 6.14 Means Of Cash Payment ...... 4749 6.15 Withholding And Reporting Requirements ...... 4849 6.16 Setoffs ...... 4850 6.17 Fractional Dollars ...... 4850 6.18 Release Of Liens...... 4850 vi DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. ARTICLE VII TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES ...... 4850 7.1 Rejected Contracts And Leases ...... 4850 7.2 Bar To Rejection Damages...... 4850 7.3 Assumed And Assigned Contracts And Leases ...... 4950 7.4 Compensation And Benefit Programs...... 4951 7.5 Treatment of RCM Executory Contracts and Unexpired Leases ...... 4951
ARTICLE VIII PROCEDURES FOR RESOLVING DISPUTED, CONTINGENT, AND UNLIQUIDATED CLAIMS AND INTERESTS...... 4951 8.1 Objection Deadline; Prosecution Of Objections ...... 4951 8.2 No Distributions Pending Allowance...... 4951 8.3 Distributions After Allowance...... 4951
ARTICLE IX CONFIRMATION AND CONSUMMATION OF THE PLAN...... 5051 9.1 Conditions To Confirmation...... 5051 9.2 Conditions To Effective Date ...... 5052 9.3 Waiver Of Conditions ...... 5153 9.4 Consequences Of Non-Occurrence Of Effective Date ...... 5153
ARTICLE X EFFECT OF PLAN CONFIRMATION ...... 5153 10.1 Binding Effect ...... 5153 10.2 Releases...... 5153 10.3 Exculpation And Limitation Of Liability ...... 5355 10.4 No Discharge Of Claims; Injunction...... 5355 10.5 Term Of Bankruptcy Injunction Or Stays ...... 5456 10.6 Continuation of Forex Adversary ...... 56
ARTICLE XI RETENTION OF JURISDICTION...... 5456 11.1 Exclusive Jurisdiction of the Bankruptcy Court ...... 5456
ARTICLE XII MISCELLANEOUS PROVISIONS ...... 5658 12.1 Effectuating Documents And Further Transactions...... 5658 12.2 Corporate Action ...... 5658 12.3 Bar Dates For Certain Claims...... 5658 12.4 Payment Of Statutory Fees...... 5759 12.5 Amendment Or Modification Of The Plan ...... 5759 12.6 Severability Of Plan Provisions...... 5759 12.7 Successors And Assigns...... 5759 12.8 Revocation, Withdrawal, Or Non-Consummation...... 5760 12.9 Notice...... 5860 12.10 Governing Law...... 5961 12.11 Tax Reporting And Compliance ...... 5961 12.12 Filing Of Additional Documents ...... 5961 12.13 Limit on Precedential Effect...... 5961 12.14 Claims Preserved Pending Consummation...... 5961 12.15 Continuation of RCM Settlement Agreement...... 5961 12.16 Continuation of Early Payment Order...... 6062
vii DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. EXHIBITS
EXHIBIT A LISTING OF AFFILIATE DEBTORS
EXHIBIT B RCM SETTLEMENT AGREEMENT
EXHIBIT C RESTATED CORPORATE GOVERNANCE DOCUMENTS
EXHIBIT D EXECUTORY CONTRACTS AND UNEXPIRED LEASES TO BE ASSUMED
EXHIBIT E PLAN ADMINISTRATOR AGREEMENT
EXHIBIT F LITIGATION TRUST AGREEMENT
EXHIBIT G PRIVATE ACTIONS TRUST AGREEMENT
EXHIBIT H ASSET SCHEDULE
EXHIBIT I EARLY PAYMENT ORDER
EXHIBIT J BYLAWS OF FXCM COMMITTEE
EXHIBIT K NON-EXCLUSIVE LIST OF RETAINED CAUSES OF ACTION
viii DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. SCHEDULES
SCHEDULE 1.149 LIST OF RELEASED DIRECTORS AND OFFICERS
SCHEDULE 2.2(c) SUB-CLASSES OF CLAIMS AGAINST THE CONTRIBUTING DEBTORS
ix DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. INTRODUCTION
Refco Inc. and certain of its direct and indirect subsidiaries identified on the annexed Exhibit A along with co-Plan Proponents Marc S. Kirschner, the chapter 11 trustee of the Estate of Refco Capital Markets, Ltd., the Official Committee of Unsecured Creditors of Refco Inc., et al., and the Additional Committee of Unsecured Creditors of Refco Inc., et al. propose the following joint chapter 11 plan that contemplates the disposition of the Debtors' assets and the resolution of the outstanding Claims against and Interests in the Debtors and RCM. This Plan does not contemplate the disposition of assets or the resolution of Claims against and Interests in Refco, LLC as such Claims and Interests are being addressed separately in conjunction with the administration of the Refco, LLC chapter 7 case. In addition, although the Plan outlines certain aspects of the disposition of the assets of RCM and the votes by certain creditors of RCM will be solicited, the Plan contemplates that on or prior to the Effective Date, the RCM Chapter 11 Case shall be converted to a case under subchapter III of chapter 7 of the Bankruptcy Code unless the Debtors and the RCM Trustee agree that there is a compelling reason for the RCM Estate toshould be administered under chapter 11 of the Bankruptcy Code. In the event of such a conversion to chapter 7, this Plan shall constitute a settlement and compromise between the RCM Estate and the Debtors' Estates and among the Estates of the various Debtors and certain creditors, for which approval is sought simultaneously with the confirmation of this Plan. Furthermore, the Plan incorporates the terms of the Early Payment Order, a copy of which is attached hereto as Exhibit I. To the extent that the provisions herein, or in the Confirmation Order, differ from the terms of the Early Payment Order with respect to the treatment of the Secured Lenders, the terms of the Early Payment Order shall govern. Reference is made to the Disclosure Statement, distributed contemporaneously herewith, for a discussion of (i) the Debtors' history, business, properties, and operations, (ii) a summary and analysis of this Plan, and (iii) certain related matters, including risk factors relating to the consummation of this Plan. Subject to certain restrictions and requirements set forth in section 1127 of the Bankruptcy Code and Bankruptcy Rule 3019, the Plan Proponents reserve the right to alter, amend, modify, revoke, or withdraw this Plan prior to its substantial consummation.
ARTICLE I
DEFINED TERMS AND RULES OF INTERPRETATION
Defined Terms. As used herein, capitalized terms shall have the meanings set forth below. Any term that is not otherwise defined herein, but that is used in the Bankruptcy Code or the Bankruptcy Rules, shall have the meaning given to that term in the Bankruptcy Code or the Bankruptcy Rules, as applicable.
1.1 Additional Committee means the Additional Committee of Unsecured Creditors of Refco Inc., et al. appointed by the United States Trustee in the Chapter 11 Cases pursuant to section 1102 of the Bankruptcy Code by notice on August 3, 2006 (and as amended from time to time).
1.2 Additional RCM Claim means the additional Claim of RCM, if any, as more fully set forth in section 5.17 hereof.
1.3 Adjusted Contributing Debtors Distributive Assets means the Contributing Debtors Distributive Assets after reduction for the payment of the RCM Excess Priority Claim.
1.4 Administrative Claim means a Claim for costs and expenses of administration of the Chapter 11 Cases under sections 503(b), 507(b), or 1114(e)(2) of the Bankruptcy Code and entitled to priority under section 507(a)(1) of the Bankruptcy Code, including, without duplication: (a) any actual and necessary costs and expenses, incurred after the Petition Date, of preserving the Estates and operating the businesses of the Debtors and RCM (such as wages, salaries, and commissions for services and payments for inventory, leased equipment, and premises) and Claims of governmental units for taxes (including tax audit Claims related to tax years commencing after the Petition Date, but excluding Claims relating to tax periods, or portions thereof, ending on or before the Petition Date); (b) compensation for legal, financial, advisory, accounting, and other services and reimbursement of expenses under sections 328, 330, 331, or 503(b) of the Bankruptcy Code to the extent incurred after the Petition Date and prior to the Effective Date; (c) the amounts contributed to the Wind-Down Reserve; (d) all fees and charges assessed against the Estates under 28 U.S.C. § 1930; (e) the Senior Subordinated Note Indenture Trustee Fees, (f) the substantial contribution claims represented by the RCM Substantial Contribution Fees and the Senior Subordinated Note Holder Ad Hoc Committee Fees and Expenses, to the extent allowed by the Bankruptcy Court; (g) any amounts due to RCM for the RCM Advance and (h) all other claims entitled to administrative expense status pursuant to a Final Order of the Bankruptcy Court. In the event that the Chapter 11 Case of RCM is converted to a case administered under chapter 7, an Allowed Claim against RCM or its Estate of the type described above in respect of administering the RCM case in chapter 7 shall be included in the definition of Administrative Claim.
1.5 Administrative/Priority Claims Reserve means the Reserve account(s) to be established and maintained by the Plan Administrator, on behalf of the Reorganized Debtors, to fund the Distribution to Holders of Administrative and Allowed Priority Claims against FXA and the Contributing Debtors.
1.6 Administrative Claims Adjustment means an adjustment whereby the amount of the RCM Cash Distribution shall be reduced by the Pre-Conversion Administrative Claim Amount, if any. For the avoidance of doubt, while the Administrative Claims Adjustment, if any, shall affect the timing and accounts from which Distributions in respect of Allowed Administrative Claims are made, such adjustment shall not affect the ultimate allocation of Administrative Claims as set forth in section 5.175.16 of this Plan..
1.7 Administrative Claims Objection Deadline means the last day for filing an objection to any request for the payment of an Allowed Administrative Claim, which shall be (a) the later of (i) 60 days after the Effective Date or (ii) 30 days after the filing of such Administrative Claim or (b) such other date specified in this Plan or ordered by the Bankruptcy Court. The filing of a motion to extend the Administrative Claims Objection Deadline shall automatically extend the Administrative Claims Objection Deadline until a Final Order is entered on such motion. In the event that such motion to extend the Administrative Claims Objection Deadline is denied by the Bankruptcy Court, or if approved by the Bankruptcy Court and reversed on appeal, the Administrative Claims Objection Deadline shall be the later of the current Administrative Claims Objection Deadline (as previously extended, if applicable) or 30 days after entry of a Final Order denying the motion to extend the Administrative Claims Objection Deadline.
1.8 Administrative Professionals means the agents, financial advisors, attorneys, consultants, independent contractors, representatives, and other professionals of the Plan Administrator (in their capacities as such).
1.9 Affiliate Debtor(s) means, individually or collectively, the debtors and debtors-in-possession identified on Exhibit A annexed hereto.
1.10 AlixPartners means collectively, AlixPartners LLC and its affiliate, AP Services, LLC.
1.11 Allotted Administrative Claims means Allowed Administrative Claims accrued against RCM or the Contributing Debtors from the Petition Date through the Effective Date, but excluding (A) Allowed Administrative Claims paid prior to August 31, 2006, (B) rent and other ordinary operating expenses of the Debtors or RCM, (C) fees and commissions of the RCM Trustee, and (D) repayment of the RCM Advance.
1.12 Allowed means (a) when used with respect to an Administrative Claim, all or any portion of an Administrative Claim (i) that has been allowed, or adjudicated in favor of the holder by estimation or liquidation, by a Final Order, or (ii) that was incurred by the Debtors or RCM in the ordinary course of business during the Chapter 11 Cases; provided, however, that in no event shall a post-petition obligation that is contingent or disputed and subject to liquidation through pending or prospective litigation, including, but not limited to, alleged obligations arising from personal injury, property damage, products liability, consumer complaints, employment law (excluding claims arising under workers' compensation law), secondary payor liability, or any other disputed legal or equitable claim based on tort, statute, contract, equity, or common law, be considered to be an obligation which is payable in the ordinary course of business; or (b) when used with respect to a Claim other than an Administrative Claim, such Claim against a Debtor or RCM or any portion thereof (i) that has been allowed by a Final Order of the Bankruptcy Court, (ii) as to which, on or by the Effective Date, (w) no proof of claim has been filed with the Bankruptcy Court and (x) the liquidated and noncontingent amount of which is Scheduled, other than a Claim that is Scheduled at zero, in an unknown amount, or as disputed, (iii) for which a proof of claim in a liquidated amount has been timely filed with the Bankruptcy Court pursuant to the Bankruptcy Code, any Final Order of the Bankruptcy Court, or other applicable bankruptcy law, and as to which either (y) no objection to its allowance has been filed by the Claims Objection Deadline or the Administrative 2 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. Claims Objection Deadline (as applicable), or within any period specified by the Bankruptcy Code or an order of the Bankruptcy Court, or (x) any objection to its allowance has been settled or withdrawn, or has been denied by a Final Order, or (iv) that is expressly allowed in a liquidated amount in the Plan.
1.13 "Allowed ... Claim" means an Allowed Claim of the particular type or Class described.
1.14 Asset Schedule means the schedule prepared by Houlihan to describe the estimated value of assets of the Debtors as of August 31, 2006, attached hereto as Exhibit H.
1.15 Ballot means each of the ballot forms distributed to each Holder of a Claim or Interest entitled to vote to accept or reject this Plan.
1.16 Bankruptcy Code means title 11 of the United States Code, as now in effect or hereafter amended (if such amendment applies to the Debtors and RCM).
1.17 Bankruptcy Court means the United States Bankruptcy Court for the Southern District of New York, or any other court with jurisdiction over the Chapter 11 Cases.
1.18 Bankruptcy Rules means the Federal Rules of Bankruptcy Procedure and the local rules of the Bankruptcy Court, as now in effect or hereafter amended.
1.19 Bar Date means the deadline established by the Bankruptcy Court by order dated March 27, 2006, for filing proofs of Claim in the Chapter 11 Cases.
1.20 BAWAG means Bawag P.S.K. Für Arbeit Und Wirtschaft Und Österreichische Postsparkasse Aktiengesellschaft. means the BAWAG Parties as such term is defined in paragraph 4(a) of the Stipulation and Order of Settlement entered by the Bankruptcy Court on July 6, 2006 (docket no. 2348).
1.21 BAWAG Allocation Order means one or more orders of the Bankruptcy Court approving the allocation of the BAWAG Proceeds, which may include the Confirmation Order.
1.22 BAWAG Contingent Proceeds means an amount, if any, whether or not monetized prior to the Effective Date, of the BAWAG Proceeds up to $150,000,000 to be paid pursuant to the BAWAG Settlement upon a sale or recapitalization as set forth in the BAWAG Settlement within two (2) years of the date of approval of the BAWAG Settlement.
1.23 BAWAG Guaranteed Proceeds means that portion of the BAWAG Proceeds equal to a guaranteed amount of $506,250,000 in Cash paid pursuant to the BAWAG Settlement.
1.24 BAWAG Proceeds means the sum of (a) the BAWAG Guaranteed Proceeds plus (b) the BAWAG Contingent Proceeds, even if returned to BAWAG pursuant to the terms of this Plan and the BAWAG Settlement. 1.25 BAWAG Settlement means the settlement stipulation among the Creditors Committee, BAWAG, and the Refco Entities as approved by the Bankruptcy Court by an order entered on July 6, 2006. A copy of the BAWAG Settlement is annexed as an Exhibit to the Disclosure Statement.
1.26 Business Day means any day, other than a Saturday, Sunday, or "legal holiday" (as defined in Bankruptcy Rule 9006(a)).
1.27 Capstone means Capstone Advisory Group, LLC.
1.28 Cargill means Cargill, Incorporated and any of Cargill, Incorporated's affiliates who filed proofs of claim in any of the Chapter 11 Cases.
3 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. 1.29 Cargill Administrative Claim means an Administrative Claim of Cargill, if any, against the Contributing Debtors.
1.30 Cash means legal tender of the United States of America and equivalents thereof.
1.31 Cash-Out Option Agreement means the agreement, if any, between one or more third parties and the Holders of Litigation Trust Interests to be executed as of the Effective Date establishing the terms and conditions by which third parties may purchase Litigation Trust Interests from such Holders, the form of which Cash-Out Option Agreement will be attached as an exhibit to the Litigation Trust Agreement.
1.32 Chapter 11 Case(s) means (a) when used with reference to a particular Debtor or RCM, the case under chapter 11 of the Bankruptcy Code commenced by such Debtor in the Bankruptcy Court and (b) when used with reference to the Debtors and RCM, the cases under chapter 11 of the Bankruptcy Code commenced by the Debtors and RCM in the Bankruptcy Court.
1.33 Claim means a "claim" as defined in section 101(5) of the Bankruptcy Code.
1.34 Claims Distribution Account means the account established and maintained by the Reorganized Debtors from which Distributions to Holders of Allowed Claims against the Contributing Debtors or FXA shall be made and from which reserves on behalf of the Reorganized Debtors will be funded for the benefit of Holders of Disputed Claims.
1.35 Claims Objection Deadline means the last day for filing objections to Claims against the Debtors, which day shall be (a) the later of (i) 90 days after the Effective Date or (ii) 60 days after the filing of a proof of claim for, or request for payment of, such Claim or (b) such other date as the Bankruptcy Court may order. The filing of a motion to extend the Claims Objection Deadline shall automatically extend the Claims Objection Deadline until a Final Order is entered on such motion. In the event that such motion to extend the Claims Objection Deadline is denied by the Bankruptcy Court, or approved by the Bankruptcy Court and reversed on appeal, the Claims Objection Deadline shall be the later of the current Claims Objection Deadline (as previously extended, if applicable) or 30 days after entry of a Final Order denying the motion to extend the Administrative Claims Objection Deadline.
1.36 Class means a category of Holders of Claims or Interests, as described in Article II hereof.
1.37 Committees means, collectively, the Creditors' Committee and the Additional Committee.
1.38 Confirmation means the confirmation of the Plan by the Bankruptcy Court under section 1129 of the Bankruptcy Code.
1.39 Confirmation Date means the date on which the Bankruptcy Court enters the Confirmation Order on the docket of the Chapter 11 Cases.
1.40 Confirmation Hearing means the hearing held by the Bankruptcy Court pursuant to section 1128 of the Bankruptcy Code to consider confirmation of this Plan, as such hearing may be adjourned or continued from time to time.
1.41 Confirmation Order means the order of the Bankruptcy Court confirming this Plan pursuant to section 1129 of the Bankruptcy Code.
1.42 Contributed Claims means any and all Litigation Claims of the Debtors, RCM or their Estates (including claims being pursued by the Committees on behalf of the Debtors), which shall be contributed by the Debtors, RCM and their Estates to the Litigation Trust and, to the extent of any election, or deemed election, by Holders of RCM Related Claims to exchange and subordinate such Claims in accordance with section 6.6(c) of this Plan, such RCM Related Claims shall be deemed to remain unpaid liabilities of the Debtors and their Estates immediately prior to the contribution of Litigation Claims to the Litigation Trust. The term Contributed Claims shall specifically exclude the Released Claims.
4 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. 1.43 Contributed Claims Recoveries means any recoveries obtained on account of the Contributed Claims net of the costs of administration of the Litigation Trust, including, but not limited to fees associated with the litigation of the Contributed Claims.
1.44 Contributing Debtors means the Debtors excluding FXA.
1.45 Contributing Debtors BAWAG Proceeds means that portion of the BAWAG Proceeds that compose the Secured Lender BAWAG Proceeds, the Senior Subordinated Note Holder BAWAG Proceeds and the Contributing Debtors General Unsecured BAWAG Proceeds.
1.46 Contributing Debtors Cash Distribution means $94 million of Cash, which amount shall be adjusted, upwards or downwards, by an amount equal to the Specified Difference.
1.47 Contributing Debtors Distributive Assets means the assets of the Contributing Debtors after the payment of Contributing Debtors Effective Date Claims, Allowed Other Secured Claims against the Contributing Debtors, Allowed Secured Lender Claims against the Contributing Debtors, Senior Subordinated Note Holder Distribution and Senior Subordinated Note Holder Fee Distribution (each to the extent payable under the Plan) and the funding of any required reserves (provided that upon the release of any funds from reserves for payment of the Contributing Debtors General Unsecured Distribution or RCM Intercompany Claim Distribution, such released funds shall be counted as Contributing Debtors Distributive Assets). The term Contributing Debtors Distributive Assets shall include the assets of the Contributing Debtors reflected on the Assets Schedule and, without duplication, to the extent not inconsistent with the Assets Schedule, (i) any amounts paid to the Contributing Debtors or RCM on or after September 1, 2006, (ii) the BAWAG Proceeds, and (iii) any amounts paid to the Contributing Debtors or RCM from Non-Debtor Affiliates on or after September 1, 2006; provided, however, that any amounts paid by direct or indirect subsidiaries of RCM on or after September 1, 2006 shall not constitute Contributing Debtors Distributive Assets. The term Contributing Debtors Distributive Assets shall not include any value in respect of the RGL FXCM Distribution nor any interest in Contributed Claims.
1.48 Contributing Debtors Effective Date Claims means Allowed Priority Tax Claims and Allowed Non-Tax Priority Claims and Allowed Administrative Claims accrued through and including the Effective Date, each to the extent required to be borne by the Contributing Debtors pursuant to section 5.16 of this Plan.
1.49 Contributing Debtors General Unsecured BAWAG Proceeds means (i) $56,250,000 of the BAWAG Guaranteed Proceeds and (ii) the Contributing Debtors' sharea portion of the BAWAG Contingent Proceeds allocable to the Contributing Debtors Cash Distribution from the Contributing Debtors Distributive Assets, which proceeds, pursuant to section 5.18 hereof, shall be deemed to be exclusively offered to pay, in exchange for the releases offered by the BAWAG Settlement, Holders of Allowed Contributing Debtors General Unsecured Claims.
1.50 Contributing Debtors General Unsecured Claim means a General Unsecured Claim against a Contributing Debtor.
1.51 Contributing Debtors General Unsecured Distribution means a Distribution from the Contributing Debtors Distributive Assets equal to (A) the Contributing Debtors Cash Distribution after reduction for the payment of the Allowed Contributing Debtors Post-Effective Date Claims plus (B) 50% of the RGL FXCM Distribution; provided, however, the amount of such Distribution under (A) and (B) shall not exceed 40% of the Allowed Contributing Debtors General Unsecured Claims. The Contributing Debtors General Unsecured Distribution shall also include the Tranche A Litigation Trust Interests set forth in section 5.7 of this Plan.
1.52 Contributing Debtors Post-Effective Date Claims means Administrative Claims accrued after the Effective Date by the Contributing Debtors, which are required to be borne by the Contributing Debtors pursuant to section 5.16 of this Plan (including amounts, if any, in respect of repaying the RCM Advance).
1.53 Debtors ProjectionContributing means a projection of the Cash or value to be available from the MAC Contributing Debtors Assets for Distribution in respect of the Contributing Debtors Cash Distribution.
5 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. 1.54 Convenience Claims means collectively FXA Convenience Claims, RCM Securities Customer Convenience Claims and RCM FX/General Unsecured Convenience Claims.
1.55 1.54 Credit Agreement means the credit agreement, dated August 5, 2004 (as amended), among RGL as successor by merger to Refco Finance Holdings LLC, New Refco Group Ltd, LLC, the Secured Lender Agent and the Secured Lenders party thereto.
1.56 1.55 Creditors' Committee means the Official Committee of Unsecured Creditors of Refco Inc., et al. appointed by the United States Trustee in the Chapter 11 Cases pursuant to section 1102 of the Bankruptcy Code on October 28, 2006, as reconstituted on March 29, 2006, July 21, 2006 and August 3, 2006 (and as amended from time to time).
1.57 1.56 Debtor means any of Refco Inc. or the Affiliate Debtors in its individual capacity.
1.58 1.57 Debtors means, collectively, Refco Inc. and all of the Affiliate Debtors.
1.59 1.58 Disbursing Agent means, solely in its capacity as agent to effectuate Distributions on behalf of FXA and the Contributing Debtors pursuant to the Plan, this Plan Administrator or such other entity as may designated by the Plan Proponents and appointed by the Bankruptcy Court as set forth in the Confirmation Order. For the avoidance of doubt, the RCM Trustee shall act as the Disbursing Agent for Post-Confirmation RCM.
1.60 1.59 Disclosure Statement means the disclosure statement (including all exhibits and schedules thereto) relating to this Plan, distributed contemporaneously herewith in accordance with sections 1125 and 1126(b) of the Bankruptcy Code and Bankruptcy Rule 3018, as it may be amended or supplemented from time to time.
1.61 1.60 Disputed Claim means any Claim other than an Allowed Claim.
1.62 1.61 "Disputed ... Claim" means a Disputed Claim of the type described.
1.63 1.62 Disputed Claim Amount means (a) with respect to a contingent or unliquidated Claim, zero or the amount estimated by the Bankruptcy Court prior to the initial Distribution Date, for purposes of allowance, reserves or Distributions in respect of such Claim in accordance with section 502(c) of the Bankruptcy Code or (b) with respect to any Disputed Claim that is not contingent or unliquidated, the amount set forth in a timely filed proof of claim; provided, however, that for purposes of establishing the Disputed Claims Reserve, the Disputed Claim Amount shall not exceed an amount equal to the applicable deductible or self-retention portion plus any uninsured amount in respect of Disputed Claims that are covered by insurance.
1.64 1.63 Disputed Claims Reserve means the reserve of Contributing Debtors Distributive Assets and FXA Distributive Assets established and maintained by the Reorganized Debtors for Holders of Disputed Claims; provided, however, that any reserve from Contributing Debtors Distributive Assets shall be a reserve from amounts to be paid on the Contributing Debtors Unsecured Claim Distribution and shall not result in a reserve against amounts to be paid on the RCM Cash Distribution in accordance with section 6.56.6(b) of this Plan.
1.65 1.64 Distribution means any distribution pursuant to the Plan to the Holders of Allowed Claims. 1.66 1.65 Distribution Date means the Effective Date (subject to section 6.2 hereof) or any Quarterly Distribution Date.
1.67 1.66 Distribution Record Date means, with respect to all Claims other than Senior Subordinated Note Claims, initially the Voting Deadline (unless a different date is agreed to by the Plan Proponents and filed with the Bankruptcy Court) and thereafter, 45 days prior to each scheduled Distribution Date.
1.68 1.67 Early Payment Order means the Order Pursuant to Section 105(a) of the Bankruptcy Code and Bankruptcy Rule 9019 Approving Settlement of Controversies and Disputes Among the Debtors, the RCM
6 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. Trustee, the Secured Lenders, and Certain Other Parties dated September 27, 2006 (Docket No. ____) attached hereto as Exhibit I.
1.69 1.68 Effective Date means the Business Day this Plan becomes effective as provided in Article IX hereof.
1.70 1.69 Effective Beneficiaries means (i) the Litigation Trust Beneficiaries (other than RCM) and (ii) the Holders of Allowed RCM Securities Customer Claims and Allowed RCM FX/Unsecured Claims that benefit from RCM's beneficial interest in the Litigation Trust.
1.71 1.70 Employee Benefit Plans means those "employee benefit plans" (as defined in Section 3(3) of ERISA (whether or not such plan is subject to ERISA)), other material plans, policies, programs, practice, agreements, and understandings or arrangements maintained, sponsored, or contributed to for the benefit of current or former employees of the Debtors.
1.72 1.71 ERISA shall mean the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder.
1.73 1.72 Estate(s) means, individually, the estate of any of the Debtors or RCM and, collectively, the estates of all of the Debtors and RCM created under section 541 of the Bankruptcy Code.
1.74 1.73 Estimated Unsatisfied Credit Agreement Claims has the meaning ascribed to such term in the Early Payment Order.
1.75 1.74 Examiner means Joshua R. Hochberg, the examiner appointed by United States Trustee pursuant to 11 U.S.C. § 1104(c)(2) and approved by the Bankruptcy Court in accordance with the Examiner Order.
1.76 1.75 Examiner Order means the Order Granting the Motion of the United States Trustee for the Appointment of an Examiner entered on March 16, 2006 (Docket No. 1487).
1.77 1.76 Excess Priority Claims means that portion of Allowed Administrative Claims, Allowed Priority Tax Claims and Allowed Non-Tax Priority Claims against the Contributing Debtors and RCM, or their respective Estates, accrued through the Effective Date that exceed $180 million in the aggregate, excluding any amounts paid as of August 31, 2006, as more particularly set forth in section 5.16 of this Plan.
1.78 Exhibit means an exhibit annexed to either this Plan or as an appendix to the Disclosure Statement.
1.79 1.78 Exhibit Filing Date means the date on which Exhibits to the Plan shall be filed with the Bankruptcy Court and posted on the refcodocket.com website, which date shall be at least ten (10) days prior to the Voting Deadline or such later date as may be approved by the Bankruptcy Court without further notice to parties-in-interest.
1.80 1.79 Fee Committee means the committee established by the Bankruptcy Court pursuant to the order entered on July 24, 2006 (Docket No. 2482).
1.81 1.80 Final Order means an order or judgment of the Bankruptcy Court, or other court of competent jurisdiction, as entered on the docket in any Chapter 11 Case, 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 thereof) the time to appeal or seek review or rehearing has expired and as to which no appeal or petition for review or rehearing was filed or, if filed, remains pending; provided, however, that the possibility that a motion under section 502(j) of the Bankruptcy Code, Rule 59 or Rule 60 of the Bankruptcy Rules or any analogous rule may be, but has not been filed shall not cause an order not to be a Final Order.
7 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. 1.82 1.81 FXA means Refco F/X Associates, LLC.
1.82
1.83 FXA Cash Accounts means the Cash accounts of FXA listed in the Schedules of FXA, which consist of the following accounts at the bank and with the account numbers designated herein: (i) Fleet Bank of New York, acct: 9421286511; (ii) Fleet Bank of New York, acct: 9421286589; (iii) Fleet Bank of New York, acct: 9421286693; (iv) Fleet Bank of New York, acct: 9421286896; (v) Fleet Bank of New York, acct: 9489924815; (vi) HK and Shanghai Banking Corp., acct: 009-030925-001; and (vii) Wachovia Bank, N.A., acct: 200017918646.
1.84 FXA Convenience Claims means any FXA General Unsecured Claim equal to or less than $10,000 or greater than $10,000 but, with respect to which, the Holder thereof voluntarily reduces the FXA General Unsecured Claim to $10,000 on the applicable Ballot; provided, however, that for purposes of the Plan and the Distributions to be made hereunder, the aggregate amount of Distributions to FXA Convenience Claims shall be limited to $5 million. To the extent that the amount of FXA General Unsecured Claims electing to receive a FXA Convenience Claim exceeds $5 million, the Claims permitted to elect such treatment shall be determined by reference to the amount of the Claim, with the Claim in the lowest amount being selected first and the next largest Claims being selected thereafter until the $5 million cap is reached.
1.85 1.84 FXA Distributive Assets means (i) the FXA Cash Accounts, allocated as agreed or otherwise resolved between FXA and KK Japan, plus (ii) proceeds, if any, of the sale of the customer list of FXA.
1.86 1.85 FXA General Unsecured Claim means a General Unsecured Claim against FXA.
1.87 1.86 FXA General Unsecured Claim Distribution means a Distribution from the FXA Distributive Assets after the payment of Allowed Administrative Claims, Allowed Priority Tax Claims and Allowed Non-Priority Tax Claims, Allowed Other Secured Claims and Allowed Secured Lender Claims against FXA, and less any amounts paid to the Holders of Allowed FXA Convenience Claims. The FXA General Unsecured Claim Distribution shall also include the Tranche A Litigation Trust Interests set forth in section 5.7 of this Plan.
1.88 1.87 FXCM means Forex Capital Markets, LLC.
1.89 FXCM Committee means a five person committee composed of the RCM Trustee and four creditors of either RCM or the Contributing Debtors (and chaired by the RCM Trustee) formed to coordinate on all matters relating to the disposition or distribution of RGL's 35% interest in FXCM.
1.90 1.88 General Unsecured Claim means a Claim that is not an Administrative Claim, Priority Tax Claim, Non-Tax Priority Claim, Other Secured Claim, Secured Lender Claim, Senior Subordinated Note Claim, RCM Intercompany Claim, FXA Convenience Claim, RCM Securities Customer Claim, RCM Leuthold Metals ClaimsClaim, RCM Securities Customer Convenience Claim, RCM FX/General Unsecured Convenience Claim, Subordinated Claim or Old Equity Interest.
1.91 1.89 Holder means an entity holding a Claim or Interest and, with respect to Senior Subordinated Note Claims, the beneficial holder of the Senior Subordinated Notes.
1.92 1.90 Houlihan means Houlihan Lokey Howard & Zukin Capital Advisors, Inc.
1.93 1.91 Impaired means, when used in reference to a Claim or Interest, a Claim or Interest that is impaired within the meaning of section 1124 of the Bankruptcy Code.
1.94 1.92 Intercompany Claim means any Claim held by a Refco Entity against any other Refco Entity, including any intercompany book entries reflecting obligations owed by one Refco Entity with respect to any other Refco Entity.
8 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. 1.95 1.93 Interest means the legal, equitable, contractual, and other rights of any Person with respect to any capital stock or other ownership interest in any Debtor or RCM, whether or not transferable, and any option, warrant, or right to purchase, sell, or subscribe for an ownership interest or other equity security in any Debtor.
1.96 1.94 IPO Underwriter Claims Recovery means any recovery from a claim brought by the Litigation Trust against an underwriter in connection with the initial public offering of Refco Inc., net of the fees and expenses incurred in pursuing such recovery.
1.97 1.95 Joinder Parties has the meaning set forth in the RCM Settlement Agreement.
1.98 1.96 Joint Sub-Committee means the joint sub-committee comprised of the Committee and the Additional Committee pursuant to a stipulation and protocol approved by order of the Bankruptcy Court, dated August 17, 2006 (Docket No. 2711).
1.99 1.97 KK Japan means RefcoFX Japan KK.
1.100 1.98 Lien shall mean any lien, security interest, pledge, title retention agreement, encumbrance, charge, mortgage or hypothecation, other than, in the case of securities and any other equity ownership interests, any restrictions imposed by applicable United States or foreign securities laws.
1.101 1.99 Litigation Claims means the claims, rights of action, suits, or proceedings, whether in law or in equity, whether known or unknown, that any Debtor or RCM may hold against any Person (after netting cross margin obligations, if applicable, to the extent required under the cross margining arrangement or to the extent determined necessary by the applicable Debtor or RCM) excluding the Released Claims and also excluding any claims, rights of action, suits, or proceedings held by the RCM Estate pursuant to sections 547, 550 and 749 of the Bankruptcy Code; provided, however, that the claims commenced and settled by the Creditors’ Committee against SPhinX Managed Futures Fund, LLC, and BAWAG shall not constitute Litigation Claims.
1.102 1.100 Litigation Trust means the trust established on the Effective Date to hold the Litigation Claims.
1.103 1.101 Litigation Trust Agreement means the agreement to be executed as of the Effective Date establishing the Litigation Trust pursuant to the Plan attached as Exhibit F hereto.
1.104 1.102 Litigation Trust Beneficiaries means the Estate of RCM, Holders of Allowed Contributing Debtors General Unsecured Claims, Holders of Allowed FXA General Unsecured Claims, Holders of Allowed Contributing Debtors Subordinated Claims and, Holders of Allowed Old Equity Interests and the Disputed Claims Reserve.
1.103
1.105 Litigation Trust Committee means the Committee established pursuant to section 5.7(d) of this Plan to participate in management of the Litigation Trust.
1.106 1.104 Litigation Trustee means the Person appointed pursuant to Section 5.7(a) of the Plan to act as trustee of and administer the Litigation Trust and identified on or before the date of the hearing before the Bankruptcy Court seeking approval of the Disclosure Statement, who may be the Plan Administrator and/or the Private Actions Trustee.
1.107 1.105 Litigation Trust Interests means the beneficial interests in the Litigation Trust.
1.108 1.106 Loan Documents has the meaning ascribed to such term in the Early Payment Order.
1.109 1.107 Loans has the meaning ascribed to such term in the Early Payment Order.
9 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. 1.110 1.108 MAC Contributing Debtors Assets means (x) the estimated value of the sum of the Contributing Debtors Distributive Assets (including the RCM BAWAG Proceeds), less (y) the estimated sum of, without duplication, (A) payments to be made in respect of the RCM Excess Priority Claims (whether funded from the RCM Cash Distribution or as part of the Pre-Conversion Administrative Claim Amount), (B) payments to be made in respect of the RCM Cash Distribution (without reduction for the Administrative Claims Adjustment), and (C) payments to be made by RCM pursuant to clause (iii) of section 5.15 of this Plan, provided that for purposes of making the estimate in this sub-section (C), total Allowed Contributing Debtors General Unsecured Claims will be assumed to be $502 million (unless the actual total amount of Allowed Contributing Debtors General Unsecured Claims are known at the time).
1.111 1.109 MAC RCM Assets means (x) the estimated value of the sum of (A) the Contributing Debtors Distributive Assets (including the RCM BAWAG Proceeds) less (y) the estimated sum of, without duplication, (A) payments to be made in respect of the RCM Excess Priority Claims (whether funded from the RCM Cash Distribution or as part of the Pre-Conversion Administrative Claim Amount), (B) payments to be made in respect of the Contributing Debtors Cash Distribution (without adjustment for the Contributing Debtors Post-Effective Date Claims), and (C) payments to be made by RCM pursuant to clause (iii) of section 5.15 of this Plan; provided, however, that for purposes of making the estimate in this sub-section (C), total Allowed Contributing Debtors General Unsecured Claims will be assumed to be $502 million (unless the actual total amount of Allowed Contributing Debtors General Unsecured Claims are known at the time).
1.112 1.110 MCG Members has the meaning set forth in the RCM Settlement Agreement.
1.113 1.111 Master Ballot means the ballot distributed to brokers, nominees or other agents for Holders of the Senior Subordinated Notes to record the votes of the beneficial Holders of Senior Subordinated Notes.
1.114 1.112 Non-Debtor Affiliates means Refco LLC, Refco Canada Finance Inc., Refco Commodity Management Inc., Refco Administrative Services Inc., EasyScreen Inc., Refco Mortgage Services LLC, Refco Securities LLC, Refco Clearing LLC, Refco EasySolutions LLC, RefcoFund Management LLC, Haut Commodities LLC, Refco Local Divisions LLC, RefcoFund Holdings LLC, Refco Alternative Investments LLC, Refco Trading Services LLC, Refco Screens Trustees Ltd. (in liquidation), Refco Screens Link Ltd. (in liquidation), Refco MF Ltd. (in liquidation), Refco Securities Ltd. (in liquidation), Refco Screens Employee Services Ltd., Refco Energy (UK) Ltd., Refco TC Ltd., RGE Ltd., Refco MT Limited, Refco Ltd., Westminster Clearing Ltd., Refco Screens Ltd., Refco Trading Services Ltd., Refco Trading Services (UK) Ltd., CI Investor Services Ltd., Refco Equity Derivatives Ltd., Refco Europe Ltd., Refco Overseas Ltd., Refco East Services Ltd. (in liquidation), Just Commodity Inc., Just (Dalian) Trading Co Ltd., Refco Capital Singapore Pte Ltd, Refco India Pvt Ltd, Easy Tiger Pte Ltd, EasyScreen Pty Ltd, Refco Singapore Pte Ltd, Refco Investment Services Pte Ltd, Refco Forex Ltd (in liquidation), Refco Securities SA, Refco Futures (HK) Limited, Refco Trading Services (Gibraltar) Ltd., Refco Capital Markets International Ltd, Refco Capital Markets International Services Ltd, ACM Advanced Currency Markets SA.
1.115 1.113 Non-Tax Priority Claim means a Claim, other than an Administrative Claim or Priority Tax Claim, which is entitled to priority in payment pursuant to section 507(a) of the Bankruptcy Code.
1.116 1.114 Old Equity Interests means the common stock of Refco Inc. outstanding immediately prior to the Petition Date, including treasury stock and all options, warrants, calls, rights, participation rights, puts, awards, commitments, or any other agreements of any character to acquire such common stock, and shall also include any Claim subordinated pursuant to section 510(b) arising from the rescission of a purchase or sale of any such common stock or rights relating to such common stock, or any Claim for damages arising from the purchase or sale of common stock of Refco Inc. or any Claim for reimbursement, contribution, or indemnification arising from or relating to any such claims.
1.115
1.117 Other Related Claim means, other than an RCM Related Claim, any Claim or cause of action of any Holder of an Impaired Claim against RCM or any Debtor arising from the same facts, transactions or occurrences giving rise to such Holder's Impaired Claim against its primary Debtor obligor; provided, however, that
10 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. the term Other Related Claim shall not include any Claim, based on a contractual guarantee or other direct contractual undertaking, against RCM or any Debtor that is not such Holder’s primary Debtor Obligor.obligor.
1.118 1.116 Other Secured Claim means a Claim (other than an Administrative Claim or Secured Lender Claim) that is secured by a lien on property in which a Debtor's Estate or RCM's Estate has an interest or that is subject to setoff under section 553 of the Bankruptcy Code, to the extent of the value of the Claim Holder's interest in the applicable Estate's interest in such property or to the extent of the amount subject to setoff, as applicable, as determined pursuant to section 506(a) of the Bankruptcy Code or, in the case of setoff, pursuant to section 553 of the Bankruptcy Code.
1.119 1.117 Person means an individual, corporation, partnership, joint venture, association, joint stock company, limited liability company, limited liability partnership, trust, estate, unincorporated organization, or other entity.
1.120 1.118 Petition Date means, with respect to a Debtor or RCM, the date on which such Debtor filed its petition for relief commencing its Chapter 11 Case.
1.121 1.119 Plan means this chapter 11 plan, including the Exhibits and all supplements, appendices, and schedules hereto, either in its current form or as the same may be altered, amended, or modified from time to time in accordance with the Bankruptcy Code and the Bankruptcy Rules.
1.122 1.120 Plan Administrator means the person designated pursuant to section 5.65.5 hereof prior to the Confirmation Date and approved by the Bankruptcy Court pursuant to the Confirmation Order to administer the Plan on behalf of the Contributing Debtors and FXA in accordance with the terms of the Plan and the Plan Administrator Agreement and to take such other actions as may be authorized under the Plan Administrator Agreement, and any successor thereto.
1.123 1.121 Plan Administrator Agreement means the agreement between and among the Contributing Debtors and the Plan Administrator specifying the rights, duties, and responsibilities of and to be performed by the Plan Administrator under the Plan, in substantially the same form as the agreement attached to the Plan as Exhibit E.
1.124 1.122 Plan Committee means the committee as appointed pursuant to section 5.11(b) hereof as of the Effective Date, which will supervise and direct the Plan Administrator, to monitor implementation of the Plan, and to take such other actions and have such other rights as are set forth in the Plan, all as described in Article V of this Plan.
1.125 1.123 Plan Document means the Plan, together with any contract, instrument, release, or other agreement or document entered into in connection with Plan.
1.126 1.124 Plan Filing Date means September 24, 2006.
1.127 1.125 Plan Proponents means the Debtors, the RCM Trustee and the Committees.
1.128 Plan Support Agreement means that certain agreement among the RCM Trustee, certain Non-Debtor Affiliates, the Committees, certain individual customers and creditors of RCM and the Debtors, and the chapter 7 trustee for Refco, LLC, in his capacity as chapter 7 trustee for Refco, LLC, filed with the Bankruptcy Court on September 15, 2006 (docket no. 2861).
1.129 1.126 Post-Confirmation RCM means the estate of RCM on and after the entry of the Confirmation Order as administered by the RCM Trustee.
11 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. 1.130 1.127 Post-Petition Management means AlixPartners and Harrison J. Goldin, Goldin Associates, LLC, and any directors appointed to the board of directors of Refco Inc. subsequent to Mr. Goldin's appointment as Chief Executive Officer of Refco Inc. on January 25, 2006.
1.131 1.128 Pre-Conversion Administrative Claim Amount means, if determined necessary by the RCM Trustee, any amount deposited by the Contributing Debtors into a reserve for the benefit of Holders of Administrative Claims against RCM arising or accruing prior to the date of conversion, if any, of RCM's Chapter 11 Case to a case under chapter 7 of the Bankruptcy Code (including RCM Substantial Contribution Fees). The Pre-Conversion Administrative Claim Amount shall in no case exceed an amount equal to (i) $60 million plus (ii) the RCM Excess Priority Claims that RCM is responsible for bearing pursuant to section 5.16 of this Plan.
1.132 1.129 Priority Claims means, collectively, all Priority Tax Claims and Non-Tax Priority Claims.
1.133 1.130 Priority Tax Claim means a Claim of a governmental unit of the kind specified in sections 502(i) and 507(a)(8) of the Bankruptcy Code.
1.134 1.131 Private Actions Trust means the trust established on the Effective Date pursuant to section 5.8 of the Plan to hold certain claims and causes of action against third-parties owned by Holders of Claims against RCM or the Debtors and which claims, even after contribution, are not assets of the Estates.
1.135 1.132 Private Actions Trust Agreement means the agreement to be executed as of the Effective Date establishing the Private Actions Trust pursuant to the Plan attached as Exhibit G hereto.
1.136 1.133 Private Actions Trustee means the Person appointed pursuant to the Private Actions Trust Agreement of the Plan to act as trustee of and administer the Private Actions Trust and identified on or before the date of the hearing before the Bankruptcy Court seeking approval of the Disclosure Statement, who may be the Plan Administrator and/or the Litigation Trustee.
1.137 1.134 Professional means (a) any professional employed in these Chapter 11 Cases pursuant to sections 327, 328, or 1103 of the Bankruptcy Code or otherwise and (b) any professional or other entity seeking compensation or reimbursement of expenses in connection with the Chapter 11 Cases pursuant to section 503(b)(4) of the Bankruptcy Code.
1.138 1.135 Professional Fee Claim means an Administrative Claim of a Professional for compensation for services rendered or reimbursement of costs, expenses, or other charges incurred after the Petition Date and prior to and including the Effective Date.
1.139 1.136 Pro Rata means, with respect to Claims or Interests (i) within the same Class or sub-Class, the proportion that a Claim or Interest bears to the sum of all Claims or Interests, as the case may be, within such Class or sub-Class, and (ii) among all Classes, the proportion that a Class of Claims or Interests bears to the sum of all Claims or Interests, as the case may be; provided, however, that for purposes of distributing Litigation Trust Interests, Pro Rata share shall exclude Convenience Claims.
1.140 1.137 Qualifying Plan has the meaning ascribed to such term in the Early Payment Order.
1.141 1.138 Quarterly Distribution Date means the last Business Day of the month following the end of each calendar quarter after the Effective Date; provided, however, that if the Effective Date is within 30 days of the end of a calendar quarter, the first Quarterly Distribution Date shall be the last Business Day of the month following the end of the first calendar quarter after the calendar quarter in which the Effective Date falls.
1.142 1.139 RCM means Refco Capital Markets, Ltd.
12 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. 1.143 1.140 RCM Administrative/Priority Claims Reserve means the Reserve account(s) to be established and maintained by the RCM Trustee, on behalf of Post-Confirmation RCM, to fund the Distribution to Holders of Administrative and Priority Claims against RCM.
1.144 1.141 RCM Administrative Professional means any professional employed in the RCM Chapter 11 Case pursuant to sections 327, 328, or 1103 of the Bankruptcy Code or otherwise.
1.145 1.142 RCM Advance means a post-petition advance, if any, by RCM to or for the benefit of one or more of the Contributing Debtors in the amount of up to $115 million.
1.146 1.143 RCM BAWAG Proceeds means (i) $200,000,000.00 of the BAWAG Guaranteed Proceeds (whether directly allocated to RCM or recovered by RCM on account of its RCM Intercompany Claim), and (ii) the Contributing Debtors' sharea portion of the BAWAG Contingent Proceeds, which proceeds, pursuant to section 5.18 hereof, shall be deemed to be exclusively offered to pay, in exchange for the releases required by the BAWAG Settlement, Holders of Allowed RCM Securities Customer Claims and Allowed RCM FX/Unsecured Claims. allocable to payment of the RCM Cash Distribution from the Contributing Debtors Distributive Assets, which proceeds, pursuant to section 5.18 hereof, shall be deemed to be exclusively offered to pay, in exchange for the releases required by the BAWAG Settlement, Holders of Allowed RCM Securities Customer Claims and Allowed RCM FX/Unsecured Claims. RCM BAWAG Proceeds means that portion of the BAWAG Proceeds (and included in the RCM Cash Distribution) available for Distribution to RCM from the BAWAG Settlement pursuant to the BAWAG Allocation Order.RCM Cash Distribution means the sum of (i) $460 million of Cash (inclusive of RCM BAWAG Proceeds) payable from Contributing Debtor Distributive Assets, which amount shall be adjusted upwards or downwards, by an amount equal to the Specified Difference plus (ii) payment to RCM of any amounts available frorm the Contributing Debtors General Unsecured Distribution, to the extent that such amounts are not paid to Holders of Allowed Contributing Debtors General Unsecured Claims as a result of recoveries for Holders of Allowed Contributing Debtors General Unsecured Claims (from Contributing Debtors Distributive Assets and the RGL FXCM Distribution) having reached 40%; provided, however, such Distribution shall be subject to the Administrative Claims Adjustment.
1.148 1.146 RCM Difference means the amount by which the Allowed amount of any RCM FX/Unsecured Claim filed by Cargill is reduced by allowance of the Cargill Administrative Claim.
1.147
1.149 RCM Claims Distribution Account means the account established and maintained by the Post-Confirmation RCM from which Distributions to Holders of Allowed Claims against RCM shall be made and from which reserves on behalf of RCM will be funded.
1.150 1.148 RCM Distribution Reserve means the reserve established by the Plan Administrator or RCM, as the case may be, to hold that portion of the RCM Cash Distribution and that portion of the RGL FXCM Distribution applicable to Holders of a right to demand an applicable share of the RCM Cash Distribution and 50% of the RGL FXCM Distribution, but who have not tendered an RCM Related Claim Subordination Form.
1.151 1.149 RCM Excess Priority Claims means that portion of Excess Priority Claims that are to be borne by RCM pursuant to section 5.16 of this Plan.
1.152 RCM FX/Unsecured Claims has the meaning given to the term “FX/Unsecured Claim” in the RCM Settlement Agreement.
1.153 1.151 RCM FX/Unsecured Claims Distribution means the distribution for Holders of RCM FX/Unsecured Claims set forth in the RCM Settlement Agreement less any amounts paid to the Holders of Allowed RCM FX/ Unsecured Convenience Claims.
13 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. 1.154 RCM FX/Unsecured Convenience Claims means any RCM FX/Unsecured Claim equal to or less than $10,000 or greater than $10,000 but, with respect to which, the Holder thereof voluntarily reduces the RCM FX/Unsecured Claim to $10,000 on the applicable Ballot; provided, however, that for purposes of the Plan and the Distributions to be made hereunder, the aggregate amount of Distributions to RCM FX/General Unsecured Claims shall be limited to $1.458 million. To the extent that the amount of RCM FX/General Unsecured Claims electing to receive a RCM FX/General Unsecured Convenience Claim exceeds $1.458 million, the Claims permitted to elect such treatment shall be determined by reference to the amount of the Claim, with the Claim in the lowest amount being selected first and the next largest Claims being selected thereafter until the $1.458 million cap is reached.
1.155 1.152 RCM Implied Deficiency Claim has the meaning given to the term "Implied Deficiency Claim" in §8(b) of the RCM Settlement Agreement.
1.156 1.153 RCM Intercompany Claims means Claims of RCM against one or more of the Debtors. Unless and until Allowed in a definitive amount, for purposes of calculations herein, the RCM Intercompany Claims shall be deemed to be in an amount that is no less than the amount necessary to cause all Holders of Allowed RCM Securities Customer Claims and Allowed RCM FX/Unsecured Claims to receive payment in full.
1.157 1.154 RCM Intercompany Claim Distribution means the sum of (i) the RCM Rights Distribution, (ii) the Additional RCM Claim, (iii) 50% of the RGL FXCM Distribution, (iv) the RCM BAWAG Proceeds, and (v) the allocable share of the Tranche A Litigation Trust Interests set forth in section 5.7 of this Plan. 1.155
1.158 RCM Leuthold Metals Claim has the meaning given to the term “Leuthold Metals Claim” in the RCM Settlement Agreement.
1.159 1.156 RCM Leuthold Metals Claim Distribution means the Distribution for Holders of RCM Leuthold Metals Claims set forth in the RCM Settlement Agreement.
1.160 1.157 RCM Projection means a projection of the Cash or value to be available from the MAC RCM Assets for Distribution in respect of the RCM Cash Distribution and the Additional RCM Claim.
1.161 1.158 RCM Related Claims means any Claim or cause of action of any Holder of an Impaired Claim against the Debtors and Non-Debtor Affiliates arising from the same facts, transactions or occurrences giving rise to such Holder's Impaired Claim against RCM; provided, however, that the term RCM Related Claim shall not include any Claim of Holder of an RCM Securities Customer Claim or an RCM FX/Unsecured Claim against any Contributing Debtor or FXA based on contractual guarantees or other direct contractual undertakings.
1.162 1.159 RCM Related Claim Subordination Form means, in respect of a Holder of an Allowed RCM Securities Customer Claim or Allowed RCM FX/Unsecured Claim, either (i) a ballot cast by such Holder in respect of the Plan whereby the Holder has elected (by means of not affirmatively opting out of such election) to (A) release itsassign those RCM Related Claim in respect ofClaims, if any, to the Litigation Trust; (B) release their RCM Related Claims against any Refco Entity that is not a Debtor in these Chapter 11 Cases, (B) cause its RCM Related Claim in respect of all Debtors to be subordinated to the extent set forth in the Plan, (C) cause its RCM Related Claim to be assigned to the Litigation Trust, (D, and (C) release the Secured Lenders (in such capacities) from the Secured Lender Released Claims held by such Holders, if any, and (ED) receive its applicable share of the RCM Cash Distribution, which, unless such Holder opts out, shall include the Holders' applicable share of the RCM BAWAG Proceeds portion of the RCM Cash Distribution or (ii) any agreement, in a form satisfactory to the Plan Administrator, by which such Holder agrees to (A) release its RCM Related Claim in respect of any Refco Entity that is not a Debtor in these Chapter 11 Cases, (B) cause its RCM Related Claim in respect of all Debtors to be subordinated and to receive to the extent set forth in the Plan, (C) cause its RCM Related Claim to be assigned to the Litigation Trust, (D) release the Secured Lenders (in such capacities) from the Secured Lender Released Claims held by such Holders, if any, and (E) receive its applicable share of the RCM Cash Distribution, which, unless such Holder opts out, shall include the Holders' applicable share of the RCM BAWAG Proceeds portion of the RCM Cash Distribution. For the avoidance of doubt, any ballot properly cast by the Voting Deadline and satisfying the conditions above shall be deemed to have been “provided” to the RCM Trustee and the Plan Administrator for purposes of section 6.6(c) of this Plan.RCM 14 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. Reserves means (A) the RCM Disputed Claims Reserve, (B) the RCM Administrative/Priority Reserve, (C) the RCM Wind-Down Reserve, (D) the RCM Unclaimed Distribution Reserve, and (E) any other reserves required to be established by the RCM Trustee under the RCM Settlement Agreement.
1.164 1.161 RCM Rights Distribution means the transfer to the RCM Trustee, as part of the RCM Intercompany Claims Distribution, of rights which will allow each Holder of an Allowed RCM Securities Customers Claim on account of its RCM Implied Deficiency Claim and each Holder of an Allowed RCM FX/Unsecured Claim to make a demand for payment from the Plan Administrator or RCM, as the case may be, for such Holder's pro-rata share of the RCM Distribution Reserve to the extent that such Holder satisfies the conditions set forth in section 6.6(c) of this Plan.
1.165 1.162 RCM Securities Customer Claims has the meaning given to the term “Securities Customer Claims” in the RCM Settlement Agreement.
1.166 RCM Securities Customer Convenience Claims means any RCM Securities Customer Claim equal to or less than $10,000 or greater than $10,000 but, with respect to which, the Holder thereof voluntarily reduces the RCM Securities Customer Claim to $10,000 on the applicable Ballot; provided, however, that for purposes of the Plan and the Distributions to be made hereunder, the aggregate amount of Distributions to RCM Securities Customer Claims shall be limited to $0.333 million. To the extent that the amount of RCM Securities Customer Claims electing to receive a RCM Securities Customer Convenience Claim exceeds $0.333 million, the Claims permitted to elect such treatment shall be determined by reference to the amount of the Claim, with the Claim in the lowest amount being selected first and the next largest Claims being selected thereafter until the $0.333 million cap is reached.
1.167 1.163 RCM Securities Customer Claims Distribution means the distribution for Holders of RCM Securities Customer Claims set forth in the RCM Settlement Agreement less any amounts paid to the Holders of Allowed RCM Securities Customer Convenience Claims.
1.168 1.164 RCM Settlement Agreement means, collectively, (i) the settlement agreement dated as of June 29, 2006 by and among the RCM Trustee and certain creditors of RCM and (ii) the Joinder Agreement dated as of July 20, 2006 between the RCM Trustee and the Rogers Funds, in each case as amended (copies of which are attached hereto as Exhibit B).
1.169 1.165 RCM Substantial Contribution Fees means the approximate amount of $4.3 million constituting the substantial contribution Claim of the MCG Members and the Joinder Parties under sections 503(b)(3)(d), 507(a)(2) and 752(a) of the Bankruptcy Code as set forth in the RCM Settlement Agreement.
1.170 1.166 RCM Trustee means Marc S. Kirschner, the Chapter 11 Trustee appointed in the RCM chapter 11 case in connection with the March 22, 2006 order issued by the Bankruptcy Court authorizing appointment of one disinterested person as Chapter 11 trustee for the Estate of RCM. The term includes any successor Chapter 11 Trustee or, if the RCM Chapter 11 Case is converted to a chapter 7 case to be administered under subchapter III of chapter 7 of the Bankruptcy Code, the chapter 7 trustee.
1.167
1.171 RCM Unclaimed Distribution Reserve means the reserve or reserves established in respect of unclaimed Distributions for RCM pursuant to Article VI of the Plan.
1.172 1.168 RCM Wind-Down Reserve means a reserve, if determined necessary by the RCM Trustee, of up to $15 million from the Cash or value available for the RCM Cash Distribution, with the amount of such RCM Wind-Down Reserve to be subject to downward adjustment from time to time by the RCM Trustee, to the extent the RCM Trustee determines that RCM's wind-down expenses after the Effective Date will be less than $15 million. 1.173 1.169 Reinstated means (a) leaving unaltered the legal, equitable, and contractual rights to which a Claim entitles the Holder of such Claim so as to leave such Claim Unimpaired in accordance with section 1124 of the Bankruptcy Code or (b) notwithstanding any contractual provision or applicable law that entitles the
15 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. Holder of such Claim to demand or receive accelerated payment of such Claim after the occurrence of a default, (i) curing any such default that occurred before or after the Petition Date, other than a default of a kind specified in section 365(b)(2) of the Bankruptcy Code, (ii) reinstating the maturity of such Claim as such maturity existed before such default, and (iii) not otherwise altering the legal, equitable, or contractual rights to which such Claim entitles the Holder of such Claim.
1.174 1.170 Refco Entities means the Debtors, RCM and the Non-Debtor Affiliates.
1.175 1.171 Related Claims means any RCM Related Claim or Other Related Claim.
1.176 1.172 Released Claims means the claims or causes of actions described in sections 10.2(a) and (b) of the Plan or claims or causes of action that have been otherwise released or waived pursuant to an order of the Bankruptcy Court (including, without limitation, the Early Payment Order).
1.177 1.173 Released Parties means, acting in such capacity, (i) the directors and officers of certain foreign Non-Debtor Affiliates set forth on Schedule 1.1491.177 attached hereto and the Post-Petition Management, (ii) RCM, (iii) the RCM Trustee, (iv) the trustee appointed in the Refco, LLC chapter 7 case, (v) the Committees and their members, (vi) the Debtors (vii) the Secured Lender Releasees, (viii) the Senior Subordinated Note Indenture Trustee, its directors, officers, and employees, (ix) present and former holders of the Senior Subordinated Notes in their capacity as Holders of the Senior Subordinated Notes, and (x) the respective current professionals (as of the Petition Date and thereafter) of the entities released under subclauses (i) - (ix) acting in such capacity for such entity.
1.178 1.174 Reorganized Debtors means Reorganized Refco and Reorganized FXA.
1.179 1.175 Reorganized FXA means FXA on and after the Effective Date.
1.180 1.176 Reorganized Refco means Refco Inc. on and after the Effective Date.
1.181 1.177 Reserves means, collectively, the Disputed Claims Reserve, Unclaimed Distribution Reserve, Administrative/Priority Claims Reserve and the RCM Distribution Reserve (if held by the Plan Administrator, rather than the RCM Trustee).
1.182 1.178 Restated Corporate Governance Documents means the restated corporate governance documents of the Reorganized Debtors in substantially the form attached to this Plan as Exhibit C.
1.183 Retained Causes of Action means the claims and causes of action of the Debtors and RCM retained as set forth in section 5.10(a) of this Plan and of which a non-exclusive list is set forth on Exhibit K attached hereto.
1.184 1.179 RGL means Refco Group Limited LLC.
1.185 1.180 RGL FXCM Distribution means RGL's 35% interest in FXCM, which for purposes of the calculation of the cap on Distributions to holders of Contributing Debtors General Unsecured Claims from Contributing Debtors Distributive Assets and the RGL FXCM Distribution shall have a value equal to (i) if liquidated prior to the Effective Date, the value obtained through liquidation and (ii) if not liquidated prior to the Effective Date, a deemed value of $90 million.
1.186 1.181 Rogers Funds means Rogers Raw Materials Fund, L.P. and Rogers International Raw Materials Fund, L.P.
1.187 1.182 Scheduled means, with respect to any Claim, the status, priority, and amount, if any, of such Claim as set forth in the Schedules.
16 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. 1.188 1.183 Schedules means the schedules of assets and liabilities, the list of Holders of Interests, and the statements of financial affairs filed by the Debtors or RCM pursuant to section 521 of the Bankruptcy Code and Bankruptcy Rules, as such schedules have been or may be further modified, amended, or supplemented in accordance with Bankruptcy Rule 1009 or orders of the Bankruptcy Court.
1.189 1.184 Secured Lender(s) has the meaning assigned to the term “Lender(s)” in the Early Payment Order.
1.190 1.185 Secured Lender Agent has the meaning assigned to the term “Agent” in the Early Payment Order.
1.191 1.186 Secured LenderBAWAGProceeds means $100 million of the BAWAG Guaranteed Proceeds, which proceeds, pursuant to section 5.18 hereof, shall be deemed exclusively offered to pay and accepted by the Holders of Allowed Secured Lender Claims.
1.192 1.187 Secured Lender Claims has the meaning assigned to the term “Secured Claim” in the Early Payment Order.
1.193 1.188 Secured Lender Indemnification Claims means any and all Estimated Unsatisfied Credit Agreement Claims and all other claims of the Secured Lender Agent and/or the Secured Lenders of the type specified in paragraph 9(b) of the Early Payment Order.
1.194 1.189 Secured Lender Payment Date has the meaning assigned to the term “Payment Date” in the Early Payment Order.
1.195 1.190 Secured Lender Released Claims means any and all actual or potential demands, claims, causes of action (including, without limitation, derivative causes of action), suits, assessments, liabilities, losses, costs, damages, penalties, fees, charges, expenses and all other forms of liability whatsoever, in law or equity (including, without limitation, actions seeking to recharacterize, avoid, subordinate, set aside or disallow the liens or claims of any Secured Lender Releasee, or seeking turnover of property, damages or any other affirmative recovery from any Secured Lender Releasee, including, without limitation, any claim for contribution), whether asserted or unasserted, known or unknown, foreseen or unforeseen, pending or anticipated, arising under the Bankruptcy Code or under otherwise applicable law, that any Person ever had, now has or hereafter may have (whether by assignment or otherwise) based in whole or in part upon any act or failure to act by any of the Secured Lender Releasees, on or prior to the Secured Lender Payment Date, in contemplation of the execution of the Loan Documents, in connection with the execution of the Loan Documents or the making or repayment of the Loans, or in connection with any transactions directly or indirectly related or connected in any way to the Loan Documents, the Secured Lender’s Collateral, the use of proceeds of Loans made under the Loan Documents, or any other transactions related to or in connection with any of the foregoing.
1.196 1.191 Secured Lender Releasee has the meaning assigned to the term “Lender Releasee” in the Early Payment Order.
1.197 1.192 Secured Lender’s Collateral has the meaning assigned to the term “Collateral” in the Early Payment Order.
1.198 Securities Class Action Stipulation means that certain Stipulation and Agreement of Settlement entered into on September 7, 2006 between BAWAG and the lead plaintiffs in the securities class action entitled In re Refco Inc. Securities Litigation, Case No. 05 Civ. 8626 (GEL), filed in the United States District Court for the Southern District of New York.
1.199 1.193 Senior Subordinated Note Allocation means an allocation of the Senior Subordinated Note Holder Fee Distribution on account of the Senior Subordinated Note Indenture Trustee Fees and Senior Subordinated Note Holder Ad Hoc Committee Fees and Expenses, which allocation shall be agreed upon between the Senior Subordinated Note Indenture Trustee and the Senior Subordinated Note Ad Hoc Committee. Any
17 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. amount of Senior Subordinated Note Indenture Trustee Fees not paid on account of such allocation may be satisfied pursuant to the Subordinated Note Indenture Trustee Charging Lien.
1.200 1.194 Senior Subordinated Note Claims means all Claims of any kind arising from or related to the Senior Subordinated Notes, and including, without limitation, any Claims arising from any guarantees under the Senior Subordinated Note Indenture, which Claims shall be Allowed Claims in the amount of $397,413,324.50.
1.201 1.195 Senior Subordinated Note Holder Ad Hoc Committee Fees and Expenses means fees and expenses of counsel to the Ad Hoc Bondholders' Committeead hoc committee of Holders of Senior Subordinated Notes subject to application pursuant to section 503(b) of the Bankruptcy Code, to which the parties to the Plan Support Agreement, other than the Debtors may not object and (ii) the Debtors, in the event that they do object to such application, may object solely with respect to the reasonableness, compensability and allocation of the fees and expenses incurred.
1.202 1.196 Senior Subordinated Note Holder BAWAG Proceeds means $150,000,000 of the BAWAG Guaranteed Proceeds plus all BAWAG Contingent Proceeds (if any), which proceeds, pursuant to section 5.18 hereof, shall be deemed to be exclusively offered to pay, in exchange for releases required in the BAWAG Settlement, Holders of Allowed Senior Subordinated Note Claims.
1.203 1.197 Senior Subordinated Note Holder Distribution means $331,522,195.30, which, pursuant to the compromises and settlements contained in this Plan document, constitutes 83.42% of the outstanding balance of principal and prepetition interest of the Senior Subordinated Note Claims. Such Distribution shall be paid to the Senior Subordinated Note Indenture Trustee on the Effective Date to the extent of available Cash after taking into account the funding of the Administrative/Priority Claims Reserve, with anybalance paid from time totime to the Senior Subordinate Note Indenture Trustee from available Cash with interest accruing, beginning January 1, 2007, on the unpaid balance at the same rate of interest that Refco LLC earns on its invested Cash and cash equivalents, payable from the Senior Subordinated Note Holder BAWAG Proceeds and, to the extent of any deficiencies, the Contributing Debtors Distributive Assets.
1.204 1.198 Senior Subordinated Note Holder Fee Distribution means an amount up to $6.0 million of the (i) Senior Subordinated Note Indenture Trustee Fees, and (ii) the Allowed Senior Subordinated Note Ad Hoc Committee Fees and Expenses. Such Distribution shall be paid on the Effective Date from the Contributing Debtors Distributive Assets to the Senior Subordinated Note Indenture Trustee and counsel to the Senior Subordinated Note Ad Hoc Committee, subject to the Senior Subordinated Note Allocation. For the avoidance of doubt, any portion of the Senior Subordinated Note Indenture Trustee Fees not paid by the Senior Subordinated Note Holder Fee Distribution may be satisfied pursuant to the Senior Subordinated Note Indenture Trustee Charging Lien.
1.205 1.199 Senior Subordinated Note Indenture means the indenture dated as of August 5, 2004, among Refco Finance Holdings LLC (now known as Refco Group Ltd., LLC) and Refco Finance Inc., as issuers, and Wells Fargo Bank National Association, as indenture trustee, relating to the Senior Subordinated Notes, as it may be amended, supplemented, or modified from time to time.
1.206 1.200 Senior Subordinated Note Indenture Trustee means Wells Fargo Bank National Association, the indenture trustee under the Senior Subordinated Note Indenture, or any successor thereto.
1.207 1.201 Senior Subordinate Note Indenture Trustee Charging Lien means any Lien or other priority in payment or right available to the Senior Subordinated Note Indenture Trustee pursuant to the Senior Subordinated Note Indenture or otherwise available to the Senior Subordinate Note Indenture Trustee under applicable law, for the payment of Senior Subordinated Note Indenture Trustee Fees.
1.208 1.202 Senior Subordinated Note Indenture Trustee Fees means the fees, costs, expenses and indemnity claims of the Senior Subordinated Note Indenture Trustee and the fees and expenses of its counsel and financial advisor.
18 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. 1.209 1.203 Senior Subordinated Notes means the 9% Senior Subordinated Notes due 2012 issued by RGL and Refco Finance Inc. under the Senior Subordinated Note Indenture and guaranteed by certain of the Debtors.
1.210 1.204 Specified Difference means 50% of the difference (positive or negative) between the value of the Adjusted Contributing Debtors Distributive Assets and $554 million (in making such calculation the Adjusted Contributing Debtors Distributive Assets shall not be subject to the Administrative Claims Adjustment); provided, however, that once the portion of the Contributing Debtors General Unsecured Distribution has reached 40% exclusive of the value of the Tranche A Litigation Trust Interests, 100% of the remainder of the positive difference shall be added to the RCM Cash Distribution. For the avoidance of doubt, any BAWAG Proceeds received pursuant to the BAWAG Settlement, even if returned to BAWAG pursuant to the terms of this Plan and the BAWAG Settlement, shall be included in the calculation of Adjusted Contributing Debtors Distributive Assets.
1.211 1.205 Subordinated Claim means any Claim which is (i) is subordinated pursuant to section 510(c) of the Bankruptcy Code or (ii, (ii) arises from a debt security and is subordinated pursuant to section 510(b) of the Bankruptcy Code or (iii) is a Claim for a fine, penalty, forfeiture, multiple, exemplary or punitive damages, or otherwise not predicated upon compensatory damages, and that would be subordinated in a chapter 7 case pursuant to section 726(a)(4) of the Bankruptcy Code or otherwise.
1.212 1.206 Subsidiary Claims and Interests means Claim against or an Interest in any of the Refco Entities held by any other Refco Entity other than the RCM Intercompany Claims.
1.213 1.207 Tranche A Litigation Trust Interests means the Litigation Trust Interests distributed to (i) the RCM Estate, (ii) Holders of Contributing Debtors General Unsecured Claims (which for the sake of clarity, shall not include the Secured Lender Claims or, the Senior Subordinated Note Claims) and (iii) the Holders of FXA General Unsecured Claims (which for the sake of clarity, shall not include FXA Convenience Class Claims, RCM Securities Customer Convenience Claims and RCM FX/General Unsecured Convenience Claims).
1.214 1.208 Tranche B Litigation Trust Common Interests means the Litigation Trust Interests distributed to the Old Equity Interests.
1.215 1.209 Tranche B Litigation Trust Preferred Interests means the Litigation Trust Interests distributed to the Holders of Subordinated Claims.
1.216 1.210 Unclaimed Distribution Reserve means the reserve or reserves established in respect of unclaimed Distributions for FXA and the Contributing Debtors pursuant to Article VI of the Plan.
1.217 1.211 Unclassified Claims means Administrative Claims and Priority Tax Claims
1.218 1.212 Unimpaired means a Claim or Interest that is not impaired within the meaning of section 1124 of the Bankruptcy Code.
1.219 1.213 Voting Deadline means [$], 2006 at [$] p.m. (prevailing Eastern Time).
1.220 1.214 Voting Record Date means [$].
1.221 1.215 VR means, collectively, VR Global Partners, L.P. and its affiliates.
1.222 1.216 VR/Leuthold Guarantee Claims means the Claims against RGL arising from (i) that certain guarantee agreement, dated July 11, 2003 between Refco Group Ltd., LLC and VR Capital Group Ltd., (ii) that certain guarantee agreement, dated July 11, 2003 between Refco Group Ltd., LLC and VR Argentina Recovery Fund, Ltd., (iii) that certain guarantee agreement, dated July 11, 2003 between Refco Group Ltd., LLC and VR Global Partners, L.P., and (iv) that certain guarantee agreement, dated September 1, 2005 between Refco Group Ltd., LLC and Leuthold Funds, Inc. and (v) any other documents, agreements or transactions in any way related to (i) through (iv) above.
19 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. 1.223 1.217 Wind-Down Reserves means the reserve accounts to be established and maintained by the Plan Administrator, on behalf of the Reorganized Debtors, to fund the administration of this Plan, including but not limited to compensation of the Plan Administrator and Administrative Professionals.
Rules Of Interpretation And Computation Of Time. For purposes of this Plan, unless otherwise provided herein: (a) whenever from the context it is appropriate, each term, whether stated in the singular or the plural, shall include both the singular and the plural; (b) unless otherwise provided in this Plan, any reference in this Plan to a contract, instrument, release, or other agreement or document being in a particular form or on particular terms and conditions means that such document shall be substantially in such form or substantially on such terms and conditions; (c) any reference in this Plan to an existing document or schedule filed or to be filed means such document or schedule, as it may have been or may be amended, modified, or supplemented pursuant to this Plan; (d) any reference to an entity as a Holder of a Claim or Interest includes that entity's successors and assigns; (e) all references in this Plan to sections and articles are references to sections and articles of or to this Plan; (f) the words "herein," "hereunder," and "hereto" refer to this Plan in its entirety rather than to a particular portion of this Plan; (g) captions and headings to articles and sections are inserted for convenience of reference only and are not intended to be a part of or to affect the interpretation of this Plan; (h) subject to the provisions of any contract, certificates of incorporation, by-laws, instrument, release, or other agreement or document entered into in connection with this Plan, the rights and obligations arising under this Plan shall be governed by, and construed and enforced in accordance with, federal law, including the Bankruptcy Code and Bankruptcy Rules; (i) the rules of construction set forth in section 102 of the Bankruptcy Code shall apply; (j) in computing any period of time prescribed or allowed by this Plan, the provisions of Bankruptcy Rule 9006(a) shall apply; (k) "including" means "including without limitation;" and (l) with reference to any distribution under this Plan, "on" a date means on or as soon as reasonably practicable after that date.
Exhibits. All Exhibits to the Plan are incorporated into and are a part of this Plan as if set forth in full herein, and, to the extent not annexed hereto, such Exhibits shall be filed with the Bankruptcy Court on or before the Exhibit Filing Date. After the Exhibit Filing Date, copies of Exhibits can be obtained upon written request to Skadden, Arps, Slate, Meagher & Flom LLP, Four Times Square, New York, New York, 10036-6522 (Attn. David R. Hurst, Esq.), counsel to the Debtors or by downloading such Exhibits from the Bankruptcy Court's website at http://www.nysb.uscourts.gov (registration required) or the Refco website at http://www.refcoinc.com. To the extent any Exhibit is inconsistent with the terms of this Plan, unless otherwise ordered by the Bankruptcy Court, the non-Exhibit portion of this Plan shall control; provided, however, in all relevant cases, to the extent this Plan is inconsistent with the RCM Settlement Agreement, the RCM Settlement Agreement shall control.
ARTICLE II
CLASSIFICATION OF CLAIMS AND INTERESTS
2.1 Introduction
Pursuant to section 1122 of the Bankruptcy Code, set forth below is a designation of Classes of Claims against and Interests in the Debtors and RCM. In accordance with section 1123(a)(1) of the Bankruptcy Code, Administrative Claims and Priority Tax Claims, as described below, have not been classified and are not entitled to vote on the Plan. A Claim or Interest is placed in a particular Class only to the extent that the Claim or Interest falls within the description of that Class and is classified in other Classes to the extent that any portion of the Claim or Interest falls within the description of such other Classes. A Claim or Interest is also placed in a particular Class for the purpose of receiving Distributions pursuant to the Plan only to the extent that such Claim or Interest is an Allowed Claim in that Class and such Claim or Interest has not been paid, released, or otherwise settled prior to the Effective Date.
This Plan is premised on a consensual pooling of assets and liabilities by the Contributing Debtors solely to implement the settlements and compromises reached by the primary constituencies in the Chapter 11 Cases, including the Debtors, the RCM Trustee, the Committees, the Secured Lenders and certain of the Holders of Senior Subordinated Notes. If for any reason the Bankruptcy Court determines that such compromises and settlement as embodied herein should not be implemented as set forth herein, the Plan Proponents may elect to seek confirmation of the Plan on the basis of complete or partial substantive consolidation or on a Debtor by Debtor basis identifying subclasses of each of the listed Classes of Claims of the Contributing Debtors for each Contributing Debtor. 20 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. The provisions set forth below also describe the classification of RCM Claims and Interests, but the provisions applicable to the RCM Claims and Interests are qualified in their entirety by reference to the RCM Settlement Agreement with respect to the Claims against RCM. To the extent that the summary below differs from the provisions of the RCM Settlement Agreement, the terms and conditions set forth in the RCM Settlement Agreement and applicable provisions of the Bankruptcy Code shall govern. This Plan contemplates that on or prior to the Effective Date, the RCM Chapter 11 Case shall be converted to a case under subchapter III of chapter 7 of the Bankruptcy Code unless the Debtors and the RCM Trustee agree that there is a compelling reason for the RCM Estate toshould be administered under chapter 11 of the Bankruptcy Code. Upon conversion of RCM's Chapter 11 Case to a case under chapter 7 of the Bankruptcy Code, this Plan shall proceed as a chapter 11 plan for the Debtors and shall constitute a settlement and compromise of claims between the Estate of RCM and the Debtors, for which RCM and the Debtors seek approval simultaneously with the confirmation of this Plan.
The provisions set forth below also describe the classification of Secured Lender Claims, but the provisions applicable to the Secured Lender Claims are qualified in their entirety by reference to the Early Payment Order with respect to such Claims.
2.2 Classification of Claims and Interests of the Contributing Debtors
(a) Unclassified Claims –Contributing Debtors (not entitled to vote on the Plan).
Administrative Claims.
Priority Tax Claims.
(b) Unimpaired Classes of Claims –Contributing Debtors (deemed to have accepted the Plan and, therefore, not entitled to vote on the Plan).
Class 1 - Non-Tax Priority Claims.
Class 2 - Other Secured Claims.
Class 3 - Secured Lender Claims.
(c) Impaired Classes of Claims –Contributing Debtors (Classes 3, 4, 5 and 6 are entitled to vote on the Plan; Class 7 shall be deemed to have rejected the Plan and, therefore, is not entitled to vote on the Plan).
Class 4 - Senior Subordinated Note Claims.
Class 5(a) - General Unsecured Claims.
Class 5(b) - Related Claims
Class 6 - RCM Intercompany Claims.
Class 7 - Subordinated Claims.
Each of Classes 4 and 5 shall contain sub-classes corresponding to each of the Contributing Debtors. A schedule of such sub-classes is attached hereto as Schedule 2.2(c).
(d) Impaired Classes of Interests –Contributing Debtors (deemed to have rejected the Plan and, therefore, not entitled to vote on the Plan).
Class 8 - Old Equity Interests.
21 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. 2.3 Classification of Claims of FXA.
(a) Unclassified Claims –FXA (not entitled to vote on the Plan).
Administrative Claims.
Priority Tax Claims.
(b) Unimpaired Classes of Claims –FXA (deemed to have accepted the Plan and, therefore, not entitled to vote on the Plan).
Class 1 - FXA Non-Tax Priority Claims.
Class 2 - FXA Other Secured Claims.
Class 3 - Secured Lender Claims.
(c) Impaired Classes of Claims –FXA (Classes 3, 4, 5 and 6 are entitled to vote on the Plan; Class 7 shall be deemed to have rejected the Plan and, therefore, not entitled to vote on the Plan).
Class 4 - Senior Subordinated Note Claims.
Class 5(a) - FXA General Unsecured Claims.
Class 5(b) - Related Claims
Class 6 - FXA Convenience Claims.
Class 7 - FXA Subordinated Claims.
2.4 Classification of Claims of RCM
(a) Unclassified Claims –RCM (not entitled to vote on the Plan).
Administrative Claims.
Priority Tax Claims.
(b) Unimpaired Classes of Claims –RCM (deemed to have accepted the Plan and, therefore, not entitled to vote on the Plan).
Class 1 - Non-Tax Priority Claims.
Class 2 - Other Secured Claims.
(c) Impaired Classes of Claims –RCM (Classes 3 and 4 are entitled to vote on the Plan).
Class 3 - RCM FX/Unsecured Claims.
Class 4 - RCM Securities Customer Claims.
Class 5 - RCM Leuthold Metals Claims.
22 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. Class 6 - RelatedRCM FX/Unsecured Convenience Claims
Class 7 - RCM Securities Customer Convenience Claims
Class 8 - Related Claims
Class 9 - RCM Subordinated Claims.
ARTICLE III
TREATMENT OF CLAIMS AND INTERESTS
3.1 Treatment of Claims and Interests of the Contributing Debtors
(a) Unclassified Claims –Contributing Debtors.
(i) Administrative Claims. On the later of (a) the Effective Date, (b) the date on which its Administrative Claim becomes Allowed, or (c) the date on which its Administrative Claim becomes payable under any agreement relating thereto, each Holder of an Allowed Administrative Claim shall receive, in full and final satisfaction, settlement, release, and discharge of, and in exchange for, such Allowed Administrative Claim against the Contributing Debtors, Cash equal to the unpaid portion of such Administrative Claim in accordance with the allocation set forth in section 5.16 of the Plan. Notwithstanding the foregoing, (a) any Administrative Claim based on a liability incurred by a Contributing Debtor in the ordinary course of business during the Chapter 11 Cases may be paid in the ordinary course of business in accordance with the terms and conditions of any agreement relating thereto and (b) any Administrative Claim may be paid on such other terms as may be agreed on between the Holder of such Claim and the Contributing Debtors or the Plan Administrator. Subsection (b) of the second sentence in this section 3.1(a)(i) of the Plan shall not be construed to avoid the need for Court approval of an Administrative Claim when such Court approval is otherwise required by the Bankruptcy Code.
(ii) Priority Tax Claims. On the later of (a) the Effective Date or (b) the date on which its Priority Tax Claim becomes an Allowed Priority Tax Claim, in the sole discretion of the Contributing Debtors, each Holder of an Allowed Priority Tax Claim shall receive, in full and final satisfaction, settlement, release, and discharge of, and in exchange for, such Allowed Priority Tax Claim against the Contributing Debtors, (i) Cash equal to the unpaid portion of such Allowed Priority Tax Claim in accordance with the allocation set forth in section 5.16 of the Plan, (ii) treatment in any other manner such that its Allowed Priority Tax Claims shall not be impaired pursuant to section 1124 of the Bankruptcy Code, including payment in accordance with the provisions of section 1129(a)(9)(C) of the Bankruptcy Code, or (iii) such other treatment as to which the Contributing Debtors or the Plan Administrator and such Holder shall have agreed upon in writing. Clause (iii) of the preceding sentence shall not be construed to avoid the need for Bankruptcy Court approval of a Priority Tax Claim when such Bankruptcy Court approval is otherwise required by the Bankruptcy Code.
(b) Unimpaired Classes of Claims –Contributing Debtors.
(i) Class 1 - Non-Tax Priority Claims. On (a) the Effective Date if such Non-Tax Priority Claim is an Allowed Non-Tax Priority Claim on the Effective Date or (b) the Quarterly Distribution Date following the date on which such Non-Tax Priority Claim becomes an Allowed Non-Tax Priority Claim against the Contributing Debtors, each Holder of an Allowed Class 1 Non-Tax Priority Claim shall receive, in full and final satisfaction, release, and discharge of, and in exchange for, such Allowed Non-Tax Priority Claim, Cash equal to
23 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. the unpaid portion of such Allowed Non-Tax Priority Claim in accordance with the allocation set forth in section 5.16 of the Plan.
(ii) Class 2 - Other Secured Claims. On the Effective Date, each Holder of an Allowed Class 2 Other Secured Claim against the Contributing Debtors shall receive, in full and final satisfaction, settlement, release, and discharge of, and in exchange for, such Allowed Other Secured Claim, one of the following Distributions: (i) the payment of such Holder's Allowed Other Secured Claim in full, in Cash; (ii) the sale or disposition proceeds of the property securing such Allowed Other Secured Claim to the extent of the lesser of the amount of such Allowed Other Secured Claim and the value of the interests in such property; (iii) the surrender to the Holder or Holders of such Allowed Other Secured Claim of the property securing such Claim; or (iv) such other Distributions as shall be necessary to satisfy the requirements of chapter 11 of the Bankruptcy Code.
(iii) Class 3 - Secured Lender Claims. The Secured Lender Claims against the Contributing Debtors shall be allowed to the extent provided in the Early Payment Order, the terms and conditions of which are incorporated by reference herein, and such Allowed Secured Lender Claims, to the extent not paid in cash prior to the Effective Date or estimated at zero pursuant to the Early Payment Order, shall be paid the full amount set forth in and required to be paid by the Early Payment Order. In addition, the Secured Lenders shall have the benefit of the releases to the full extent contemplated by paragraph 8 of the Early Payment Order and section 10.2 of the Plan.
(c) Impaired Classes of Claims –Contributing Debtors.
(i) Class 4 - Senior Subordinated Note Claims. On the Effective Date, each Holder of an Allowed Class 4 Senior Subordinated Note Claim against the Contributing Debtors shall receive, to the extent not previously paid, in full and final satisfaction, settlement, release, and discharge of, and in exchange for, such Allowed Senior Subordinated Note Claim and any and all Claims against the Refco Entities, its Pro Rata share of the Senior Subordinated Note Holder Distribution (subject to the Senior Subordinated Note Indenture Trustee Charging Lien); and the Debtors shall pay the Senior Subordinated Note Holder Fee Distribution; provided, however, to the extent that a Holder of an Allowed Class 4 Senior Subordinated Note Claim against the Contributing Debtors elects to not receive the Senior Subordinated Note Holder BAWAG Proceeds, such Holder's Distribution shall consist of its Pro Rata Share of the Senior Subordinated Note Holder Distribution less such holdersHolder's portion of the Senior Subordinated Note Holder BAWAG Proceeds.
(ii) Class 5(a) - Contributing Debtors General Unsecured Claims. Subject to section 6.4 of this Plan, on the Effective Date (but in no case prior to payment in full of the Senior Subordinated Note Holder Distribution and the Senior Subordinated Note Holder Fee Distribution), each Holder of an Allowed Class 5(a) Contributing Debtors General Unsecured Claim shall receive, in full and final satisfaction, settlement, release, and discharge of, and in exchange for, such Allowed Contributing Debtors General Unsecured Claim and any and all Other Related Claims, its Pro Rata share of the Contributing Debtors General Unsecured Distribution; provided, however, to the extent that a Holder of an Allowed Class 5(a) General Unsecured Claim against the Contributing Debtors elects to not receive the Contributing Debtors General Unsecured BAWAG Proceeds, if any, such Holder's Distribution shall consist of its Pro Rata share of the Contributing Debtors General Unsecured Distribution less such Holder's portion of the Contributing Debtors General Unsecured BAWAG Proceeds.
(iii) Class 5(b) - Related Claims. On the Effective Date, pursuant to section 6.4 hereof, each Allowed Class 5(b) Related Claim against any Contributing Debtor shall be subordinated and shall receive no Distribution from the Contributing Debtors Distributive Assets unless and until such time as all Holders of Allowed Contributing Debtors General Unsecured Claims and Allowed RCM Intercompany Claims have been paid in full; 24 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. provided, however, that any holder of an RCM Related Claim that provides an RCM Related Claim Subordination Form in accordance with section 6.6(c) of this Plan shall, on account of its RCM Securities Customer Claim or RCM FX/Unsecured Claim (if Allowed), receive its applicable share of the RCM Distribution Reserve as more fully set forth in section 6.6(c) hereof.
(iv) Class 6 - RCM Intercompany Claims. On the Effective Date (but in no case prior to payment in full of the Senior Subordinated Note Holder Distribution and the Senior Subordinated Note Holder Fee Distribution), the RCM Trustee, on behalf of RCM, shall receive the RCM Intercompany Claim Distribution.
(vi) Class 7 - Subordinated Claims. On the Effective Date (but in no case prior to payment in full of the Senior Subordinated Note Holder Distribution and the Senior Subordinated Note Holder Fee Distribution), each Holder of an Allowed Class 7 Subordinated Claim against the Contributing Debtors shall receive, in full and final satisfaction, settlement, release, and discharge of, and in exchange for, such Allowed Class 7 Subordinated Claim, its Pro Rata share of the Tranche B Litigation Trust Preferred Interests as more particularly set forth below in section 5.7(c) of this Plan.
(d) Impaired Classes of Interests –Contributing Debtors.
(i) Class 8 - Old Equity Interests. On the Effective Date, each Holder of an Allowed Class 8 Old Equity Interest shall receive, in full and final satisfaction, settlement, release, and discharge of, and in exchange for, such Allowed Old Equity Interest, the greater of (a) a Pro Rata share of 10% of the IPO Underwriter Claims Recovery or (b) a Pro Rata share of Tranche B Litigation Trust Common Interests as more particularly set forth in section 5.7(c) of the Plan; provided, however, that the Contributing Debtors and all parties in interest reserve the right to assert that the Interests of insider Refco Inc. shareholders’ should not be entitled to any distribution under the Plan.
3.2 Treatment of Claims of FXA
(a) Unclassified Claims –FXA.
(i) Administrative Claims. On the later of (a) the Effective Date, (b) the date on which its Administrative Claim becomes Allowed, or (c) the date on which its Allowed Administrative Claim becomes payable under any agreement relating thereto, each Holder of an Administrative Claim against FXA shall receive, in full and final satisfaction, settlement, release, and discharge of, and in exchange for, such Allowed Administrative Claim, Cash equal to the unpaid portion of such Administrative Claim in accordance with the allocation set forth in section 5.16 of the Plan. Notwithstanding the foregoing, (a) any Administrative Claim based on a liability incurred by FXA in the ordinary course of business during the Chapter 11 Cases may be paid in the ordinary course of business in accordance with the terms and conditions of any agreement relating thereto and (b) any Administrative Claim may be paid on such other terms as may be agreed on between the Holder of such Claim and FXA or the Plan Administrator. Subsection (b) of the second sentence in this section 3.2(a)(i) of the Plan shall not be construed to avoid the need for Court approval of an Administrative Claim when such Court approval is otherwise required by the Bankruptcy Code.
(ii) Priority Tax Claims. On the later of (a) the Effective Date or (b) the date on which its Priority Tax Claim becomes an Allowed Priority Tax Claim, in the sole discretion of FXA, each Holder of an Allowed Priority Tax Claim against FXA shall receive, in full and final satisfaction, settlement, release, and discharge of, and in exchange for, such Allowed Priority Tax Claim, (i) Cash equal to the unpaid portion of such Allowed Priority Tax Claim in accordance with the allocation set forth in section 5.16 of the Plan, (ii) treatment in any other manner such that its Allowed Priority Tax Claims shall not be impaired pursuant to section 1124 of the Bankruptcy Code, including payment in accordance with the provisions of section 1129(a)(9)(C) 25 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. of the Bankruptcy Code, or (iii) such other treatment as to which FXA or the Plan Administrator and such Holder shall have agreed upon in writing. Clause (iii) of the preceding sentence shall not be construed to avoid the need for Bankruptcy Court approval of a Priority Tax Claim when such Bankruptcy Court approval is otherwise required by the Bankruptcy Code.
(b) Unimpaired Classes of Claims –FXA.
(i) Class 1 - FXA Non-Tax Priority Claims. On (a) the Effective Date if such Non-Tax Priority Claim against FXA is an Allowed Non-Tax Priority Claim on the Effective Date or (b) the Quarterly Distribution Date following the date on which such Non-Tax Priority Claim becomes an Allowed Non-Tax Priority Claim, each Holder of an Allowed Class 1 Non-Tax Priority Claim against FXA shall receive, in full and final satisfaction, release, and discharge of, and in exchange for, such Allowed Class 1 FXA Non-Tax Priority Claim, Cash equal to the unpaid portion of such Allowed Class 1 FXA Non-Tax Priority Claim in accordance with the allocation set forth in section 5.16 of the Plan.
(ii) Class 2 - FXA Other Secured Claims. On the Effective Date, each Holder of an Allowed Class 2 Other Secured Claim against FXA shall receive, in full and final satisfaction, settlement, release, and discharge of, and in exchange for, such Allowed Class 2 Other Secured Claim, one of the following Distributions: (i) the payment of such Holder's Allowed Class 2 Other Secured Claim in full, in Cash; (ii) the sale or disposition proceeds of the property securing such Allowed Class 2 Other Secured Claim to the extent of the lesser of the amount of such Allowed Other Secured Claim and the value of the interests in such property; (iii) the surrender to the Holder or Holders of such Allowed Class 2 Other Secured Claim of the property securing such Claim; or (iv) such other Distributions as shall be necessary to satisfy the requirements of chapter 11 of the Bankruptcy Code.
(iii) Class 3 - FXA Secured Lender Claims. The Secured Lender Claims against FXA shall be allowed to the extent provided in the Early Payment Order, the terms and conditions of which are incorporated by reference herein, and such Allowed Secured Lender Claims against FXA, to the extent not paid in cash prior to the Effective Date or estimated at zero pursuant to the Early Payment Order, shall be paid the full amount set forth in and required to be paid by the Early Payment Order. In addition, the Secured Lenders shall have the benefit of the releases to the full extent contemplated by paragraph 8 of the Early Payment Order and section 10.2 of the Plan.
(c) Impaired Classes of Claims –FXA.
(i) Class 4 - FXA Senior Subordinated Note Claims. On the Effective Date, based on the agreements and settlement set forth in this Plan, each Holder of an Allowed Class 4 FXA Senior Subordinated Note Claim shall waive its share of the FXA General Unsecured Claims Distribution in return for the releases set forth in sections 10.2(a) and (b) of the Plan.
(ii) Class 5(a) - FXA General Unsecured Claims. On the Effective Date, each Holder of an Allowed Class 5(a) FXA General Unsecured Claim shall receive, in full and final satisfaction, settlement, release, and discharge of, and in exchange for, such Allowed Class 5(a) FXA General Unsecured Claim and any and all Other Related Claims, its Pro Rata share of the FXA General Unsecured Claim Distribution.
(iii) Class 5(b) –Related Claims. On the Effective Date, pursuant to section 6.4 hereof, each Allowed Class 5(b) Related Claim against FXA shall be subordinated and shall receive no Distribution from the FXA Distributive Assets unless and until such time as all Holders of Allowed FXA General Unsecured Claims have been paid in full; provided, however, that any holder of an RCM Related Claim that provides an RCM Related Claim Subordination Form in accordance with section 6.6(c) of this Plan shall, on account of its RCM 26 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. Securities Customer Claim or RCM FX/Unsecured Claim (if Allowed), receive its applicable share of the RCM Distribution Reserve as more fully set forth in section 6.6(c) hereof.
(iv) Class 6 - FXA Convenience Claims. On the Effective Date, each Holder of an Allowed Class 6 FXA Convenience Claim shall receive, in full and final satisfaction, settlement, release, and discharge of, and in exchange for, such Allowed Class 6 FXA Convenience Claim, Cash equal to 40% of its Allowed Class 6 FXA Convenience Claim. Holders of Allowed Class 6 FXA Convenience Claims shall not receive any interest in the Litigation Trust described in section 5.7 of this Plan.
(v) Class 7 - FXA Subordinated Claims. No Holder of a Class 7 Subordinated Claim against FXA shall be entitled to, nor shall it receive or retain, any property or interest in property on account of such Class 7 Subordinated Claim.
3.3 Treatment of Claims of RCM
The following section is a summary of the treatment of RCM Claims set forth in the RCM Settlement Agreement and applicable provisions of the Bankruptcy Code. This Plan summary of the treatment of RCM Claims is qualified in its entirety by reference to the RCM Settlement Agreement. To the extent that the summary treatment below differs from the treatment afforded in the RCM Settlement Agreement, the terms and conditions set forth in the RCM Settlement Agreement shall govern the treatment of RCM Claims.
(a) Unclassified Claims –RCM.
(i) Administrative Claims. As is more fully set forth in and governed by the RCM Settlement Agreement and applicable provisions of the Bankruptcy Code, on the later of (a) the Effective Date, (b) the date on which its Administrative Claim becomes Allowed, or (c) the date on which its Administrative Claim becomes payable under any agreement relating thereto, each Holder of an Allowed Administrative Claim shall receive, in full and final satisfaction, settlement, release, and discharge of, and in exchange for, such Administrative Claim, Cash equal to the unpaid portion of such Allowed Administrative Claim in accordance with the allocation set forth in section 5.16 of the Plan. Notwithstanding the foregoing, (a) any Administrative Claim based on a liability incurred by RCM in the ordinary course of business during the Chapter 11 Cases may be paid in the ordinary course of business in accordance with the terms and conditions of any agreement relating thereto and (b) any Administrative Claim may be paid on such other terms as may be agreed on between the Holder of such Claim and the RCM Trustee. Subsection (b) of the second sentence in this section 3.3 of the Plan shall not be construed to avoid relieving the need for Court approval of an Administrative Claim when such Court approval is otherwise required by the Bankruptcy Code.
(ii) Priority Tax Claims. As is more fully set forth in and governed by the RCM Settlement Agreement and applicable provisions of the Bankruptcy Code, on the later of (a) the Effective Date or (b) the date on which its Priority Tax Claim becomes an Allowed Priority Tax Claim, in the sole discretion of the RCM Trustee, each Holder of an Allowed Priority Tax Claim against RCM shall receive, in full and final satisfaction, settlement, release, and discharge of, and in exchange for, such Allowed Priority Tax Claim, (i) Cash equal to the unpaid portion of such Allowed Priority Tax Claim in accordance with the allocation set forth in section 5.16 of the Plan, (ii) treatment in any other manner such that its Allowed Priority Tax Claims shall not be impaired pursuant to section 1124 of the Bankruptcy Code, including payment in accordance with the provisions of section 1129(a)(9)(C) of the Bankruptcy Code, or (iii) such other treatment as to which the RCM Trustee and such Holder shall have agreed upon in writing. Clause (iii) of the preceding sentence shall not be construed to avoid the need for Bankruptcy Court approval of a Priority Tax Claim when such Bankruptcy Court approval is otherwise required by the Bankruptcy Code.
27 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. (b) Unimpaired Classes of Claims –RCM.
(i) Class 1 - RCM Non-Tax Priority Claims. As is more fully set forth in and governed by the RCM Settlement Agreement and applicable provisions of the Bankruptcy Code, on (a) the Effective Date if such Non-Tax Priority Claim is an Allowed Non-Tax Priority Claim against RCM on the Effective Date or (b) the Quarterly Distribution Date following the date on which such Non-Tax Priority Claim becomes an Allowed Non-Tax Priority Claim, each Holder of an Allowed Class 1 Non-Tax Priority Claim against RCM shall receive, in full and final satisfaction, release, and discharge of, and in exchange for, such Allowed Non-Tax Priority Claim, Cash equal to the unpaid portion of such Allowed Non-Tax Priority Claim in accordance with the allocation set forth in section 5.16 of the Plan.
(ii) Class 2 - RCM Other Secured Claims. As is more fully set forth in and governed by the RCM Settlement Agreement and applicable provisions of the Bankruptcy Code, on the Effective Date, each Holder of an Allowed Class 2 Other Secured Claim against RCM shall receive, in full and final satisfaction, settlement, release, and discharge of, and in exchange for, such Allowed Other Secured Claim, one of the following Distributions: (i) the payment of such Holder's Allowed Other Secured Claim in full, in Cash; (ii) the sale or disposition proceeds of the property securing such Allowed Other Secured Claim to the extent of the value of the interests in such property; (iii) the surrender to the Holder or Holders of such Allowed Other Secured Claim of the property securing such Claim; or (iv) such other Distributions as shall be necessary to satisfy the requirements of chapter 11 of the Bankruptcy Code.
(c) Impaired Classes of Claims –RCM.
(i) Class 3 - RCM FX/Unsecured Claims. Subject to section 6.4 of this Plan, as is more fully set forth in and governed by the RCM Settlement Agreement, on the Effective Date, each Holder of an Allowed Class 3 RCM FX/Unsecured Claim shall receive, in full and final satisfaction, settlement, release, and discharge of, and in exchange for, such Allowed RCM FX/Unsecured Claim, its applicable share (as more fully set forth in the RCM Settlement Agreement) of (A) the RCM FX/Unsecured Claims Distribution and (B) unless a Holder elects not to release its RCM Related Claims, the RCM Cash Distribution, which shall include, unless such Holder affirmatively elects otherwise prior to the Voting Deadline, the RCM BAWAG Proceeds.
(ii) Class 4 - RCM Securities Customer Claims. Subject to section 6.4 of this Plan, as is more fully set forth in and governed by the RCM Settlement Agreement, on the Effective Date, each Holder of an Allowed Class 4 RCM Customer Claim shall receive, in full and final satisfaction, settlement, release, and discharge of, and in exchange for, such Allowed RCM Customer Claim, its applicable share (as more fully set forth in the RCM Settlement Agreement) of (A) the RCM Securities Customer ClaimsFX/Unsecured Claims Distribution and (B) unless a Holder elects not to release its RCM Related Claims, the RCM Cash Distribution, which shall include, unless such Holder affirmatively elects otherwise prior to the Voting Deadline, the RCM BAWAG Proceeds.
(iii) Class 5 - RCM Leuthold Metals Claims. Subject to section 6.4 of this Plan, as is more fully set forth in and governed by the RCM Settlement Agreement, on the Effective Date, each Holder of an Allowed Class 5 RCM Leuthold Metals Claim shall receive, in full and final satisfaction, settlement, release, and discharge of, and in exchange for, such Allowed RCM Leuthold Metals Claim, its Pro Rata share of the RCM Leuthold Metals Claim Distribution.
(iv) Class 6 –RCM FX/Unsecured Convenience Claims. On the Effective Date, each Holder of an Allowed Class 6 RCM FX/Unsecured Convenience Claim shall receive, in full and final satisfaction, settlement, release, and discharge of, and in exchange for, such Allowed Class 6 RCM FX/Unsecured Convenience Claim, Cash equal to 60% of its Allowed 28 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. Class 6 RCM FX/Unsecured Convenience Claim. Holders of Allowed Class 6 RCM FX/Unsecured Convenience Claims shall not receive any interest in the Litigation Trust described in section 5.7 of this Plan.
(vi) Class 7 –RCM Securities Customer Convenience Claims. On the Effective Date, each Holder of an Allowed Class 7 RCM Securities Customer Convenience Claim shall receive, in full and final satisfaction, settlement, release, and discharge of, and in exchange for, such Allowed Class 7 RCM Securities Customer Convenience Claim, Cash equal to 100% of its Allowed Class 7 RCM Securities Customer Convenience Claim. Holders of Allowed Class 7 RCM Securities Customer Convenience Claims shall not receive any interest in the Litigation Trust described in section 5.7 of this Plan.
(vii) (iv) Class 68 - Related Claims. On the Effective Date, pursuant to section 6.4 hereof, each Allowed Class 68 Other Related Claim against RCM shall be subordinated and shall receive no Distribution from RCM unless and until such time as all Holders of Allowed RCM FX/Unsecured Claims, Allowed RCM Securities Customer Claims and Allowed RCM Leuthold Metals Claims have been paid in full.
(viii) (v) Class 79 - RCM Subordinated Claims. No Holder of a Class 6 Subordinated Claim against RCM shall be entitled to, nor shall it receive or retain, any property or interest in property on account of such Class 69 RCM Subordinated Claim. On the Effective Date, all Class 69 RCM Subordinated Claims shall be cancelled and extinguished.
3.4 Allowed Claims and Interests. Except as provided in the Early Payment Order, notwithstanding any provision herein to the contrary, the Disbursing Agent, on behalf of the Reorganized Debtors, and the RCM Trustee, on behalf of RCM, shall make Distributions only to Holders of Allowed Claims and Interests. A Holder of a Disputed Claim or Disputed Interest shall receive only a Distribution on account thereof when and to the extent that its Disputed Claim or Disputed Interest becomes an Allowed Claim or an Allowed Interest, as applicable.
3.5 Alternative Treatment. Notwithstanding any provision herein to the contrary, any Holder of an Allowed Claim or Interest may receive, instead of the Distribution or treatment to which it is entitled hereunder, any other less favorable Distribution or treatment to which it, the Plan Proponents and FXA (in respect of FXA), the Plan Administrator (in respect of the Contributing Debtors) or the RCM Trustee (in respect of RCM) may agree in writing.
3.6 Limitation on Recoveries. Notwithstanding anything contained herein to the contrary, in the event that the sum of the distributions toeach Holder of an Allowed Claim in any Class of Claims is equal to orreceive Distributions in excess of one hundred percent (100%) of sucheach hHolder’s Allowed Claimin such Class, then, any amounts remaining to be distributed to such hHolders in excess of such one hundred percent (100%) shall be redistributed to hHolders of Allowed Claims or Interests immediately junior to such Cclass as set forth in Article III of this Plan and shall be distributed in accordance with the provisions of the documents, instruments and agreements governing such Cclaims or Iinterests, including, without limitation, the RCM Settlement Agreement and the Bankruptcy Code.
3.7 Special Provision Regarding Unimpaired Claims. Except as otherwise provided in this Plan, the RCM Settlement Agreement or a Final Order of the Bankruptcy Court (including, without limitation, the Early Payment Order), nothing shall affect the Debtors', RCM's, the Reorganized Debtors' or Post-Confirmation RCM's rights and defenses, both legal and equitable, with respect to any Unimpaired Claims, including, but not limited to, all rights with respect to legal and equitable defenses to, setoffs against, or recoupments of Unimpaired Claims.
3.8 Classification and Treatment of Claims and Interests of Non-Debtor Affiliates . Claims of Non-Debtor Affiliates against the Debtors or RCM shall be classified and treated as General Unsecured Claims against the applicable Debtor or RCM. Interests of Non-Debtor Affiliates shall be treated in accordance with the provisions of this Plan, including, but not limited to, sections 5.1 and 5.20 below.
29 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. 3.9 Classification and Treatment of Intercompany Claims. Except as provided herein, Intercompany Claims among the Debtors or RCM are deemed to be resolved and satisfied by the provisions of and in accordance with this Plan. Notwithstanding the compromises and settlements set forth herein, each such Intercompany Claim shall be deemed to be an unsatisfied liability of each of the Debtors and RCM immediately prior to their contribution of Contributed Claims to the Litigation Trust.
3.10 Claims of Debtors against RCM. Notwithstanding anything in this Plan to the contrary, Claims against RCM held by any other Debtor will receive no distribution consistent with the settlement among RCM and the Debtors contained in and implemented by this Plan.
3.11 Non-Debtor Affiliates' Intercompany Claims Against RCM. Notwithstanding anything in this Plan to the contrary, to the extent that a Non-Debtor Affiliate has an Intercompany Claim against RCM, such Claim will be resolved by (a) the netting of such Claim against any Claim held by the Contributing Debtors or RCM against such Non-Debtor Affiliate or (b) to the extent that a distribution is made by RCM on account of such Claim, the Contributing Debtors shall reimburse RCM for such payments from any amounts the Contributing Debtors receive directly or indirectly from any Non-Debtor Affiliate.
ARTICLE IV
ACCEPTANCE OR REJECTION OF THE PLAN
4.1 Classes Entitled To Vote. Each Impaired Class of Claims of the Contributing Debtors, FXA or RCM that is entitled to receive or retain property or any interest in property under the Plan (other than Contributing Debtor Classes 7 and 8) is entitled to vote to accept or reject the Plan. By operation of law, each Unimpaired Class of Claims is deemed to have accepted the Plan and, therefore, is not entitled to vote. Holders of Claims and Interests in Classes that are not entitled to receive or retain any property under the Plan are presumed to have rejected the Plan and such Holders are also not entitled to vote.
4.2 Acceptance By Impaired Classes. An Impaired Class of Claims shall have accepted the Plan if (i) the Holders of at least two-thirds in amount of the Allowed Claims actually voting in the Class have voted to accept the Plan and (ii) the Holders of more than one-half in number of the Allowed Claims actually voting in the Class have voted to accept the Plan, not counting the vote of any Holder designated under section 1126(e) of the Bankruptcy Code or any insider.
4.3 Presumed Acceptance by Unimpaired Classes. Classes 1, 2 and 3 of each of the Contributing Debtors, and FXA and RCM Classes 1, and 2 are Unimpaired by this Plan. Under section 1126(f) of the Bankruptcy Code, Holders of such Claims or Interests are conclusively presumed to accept this Plan, and the votes of the Holders of such Claims or Interests will not be solicited.
4.4 Classes Deemed to Reject the Plan. Classes 7 and 8 of the Contributing Debtors, FXA Class 7 and RCM Class 79 are deemed to reject the Plan and, therefore, votes to accept or reject the Plan will not be solicited from Holders of Claims or Interests in such classes.
4.5 Summary of Classes Voting on the Plan. As a result of the provision of sections 4.3 and 4.4 of this Plan, only the votes of Holders of Claims of the Contributing Debtors in Classes 4, 5 and 6, Holders of FXA Claims in Classes 4, 5 and 6 and Holders of RCM Claims in Classes 3, 4, 55,6 ,7 and 68 will be solicited with respect to this Plan.
4.6 Elimination Of Classes. Any Class that does not contain any Allowed Claims or any Claims temporarily allowed for voting purposes under Bankruptcy Rule 3018, as of the date of the commencement of the Confirmation Hearing, shall be deemed to have been deleted from the Plan for purposes of (a) voting to accept or reject the Plan and (b) determining whether it has accepted or rejected the Plan under section 1129(a)(8) of the Bankruptcy Code.
30 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. 4.7 Confirmation Pursuant to Section 1129(b) of the Bankruptcy Code. To the extent that any Impaired Class votes to reject the Plan or is deemed to have rejected it, the Plan Proponents shall request Confirmation of the Plan under section 1129(b) of the Bankruptcy Code.
ARTICLE V
MEANS FOR IMPLEMENTATION OF THE PLAN
5.1 Merger Of Subsidiaries Into Refco Inc. On the Effective Date or as soon thereafter as practicable, (a) the members of the board of directors of each of the Affiliate Debtors, other than FXA, shall be deemed to have resigned and (b) each of the Affiliate Debtors shall be deemed to have merged with and into Refco Inc., with Refco Inc. as the surviving entity. Notwithstanding anything to the contrary in this section of the Plan, mergers in fact of each of the Affiliate Debtors, other than FXA, with and into Refco Inc. referenced in such section shall occur on the Effective Date. As soon as reasonably practicable after the Effective Date, the Plan Administrator, on behalf of the Reorganized Debtors, shall file all appropriate and required documentation with applicable state governmental agencies to reflect the occurrence of such mergers.
5.2 Continued Corporate Existence And Dissolution Of Reorganized Debtors.
(a) Refco Inc. and FXA shall continue to exist as Reorganized Refco and Reorganized FXA, respectively, after the Effective Date pursuant to the certificate of incorporation, certificate of formation or other corporate governance document, as applicable, and by-laws, operating agreement or other corporate governance document in effect prior to the Effective Date, except to the extent that such corporate governance documents are amended under the Plan, for the limited purposes of liquidating all of the assets of the Estates, and making distributions in accordance with the Plan.
(b) As soon as practicable after the Plan Administrator, liquidates or otherwise disposes of assets of the Estates of the Reorganized Debtors and makes the final Distribution under the Plan, the Plan Administrator shall, at the expense of the Estates of the Reorganized Debtors and in consultation with the Plan Committee, (i) provide for the retention and storage of the books, records, and files that shall have been delivered to or created by the Plan Administrator until such time as all such books, records, and files are no longer required to be retained under applicable law, and file a certificate informing the Bankruptcy Court of the location at which such books, records, and files are being stored, (ii) file a certification stating that the Plan Administrator has liquidated or otherwise disposed of the assets of the Estates of the Reorganized Debtors and made a final Distribution under the Plan, (iii) file the necessary paperwork with the Office of the Secretary of State for the State of Delaware to effectuate the dissolution of the Reorganized Debtors in accordance with the laws of the State of Delaware, and (iv) resign as the sole officer, manager or director, as applicable, of the Reorganized Debtors. Upon the filing of the certificates described in sub-section (ii) of the preceding sentence, the Reorganized Debtors shall be deemed dissolved for all purposes without the necessity for any other or further actions to be taken by or on behalf of the Reorganized Debtors or payments to be made in connection therewith.
(c) The RCM Trustee shall have sole discretion with respect to determining the timing and manner of dissolution of Post-Confirmation RCM in accordance with the RCM Settlement Agreement and applicable provisions of the Bankruptcy Code.
5.3 Corporate Governance Documentation. The certificate of incorporation of Reorganized Refco shall be restated to, among other things: (a) authorize issuance of one share of new common stock, $0.01 par value per share that will be held by the Plan Administrator; (b) provide, pursuant to section 1123(a)(6) of the Bankruptcy Code, for a provision prohibiting the issuance of non-voting equity securities; and (c) limit the activities of the Reorganized Refco to matters related to the implementation of the Plan and to matters reasonably incidental thereto. The corporate governance documents of Reorganized FXA shall be restated to, among other things: (a) provide, pursuant to section 1123(a)(6) of the Bankruptcy Code, for a provision prohibiting the issuance of non-voting equity securities; and (b) limit the activities of the Reorganized FXA to matters related to the implementation of the Plan and to matters reasonably incidental thereto. The form of each restated corporate governance document is attached hereto as Exhibit C.
31 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. 5.4 Directors, Managers And Officers: Effectuating Documents; Further Transactions. From and after the Effective Date, the Plan Administrator shall serve as the sole officer and director or manager, as applicable, of the Reorganized Debtors and the RCM Trustee shall serve as the sole representative of RCM. The Plan Administrator on behalf of the Reorganized Debtors, and the RCM Trustee, on behalf of RCM, shall be authorized to execute, deliver, file, or record such documents, instruments, releases, and other agreements and to take such actions as may be necessary or appropriate to effectuate and further evidence the terms and conditions of the Plan.
5.5 The Plan Administrator.
(a) Appointment. From and after the Effective Date, a person or entity designated by the Joint Sub- Committee (inclusive of its ex-officio members, but exclusive of Holders of Senior Subordinated Note Claims and the Senior Subordinated Note Indenture Trustee) prior to the Confirmation Date, shall serve as the Plan Administrator pursuant to the Plan Administrator Agreement and the Plan, until the resignation or discharge and the appointment of a successor Plan Administrator in accordance with the Plan Administrator Agreement and the Plan.
(b) Plan Administrator Agreement. Prior to or on the Effective Date, the Contributing Debtors and FXA shall execute a Plan Administrator Agreement in substantially the same form as Exhibit E hereto with the Plan Administrator. The form of Plan Administrator Agreement is hereby approved. Any nonmaterial modifications to the Plan Administrator Agreement by the Debtors prior to the Effective Date are hereby ratified. The Plan Administrator Agreement will contain provisions permitting the amendment or modification of the Plan Administrator Agreement necessary to implement the provisions of this Plan. Separate Administration of the RCM Estates. Notwithstanding anything herein to the contrary, all references in the Plan to the Plan Administrator shall refer exclusively to the administration of the Estates of the Contributing Debtors and FXA. The RCM Estate shall be administered separately by the RCM Trustee and the RCM Trustee shall wind down the RCM Estate in accordance with the terms and conditions set forth in the RCM Settlement Agreement and applicable provisions of the Bankruptcy Code.
(d) Rights, Powers, And Duties Of The Reorganized Debtors And The Plan Administrator. The Reorganized Debtors shall retain and have all the rights, powers, and duties necessary to carry out their responsibilities under the Plan. Such rights, powers, and duties, which shall be exercisable by the Plan Administrator on behalf of the Reorganized Debtors and the Estates pursuant to the Plan and the Plan Administrator Agreement, shall include, among others:
(i) liquidating the Reorganized Debtors' assets;
(ii) investing the Cash of the Estates of the Reorganized Debtors, including, but not limited to the Cash held in the Reserves, in (A) direct obligations of the United States of America or obligations of any agency or instrumentality thereof that are backed by the full faith and credit of the United States of America, including funds consisting solely or predominantly of such securities, (B) money market deposit accounts, checking accounts, savings accounts or certificates of deposit, or other time deposit accounts that are issued by a commercial bank or savings institution organized under the laws of the United States of America or any state thereof, or (C) any other investments that may be permissible under section 345 of the Bankruptcy Code or as otherwise ordered by the Bankruptcy Court;
(iii) calculating and paying all Distributions in accordance with the terms of the Plan, the Plan Administrator Agreement, and other orders of the Bankruptcy Court by the Plan Administrator to Holders of Allowed Claims;
(iv) employing, supervising, and compensating professionals retained to represent the interests of and serve on behalf of the Reorganized Debtors and their Estates;
32 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. (v) making and filing tax returns for any of the Contributing Debtors, FXA or the Reorganized Debtors;
(vi) as provided in Article V, objecting to Claims or Interests filed against the Estates of any of the Contributing Debtors, FXA or the Reorganized Debtors on any basis except to the extent such Claims or Interests have previously been allowed by a Final Order;
(vii) seeking estimation of contingent or unliquidated Claims against the Contributing Debtors, FXA or the Reorganized Debtors under section 502(c) of the Bankruptcy Code;
(viii) seeking determination of tax liability for the Contributing Debtors, FXA and the Reorganized Debtors under section 505 of the Bankruptcy Code;
(ix) closing the Chapter 11 Cases of the Reorganized Debtors;
(x) dissolving and winding up the Reorganized Debtors;
(xi) exercising all powers and rights, and taking all actions, contemplated by or provided for in the Plan Administrator Agreement; and
(xii) taking any and all other actions necessary or appropriate to implement or consummate the Plan and the provisions of the Plan Administrator Agreement.
(e) Compensation Of The Plan Administrator. The Plan Administrator shall be compensated from the Wind-Down Reserve pursuant to the terms and conditions of the Plan Administrator Agreement. Any professionals retained by the Plan Administrator shall be entitled to reasonable compensation for services rendered and reimbursement of expenses incurred from the Wind-Down Reserve. The payment of the reasonable fees and expenses of the Plan Administrator and its retained professionals shall be made in the ordinary course of business and shall not be subject to the approval of the Bankruptcy Court; provided, however, that any disputes related to such fees and expenses shall be brought before the Bankruptcy Court.
(f) Indemnification. The Reorganized Debtors shall indemnify and hold harmless (i) the Plan Administrator (in its capacity as such and as officer, director or manager, as applicable of the Reorganized Debtors), (ii) such individuals as may serve as officers, directors or managers, as applicable of the Reorganized Debtors, if any, and (iii) the Administrative Professionals (collectively, the "Indemnified Parties"), from and against, and with respect to any and all liabilities, losses, damages, claims, costs, and expenses, including, but not limited to, attorneys' fees, arising out of or due to their actions or omissions, or consequences of such actions or omissions, other than acts or omissions resulting from such Indemnified Party's willful misconduct or gross negligence, with respect to the Reorganized Debtors or the implementation or administration of the Plan or Plan Administration Agreement. To the extent an Indemnified Party asserts a claim for indemnification as provided above, the legal fees and related costs incurred by counsel to the Indemnified Party in the defense of such claims giving rise to the asserted right of indemnification shall be advanced to such Indemnified Party (and such Indemnified Party undertakes to repay such amounts if it ultimately shall be determined that such Indemnified Party is not entitled to be indemnified therefor) out of the Wind-Down Reserve or any insurance purchased using the Wind-Down Reserve. The indemnification provisions of the Plan Administrator Agreement shall remain available to and be binding upon any former Plan Administrator or the estate of any decedent Plan Administrator and shall survive the termination of the Plan Administrator Agreement.
(g) Insurance. The Plan Administrator shall be authorized to obtain and pay for out of the Wind-Down Reserve all reasonably necessary insurance coverage for itself, its agents, representatives,
33 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. employees, or independent contractors, and the Reorganized Debtors, including, but not limited to, coverage with respect to (i) any property that is or may in the future become the property of the Reorganized Debtors or their Estates and (ii) the liabilities, duties, and obligations of the Plan Administrator and its agents, representatives, employees, or independent contractors under the Plan Administrator Agreement (in the form of an errors and omissions policy or otherwise), the latter of which insurance coverage may, at the sole option of the Plan Administrator, remain in effect for a reasonable period (not to exceed seven years) after the termination of the Plan Administrator Agreement.
(h) Authority To Object To Claims And Interests And To Settle Disputed Claims. From and after the Effective Date, the Plan Administrator, on behalf of the Reorganized Debtors, shall be authorized, with respect to those Claims or Interests which are not Allowed hereunder or by Court order, after consultation with the Plan Committee, (i) to object to any Claims or Interests filed against any of the Contributing Debtors' or FXA's Estates and (ii) pursuant to Bankruptcy Rule 9019(b) and section 105(a) of the Bankruptcy Code, to compromise and settle Disputed Claims against any of the Contributing Debtors' or FXA's Estates, in accordance with the following procedures, which shall constitute sufficient notice in accordance with the Bankruptcy Code and the Bankruptcy Rules for compromises and settlements of claims:
(i) If the proposed face amount at which the Disputed Claim is to be allowed is less than or equal to $500,000, the Plan Administrator shall be authorized and empowered to settle the Disputed Claim and execute necessary documents, including a stipulation of settlement or release, in its sole discretion and without notice to any party or Bankruptcy Court approval and the Plan Administrator shall have no liability to any party for the reasonableness of such settlement, except to the extent such settlement is determined by a Final Order to have been the product of the Plan Administrator's gross negligence or willful misconduct.
(ii) If the proposed face amount at which the Disputed Claim is to be allowed is greater than $500,000, but less than or equal to $10 million, the Plan Administrator, on behalf of the Reorganized Debtors, shall be authorized and empowered to settle such Disputed Claim and execute necessary documents, including a stipulation of settlement or release, only upon receipt of Plan Committee orapproval or, if such approval of the Plan Committee is not forthcoming, upon Bankruptcy Court approval of such settlement.
(iii) If the proposed face amount at which the Disputed Claim is to be allowed is greater than $10 million, the Plan Administrator shall be authorized and empowered to settle the Disputed Claim and execute necessary documents, including a stipulation of settlement or release, only upon receipt of Plan Committee and Bankruptcy Court approval of such settlement.
Other than as set forth in section 5.21 herein, parties in interest (other than the Reorganized Debtors and Plan Administrator, whose objection deadlines are set forth in section 8.1 of the Plan) shall have 90 days following the Effective Date to object to any Claims or Interests filed against any of the Contributing Debtors' or FXA's Estates to the extent that under the Bankruptcy Code such parties are permitted (to the extent not previously allowed pursuant to the Plan or by order of the Bankruptcy Court), and have standing, to assert such objections. Notwithstanding anything to the contrary in this section of the Plan, Disputed Claims may not be resolved absent Bankruptcy Court approval under the procedures set forth in this section of the Plan until the date that is on or after 90 days following the Effective Date.
5.6 Administration of Post-Confirmation RCM
(a) Rights, Powers, And Duties Of The RCM Trustee. The RCM Trustee shall retain and have all the rights, powers, and duties necessary to carry out his responsibilities under the Plan, the RCM Settlement Agreement or applicable law. Such rights, powers, and duties, which shall be exercisable by the RCM Trustee on behalf of Post-Confirmation RCM and the RCM Estate pursuant to the Plan and the RCM Settlement Agreement, shall include, among others: 34 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. (i) liquidating Post-Confirmation RCM's assets;
(ii) investing Post-Confirmation RCM's Cash, including, but not limited to the Cash held in any reserves, in (A) direct obligations of the United States of America or obligations of any agency or instrumentality thereof that are backed by the full faith and credit of the United States of America, including funds consisting solely or predominantly of such securities, (B) money market deposit accounts, checking accounts, savings accounts or certificates of deposit, or other time deposit accounts that are issued by a commercial bank or savings institution organized under the laws of the United States of America or any state thereof, or (C) any other investments that may be permissible under section 345 of the Bankruptcy Code or as otherwise order by the Bankruptcy Court;
(iii) calculating and paying all Distributions to be made under the Plan, the RCM Settlement Agreement, and other orders of the Bankruptcy Court to Holders of Allowed Claims against RCM;
(iv) employing, supervising, and compensating professionals retained to represent the interests of and serve on behalf of the Post-Confirmation RCM including professionals engaged for the valuation, sale or other disposition of Post-Confirmation RCM's assets or proceeds thereof;
(v) making and filing tax returns, if any are required, for Post-Confirmation RCM;
(vi) as provided in Article V, objecting to Claims or Interests filed against RCM or Post-Confirmation RCM on any basis except to the extent such Claims or Interests have previously been Allowed;
(vii) seeking estimation of contingent or unliquidated Claims against RCM or Post-Confirmation RCM under section 502(c) of the Bankruptcy Code;
(viii) seeking determination of tax liability, if any, for RCM and Post-Confirmation RCM under section 505 of the Bankruptcy Code;
(ix) closing the RCM Chapter 11 or chapter 7 case;
(x) dissolving and winding up Post-Confirmation RCM;
(xi) exercising all powers and rights, and taking all actions, contemplated by or provided for in the RCM Settlement Agreement or applicable law; and
(xii) taking any and all other actions necessary or appropriate to implement or consummate the Plan and the provisions of the RCM Settlement Agreement or to administer the RCM Estate.
(b) Authority To Object To Claims And Interests And To Settle Disputed Claims. From and after the Effective Date, the RCM Trustee, on behalf of Post-Confirmation RCM, shall be authorized, with respect to those Claims or Interests which are not Allowed hereunder, under the RCM Settlement Agreement or by Court order (i) to object to any Claims or Interests filed against the RCM Estate and (ii) pursuant to Bankruptcy Rule 9019(b) and section 105(a) of the Bankruptcy Code, to compromise and settle any such Disputed Claims asserted against RCM.
35 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. 5.7 Litigation Trust
(a) Establishment of the Litigation Trust. The Litigation Trust shall be established for pursuit of the Contributed Claims and shall become effective on the Effective Date as summarized below and in accordance with the terms and conditions set forth in more detail in the Litigation Trust Agreement attached hereto as Exhibit F. The Litigation Trustee will be selected by the Joint Sub- Committee (inclusive of its ex-officio members, but exclusive of Holders of Senior Subordinated Note Claims and the Senior Subordinated Note Indenture Trustee), identified by the Exhibit Filing Deadline and approved by the Bankruptcy Court at the Confirmation Hearing.
(b) Transfer of Assets. The transfer of the Contributed Claims to the Litigation Trust shall be made, as provided herein, for the ratable benefit of the Litigation Trust Beneficiaries as set forth herein. On the Effective Date, the Contributed Claims, held by the Debtors and RCM on behalf of the Litigation Trust Beneficiaries shall be transferred to the Litigation Trust in exchange for Litigation Trust Interests for the ratable benefit of the Litigation Trust Beneficiaries. Upon transfer of the Contributed Claims to the Litigation Trust, the Debtors, RCM and the Plan Administrator shall have no interest in or with respect to the Contributed Claims or the Litigation Trust.
(c) Structure of the Litigation Trust and Trust Distributions. The Litigation Trust shall be structured in a manner that provides for a senior Tranche A and a junior Tranche B. No Distributions of Litigation Trust Interests shall be made in respect of Tranche B until Tranche A has been fully and indefeasibly paid; provided that Holders of Allowed Old Equity Interests may receive recoveries directly from 10% of the IPO Underwriter Claims Recovery in Tranche A as more fully set forth in section 5.7(c)(iii) below. Tranche A shall have a fluctuating balance equal to the amount necessary to cause Holders of Allowed RCM Implied Deficiency Claims, RCM FX/Unsecured Claims, Contributing Debtors General Unsecured Claims and FXA General Unsecured Claims to be paid in full, plus simple interest at the rate of 10% on the unpaid balance of such Claims from the Petition Date through the date of final payment. All Contributed Claims Recoveries, whether applicable to Tranche A or Tranche B, will be distributed Pro Rata according to the beneficial interests in Tranche A and Tranche B. The Litigation Trustee (in consultation with the Litigation Trust Committee) may establish further separate sub-Tranches, as necessary, in respect of the beneficial interests of the Litigation Trust Beneficiaries in Tranche A and Tranche B. To the extent deemed "securities," the Litigation Trust Interests (or any redistribution of such interests or related interests by the RCM Trustee to the Holders of Allowed RCM Securities Customer Claims and Allowed RCM FX/Unsecured Claims) will be exempt from registration pursuant to section 1145 of the Bankruptcy Code.
(i) Tranche A Litigation Trust Interests. Beneficiaries of Tranche A Litigation Trust Interests will be the RCM Estate (for distribution in accordance with the RCM Settlement Agreements), Holders of Allowed Contributing Debtors General Unsecured Claims (which for the sake of clarity, shall not include the Secured Lenders, the Senior Subordinated Note Indenture Trustee or the Holders of Senior Subordinated Notes) and Holders of Allowed FXA General Unsecured Claims (which for the sake of clarity, shall not include Holders of FXA Convenience Class Claims, RCM Securities Customer Convenience Claims or RCM FX/General Unsecured Convenience Claims) and such Beneficiaries shall share the Tranche A Litigation Trust Interests Pro Rata based on (x) in the case of the RCM Estate, the aggregate amount of Allowed RCM Implied Deficiency Claims and the Allowed RCM FX/Unsecured Claims and (y) in the case of Holders of Contributing Debtors General Unsecured Claims and the Holders of FXA General Unsecured Claims, the amount of each such Holder's Allowed Claim.
(ii) Tranche B Litigation Trust Preferred Interests. Beneficiaries of Tranche B Litigation Trust Preferred Interests will be the Holders of Allowed Contributing Debtors Class 7 Subordinated Claims who will receive their Pro Rata share of the Contributed Claims Recoveries after the beneficiaries of the Tranche A Litigation Trust Interests have been paid in full; provided, however, that the Debtors, the RCM Trustee and all parties in interest reserve the right to assert that any creditor whose claim is equitably subordinated pursuant to 36 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. section 510(c) of the Bankruptcy Code, should not be entitled to any distribution under the Global Plan.
(iii) Tranche B Litigation Trust Common Interests. Beneficiaries of Tranche B Litigation Trust Common Interests will be the Holders of Old Equity Interests who will receive their Pro Rata share of the Contributed Claims Recoveries after the beneficiaries of the Tranche B Litigation Trust Preferred Interests have been paid in full; provided, however, that, to the extent that recoveries from 10% of the IPO Underwriter Claim Recovery would exceed that obtained from Tranche B Litigation Trust Common Interests, the Holders of Old Equity Interests will receive a Pro Rata share of 10% of the IPO Underwriter Claims Recovery,
(d) Management of the Litigation Trust. The Litigation Trust shall be managed and operated by the Litigation Trustee. A committee composed of VR and four Holders of Claims against RCM that do not assert Claims against any Contributing Debtor based on guarantees or other direct contractual undertakings shall have certain approval rights on key issues relating to the operation and management of the Litigation Trust until Tranche A has been fully and indefeasibly paid. The Four members (other than VR) shall be selected by the Joint Sub- Committee (inclusive of its ex-officio members, but exclusive of Holders of Senior Subordinated Note Claims and the Senior Subordinated Note Indenture Trustee). Tranche B beneficiaries shall have no such approval rights in respect of management and operation of the Litigation Trust, unless and until Tranche A has been fully and indefeasibly paid. Once Tranche A has been paid in full, a committee of the five largest Tranche B beneficiaries shall have like approval rights.
(e) Funding the Litigation Trust. The Litigation Trust may be funded (i) from a loan that is non-recourse to RCM, the Debtors or the Estates, secured only by the proceeds of the Contributed Claims from one or more lenders who agree to make such loan on terms acceptable to the RCM Trustee, the Committees and the Super Majority (as defined in the RCM Settlement Agreement) or (ii) with up to $25 million drawn from the Contributing Debtors Distributive Assets, deducted on a Pro Rata basis from the Distributions that otherwise would be made to (x) Holders of Contributing Debtors General Unsecured Claims in accordance with the calculation of the Contributing Debtors General Unsecured Distribution and (y) to the RCM Estate in accordance with the calculation of the RCM Intercompany Claims Distribution in section 3.1 of this Plan. Any failure or inability of the Litigation Trust to obtain funding will not affect the consummation of this Plan.
(f) Distributions by the Litigation Trust. Any Contributed Claims Recoveries will first be used to repay the funding described in section 5.7(e) above and then will be transferred to the Disbursing Agent or the RCM Trustee, as applicable, for Distribution to the Litigation Trust Beneficiaries as set forth herein. In addition, to the extent that the Reorganized Debtors or Post-Confirmation RCM become liable for the payment of any Claims arising under section 502(h) of the Bankruptcy Code by reason of the Litigation Trustee's prosecution of the Litigation Claims, the Litigation Trustee will be responsible for making Distributions on account of such Claims from the assets of the Litigation Trust.
(g) Cash-Out Option. As set forth more fully in the Cash-Out Option Agreement, if any, the form of which would be attached as an exhibit to the Litigation Trust Agreement, one or more third parties may offer, to Purchase Litigation Trust Interests from the Litigation Trust Beneficiaries.
(h) Duration of Trust. The Litigation Trust shall have an initial term of five (5) years, provided that if reasonably necessary to realize maximum value with respect to the assets in the Litigation Trust and following Bankruptcy Court approval, the term of the Litigation Trust may be extended for one or more one (1) year terms. The Litigation Trust may be terminated earlier than its scheduled termination if (i) the Bankruptcy Court has entered a Final Order closing all of or the last of the Chapter 11 Cases pursuant to section 350(a) of the Bankruptcy Code and the RCM Case to the extent the RCM Case was converted to chapter 7; and (ii) the Litigation Trustee has administered all assets of the Litigation Trust and performed all other duties required by the Plan and the Litigation Trust Agreement.
(j) Certain Federal Income Tax Matters. 37 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. (i) For federal income tax purposes, the Debtors, RCM, the Litigation Trustee and the Effective Beneficiaries will treat the transfer of assets to the Litigation Trust and issuance of Litigation Trust Interests as a transfer by the Debtors and RCM of the assets to the Effective Beneficiaries, followed by a transfer of such assets by the Effective Beneficiaries to the Litigation Trust in exchange for direct or indirect beneficial interests in the Litigation Trust. For federal income tax purposes, the Effective Beneficiaries will be treated as the grantors, deemed owners and beneficiaries of the Litigation Trust.
(ii) The Litigation Trustee, the Debtors and RCM will determine the fair market value as of the Effective Date of all assets transferred to the Litigation Trust, and such determined fair market value shall be used by the Debtors, RCM, the Litigation Trust, the Litigation Trustee and the Effective Beneficiaries for all federal income tax purposes.
5.8 Private Actions Trust. On the Effective Date the Private Actions Trust will be established on the terms set forth in the Private Actions Trust Agreement attached hereto as Exhibit G.
5.9 No Revesting Of Assets. Other than as set forth herein, the remaining property of the respective Estates, other than the Contributed Claims, which shall be transferred to and vest in the Litigation Trust, shall not revest in the Debtors or RCM on or following the Confirmation Date or Effective Date, but shall remain property of the respective Estates and continue to be subject to the jurisdiction of the Bankruptcy Court until distributed to Holders of Allowed Claims in accordance with the provisions of the Plan, the Confirmation Order and the RCM Settlement Agreement. From and after the Effective Date, all such property shall be distributed in accordance with the provisions of the Plan, the Confirmation Order and the RCM Settlement Agreement, without further order of the Court (except as specifically required). For the avoidance of doubt, the Debtors' or RCM's insurance policies shall remain property of their respective Estates in accordance with this section of the Plan, and shall not be subject to the rejection provisions of section 7.1 of the Plan.
5.10 Preservation Of Rights Of Action; Settlement Of Litigation.
(a) Preservation Of Rights Of Action. Except as otherwise provided herein, the Confirmation Order, the RCM Settlement Agreement, or in any other Plan Document, in accordance with section 1123(b) of the Bankruptcy Code, the Reorganized Debtors' and RCM's rights in the Litigation Claims shall be retained and transferred to the Litigation Trust on the Effective Date; provided, however, the RCM Estate shall retain all of its causes of action (excluding Released Claims) arising under sections 547, 550 and 749 of the Bankruptcy Code and shall pursue such causes of action in the sole discretion of the RCM Trustee.
(b) Settlement Of Litigation Claims Prior to the Effective Date. At any time prior to the Effective Date, notwithstanding anything in the Plan to the contrary, the Debtors (and the RCM Trustee on behalf of RCM with respect to Litigation Claims of RCM) may settle any or all of the Litigation Claims with Bankruptcy Court approval pursuant to Bankruptcy Rule 9019, following notice to parties-in-interest and a hearing. Any net proceeds obtained in respect of Litigation Claims prior to the Effective Date shall be contributed to the Litigation Trust.
5.11 The Committees and the Plan Committee.
(a) Dissolution of the Committees. The Committees shall continue in existence until the Effective Date to exercise those powers and perform those duties specified in section 1103 of the Bankruptcy Code and such other duties as they may have been assigned by the Bankruptcy Court prior to the Effective Date. On the Effective Date, the Committees shall be dissolved and their members shall be deemed released of all their duties, responsibilities and obligations in connection with the Chapter 11 Cases or the Plan and its implementation, and the retention or employment of the Committees' attorneys, accountants, professionals and other agents shall terminate, except with respect to (i) all Professional Fees, (ii) any appeals of the Confirmation Order and (iii) the continuation and completion of any litigation to which the Creditors' Committee or the Additional Committee, as applicable, is a 38 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. party as of the Effective Date. All expenses of members of the Committees and the fees and expenses of the Committees' professionals through the Effective Date shall be paid in accordance with any applicable orders of the Bankruptcy Court. Counsel to the Committees shall be entitled to reasonable compensation and reimbursement of actual, necessary expenses for post-Effective Date activities authorized hereunder without further court approval upon the submission of invoices to the Reorganized Debtors. Following the Effective Date, subject to actual conflicts of interest, none of the Committees' professionals shall be precluded from representing any entity acting for any successor fiduciaries or other entities created by this Plan, including the Plan Administrator, Plan Committee, Litigation Trustee or any of the Reorganized Debtors.
(b) Creation of Plan Committee; Procedures.
(i) Unless there are no parties in interest willing to serve, on the Effective Date, the Plan Committee shall be formed and constituted. The Plan Committee shall be of a size determined by and composed of members chosen by the Joint Sub-Committee (exclusive of the Senior Subordinated Note Indenture Trustee and any Holder of a Senior Subordinated Note Claim); provided, however, that the Plan Committee shall include VR, Leuthold and Cargill and shall include the Senior Subordinated Note Indenture Trustee until such time as all payments in respect of the Senior Subordinated Note Holder Distribution have been made. All proposed members of the Plan Committee shall be disclosed to the Bankruptcy Court on or before the Confirmation Hearing. Membership on the Plan Committee shall be on an institutional and not on an individual basis. In the event that a member of the Plan Committee resigns from its position on the Plan Committee, the remaining members shall have the right to designate its successor on the Plan Committee as set forth in the Plan Administrator Agreement. The Plan Committee shall, absent further order of the Bankruptcy Court, have not fewer than three members.
(ii) In the event that there are fewer than three members of the Plan Committee for a period of sixty (60) consecutive days, then the Plan Administrator may, during such vacancy and thereafter, in its sole discretion, ignore any reference in the Plan, the Plan Administrator Agreement or the Confirmation Order to the Plan Committee, and all references to the Plan Committee's ongoing duties and rights in the Plan, the Plan Administrator Agreement and the Confirmation Order shall be null and void.
(c) Standing of Plan Committee. The Plan Committee shall have independent standing to appear and be heard in the Bankruptcy Court as to any matter relating to the Plan, the Plan Administrator, the Estates or the Reorganized Debtors, including any matter as to which the Bankruptcy Court has retained jurisdiction pursuant to Article XI of the Plan.
(d) Function and Duration; Compensation and Expenses. The Plan Committee shall have ultimate supervisory authority over the Plan Administrator (but shall have no authority over the RCM Trustee, the RCM Estate or the Litigation Trustee, in such capacity). The Plan Administrator shall report to the Plan Committee and the Plan Committee shall have the power to remove the Plan Administrator with or without cause. The Plan Committee (i) shall be responsible for (A) instructing and supervising the Reorganized Debtors and the Plan Administrator with respect to their responsibilities under the Plan and the Plan Administrator Agreement, (B) reviewing and approving the prosecution of adversary and other proceedings, if any, including approving proposed settlements thereof, (C) reviewing and approving objections to and proposed settlements of Disputed Claims against the Contributing Debtors, FXA or the Reorganized Debtors, (D) performing such other duties that may be necessary and proper to assist the Plan Administrator and its retained professionals, and (ii) shall remain in existence until such time as the final Distributions under the Plan have been made by the Disbursing Agent, on behalf of the Reorganized Debtors. The members of the Plan Committee shall serve without compensation for their performance of services as members of the Plan Committee, except that they shall be entitled to reimbursement of reasonable expenses by the Reorganized Debtors to be paid from the Wind-Down Reserve. The Plan Committee may retain counsel or other professionals who shall be entitled to reasonable compensation and reimbursement of actual, necessary expenses to be paid from the Wind-Down Reserve upon the submission of invoices to the Reorganized Debtors; provided, however, that any disputes related to such fees and expenses may be brought before the Bankruptcy Court.
39 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. (e) Liability; Indemnification. Neither the Plan Committee, nor any of its members or designees, nor any duly designated agent or representative of the Plan Committee, or their respective employees, shall be liable for the act or omission of any other member, designee, agent or representative of the Plan Committee, nor shall any member be liable for any act or omission taken or omitted to be taken in its capacity as a member of the Plan Committee, other than acts or omissions resulting from such member's willful misconduct or gross negligence. The Reorganized Debtors shall indemnify and hold harmless the Plan Committee and its members and designees, and any duly designated agent or representative thereof (in their capacity as such), from and against and with respect to any and all liabilities, losses, damages, claims, costs and expenses, including, but not limited to, attorneys' fees arising out of or due to their actions or omissions, or consequences of such actions or omissions, other than as a result of their willful misconduct or gross negligence, with respect to the Reorganized Debtors or the implementation or administration of the Plan. To the extent the Reorganized Debtors indemnify and holds harmless the Plan Committee and its members and designees, or any duly designated agent or representative thereof (in their capacity as such), as provided above, the legal fees and related costs incurred by counsel to the Plan Committee in monitoring and participating in the defense of such claims giving rise to the right of indemnification shall be paid out of the Wind-Down Reserve or any applicable insurance.
5.12 Fee Committee. From and after the Confirmation Date, the members of the Fee Committee (including the RCM Trustee) and the Fee Committee's professionals shall continue to serve and be authorized to continue, in a manner consistent with practice before the Confirmation Date, to review, analyze, and prepare advisory reports with respect to applications for the payment of fees and the reimbursement of expenses of professionals retained in the Chapter 11 Cases pursuant to an order of the Bankruptcy Court during the period up to and including the Confirmation Date, including, without limitation, final fee applications in accordance with sections 328, 330, 331, and 503 of the Bankruptcy Code. From and after the Confirmation Date, the Reorganized Debtors shall pay the reasonable fees and expenses of the members of the Fee Committee to satisfy their duties and responsibilities. Notwithstanding the foregoing, unless otherwise provided by the Bankruptcy Court, the Fee Committee shall be dissolved and the members thereof and the professionals retained by the Fee Committee shall be released and discharged from their respective obligations upon the earlier to occur of (i) the date which is six (6) months after the Confirmation Date and (ii) resolution of all duties of the Fee Committee set forth in this section of the Plan.
5.13 Cancellation Of Securities, Instruments, And Agreements Evidencing Claims And Interests. With the exception of the common shares of Refco Inc. and the LLC Interests of FXA and RCM, except as otherwise provided in the Plan and in any other Plan Document, on the Effective Date and concurrently with the applicable Distributions made pursuant to this Article V, the promissory notes, share certificates (including treasury stock), other instruments evidencing any Claims or Interests, and all options, warrants, calls, rights, puts, awards, commitments, or any other agreements of any character to acquire such Interests shall be deemed canceled and of no further force and effect, without any further act or action under any applicable agreement, law, regulation, order, or rule, and the obligations of the Debtors or RCM under the notes, share certificates, and other agreements and instruments governing such Claims and Interests shall be discharged; provided, however, that the Senior Subordinated Notes Indenture shall continue in effect solely for the purposes of allowing the Senior Note Indenture Trustee to enforce the indemnity provisions of the Senior Subordinated Note Indenture on account of the Senior Subordinated Note Indenture Trustee's service on the Plan Committee, to make the Distributions to be made on account of Senior Subordinated Note Claims under the Plan and, to the extent necessary, enforce the Senior Subordinated Note Indenture Trustee Charging Lien, after which point the Senior Subordinated Note Indenture shall be cancelled and discharged. The Holders of or parties to such canceled notes, share certificates, and other agreements and instruments shall have no rights arising from or relating to such notes, share certificates, and other agreements and instruments, or the cancellation thereof, except the rights provided pursuant to the Plan.
5.14 Sources Of Cash For Plan Distributions. Except as otherwise provided in the Plan or the Confirmation Order, all Cash necessary for the Reorganized Debtors and the Plan Administrator to make payments pursuant to the Plan shall be obtained from the Reorganized Debtors' Cash balances and the liquidation of the Reorganized Debtors' and the Reorganized Debtors' remaining non-Cash assets, if any, including the Contributing Debtors BAWAG Proceeds. Cash payments to be made pursuant to the Plan to Holders of Allowed Claims and to the Senior Subordinated Note Indenture Trustee for the benefit of the Holders of Senior Subordinatesd Note Claims shall be made by the Reorganized Debtors (or any successor thereto) or, if the Disbursing Agent is an entity other than the Reorganized Debtors, the Disbursing Agent, which may be the Senior Subordinated Note Indenture Trustee .
40 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. Distributions to be made on behalf of the RCM Estate pursuant to the Plan or the RCM Settlement Agreement shall be made by the RCM Trustee in accordance with the Plan, the RCM Settlement Agreement and applicable law.
5.15 Risk Sharing in Respect of Cargill Administrative Claim. In the event that Cargill receives a Cargill Administrative Claim, the amount of such Claim shall be borne by RCM and the Contributing Debtors as follows: (i) to the extent the allowance of the Cargill Administrative Claim reduces the Allowed amount of any RCM FX/Unsecured Claim held by Cargill, RCM shall bear for the benefit of the Contributing Debtors a portion of the Cargill Administrative Claim equal to forty percent (40%) of the amount of the RCM Difference; (ii) the Contributing Debtors shall next pay an amount up to the remainder of the Cargill Administrative Claim Amount; provided, however, that such payment pursuant to this subsection (ii) shall be capped at the amount that would cause recoveries of Holders of Allowed Contributing Debtors General Unsecured Claims from Contributing Debtors Distributive Assets plus the Contributing Debtors portion of the RGL FXCM Distribution to fall below 30% of the face amount of such Allowed Contributing Debtors General Unsecured Claims; and (iii) if not yet paid in full, the remainder of the Cargill Administrative Claim will be borne by the Contributing Debtors and RCM equally. For the avoidance of doubt, amounts to be borne by the Contributing Debtors shall be deducted from the amounts available for the Contributing Debtors General Unsecured Distribution and amounts to be borne by RCM shall be deducted from the amounts available for the RCM Cash Distribution.
5.16 Allocation of Administrative Claims, Priority Tax Claims and Non-Tax Priority Claims. Payment of Allowed Priority Tax Claims and Allowed Non-Tax Priority Claims of the Contributing Debtors and of the RCM Estate and Allowed Administrative Claims of the Contributing Debtors and of the RCM Estate, other than amounts in respect of the RCM Advance, accrued through the Effective Date (excluding any amounts paid as of August 31, 2006) will be allocated such that RCM will first provide up to $60 million, the Contributing Debtors will next provide up to $120 million and to the extent that such Claims exceed $180 million in the aggregate, RCM and the Contributing Debtors will bear the cost of such excess (the "Excess Priority Claims") equally. Notwithstanding the preceding sentence, the Contributing Debtors may fund the payment of any Pre-Conversion Administrative Claim Amounts if and to the extent that the RCM Trustee and the Contributing Debtors determine such funding necessary to facilitate Distributions in respect of such amounts on the Effective Date; provided, however, that any amounts so paid by the Contributing Debtors shall be deducted from the RCM Cash Distribution in a manner that causes RCM to ultimately bear the cost of the Pre-Conversion Administrative Claim Amounts. FXA shall be responsible for all of its Allowed Administrative Claims, Allowed Priority Tax Claims, Allowed Non-Tax Priority Claims, provided, however, that professional services (other than those related to FXA's claims resolution process and issues unique to FXA after the initial date of the filing of this Plan) and overhead allocable to FXA in the period between the Plan Filing Date and the Plan Effective Date shall be borne by RCM and the Contributing Debtors as set forth in the preceding sentence. Only Allowed Administrative Claims accrued from the Petition Date through the Plan Effective Date that were or are paid after August 31, 2006 shall be counted toward the sharing allocation of the preceding two sentences; provided that the Contributing Debtors shall alone bear the cost of repaying the RCM Advance. To the extent RCM is responsible for bearing amounts in respect of Excess Priority Claims, payment of such amounts shall be made from Cash otherwise available for the RCM Cash Distribution. Allowed Administrative Claims incurred by the Contributing Debtors after the Effective Date shall be borne by the Contributing Debtors out of the Cash or value that would otherwise be paid to Holders of Allowed Contributing Debtors General Unsecured Claims. Allowed Administrative Claims incurred by RCM after the Effective Date shall be borne by RCM from the RCM Wind-Down Reserve, and, to the extent the RCM Wind-Down Reserve is not sufficient to pay such Allowed Administrative Claims, such Claims shall be paid directly by RCM out of the Cash or value that would otherwise be paid to Holders of Allowed Securities Customer Claims and RCM FX/Unsecured Claims as more particularly set forth in the RCM Settlement Agreement. Allowed Administrative Claims incurred by FXA after the Effective Date shall be borne by the FXA out of the Cash or value that would otherwise be paid to Holders of Allowed FXA General Unsecured Claims. All costs and expenses of administering the Litigation Trust described in section 5.7 shall be separately funded by the Litigation Trust and shall not be included in the calculation of the allocations of Administrative Claims, Priority Tax Claims and Non-Tax Priority Claims above.
5.17 Additional RCM Claim. If, at the conclusion of the claims reconciliation process, (x) the total Allowed Contributing Debtors General Unsecured Claims are less than $394 million, and (y) the Distributions to be made to Holders of Allowed Contributing Debtors General Unsecured Claims would result in a recovery for such Holders in excess of 35% from the sum of the Contributing Debtors Distributive Assets and the Contributing Debtors' portion of the RGL FXCM Distribution, RCM shall be entitled to an additional Claim. Specifically, RCM shall be
41 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. entitled to an additional Claim equal to the positive difference between $394 million minus the amount of the Allowed Contributing Debtors General Unsecured Claims. This “Additional RCM Claim” shall participate pro rata in all Distributions from Contributing Debtors Distributive Assets and the Contributing Debtors' portion of the RGL FXCM Distribution to Holders of Allowed Contributing Debtors General Unsecured Claims that exceed the 35% recovery threshold set forth in clause (y) above; provided, however, that the such Additional RCM Claim shall not be subject to the 40% limit on Distributions set forth in the Contributing Debtors General Unsecured Claim Distribution.
5.18 Contributing Debtors BAWAGProceeds. Notwithstanding the actual timing and source of any payments hereunder, so long as not inconsistent with the BAWAG Allocation Order, (i) a portion of BAWAG Guaranteed Proceeds equal to $100 million will be deemed to have been received by the Contributing Debtors and paid to the Secured Lenders under the Early Payment Order, (ii) a portion of BAWAG Guaranteed Proceeds equal to $150 million will be deemed to have been received by the Contributing Debtors and made available for Distribution to Holders of Allowed Senior Subordinated Note Claims, (iii) a portion of BAWAG Guaranteed Proceeds equal to $56.25 million plus an applicable share of BAWAG Contingent Proceeds (if any) will be deemed to have been received by the Contributing Debtors and made available for Distribution to Holders of Allowed Contributing Debtors General Unsecured Claims, and (iv) a portion of BAWAG Guaranteed Proceeds equal to $200 million plus an applicable share of BAWAG Contingent Proceeds (if any) will be deemed to have been received by RCM or the Contributing Debtors and made available for Distribution to Holders of RCM Securities Customer Claims and RCM FX/Unsecured Claims. To the extent that a Holder of an Allowed Senior Subordinated Note Claim against the Contributing Debtors, a Holder of an Allowed Contributing Debtors General Unsecured Claim, a Holder of an Allowed RCM Securities Customer Claim or a Holder of an Allowed RCM FX/Unsecured Claim elects not to receive its allocable share of the Senior Subordinated Note Holder BAWAG Proceeds, the Contributing Debtors General Unsecured BAWAG Proceeds or the RCM BAWAG Proceeds, as applicable, such portion of BAWAG Proceeds shall be returned to BAWAG in accordance with the BAWAG Settlement.
5.19 Exemption From Transfer Taxes. Pursuant to section 1146 of the Bankruptcy Code, (a) the issuance, transfer or exchange of notes or equity securities under the Plan, (b) the creation of any mortgage, deed of trust, lien, pledge, or other security interest, (c) the making or assignment of any contract, lease, or sublease; or (d) the making or delivery of any deed or other instrument of transfer under, in furtherance of, or in connection with, the Plan, any merger agreements; agreements of consolidation, restructuring, disposition, liquidation or dissolution; deeds; bills of sale; and transfers of tangible property, shall not be subject to any stamp tax, recording tax, transfer tax, or other similar tax. Unless the Bankruptcy Court orders otherwise, all sales, transfers, and assignments of owned and leased property, approved by the Bankruptcy Court on or prior to the Effective Date, shall be deemed to have been in furtherance of, or in connection with, the Plan. Notwithstanding anything in this section of the Plan to the contrary, the exemption from taxes referenced in this section of the Plan shall only be to the extent permitted for under section 1146 of the Bankruptcy Code.
5.20 RCM Settlement Agreement and Conversion. This Plan incorporates the RCM Settlement Agreement in its entirety. On or prior to the Effective Date, the RCM Chapter 11 Case will be converted to a case under subchapter III of chapter 7 of the Bankruptcy Code unless the Debtors and the RCM Trustee agree that there is a compelling reason for the RCM Estate to be administered under Chapter 11 of the Bankruptcy Code. Upon conversion of RCM's Chapter 11 Case to a case under chapter 7 of the Bankruptcy Code, this Plan shall proceed as a chapter 11 plan for the Debtors and shall constitute a settlement and compromise of claims between the chapter 7 Estate of RCM and the Debtors, for which RCM and the Debtors seek approval simultaneously with the confirmation of this Plan. In the event that the RCM Estate does not convert to chapter 7, the Distributions to RCM's creditors shall be governed by the terms of the RCM Settlement Agreement and this Plan.
5.21 Allowance of VR/Leuthold Guarantee Claims. The VR/Leuthold Guarantee Claims shall be Allowed Contributing Debtors General Unsecured Claims (subject, however, to allowance of the underlying Claims against RCM) unless objected to by the Contributing Debtors prior to entry of the Confirmation Order. No party other than the Contributing Debtors shall be authorized to object to or otherwise challenge the VR and Leuthold Claims against RGL (the “Guarantee Claims”). The Contributing Debtors will not object to or otherwise challenge the VR/Leuthold Guarantee Claims based on or related to any of the following theories or issues: the corporate structure or business practices of any of the Contributing Debtors; alter ego; substantive consolidation; fraud; or any other theories or causes of action similar to the foregoing. The Contributing Debtors, however, may object to the VR/Leuthold Guarantee Claims based on facts specific to a particular VR/Leuthold Guarantee Claim, including, but
42 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. not limited to, objections based on Bankruptcy Code avoidance theories or challenges to the purported dollar amount of the asserted claims.
5.22 Wind-Up of Non-Debtor Affiliates. All Non-Debtor Affiliates, other than the direct or indirect subsidiaries of RCM and Refco LLC, shall be wound up and dissolved as soon as practicable and all available Cash, after appropriate wind-up activities, shall be distributed to the Contributing Debtors and Refco LLC on account of intercompany balances (or equity dividends where applicable). All Non-Debtor Affiliates that are direct or indirect subsidiaries of RCM shall be wound up as soon as practicable and all available Cash, after appropriate wind-up activities, shall be distributed to RCM on account of intercompany balances (or equity dividends where appropriate). The direct and indirect subsidiaries of RCM shall be wound up and dissolved by the RCM Trustee and the remainder of the Non-Debtor Affiliates shall be wound up and dissolved by the Plan Administrator.
5.23 FXCM. If not liquidated in advance of the Effective Date, RGL’s 35% interest in FXCM shall become an interest of and be held by Reorganized Refco upon the merger of RGL into Reorganized Refco pursuant to section 5.1 of this Plan. The Plan Administrator shall exercise all rights of Reorganized Refco in respect of the 35% interest in FXCM. Notwithstanding the above, the FXCM Committee shall be formed to coordinate on all matters relating to the disposition or distribution of the 35% interest in FXCM. If not formed as of the Effective Date pursuant to the Plan Support Agreement, the members of the FXCM Committee, other than the RCM Trustee, shall be selected by the Joint Sub-Committee (inclusive of its ex-officio members, but exclusive of Holders of Senior Subordinated Note Claims and the Senior Subordinated Note Indenture Trustee). All decisions in respect of the disposition or distribution of the 35% interest in FXCM shall be made by Reorganized Refco; provided, however, that no such decision shall be made by Reorganized Refco without first consulting with the FXCM Committee and, to the extent permitted by applicable law, obtaining the consent of the FXCM Committee. Bylaws of the FXCM Committee shall be established by the FXCM Committee after its formation and shall be substantially in the form attached hereto as Exhibit J.
5.24 Examiner. No provision of the Plan shall be construed as impairing the Examiner's investigation, and his authority to file his report in accordance with the provisions of the Examiner Order and the additional directions given by the Bankruptcy Court at the Hearing held on June 21, 2006, even if such investigation concludes, and such filing occurs, after the occurrence of the Effective Date. Unless otherwise ordered by the Bankruptcy Court prior to the Effective Date, the procedures with respect to the filing and consideration of the Examiner’s Fee Applications and Requests for Reimbursements of Expenses shall continue after the Effective Date in the same manner as prior to the Effective Date as provided in the Examiner Order.
ARTICLE VI
PROVISIONS GOVERNING DISTRIBUTIONS
6.1 RCM Rights Distribution. On the Effective Date the Plan Administrator shall be deemed to have made the RCM Rights Distribution to the RCM Trustee and the Plan Administrator or the RCM Trustee, as the case may be, shall establish the RCM Distribution Reserve. Unless a Holder of an RCM FX/Unsecured Claim or RCM Securities Customer Claim has decided to not participate in the RCM Cash Distribution by electing to (i) assign those RCM Related Claims, if any, to the Litigation Trust; (ii) release their RCM Related Claims against any Refco Entity that is not a Debtor, and (iii) release the Secured Lenders (in such capacities) from the Secured Lender Released Claims held by such Holders, if any, such Holder will receive their Pro Rata share of the RCM Cash Distribution. Upon contribution of the RCM Related Claims to the Litigation Trust, such claims will be deemed Allowed.
6.2 Distributions For Claims Allowed As Of The Effective Date. Except as otherwise provided herein or as ordered by the Bankruptcy Court, Distributions to be made on account of Claims against FXA, the Contributing Debtors or RCM that are Allowed Claims as of the Effective Date shall be made on the Effective Date or as soon thereafter as is practicable; provided, however, that the Disbursing Agent, on behalf of the Reorganized Debtors, shall not be required to make Distributions to Holders of Allowed Claims (other than Allowed Secured Lender Claims) that are not Senior Subordinated Note Claims until all Reserves have been established and adequately funded in accordance with the terms of this Plan and the Senior Subordinated Note Holder Distribution and the Senior Subordinated Note Holder Fee Distribution have been paid in full; provided further, however, that the RCM Trustee shall not be required to make Distributions until all RCM Reserves have been established and adequately funded in 43 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. accordance with the terms of this Plan and the RCM Settlement Agreement. Any Distribution to be made on the Effective Date pursuant to this Plan shall be deemed as having been made on the Effective Date if such Distribution is made on the Effective Date or as soon thereafter as is practicable. Any payment or Distribution required to be made under this Plan on a day other than a Business Day shall be made on the next succeeding Business Day.
6.3 Distributions of Proceeds of the Litigation Trust. Pursuant to the terms and conditions set forth in the Litigation Trust Agreement, the Litigation Trustee shall transfer all the Contributed Claims Recoveries to the Disbursing Agent or the RCM Trustee for Distribution in accordance with the provisions of this Plan and the RCM Settlement Agreement.
6.4 Single Distribution. Except with respect to Allowed Secured Lender Claims and Senior Subordinated Note Claims, any Holder of a Claim asserted against more than one Debtor (or a Debtor and RCM), shall be entitled to a Distribution from only its primary obligor (whether that results in Distribution from RCM, FXA, or the Contributing Debtors), and all RCM Related Claims and Other Related Claims shall be subordinated and shall receive no Distribution from the assets of the applicable Debtor or RCM, as the case may be, unless and until such time as all Allowed General Unsecured Claims (or in the case of RCM, all Allowed RCM Securities Customer Claims, Allowed RCM FX/Unsecured Claims and Allowed Leuthold Metals Claims) against the applicable Debtor or RCM, as the case may be, have been paid in full; provided, however, that (A) any Holder of an RCM Securities Customer Claim or an RCM FX/Unsecured Claim with a separatean independent Claim against any Contributing Debtor based on contractual guarantee or other direct contractual undertaking may also recover once from the Contributing Debtors on such Claim based on the full underlying Claim amount owed by RCM, as of the Petition Date, for which such guarantee or other direct contractual undertaking was provided (and such Claim against the Contributing Debtors shall not be limited to the amount remaining after recovery from RCM under this Plan), and (B) any Holder of a Claim against FXA with a separatean independent Claim against the Contributing Debtors or RCM based on contractual guarantee or other direct contractual undertaking may also recover once from the Contributing Debtors on such Claim based on the full underlying Claim amount owed by FXA, as of the Petition Date, for which such guarantee or other direct contractual undertaking was provided (and such Claim against the Contributing Debtors shall not be limited to the amount remaining after recovery from FXA under this Plan). In addition, subject to the earning of interest in respect of the Litigation Trust as set forth in section 5.7 of this Plan no Holder of a Claim against one or more Debtors (or a Debtor and RCM) shall receive a Distribution under the Plan that results in greater than a 100% recovery on such Holder's Claim (which, in the case of a Holder of both a primary Claim against a Debtor or RCM and a contractual guarantee from another Debtor or RCM, shall mean no more than a cumulative 100% recovery on the underlying Claim amount owed by the primary obligor).
6.5 Accounts; Escrows; Reserves for the Reorganized Debtors. The Plan Administrator, on behalf of the Reorganized Debtors, in accordance with the provisions of the Plan Administrator Agreement, shall (a) establish one or more general accounts into which shall be deposited all funds not required to be deposited into any other account, Reserve, or escrow and (b) create, fund, and withdraw funds from, as appropriate, such general accounts in order to comply with and implement the provisions of this Plan. The Plan Administrator shall dispose of non-Cash assets of the Estates of the Reorganized Debtors, if any, in accordance with the provisions of the Plan and the Plan Administrator Agreement.
(a) Administrative/Priority Claims Reserve. On the Effective Date (or as soon thereafter as is practicable), the Plan Administrator shall, subject to the provisions of section 5.16 hereof, create and fund the Administrative/Priority Claims Reserve with Cash equal to one hundred percent (100%) of the Distributions to which Holders of Administrative and Allowed Priority Claims of the Contributing Debtors and FXA, not otherwise paid in full on the Effective Date, would be entitled under the Plan if such Claims were Allowed in full. The Plan Administrator may increase the amount of the Administrative/Priority Claims Reserve to satisfy disputed, contingent or unliquidated Administrative and Priority Claims (not previously estimated or allowed as of the Effective Date) with funds held in the Claims Distribution Account.
(b) Disputed Claims Reserve.
(i) The Plan Administrator shall create and fund the Disputed Claims Reserve with Cash and Litigation Trust Interests equal to the aggregate Pro Rata share of the Contributing Debtors General Unsecured Distribution or the FXA General Unsecured Distribution , 44 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. as applicable, that would have been made to each holder of a Disputed Claim against the Contributing Debtors or FXA if such Claim were an Allowed Contributing Debtors General Unsecured Claim or an Allowed FXA General Unsecured Claim for the Disputed Claim Amount or such other amount established by the Bankruptcy Court prior to the Effective Date; provided, however, that the Debtors, the Plan Administrator or the Reorganized Debtors may within 90 days after the Effective Date (or such other date as the Bankruptcy Court may order) file a motion(s) seeking to estimate any contingent or unliquidated Claims asserted on or before the Effective Date, with notice and an opportunity to be heard to be given to the affected Holders of such Disputed Claims.
(ii) The Disputed Claims Reserve shall be funded with Cash and Litigation Trust Interests equal to such percentage amounts approved by the Bankruptcy Court at the Confirmation Hearing and shall be reduced following each Quarterly Distribution Date by any amounts in the Disputed Claims Reserve that exceed the amounts required to be reserved by section (i) above, with such amounts being distributed to the Holders of Disputed Claims against the Contributing Debtors or FXA whose Claims have become Allowed Claims.
(iii) If any Cash or Litigation Trust Interests remains in the Disputed Claims Reserve after all Disputed Claims against the Contributing Debtors and FXA have been resolved, such remaining amountsassets shall be transferred to Reorganized Refco or Reorganized FXA, as applicable, for Distribution in accordance with the terms hereof. Unless otherwise provided in an order of the Bankruptcy Court, in the event that the Bankruptcy Court estimates any contingent, unliquidated, or Disputed Claim, the estimated amount shall constitute either the Allowed amount of such Claim or a maximum limitation on such Claim, as determined by the Bankruptcy Court; provided, however, that, if the estimate constitutes the maximum limitation on such Claim, the Plan Administrator may elect to pursue supplemental proceedings to object to any ultimate allowance of such Claim.
(iv) The Plan Administrator shall maintain two sub-accounts within the Disputed Claims Reserve for (i) the Contributing Debtors and (ii) FXA.
(c) Wind-Down Reserves. On the Effective Date (or as soon thereafter as is practicable), the Plan Administrator, on behalf of the Reorganized Debtors, shall create and fund the Wind-Down Reserve with sufficient Cash to administer the Plan, including, but not limited to, compensation of the Plan Administrator and Administrative Professionals. The Plan Administrator may make reasonable adjustments to the Wind-Down Reserve as necessary. Any Cash in the Wind-Down Reserve which is unnecessary for the administration of the Plan shall be transferred to Reorganized Refco or Reorganized FXA, as applicable, for distribution to Holders of Allowed Claims against the Contributing Debtors or FXA, as applicable, in accordance with the terms hereof.
6.6 Accounts; Escrows; Reserves for the Post-Confirmation RCM. The RCM Trustee, on behalf of Post-Confirmation RCM, in accordance with the provisions of the RCM Settlement Agreement, shall (a) establish one or more general accounts into which shall be deposited all funds not required to be deposited into any other account, RCM Reserve, or escrow and (b) create, fund, and withdraw funds from, as appropriate, such general accounts in order to comply with and implement the provisions of this Plan. The RCM Trustee shall dispose of non-Cash assets of the RCM Estate, if any, in accordance with the provisions of the Plan and the RCM Settlement Agreement and applicable law.
(a) RCM Administrative/Priority Claims Reserve. On the Effective Date (or as soon thereafter as is practicable), the RCM Trustee shall, subject to the provisions of section 5.16 hereof, create and fund the RCM Administrative/Priority Claims Reserve with Cash equal to one hundred percent (100%) of the Distributions to which Holders of Administrative and Allowed Priority Claims of RCM, not otherwise paid in full on the Effective Date, would be entitled under the Plan if such Claims were Allowed in full. The RCM Trustee may increase the amount of the RCM Administrative/Priority Claims Reserve to satisfy disputed, contingent or unliquidated Administrative and Priority Claims (not previously estimated or allowed as of the Effective Date) with funds held in the RCM Claims Distribution Account. If the Chapter 11 Case of RCM is converted to a case in chapter 7, prior to any conversion the RCM Trustee shall be entitled to set aside appropriate reserves for Administrative Claims incurred or to 45 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. be incurred prior to conversion, with the amounts of such Administrative Claims to be payable from the reserves upon allowance of the Claims therefor so long as the RCM Trustee has determined that there are or will be sufficient funds available to pay all Administrative Claims of the chapter 7 case.
(b) RCM Disputed Claims Reserve.
(i) The RCM Trustee shall create and fund the RCM Disputed Claims Reserve with Cash and Litigation Trust Interests equal to the aggregate Pro Rata share of the Distribution that would have been made to each holder of a Disputed Claim against RCM if such Claim were an Allowed RCM Securities Customer Claim or RCM FX/Unsecured Claim for the Disputed Claim Amount or such other amount established by the Bankruptcy Court prior to the Effective Date; provided, however, that the RCM, Post-Confirmation RCM or the RCM Trustee may within 90 days after the Effective Date (or such other date as the Bankruptcy Court may order) file a motion(s) seeking to estimate any contingent or unliquidated Claims asserted on or before the Effective Date, with notice and an opportunity to be heard to be given to the affected Holders of such Disputed Claims.
(ii) The RCM Disputed Claims Reserve shall be funded with Cash and Litigation Trust Interests equal to such percentage amounts approved by the Bankruptcy Court at the Confirmation Hearing and shall be reduced following each Quarterly Distribution Date by any amounts in the RCM Disputed Claims Reserve that exceed the amounts required to be reserved by section (i) above, with such amounts being distributed to the Holders of Disputed Claims whose Claims against RCM have become Allowed Claims.
(iii) If any Cash or Litigation Trust Interests remain in the RCM Disputed Claims Reserve after all Disputed Claims against RCM have been resolved, such remaining amounts shall be transferred to Post-Confirmation RCM for Distribution in accordance with the terms of the Plan and the RCM Settlement Agreement. Unless otherwise provided in an order of the Bankruptcy Court, in the event that the Bankruptcy Court estimates any contingent, unliquidated, or Disputed Claim against RCM, the estimated amount shall constitute either the Allowed amount of such Claim or a maximum limitation on such Claim, as determined by the Bankruptcy Court; provided, however, that, if the estimate constitutes the maximum limitation on such Claim, the RCM Trustee may elect to pursue supplemental proceedings to object to any ultimate allowance of such Claim.
(iv) The RCM Trustee shall maintain sub-accounts within the RCM Disputed Claims Reserve for RCM Securities Customer Claims and RCM FX/Unsecured Claims. Each sub-account shall be further subdivided for Assets in Place and Additional Property (each as defined in the RCM Settlement Agreement). The RCM Trustee may maintain such other reserves as are permitted by the RCM Settlement Agreement.
(v) Distributions of Additional Property under the RCM Settlement Agreement on behalf of RCM Securities Customer Claims and RCM FX/Unsecured Claims shall be made Pro Rata (as such term is defined in the RCM Settlement Agreement). True up Distributions (as defined in the RCM Settlement Agreement) shall be made from time to time from Additional Property as determined by the RCM Trustee. The RCM Reserves shall take into account the requirement to true up with respect to Pro Rata (as defined in the RCM Settlement Agreement) shares of Additional Property.
(c) RCM Distribution Reserve. On the Effective Date, the Plan Administrator shall create and fund the RCM Distribution Reserve. Each Holder of an Allowed RCM Securities Customer Claim or Allowed RCM FX/Unsecured Claim that has provided the Plan Administrator with an RCM Related Claim Subordination Form shall receive from the Plan Administrator on the next available Distribution Date its allocable share (as determined by the RCM Trustee consistent with their elections) of the RCM Distribution Reserve (net of costs, if any, with respect to obtaining such RCM Related Claim Subordination Form if such form has been provided 46 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. after the Voting Deadline and the election was not made in a ballot); provided, however, if the RCM Settlement Agreement is amended prior to the Confirmation Hearing so as to permit the RCM Trustee to receive conditional distributions of Additional Property (as defined in the RCM Settlement Agreement) and to not require an immediate distribution of all assets received by the RCM Trustee to Holders of Allowed Claims against RCM, any amounts that would have been held in the RCM Distribution Reserve shall be transferred to the RCM Trustee who shall then distribute such funds on the next available Distribution Date to each Holder of an Allowed RCM Securities Customer Claim or Allowed RCM FX/Unsecured Claim that has provided the RCM Trustee with an RCM Related Claim Subordination Form (net of costs, if any, with respect to obtaining such RCM Related Claim Subordination Form if such form has been provided after the Voting Deadline and the election was not made in a ballot). In the event that any Holder of an RCM Related Claim has not provided an RCM Related Claim Subordination Form, but the RCM Related Claim of such Holder is subsequently expunged by objection of the Plan Administrator, the reserve in respect of such Claim shall be distributed (net of costs of expunging the RCM Related Claim) by the RCM Trustee or the Plan Administrator, as applicable, Pro Rata (as defined in the RCM Settlement Agreement) to such Holder and to those Holders of Allowed RCM Securities Customer Claims and Allowed RCM FX/Unsecured Claims that provided the Plan Administrator or the RCM Trustee, as applicable, with an RCM Related Claim Subordination Form. In the event that any RCM Related Claim becomes an Allowed Claim, the reserve in respect of such Claim shall be deposited in the Claims Distribution Account for Distribution in accordance with the terms of this Plan.
(d) RCM Wind-Down Reserve. On the Effective Date (or as soon thereafter as is practicable), the RCM Trustee or the Plan Administrator, as the case may be, on behalf of Post-Confirmation RCM, shall create and fund the RCM Wind-Down Reserve with sufficient Cash from the RCM Cash Distribution to administer the Plan and the RCM Settlement Agreement, including, but not limited to, compensation of the RCM Trustee and RCM Administrative Professionals. The RCM Trustee may make reasonable adjustments to the RCM Wind-Down Reserve as necessary. Any Cash in the RCM Wind-Down Reserve which is unnecessary for the administration of the Plan and the RCM Settlement Agreement shall be transferred to Post-Confirmation RCM for distribution to Holders of Allowed Claims against RCM in accordance with the terms hereof.
6.7 Interest And Penalties On Claims. Unless otherwise specifically provided for in this Plan, the Confirmation Order or another order of the Court (including, without limitation, the Early Payment Order), or if required by applicable bankruptcy law, postpetition interest and penalties shall not accrue or be paid on any Claims and no Holder of a Claim shall be entitled to interest and penalties accruing on or after the Petition Date through the date such Claim is satisfied in accordance with the terms of this Plan.
6.8 Distributions By Disbursing Agent and RCM Trustee. All Distributions under the Plan on behalf of the Reorganized Debtors shall be made by the Disbursing Agent at the direction of the Plan Administrator and all Distributions under the Plan and the RCM Settlement Agreement on behalf of RCM shall be made by the RCM Trustee. The Disbursing Agent and the RCM Trustee shall be deemed to hold all property to be distributed by each hereunder in trust for Persons entitled to receive the same. The Disbursing Agent and the RCM Trustee shall not hold an economic or beneficial interest in such property.
6.9 Delivery Of Distributions And Undeliverable Or Unclaimed Distributions.
(a) Delivery Of Distributions In General. Distributions to Holders of Allowed Claims shall be made at the addresses set forth in the Debtors' or RCM's records unless such addresses are superseded by proofs of claim or transfers of claim filed pursuant to Bankruptcy Rule 3001; provided, however, Distributions on account of Senior Subordinated Note Claims shall be made to the Senior Subordinated Note Indenture Trustee who shall, in turn, administer such Distributions to the Holders of Senior Subordinated Note Claims in accordance with the terms of the Senior Subordinated Note Indenture. The Senior Subordinated Note Indenture Trustee shall be authorized to effect any distribution under the Plan through the book entry transfer facilities of The Depositary Trust Company pursuant to the procedures used for effecting distributions thereunder on the date of any such distribution and shall be entitled to reasonable compensation for services performed in connection therewith.. Distributions on account of Secured Lender Claims shall be made to the Secured Lender Agent, who shall in turn administer such Distributions in accordance with the terms of the Credit Agreement.
(b) Undeliverable And Unclaimed Distributions.
47 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. (i) Holding And Investment Of Undeliverable And Unclaimed Distributions. If the Distribution to any Holder of an Allowed Claim is returned to the Disbursing Agent or the RCM Trustee, as applicable, as undeliverable or is otherwise unclaimed, no further Distributions shall be made to such Holder unless and until the Disbursing Agent or the RCM Trustee, as applicable, is notified in writing of such Holder's then current address. Undeliverable and unclaimed Distributions shall be deposited in the Unclaimed Distribution Reserve or the RCM Unclaimed Distribution Reserve, as the case may be, until such time as a Distribution becomes deliverable or is unclaimed in accordance with this section of the Plan. The accounts for the Unclaimed Distribution Reserve and RCM Unclaimed Distribution Reserve may be interest-bearing accounts, provided that any interest accruing on funds in the Unclaimed Distribution Reserve shall be transferred to the Reorganized Refco or Reorganized FXA, as applicable, for Distribution in accordance with the terms hereof and any interest accruing on funds in the RCM Unclaimed Distribution Reserve shall be transferred to the RCM Trustee for Distribution in accordance with the terms of this Plan and the RCM Settlement Agreement.
(ii) After Distributions Become Deliverable. The Disbursing Agent or RCM Trustee, as applicable, shall make all Distributions that have become deliverable or have been claimed since the Effective Date or the next Quarterly Distribution Date as soon as practicable after such Distribution has become deliverable.
(iii) Failure To Claim Undeliverable Distributions. Any Holder of an Allowed Claim that does not assert a claim pursuant to this Plan for an undeliverable or unclaimed Distribution within one year after the applicable date of Distribution shall be deemed to have forfeited its claim for such undeliverable or unclaimed Distribution and shall be forever barred and enjoined from asserting any such claim for an undeliverable or unclaimed Distribution against the Debtors, RCM or their Estates, the Reorganized Debtors, the Plan Administrator, Post-Confirmation RCM, the RCM Trustee or their property. In such cases, any Cash in the Unclaimed Distribution Reserve or the RCM Unclaimed Distribution Reserve, as applicable, for Distribution on account of such Claims for undeliverable or unclaimed Distributions shall become the property of the applicable Estate free of any restrictions thereon. Such unclaimed or undeliverable funds shall be transferred to the Reorganized Debtors or Post-Confirmation RCM, as applicable, to be distributed in accordance with the terms of the Plan or the RCM Settlement Agreement. Nothing contained in this Plan, the Plan Administrator Agreement or the RCM Settlement Agreement shall require the Disbursing Agent or the RCM Trustee to attempt to locate any Holder of an Allowed Claim.
(c) Time Bar to Cash Payments. Checks issued by the Disbursing Agent or the RCM Trustee, as applicable, on account of Allowed Claims shall be null and void if not negotiated within ninety (90) days from and after the date of issuance thereof. Requests for reissuance of any check shall be made directly to the Disbursing Agent or the RCM Trustee, as applicable, by the Holder of the Allowed Claim with respect to which such check originally was issued. Any claim in respect of such a voided check shall be made on or before the later of (a) the second (2nd) anniversary of the Effective Date or (b) ninety (90) days after the date of issuance of such check, if such check represents a final Distribution hereunder on account of such Claim. After such date, all Claims in respect of voided checks shall be discharged and forever barred and the Reorganized Debtors or RCM, as the case may be, shall retain all monies related thereto for the sole purpose of redistribution to Holders of Allowed Claims or Interests in accordance with the terms of this Plan and the RCM Settlement Agreement, as applicable.
6.10 Record Date For Distributions. With respect to all Claims except Senior Subordinated Note Claims, the Disbursing Agent or the Plan Administrator or the RCM Trustee, as applicable, shall have no obligation to recognize the transfer of, or the sale of any participation in, any Claim that occurs after the close of business on the Distribution Record Date, and shall be entitled for all purposes herein to recognize and distribute only to those Holders of Claims who are Holders of such Claims, or participants therein, as of the close of business on the Distribution Record Date. The Disbursing Agent, the Plan Administrator or the RCM Trustee, as applicable, shall instead be entitled to recognize and deal for all purposes under this Plan with only those record holders stated on the official claims register as of the close of business on the Distribution Record Date. No Distribution Record Date shall be established for Distributions on account of Senior Subordinated Note Claims.
48 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. 6.11 Distributions To Holders Of Senior Subordinated Note Claims. As a condition precedent to receiving any Distribution under this Plan on account of an Allowed Senior Subordinated Note Claim, the registered Holders (as defined in the Senior Subordinated Note Indenture) of such Senior Subordinated Note Claim shall surrender any certificate(s) evidencing such Senior Subordinated Note Claim in accordance with written instructions to be provided to such registered Holders (as defined in the Senior Subordinated Note Indenture) and the Senior Subordinated Note Indenture Trustee by the Plan Administrator (in consultation with the Senior Subordinated Note Indenture Trustee, and consistent with customary market practice), unless waived in writing by the Debtors or the Plan Administrator.
6.12 Senior Subordinated Notes Indenture Trustee As Claim Holder. Consistent with Bankruptcy Rule 3003(c), the Debtors or the Plan Administrator, as the case may be, shall recognize a proof of claim filed by the Senior Subordinated Notes Indenture Trustee in respect of the Senior Subordinated Notes Claims. Accordingly, any Senior Subordinated Note Claim, proof of which is filed by the registered or beneficial Holder of a Senior Subordinated Note Claim, may be disallowed as duplicative of any Senior Subordinated Note Claims of the Senior Subordinated Notes Indenture Trustee, without need for any further action or Bankruptcy Court order. For the avoidance of doubt, the Senior Subordinated Notes Indenture Trustee shall be authorized to distribute amounts received in respect of Senior Subordinated Note Holder Distributions.
6.13 Allocation Of Plan Distributions Between Principal And Interest. Except for distributions made in respect of Allowed Secured Lender Claims, which shall be made in accordance with the Credit Agreement, to the extent that any Allowed Claim entitled to a Distribution under this Plan is composed of indebtedness and accrued but unpaid interest thereon, such Distribution shall, for all income tax purposes, be allocated to the principal amount of the Claim first and then, to the extent that the consideration exceeds the principal amount of the Claim, to the portion of such Claim representing accrued but unpaid interest.
6.14 Means Of Cash Payment. Payments of Cash made pursuant to this Plan shall be in U.S. dollars and shall be made, at the option and in the sole discretion of the Plan Administrator or the RCM Trustee, as applicable, by (a) checks drawn on or (b) wire transfer from a domestic bank selected by the Plan Administrator or the RCM Trustee, as applicable. Cash payments to foreign creditors may be made, at the option of the Plan Administrator or the RCM Trustee, as applicable,, in such funds and by such means as are necessary or customary in a particular foreign jurisdiction.
6.15 Withholding And Reporting Requirements. In connection with this Plan and all Distributions thereunder, the Disbursing Agent, the Plan Administrator or the RCM Trustee, as applicable, on behalf of the Reorganized Debtors, shall comply with all withholding and reporting requirements imposed by any federal, state, local, or foreign taxing authority, and all Distributions hereunder shall be subject to any such withholding and reporting requirements. The Disbursing Agent, the Plan Administrator and the RCM Trustee, on behalf of the Reorganized Debtors and RCM, as applicable, shall be authorized to take any and all actions that may be necessary or appropriate to comply with such withholding and reporting requirements.
6.16 Setoffs. Unless prohibited by the terms of this Plan or any other Plan Document, the Plan Administrator on behalf of the Reorganized Debtors or the RCM Trustee on behalf of Post-Confirmation RCM, may, pursuant to section 553 of the Bankruptcy Code or applicable nonbankruptcy laws, but shall not be required to, set off against any Claim, the payments or other Distributions to be made pursuant to this Plan in respect of such Claim, or claims of any nature whatsoever (other than the Released Claims) that the Debtors, RCM, the Reorganized Debtors or Post-Confirmation RCM may have against the Holder of such Claim; provided, however, that neither the failure to do so nor the allowance of any Claim hereunder shall constitute a waiver or release by the Reorganized Debtors or Post-Confirmation RCM of any such claim that the Debtors, RCM, Post-Confirmation RCM or the Reorganized Debtors may have against such Holder.
6.17 Fractional Dollars. Notwithstanding any other provision of the Plan, the Plan Administrator Agreement or the RCM Settlement Agreement, none of the Plan Administrator, the Reorganized Debtors, the RCM Trustee or RCM, as applicable, shall be required to make Distributions or payments of fractions of dollars, and whenever any payment of a fraction of a dollar under the Plan would otherwise be called for, the actual payment made shall reflect a rounding of such fraction to the nearest whole dollar (up or down), with half dollars being rounded down. 49 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. 6.18 Release Of Liens. Except as otherwise provided in this Plan or in any other Plan Document, on the Effective Date and concurrently with the applicable distributions made pursuant to this Plan, all mortgages, deeds of trust, liens, pledges, or other security interests (collectively, the "Mortgages") in and against the property of any Estate automatically shall be fully released and discharged, and all such property shall be free and clear of all such Mortgages. Nothing in the Plan shall be deemed, asserted or construed to affect the Senior Subordinated Notes Indenture Trustee Charging Lien.
ARTICLE VII
TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES
7.1 Rejected Contracts And Leases. Except as otherwise provided in the Confirmation Order, the Plan, or in any other Plan Document, the Confirmation Order shall constitute an order under section 365 of the Bankruptcy Code rejecting all prepetition executory contracts and unexpired leases to which any Debtor is a party, to the extent such contracts or leases are executory contracts or unexpired leases, on and subject to the occurrence of the Effective Date, unless such contract or lease (a) previously shall have been assumed, assumed and assigned, or rejected by the Debtors, (b) previously shall have expired or terminated pursuant to its own terms before the Effective Date, (c) is the subject of a pending motion to assume or reject on the Confirmation Date, or (d) is identified in Exhibit D to this Plan as a contract or lease to be assumed; provided, however, that the Debtors may amend such exhibit of assumed and assigned executory contracts and unexpired leases at any time prior to the Confirmation Date.
7.2 Bar To Rejection Damages. If the rejection of an executory contract or unexpired lease pursuant to section 7.1 above gives rise to a Claim by the other party or parties to such contract or lease, such Claim shall be forever barred and shall not be enforceable against the applicable Debtor or its Estate, the Reorganized Debtors, the Plan Administrator, or their respective successors or properties unless a proof of Claim is filed and served on the Reorganized Debtors and counsel for the Reorganized Debtors within thirty (30) days after service of a notice of the Effective Date or such other date as is prescribed by the Bankruptcy Court.
7.3 Assumed And Assigned Contracts And Leases. Except as otherwise provided in the Confirmation Order, the Plan, or any other Plan Document entered into after the Petition Date or in connection with the Plan, the Confirmation Order shall constitute an order under section 365 of the Bankruptcy Code assuming, as of the Effective Date, those executory contracts and unexpired leases listed on Exhibit D to this Plan; provided, however, that the Debtors may amend such Exhibit of assumed and assigned executory contracts and unexpired leases at any time prior to the Confirmation Date.
7.4 Compensation And Benefit Programs. All Employee Benefit Plans, including programs subject to sections 1114 and 1129(a)(13) of the Bankruptcy Code, entered into before or after the Petition Date shall be deemed to be, and shall be treated as if they were, executory contracts that are subject to rejection in accordance with section 7.1 of the Plan (to the extent such rejection does not violate sections 1114 and 1129(a)(13) of the Bankruptcy Code).
7.5 Treatment of RCM Executory Contracts and Unexpired Leases. Notwithstanding the preceding sections of this Article 7,VII, the RCM Trustee shall determine the appropriate treatment for the executory contracts and unexpired leases of RCM in accordance with applicable law and the RCM Settlement Agreement.
ARTICLE VIII
PROCEDURES FOR RESOLVING DISPUTED, CONTINGENT, AND UNLIQUIDATED CLAIMS AND INTERESTS
8.1 Objection Deadline; Prosecution Of Objections. NoSubject to section 5.21 of this Plan, no later than the Claims Objection Deadline or the Administrative Claims Objection Deadline, as applicable, the Plan Administrator on behalf of the Reorganized Debtors, after consultation with the Plan Committee, may file objections to Claims or Interests against FXA and the Contributing Debtors that are not yet Allowed with the Bankruptcy Court and serve such objections upon the Holders of each of the Claims or Interests to which objections are made. No later 50 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. than the Claims Objection Deadline or the Administrative Claims Objection Deadline, as applicable, the RCM Trustee on behalf of Post-Confirmation RCM may file objections to Claims or Interests against RCM that are not yet Allowed with the Bankruptcy Court and serve such objections upon the Holders of each of the Claims or Interests to which objections are made. Nothing contained herein, however, shall limit the ability of the Plan Administrator or the RCM Trustee, as applicable, to object to Claims or Interests, if any, filed or amended after the Claims Objection Deadline or the Administrative Claims Objection Deadline, as applicable. Subject to limitations set forth in the Plan Administrator Agreement and the Plan, as applicable, the Plan Administrator shall be authorized to, and shall, dispose of all Disputed Claims or Interests by withdrawing or settling such objections thereto, or by litigating to judgment in the Bankruptcy Court or such other court as may have jurisdiction the validity, nature, and/or amount thereof. The RCM Trustee shall have sole discretion and authority to object to any RCM Claims or Interests in accordance with the RCM Settlement Agreement and applicable provisions of the Bankruptcy Code.
8.2 No Distributions Pending Allowance. Notwithstanding any other provision of this Plan, no payments or Distributions shall be made with respect to any disputed portion of a Disputed Claim or Interest unless and until all objections to such Disputed Claim or Interest have been settled or withdrawn or have been determined by Final Order and the Disputed Claim or Interest, or some portion thereof, has become an Allowed Claim or Interest.
8.3 Distributions After Allowance.The Disbursing Agent on behalf of the Reorganized Debtors and the RCM Trustee on behalf of RCM shall make payments and Distributions from the Disputed Claims Reserve and the RCM Disputed Claims Reserve, as applicable, to the Holder of any Disputed Claim or Interest that has become an Allowed Claim or Interest, or any portion of which has become Allowed, on the first Quarterly Distribution Date following the date that such Disputed Claim or Interest becomes an Allowed Claim. Such Distributions shall be made in accordance with the Plan, the Plan Administrator Agreement and the RCM Settlement Agreement, as applicable.
ARTICLE IX
CONFIRMATION AND CONSUMMATION OF THE PLAN
9.1 Conditions To Confirmation.
(a) The Confirmation Order shall be reasonably acceptable in form and substance to the Plan Proponents (and with respect to any matter affecting the Secured Lender Agent and/or the Secured Lenders, the Secured Lender Agent);
(b) The Confirmation Date of this Plan shall have occurred on or before December 15, 2006; and
(c) The Plan Proponents shall have determined and shall have filed with the Bankruptcy Court a notice confirming that the Allotted Administrative Claims are not reasonably expected to exceed, in the aggregate, $180 million;
(d) Houlihan and Capstone shall have each filed with the Bankruptcy Court in advance of the Voting Deadline, its respective RCM Projection and Contributing Debtors Projection.
(e) Either (i) both of the Houlihan and Capstone RCM Projections shall be equal to or exceed $430 million, or (ii) in the event that one such RCM Projection is less than $430 million and the other is equal to or exceeds $430 million, the Bankruptcy Court (after reviewing both RCM Projections and the assumptions therein) shall have determined that the appropriate RCM Projection is equal to or exceeds $430 million; and
(f) Either (i) both of the Houlihan and Capstone Contributing Debtors Projections shall be equal to or exceed $64 million, or (ii) in the event that one such Contributing Debtors Projection is less than $64 million and the other is equal to or exceeds $64 million, the Bankruptcy Court (after reviewing both RCM Projections and the assumptions therein) shall have determined that the appropriate Contributing Debtors Projection is equal to or exceeds $64 million.
51 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. 9.2 Conditions To Effective Date. The Plan Proponents shall request that the Confirmation Order include a finding by the Bankruptcy Court that, notwithstanding Bankruptcy Rule 3020(e), the Confirmation Order shall take effect immediately upon its entry. The following are conditions precedent to the occurrence of the Effective Date, each of which must be satisfied or waived by the Plan Proponents in accordance with the terms hereof prior to December 31, 2006:
(a) The Confirmation Order, in form and substance reasonably satisfactory to the Plan Proponents, shall have been entered and not thereafter stayed, reversed or vacated and shall, among other things, provide that:
(i) the Debtors, the Plan Administrator, on behalf of the Reorganized Debtors, and the RCM Trustee on behalf of Post-Confirmation RCM are authorized to take all actions necessary or appropriate to enter into, implement, and consummate the contracts, instruments, releases, leases, indentures, and other agreements or documents created in connection with the Plan; and
(ii) the provisions of the Confirmation Order are non severable and mutually dependent.
(b) Unless the condition set forth in paragraph 1015(a) of the Early Payment Order that the Early Payment Order shall have become a Final Order in full force and effect shall have been waived in accordance therewith, the Early Payment Order shall have become a Final Order and shall be in full force and effect;
(c) The RCM Settlement Agreement shall have been approved by the Bankruptcy Court and shall have become effective by satisfaction of all conditions to effectiveness therein.
(d) All other actions, documents, and agreements necessary to implement the Plan shall have been effected or executed;
(e) The Secured Lender Payment Date shall have occurred; and
(f) The Debtors shall have sufficient Cash to make all required payments to be made on the Effective Date.
(g) All amounts owed, as of the Effective Date, to the Secured Lender Agent and/or any Secured Lender pursuant to paragraph 12 of the Early Payment Order shall have been paid in full.
9.3 Waiver Of Conditions. Each of the conditions to the Effective Date set forth herein may be waived in whole or in part by the Plan Proponents by agreement, without any notice to parties in interest or the Bankruptcy Court and without a hearing; provided, however, in the event that such waiver is not unanimous, the waiving Plan Proponents shall be required to obtain approval of the Bankruptcy Court to effect such waiver, following notice and a hearing and; provided further, the conditions set forth in the parenthetical of section 9.1(a) and sections 9.2(b), (e) and (g) hereof shall not be waived without the consent of the Secured Lender Agent and Secured Lenders that hold the number and amount of Secured Lender Claims required to accept a plan pursuant to section 1126(c) of the Bankruptcy Code (as if, for purposes of this paragraph, such Secured Lender Claims were impaired). The failure to satisfy or waive any condition to the Effective Date may be asserted by the Plan Proponents regardless of the circumstances giving rise to the failure of such condition to be satisfied, including any action or inaction by the Plan Proponents. The failure of the Plan Proponents to exercise any of the foregoing rights shall not be deemed a waiver of any other rights, and each such right shall be deemed an ongoing right that may be asserted at any time.
9.4 Consequences Of Non-Occurrence Of Effective Date. In the event that the Effective Date does not timely occur, the Plan Proponents reserve all rights to seek an order from the Bankruptcy Court directing that the Confirmation Order be vacated, that the Plan be null and void in all respects, and/or that any settlement of Claims provided for in the Plan, other than those contained in the RCM Settlement Agreement, be null and void. In the event that the Bankruptcy Court shall enter an order vacating the Confirmation Order, the time within which the
52 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. Debtors may assume and assign, or reject all executory contracts and unexpired leases not previously assumed, assumed and assigned, or rejected, shall be extended for a period of 60 days after the date the Confirmation Order is vacated, without prejudice to further extensions.
ARTICLE X
EFFECT OF PLAN CONFIRMATION
10.1 Binding Effect. This Plan, and all compromises and settlements contemplated hereby or incorporated by reference herein, shall be binding upon and inure to the benefit of the Debtors, all present and former Holders of Claims and Interests, and their respective successors and assigns, including, but not limited to, the Reorganized Debtors and any Chapter 7 trustee appointed to administer any of the Estates.
10.2 Releases.
(a) Releases By The Debtors and RCM. Except with respect to those Intercompany Claims allowed or otherwise resolved pursuant to the Plan, including, but not limited to, the RCM Intercompany Claim and Intercompany Claims of Non-Debtor Affiliates against the Debtors or RCM, as of the Effective Date, for good and valuable consideration, the adequacy of which is hereby confirmed, the Debtors and RCM (in their individual capacities and as debtors and debtors in possession) will be deemed to release forever, waive, and discharge all claims, obligations, suits, judgments, damages, demands, debts, rights, causes of action, and liabilities (other than the rights of the Debtors, RCM, the Reorganized Debtors or Post-Confirmation RCM to enforce this Plan and the contracts, instruments, releases, indentures, and other agreements or documents delivered hereunder, and liabilities arising after the Effective Date in the ordinary course of business) whether liquidated or unliquidated, fixed or contingent, matured or unmatured, known or unknown, foreseen or unforeseen, then existing or thereafter arising, in law, equity, or otherwise that are based in whole or part on any act omission, transaction, event, or other occurrences taking place on or prior to the Effective Date in any way relating to the Debtors, the Reorganized Debtors, RCM, Post-Confirmation RCM, the Chapter 11 Cases, this Plan, the Disclosure Statement or the RCM Settlement Agreement and that could have been asserted by or on behalf of the Debtors, RCM, the Estates, the Reorganized Debtors or Post-Confirmation RCM, including pursuant to principles of substantive consolidation, piercing the corporate veil, alter ego, domination, constructive trust and similar principles of state or federal creditors' rights laws, in any such case, against the Released Parties. For the avoidance of doubt, Released Claims shall include any and all claims and causes of action against the Released Parties, acting in such capacity, arising from or relating to (w) the Debtors' and RCM's centralized cash management system and intercompany transfers other than the RCM Intercompany Claim and Intercompany Claims with respect to Non-Debtor Affiliates, (x) the leveraged recapitalization in August 2004, (y) the initial public offering, and any related transactions effectuated in August 2005/September 2005, and (z) any transfer or payment made in respect of the Credit Agreement or the Senior Subordinated Note Indenture, including any redemption of Senior Subordinated Notes, which shall include any Claim or cause of action arising therefrom pursuant to sections 541, 544, 545, 547, 548, 549, 550, 551 and 553 of the Bankruptcy Code.
(b) Releases By Holders Of Claims And Interests. On the Effective Date, each Holder of an Impaired Claim, including, but not limited to all Holders of an Impaired Claim against RCM, that voted to accept the Plan or receives a Distribution, in consideration for the obligations of the Debtors, RCM, the Reorganized Debtors and Post-Confirmation RCM under the Plan and the Cash and other contracts, instruments, releases, agreements, or documents to be delivered in connection with the Plan, shall be deemed to forever release, waive, and discharge all claims, demands, debts, rights, causes of action, or liabilities (other than the right to enforce the Debtors', RCM's, the Reorganized Debtors' and Post-Confirmation RCM's obligations under the Plan, the Confirmation Order, and the contracts, instruments, releases, agreements, and documents delivered under the Plan), whether liquidated or unliquidated, fixed or contingent, matured or unmatured, known or unknown, foreseen or unforeseen, then existing or thereafter arising, in law, equity, or otherwise that are based in whole or in part on any act or omission, transaction, event, or other occurrence taking place on or prior to the Effective Date in any way relating to the Debtors, RCM the Chapter 11 Cases, the Plan, or the Disclosure Statement, in any such case, against the Released Parties.
53 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. (c) Qualifying Plan Releases. In order to obtain for the estates of the Debtors the full benefits of the Early Payment Order, including the final allowance of Secured Lender Indemnification Claims at zero for purposes of the Chapter 11 Cases pursuant to paragraph 9(a) and (b) of the Early Payment Order, all Secured Lender Released Claims are hereby fully, finally and forever released on the Effective Date, provided, however, if RCM is converted to a case under chapter 7 prior to the Effective Date the Secured Lender Released Claims, with respect to RCM, shall be effective on the first to occur of the date of such conversion to chapter 7 or the Effective Date. For the avoidance of doubt, the releases provided under this section 10.2(c) of the Plan shall be interpreted such that their scope will satisfy the requirements under the Early Payment Order for the Plan to be a Qualifying Plan thereunder.
(d) Releases by Recipients of BAWAG Proceeds. On the Effective Date, each Holder (i) of a Secured Lender Claim or (ii) each Holder, that has not affirmatively exercised its option to be excluded from any Distribution of BAWAG Proceeds prior to the Voting Deadline, of (A) a Senior Subordinated Note Claim, (B) an RCM Securities Customer Claim, (C) an RCM FX/Unsecured Claim or (D) a Contributing Debtors General Unsecured Claim or (D) an RCM FX/Unsecured Claim shall be deemed to forever release, waive, and discharge all claims, demands, debts, rights, causes of action, or liabilities, whether liquidated or unliquidated, fixed or contingent, matured or unmatured, known or unknown, foreseen or unforeseen, then existing or thereafter arising, in law, equity, or otherwise that are based in whole or in part on any act or omission, transaction, event, or other occurrence taking place on or prior to the Effective Date in any way relating to the Refco Entities or the RGHI Entities (as defined in the BAWAG Settlement), and any transactions involving such parties, including but not limited to claims or actions arising from or related to (a) the allegations set forth in the Complaint and the Counterclaim (each as defined in the BAWAG Settlement), (b) the allegations set forth in the Adversary Proceeding (as defined in the BAWAG Settlement), or (c) any allegations that could have been made by any of the Refco Entities against BAWAG; provided, however, that, pursuant to the Securities Class Action Stipulation, any Holder of a Senior Subordinated Note Claim that is also a member of securities class action class described in the Securities Class Action Stipulation may, assuming approval of the Securities Class Action Stipulation (and the settlement contained therein), elect to receive BAWAG Proceeds without releasing BAWAG of its Securities Class Action claims as set forth in this subparagraph.
(e) Injunction Related To Releases. The Confirmation Order shall permanently enjoin the commencement or prosecution by any entity, whether directly, derivatively, or otherwise, of any claims, obligations, suits, judgments, damages, demands, debts, rights, causes of action, or liabilities released pursuant to this Plan or the Early Payment Order, including, but not limited to, the claims, obligations, suits, judgments, damages, demands, debts, rights, causes of action, or liabilities released in this section of the Plan. For the avoidance of doubt, neither the Litigation Trust nor the Private Actions Trust shall bring any action to recover on any Released Claims. Notwithstanding any provision contained herein or any provision in any documents incorporating or implementing in any manner the Plan to the contrary, nothing in this Plan or the transactions approved hereby is intended to or shall release any non debtor of any liabilities or obligations to the United States of America or its agencies or subdivisions (the "United States"), nor shall it enjoin or bar any claim by the United States against any Non-Debtor Affiliate.
10.3 Exculpation And Limitation Of Liability. To the maximum extent permitted by the Bankruptcy Code and applicable law, none of the (a) Debtors, (b) RCM, (c) the Reorganized Debtors, (d) the Plan Administrator, (e) any professionals retained by the Debtors or the RCM Trustee pursuant to an order of the Bankruptcy Court, (f) the Committees (including any present and former members thereof), (g) the RCM Trustee, (h) the parties to the RCM Settlement Agreement and the Plan Support Agreement (in such capacities), (i) the Post-Petition Management, (j) Post-Confirmation RCM, (k) the Chapter 7 trustee appointed in Refco LLC's chapter 7 case, (l) AlixPartners, (m) the members of the Portfolio Management Advisory Committee and the Plan, Negotiation, and Litigation Advisory Committee, in each case, established under the RCM Settlement Agreement and in each case acting in such capacities nor (n) any of their respective representatives, agents, officers, directors, employees, advisors, or attorneys shall have or incur any liability to, or be subject to any right of action by, any Holder of a Claim or an Interest, or any other party in interest, or any of their respective agents, employees, representatives, financial advisors, attorneys, or agents acting in such capacity, or affiliates, or any of their successors or assigns, for any act or omission in connection with, relating to, or arising out of, the Chapter 11 Cases, the RCM Settlement Agreement or, if on or prior to the Effective Date, RCM’s chapter 11 case is converted to a chapter 7 case to be administered under
54 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. subchapter III of chapter 7, related to, or arising out of, the chapter 7 case, formulating, negotiating, or implementing this Plan, the solicitation of acceptances of this Plan, the pursuit of confirmation of this Plan, the confirmation of this Plan, the consummation of this Plan, or the administration of this Plan or the property to be distributed under this Plan, except for gross negligence or willful misconduct, and in all respects shall be entitled to reasonably rely upon the advice of counsel with respect to their duties and responsibilities under this Plan.
10.4 No Discharge Of Claims; Injunction.
(a) Pursuant to section 1141(d)(3) of the Bankruptcy Code, confirmation will not discharge Claims against the Contributing Debtors, FXA and RCM; provided, however, that no holder of a Claim against or Interest in any Contributing Debtor, FXA and RCM may, on account of such Claim or Interest, seek or receive any payment or other Distribution from, or seek recourse against the Estates of any Contributing Debtor, FXA or RCM, the Reorganized Debtors, Post-Confirmation RCM or their respective successors or their respective properties, except as expressly provided herein. Accordingly, except as otherwise provided in the Plan, the Confirmation Order shall provide, among other things, that from and after the Confirmation Date all Persons who have held, hold, or may hold Claims against or Interests in the Debtors or RCM are (i) permanently enjoined from taking any of the following actions against the Estate(s) of the Contributing Debtors, FXA, RCM, the Plan Administrator, the RCM Trustee, the Reorganized Debtors, Post-Confirmation RCM or any of their property on account of any such Claims or Interests and (ii) preliminarily enjoined from taking any of the following actions against any of the Contributing Debtors, FXA, RCM, the Reorganized Debtors, Post-Confirmation RCM or their property on account of such Claims or Interests: (A) commencing or continuing, in any manner or in any place, any action or other proceeding; (B) enforcing, attaching, collecting, or recovering in any manner any judgment, award, decree, or order; (C) creating, perfecting, or enforcing any lien or encumbrance;; and (D) commencing or continuing, in any manner or in any place, any action that does not comply with or is inconsistent with the provisions of the Plan; provided, however, that (x) nothing contained herein shall preclude such Persons from exercising their rights pursuant to and consistent with the terms of this Plan and (y) the preliminary injunction of actions against the Contributing Debtors, FXA and RCM, the Reorganized Debtors, Post-Confirmation RCM, and their property (if any) shall be dissolved and terminate one (1) day following the dissolution of the Reorganized Debtors and Post-Confirmation RCM and completion of the winding up of their affairs. Notwithstanding anything to the contrary set forth in this Plan, creditors' rights of setoff and recoupment are preserved, and the injunctions referenced in this section of the Plan shall not enjoin the valid exercise of such rights of setoff and recoupment.
(b) By accepting Distributions pursuant to this Plan, each Holder of an Allowed Claim or Allowed Interest shall be deemed to have specifically consented to the injunctions set forth in this Article X.
10.5 Term Of Bankruptcy Injunction Or Stays. All injunctions or stays provided for in the Chapter 11 Cases under sections 105 or 362 of the Bankruptcy Code, or otherwise, and in existence on the Confirmation Date, shall remain in full force and effect until all of the property of the Estates of the Contributing Debtors, FXA, the Reorganized Debtors and Post-Confirmation RCM have been distributed and the Contributing Debtors and the Reorganized Debtors have been merged into the Reorganized Debtors, dissolved or otherwise liquidated, as the case may be, in accordance with the terms of the Plan or any Plan Document, and the Estate of Post-Confirmation RCM shall have been fully administered and the RCM Trustee discharged from his duties; provided, however, that any injunction that by its terms is permanent or otherwise is intended to survive the Effective Date and distributions hereunder (whether by law or pursuant to order of the Court), shall be continued without modification, notwithstanding anything to the contrary contained in this Plan.
10.6 Continuation of Forex Adversary. Notwithstanding any provision herein to the contrary, neither this Plan nor any contract, instrument, release, agreement or document executed or delivered in connection therewith, nor the occurrence of the Effective Date (i) shall release, waive or discharge any of the claims or causes of action asserted in that certain adversary proceeding styled Forex Trading, LLC and The Ad Hoc Refco F/X Customer Committee v. Refco F/X Associates, LLC and Refco Capital Markets, Ltd., Adv. Proc. No. 06-01748 (RDD) (the "Forex Adversary") against FXA and RCM, their successors and assigns, including Reorganized FXA and Post-Confirmation RCM, and/or any of their property, and/or (ii) shall permanently or preliminarily enjoin, prohibit or prevent in any way the continuation and/or prosecution of the Forex Adversary and the claims and causes of action asserted therein against FXA and RCM, their successors and assigns, including Reorganized FXA and Post-Confirmation RCM, and/or any of their property; and all such claims and causes of action, as well as any and all 55 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. defenses and counterclaims of FXA and RCM (including, without limitation, FXA's right to argue that the constructive trust claim asserted against RCM in the Forex Adversary belongs to FXA and not Forex Trading LLC or the Ad Hoc Refco F/X Customer Committee, as defined in the Forex Adversary), are hereby expressly preserved.
ARTICLE XI
RETENTION OF JURISDICTION
11.1 Exclusive Jurisdiction of the Bankruptcy Court
Pursuant to sections 105(c) and 1142 of the Bankruptcy Code and notwithstanding entry of the Confirmation Order and the occurrence of the Effective Date, the Bankruptcy Court shall retain exclusive jurisdiction (unless otherwise indicated) over all matters arising out of, and related to, the Chapter 11 Cases, this Plan and the RCM Settlement Agreement to the fullest extent permitted by law, including, among other things, jurisdiction to:
(a) Allow, disallow, determine, liquidate, classify, estimate, or establish the priority or secured or unsecured status of any Claim or Interest, including the resolution of any request for payment of any Allowed Administrative Claim and the resolution of any objections to the allowance or priority of Claims or Interests;
(b) Grant or deny any applications for allowance of compensation or reimbursement of expenses authorized pursuant to the Bankruptcy Code or this Plan for periods ending on or before the Effective Date;
(c) Resolve any matters related to the assumption, assumption and assignment, or rejection of any executory contract or unexpired lease to which any Debtor or RCM is a party or with respect to which any Debtor or RCM may be liable and to hear, determine, and, if necessary, liquidate any Claims arising therefrom;
(d) Ensure that Distributions to Holders of Allowed Claims are accomplished pursuant to the provisions of this Plan and the RCM Settlement Agreement, as applicable;
(e) Decide or resolve any motions, adversary proceedings, contested or litigated matters, and any other matters and grant or deny any applications involving the Debtors or RCM that may be pending on the Effective Date (which jurisdiction shall be non-exclusive as to any such non-core matters);
(f) Enter such orders as may be necessary or appropriate to implement or consummate the provisions of this Plan, the RCM Settlement Agreement and all contracts, instruments, releases, and other agreements or documents created in connection with this Plan, the RCM Settlement Agreement, the Disclosure Statement or the Confirmation Order;
(g) Resolve any cases, controversies, suits, or disputes that may arise in connection with the consummation, interpretation, or enforcement of this Plan or the RCM Settlement Agreement or any contract, instrument, release, or other agreement or document that is executed or created pursuant to this Plan the RCM Settlement Agreement or any entity's rights arising from or obligations incurred in connection with this Plan the RCM Settlement Agreement;
(h) Modify this Plan before or after the Effective Date pursuant to section 1127 of the Bankruptcy Code or modify the Disclosure Statement, the Confirmation Order, or any other Plan Document, the Disclosure Statement, or the Confirmation Order, or remedy any defect or omission or reconcile any inconsistency in any Bankruptcy Court order, this Plan, the Disclosure Statement, the Confirmation Order, or any contract, instrument, release, or other agreement or document created in connection with this Plan, the Disclosure Statement, or the Confirmation Order, in such manner as may be necessary or appropriate to consummate this Plan;
(i) Hear and determine all applications for compensation and reimbursement of expenses of Professionals under this Plan or under sections 330, 331, 503(b), 1103, and 1129(a)(4) of the Bankruptcy Code; provided, however, that from and after the Confirmation Date the payment of fees and expenses of the
56 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. Reorganized Debtors and the Plan Administrator, including professional fees, shall be made in the ordinary course of business and shall not be subject to the approval of the Bankruptcy Court;
(j) Issue injunctions, enter and implement other orders, or take such other actions as may be necessary or appropriate to restrain interference by any entity with consummation, implementation, or enforcement of this Plan or the Confirmation Order;
(k) Hear and determine causes of action by or on behalf of the Contributing Debtor, FXA, RCM, the Reorganized Debtors, the Litigation Trustee, the Private Actions Trustee or Post-Confirmation RCM;
(l) Hear and determine matters concerning state, local, and federal taxes in accordance with sections 346, 505, and 1146 of the Bankruptcy Code;
(m) Enter and implement such orders as are necessary or appropriate if the Confirmation Order is for any reason or in any respect modified, stayed, reversed, revoked, or vacated, or Distributions pursuant to this Plan are enjoined or stayed;
(n) Determine any other matters that may arise in connection with or relate to this Plan, the RCM Settlement Agreement, the Disclosure Statement, the Confirmation Order or any other Plan Document;
(o) Enforce all orders, judgments, injunctions, releases, exculpations, indemnifications, and rulings entered in connection with the Chapter 11 Cases or any subsequent Chapter 7 Case, as applicable (which jurisdiction shall be non-exclusive except as otherwise provided by Titles 11 and 28 of the United States Code);
(p) Hear and determine all matters related to (i) the property of the Estates of the Reorganized Debtors and Post-Confirmation RCM from and after the Confirmation Date, (ii) the winding up of the Debtors' and RCM's affairs, and (iii) the activities of the Plan Administrator and the RCM Trustee, including (A) challenges to or approvals of the Reorganized Debtors', the Plan Administrator's, the RCM Trustee's or Post-Confirmation RCM's activities, (B) resignation, incapacity, or removal of the Plan Administrator or the RCM Trustee and selection of a successor, (C) reporting by, termination of, and accounting by the Reorganized Debtors, the Plan Administrator, the RCM Trustee and Post-Confirmation RCM, and (D) release of the Plan Administrator or the RCM Trustee from their duties;
(q) Hear and determine disputes with respect to compensation of (i) the Reorganized Debtors' and Post-Confirmation RCM's professional advisors and (ii) the Plan Administrator, the RCM Trustee, the Litigation Trustee, the Private Actions Trustee and their professional advisors;
(r) Hear and determine such other matters as may be provided in the Confirmation Order or as may be authorized under the Bankruptcy Code; and
(s) Enter an order closing the Chapter 11 Cases or chapter 7 cases of RCM, if any, as applicable.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 Effectuating Documents And Further Transactions. Each of the Debtors, RCM, the Plan Administrator on behalf of the Reorganized Debtors and the RCM Trustee on behalf of Post-Confirmation RCM shall be authorized to execute, deliver, file, or record such contracts, instruments, releases, and other agreements or documents and take such actions as may be necessary or appropriate to effectuate, implement, and further evidence the terms and conditions of this Plan and any notes or securities issued pursuant to this Plan.
57 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. 12.2 Corporate Action. Prior to, on, or after the Effective Date (as appropriate), all matters expressly provided for under this Plan that would otherwise require approval of the stockholders, members, directors or managers of one or more of the Debtors, RCM, the Reorganized Debtors or Post-Confirmation RCM shall be deemed to have occurred and shall be in effect prior to, on, or after the Effective Date (as appropriate) pursuant to the applicable law of the states in which the Debtors, RCM, the Reorganized Debtors or Post-Confirmation RCM are incorporated or formed without any requirement of further action by the stockholders, members, directors or managers, as applicable, of the Debtors, RCM, the Reorganized Debtors or Post-Confirmation RCM.
12.3 Bar Dates For Certain Claims.
(a) Administrative Claims. The Confirmation Order shall establish an Administrative Claims Bar Date for filing Administrative Claims against all Debtors and RCM which date shall be thirty (30) days after the Effective Date. Holders of asserted Administrative Claims not paid prior to the Confirmation Date shall submit requests for the payment of administrative expenses on or before such Administrative Claims Bar Date or forever be barred from doing so. The notice of Confirmation to be delivered pursuant to Bankruptcy Rules 3020(c) and 2002(f) shall set forth such date and constitute notice of this Administrative Claims Bar Date. The Reorganized Debtors and the RCM Trustee shall have until the Administrative Claims Objection Deadline to object to such claims.
(b) Professional Fee Claims. All Professionals and other entities requesting compensation or reimbursement of Professional Fee Claims pursuant to sections 327, 328, 330, 331, or 503(b) of the Bankruptcy Code for services rendered prior to the Confirmation Date shall file and serve on the Reorganized Debtors and counsel for the Reorganized Debtors and on the RCM Trustee and his counsel an application for final allowance of compensation and reimbursement of expenses no later than sixty (60) days after the Effective Date, unless otherwise ordered by the Bankruptcy Court. Objections to applications of such Professionals or other entities for compensation or reimbursement of expenses must be filed and served on the Reorganized Debtors, counsel for the Reorganized Debtors, the RCM Trustee and his counsel, and the requesting Professional or other entity no later than thirty (30) days (or such longer period as may be allowed by order of the Bankruptcy Court) after the date on which the applicable request for compensation or reimbursement was served. Upon the Confirmation Date, any requirement that Professionals comply with sections 328, 330, or 331 of the Bankruptcy Code in seeking retention or compensation for services rendered after such date shall terminate. Professional Fee Claims relating to fees and expenses incurred after the Effective Date shall be paid in the ordinary course of business.
(c) Professional Fee Holdback. Within 10 calendar days prior to the Confirmation Hearing, each Professional shall provide to the Plan Proponents (with a copy to the Fee Committee) a notice of Professional Fee Claim containing (i) a disclosure of fees and expenses incurred, unbilled and unpaid in the Chapter 11 Cases and (ii) an estimate of additional fees and expenses expected to be incurred by each such Professional through the Effective Date (in the aggregate, the "Professional Fee Claims"). On the Effective Date, the Reorganized Debtors and Post-Confirmation RCM, as applicable, shall pay 80% of the Professional Fee Claims. In addition, on the Effective Date, the Reorganized Debtors and Post-Confirmation RCM shall fund an escrow account consisting of 110% of (x) the amount of any holdbacks on previously billed and paid amounts and (y) the remaining 20% of the amount of the Professional Fee Claims that were not paid on the Effective Date. Amounts held in such escrow account shall be used to pay amounts not previously paid and subsequently allowed by the Bankruptcy Court following a hearing on the Professionals' final fee applications. When all Professional Fee Claims have been paid in full, amounts remaining in such escrow account, if any, shall be returned to the Reorganized Debtors and Post-Confirmation RCM.
12.4 Payment Of Statutory Fees. All fees payable pursuant to section 1930 of title 28, United States Code, as determined by the Bankruptcy Court at the Confirmation Hearing, shall be paid on the Effective Date. The Debtors, RCM, the Reorganized Debtors and Post-Confirmation RCM shall remain liable for any quarterly fees validly due and owing to the United States Trustee under 28 U.S.C. § 1930 through and including such dates that their respective Chapter 11 Cases are converted to cases under Chapter 7, dismissed, or closed.
12.5 Amendment Or Modification Of The Plan. Subject to section 1127 of the Bankruptcy Code and, to the extent applicable, sections 1122, 1123, and 1125 of the Bankruptcy Code, the Plan Proponents reserve the right to alter, amend, or modify this Plan at any time prior to or after the Confirmation Date but prior to the substantial consummation of this Plan; provided, however, that no such alteration, amendment or modification shall conflict with any Final Order (including, without limitation, the Early Payment Order). A Holder of a Claim that has 58 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. accepted this Plan shall be deemed to have accepted the Plan, as altered, amended or modified, if the proposed alteration, amendment or modification does not materially and adversely change the treatment of the Claim of such Holder.
12.6 Severability Of Plan Provisions. If, prior to the Confirmation Date, any term or provision of this Plan is determined by the Bankruptcy Court to be invalid, void, or unenforceable, the Bankruptcy Court shall have the power to alter and interpret such term or provision to make it valid or enforceable to the maximum extent practicable, consistent with the original purpose of the term or provision held to be invalid, void, or unenforceable, and such term or provision shall then be applicable as altered or interpreted. Notwithstanding any such holding, alteration, or interpretation, the remainder of the terms and provisions of this Plan shall remain in full force and effect and shall in no way be affected, impaired, or invalidated by such holding, alteration, or interpretation. The Confirmation Order shall constitute a judicial determination and shall provide that each term and provision of this Plan, as it may have been altered or interpreted in accordance with the foregoing, is valid and enforceable pursuant to its terms.
12.7 Successors And Assigns. This Plan shall be binding upon and inure to the benefit of the Debtors, RCM, and their respective successors and assigns, including, without limitation, any chapter 7 trustee subsequently appointed. The rights, benefits, and obligations of any entity named or referred to in this Plan shall be binding on, and shall inure to the benefit of, any heir, executor, administrator, successor, or assign of such entity.
12.8 Revocation, Withdrawal, Or Non-Consummation. The Plan Proponents reserve the right to revoke or withdraw the Plan at any time prior to the Confirmation Date and to file other plans of reorganization. If the Plan Proponents revoke or withdraw the Plan, or if Confirmation or consummation of the Plan does not occur, then (i) the Plan shall be null and void in all respects, (ii) except as provided in sections 12.15 and 12.16 of the Plan, any settlement or compromise embodied in the Plan (including the fixing or limiting to an amount any Claim or Class of Claims), assumption or rejection of executory contracts or leases effected by the Plan, and any document or agreement executed pursuant to the Plan shall be deemed null and void, and (iii) nothing contained in the Plan, and no acts taken in preparation for consummation of the Plan, shall (A) constitute or be deemed to constitute a waiver or release of any Claims by or against, or any Interests in, the Plan Proponents or any other Person, (B) prejudice in any manner the rights of the Plan Proponents or any Person in any further proceedings involving the Plan Proponents, or (C) constitute an admission of any sort by the Plan Proponents or any other Person.
12.9 Notice. All notices, requests, and demands to or upon the Reorganized Debtors and Post-Confirmation RCM to be effective shall be in writing and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when actually delivered or, in the case of notice by facsimile transmission, when received and telephonically confirmed, addressed as follows:
59 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP Four Times Square New York, New York 10036-6522 Telephone: (212) 735-3000 Facsimile: (212) 735-2000 Att'n: J. Gregory Milmoe, Esq. Sally McDonald Henry, Esq. J. Gregory St. Clair, Esq.
Attorneys for Debtors and Debtors-in-Possession
MILBANK, TWEED, HADLEY & McCOY LLP 1 Chase Manhattan Plaza New York, NY 10005 Telephone: (212) 530-5000 Facsimile: (212) 530-5219 Att'n: Luc A. Despins Susheel Kirpalani Dennis C. O'Donnell
Counsel for the Official Committee of Unsecured Creditors of Refco Inc., et al.
KASOWITZ, BENSON, TORRES & FRIEDMAN LLP 1633 Broadway New York, NY 10019 Telephone: (212) 506-1700 Facsimile: Att'n: David S. Rosner Andrew K. Glenn Jeffrey R. Gleit
Counsel for Additional Committee of Unsecured Creditors of Refco Inc., et al.
BINGHAM MCCUTCHEN LLP 399 Park Avenue New York, NY 10022 Telephone: (212) 705-7000 Facsimile: (212) 752-5378 Att'n: Tina L. Brozman Timothy B. DeSieno Mark W. Deveno
Counsel for the Chapter 11 Trustee for Refco Capital Markets, Ltd.
12.10 Governing Law. Except to the extent that the Bankruptcy Code, the Bankruptcy Rules or other federal law is applicable, or to the extent that an exhibit or schedule to this Plan provides otherwise, the rights and obligations arising under this Plan shall be governed by, and construed and enforced in accordance with, the laws of Delaware without giving effect to the principles of conflicts of law of such jurisdiction.
60 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. 12.11 Tax Reporting And Compliance. The Reorganized Debtors are hereby authorized, on behalf of each of the Debtors, to request an expedited determination under section 505(b) of the Bankruptcy Code of the tax liability of the Debtors for all taxable periods ending after the Petition Date through, and including, the Effective Date.
12.12 Filing Of Additional Documents. On or before substantial consummation of this Plan, the Plan Proponents shall file such agreements and other documents as may be necessary or appropriate to effectuate and further evidence the terms and conditions of this Plan.
12.13 Limit on Precedential Effect. The structure of this Plan and the classification of creditors or groups of creditors within one class contained herein shall have no evidentiary or precedential effect if the such Plan is not confirmed and consummated.
12.14 Claims Preserved Pending Consummation. Except as provided in the Early Payment Order and the RCM Settlement Agreement, in the event this Plan is not consummated, all parties-in-interest expressly reserve their claims and rights, as well as all defenses to such claims and rights and causes of action against such other parties, including, without limitation, (i) the subrogation claim of any Debtor that is a Guarantor under the Credit Agreement against any other Debtor that is a Loan Party under the Credit Agreement, arising out of the payment to the Secured Lenders, (ii) all claims of RCM and Holders of RCM Customer Claims and RCM FX/Unsecured Claims against the Contributing Debtors, Refco LLC and other third parties, (iii) all claims of the Contributing Debtors and Refco LLC, and their respective creditors, against RCM and other third parties and (iv) avoidance actions and other causes of action against creditors of RCM and the Contributing Debtors.
12.15 Continuation of RCM Settlement Agreement. Neither any term or provision of this Plan, nor any failure of such Plan to proceed or be confirmed or consummated nor any conversion of the RCM Chapter 11 Case to a case under Chapter 7 of the Bankruptcy Code, will in any way affect the terms or effectiveness of the RCM Settlement Agreement, which will at all times operate and be binding in accordance with its terms.
12.16 Continuation of Early Payment Order. Neither any term or provision of this Plan or the Confirmation Order, nor any failure of such Plan to proceed or be confirmed or consummated nor any conversion of the RCM Chapter 11 Case to a case under Chapter 7 of the Bankruptcy Code, will in any way affect the terms or effectiveness of the Early Payment Order, which will at all times operate and be binding in accordance with its terms.
Dated: New York, New York October 6,13, 2006
REFCO INC. (for itself and on behalf of the Affiliate Debtors other than Refco Finance Inc. and Refco Global Finance Ltd.)
By: Name: Title:
61 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. REFCO FINANCE INC.
By: Name: Title:
REFCO GLOBAL FINANCE LTD.
By: Name: Title:
REFCO CAPITAL MARKETS, LTD.
By: Name: Title:
RCM Trustee
By: Name: Title:
Official Committee of Unsecured Creditors of Refco Inc., et al.
By: Name: Title:
62 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. Additional Committee of Unsecured Creditors of Refco Inc., et al.
By: Name: Title:
63 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. Exhibit A
64 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. Bersec International LLC Kroeck & Associates, LLC Lind-Waldock Securities LLC Marshall Metals, LLC New Refco Group Ltd., LLC Refco Administration, LLC Refco Capital Holdings, LLC Refco Capital Management, LLC Refco Capital LLC Refco Capital Trading LLC Refco F/X Associates, LLC Refco Finance Inc. Refco Financial, LLC Refco Fixed Assets Management, LLC Refco Global Capital Management LLC Refco Global Finance Limited Refco Global Futures, LLC Refco Global Holdings, LLC Refco Group Ltd., LLC Refco Information Services, LLC Refco Managed Futures, LLC Refco Mortgage Securities, LLC Refco Regulated Companies, LLC Summit Management, LLC Westminster-Refco Management LLC
65 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. Exhibit B
66 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. Exhibit C
67 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. Exhibit D
68 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. Exhibit E
69 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. Exhibit F
70 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. Exhibit G
71 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. Exhibit H
72 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. Exhibit I
73 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. Exhibit J
74 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. Exhibit K
75 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. Schedule 1.177
76 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. Schedule 2.2(c)
77 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. This Plan Schedule 2.2(c) sets forth the sub-Classes of Claims against Contributing Debtors in Classes 4, 5(a) and 5(b). Class 4 sub-Classes consist of Senior Subordinated Note Claims against each Contributing Debtor. Class 5(a) sub-Classes consist of General Unsecured Claims against each Contributing Debtor. Class 5(b) sub-Classes consist of Related Claims against each Contributing Debtor.
SUB-CLASS NAME OF DEBTOR .01 Bersec International LLC
.02 Kroeck & Associates, LLC
.03 Lind-Waldock Securities LLC
.04 Marshall Metals, LLC
.05 New Refco Group Ltd., LLC
.06 Refco Administration, LLC
.07 Refco Capital Holdings, LLC
.08 Refco Capital Management, LLC
.09 Refco Capital LLC
.10 Refco Capital Trading LLC
.11 Refco Finance Inc.
.12 Refco Financial, LLC
.13 Refco Fixed Assets Management, LLC
.14 Refco Global Capital Management LLC
.15 Refco Global Finance Limited
.16 Refco Global Futures, LLC
.17 Refco Global Holdings, LLC
.18 Refco Group Ltd., LLC
.19 Refco Inc.
.20 Refco Information Services, LLC
.21 Refco Managed Futures, LLC
.22 Refco Mortgage Securities, LLC
.23 Refco Regulated Companies, LLC .24 Summit Management, LLC
.25 Westminster-Refco Management LLC
78 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. 79 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. Document comparison done by DeltaView on Friday, October 13, 2006 12:58:27 PM Input: Document 1 pcdocs://chisr02a/587337/35 Document 2 pcdocs://chisr02a/587337/36 Rendering set Option 3a strikethrough double score no moves
Legend: Insertion Deletion
Statistics: Count Insertions 549 Deletions 524 Moved from 0 Moved to 0 Style change 0 Format changed 3 Total changes 1076
80 DeltaView comparison of pcdocs://chisr02a/587337/35 and pcdocs://chisr02a/587337/36. Performed on 10/13/2006. EXHIBIT B
TO DISCLOSURE STATEMENT WITH RESPECT TO AMENDED JOINT CHAPTER 11 PLAN OF REFCO INC. AND CERTAIN OF ITS DIRECT AND INDIRECT SUBSIDIARIES ______
LIQUIDATION ANALYSIS
B-1 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. EXHIBIT C
TO DISCLOSURE STATEMENT WITH RESPECT TO AMENDED JOINT CHAPTER 11 PLAN OF REFCO INC. AND CERTAIN OF ITS DIRECT AND INDIRECT SUBSIDIARIES ______
RETAINED CAUSES OF ACTION
B-2 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. Retained Causes of Action
The Debtors, or the Committees on behalf of the Debtors, are engaged in investigations that, broadly speaking, are focused on fraudulent transfers, preferential transfers, the work done by professionals for Refco, and participants in the fraud at the Refco Entities. As an example of potentially recoverable transfers, the Debtors or the Committees are investigating significant payments made to Refco insiders and those with ties to Refco insiders. This includes payments made in the course of Refco's leveraged recapitalization and in the course of its initial public offering. The Debtors or the Committees also are investigating transfers made to and through related parties.
The Debtors or the Committees also are investigating potential claims against entities that were engaged to perform professional services for Refco but may have failed to discharge contractual or other duties in the performance of those services. This includes an investigation of work done by outside professionals, including auditors, accountants, tax professionals and lawyers. In addition, the Debtors or the Committees are investigating potential claims against certain persons and entities that knew of, or should have known of, the fraud. In this context, the Debtors or the Committees are investigating the role of executives and insiders at Refco as well as others whose actions and transfers helped conceal the nature of the related-party receivable at Refco.
The investigation –including efforts to obtain and review discovery from relevant parties –is ongoing. This list of potential claims and defendants is not meant to exclude other claims the Debtors or the Committees might pursue in the future. A more detailed list of the foregoing and other potential claims belonging to the Debtors will be filed as an Exhibit to the Plan on or before the Exhibit Filing Date.
B-3 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006. Document comparison done by DeltaView on Friday, October 13, 2006 2:31:19 PM Input: Document 1 pcdocs://nycsr06a/587380/36 Document 2 pcdocs://nycsr06a/587380/41 Rendering set Option 3a strikethrough double score no moves
Legend: Insertion Deletion
Statistics: Count Insertions 471 Deletions 349 Moved from 0 Moved to 0 Style change 0 Format changed 1 Total changes 821
4 DeltaView comparison of pcdocs://nycsr06a/587380/36 and pcdocs://nycsr06a/587380/41. Performed on 10/13/2006.