mg Doc 161 Filed 10/30/15 Entered 10/30/15 13:29:44 Main Document Pg 1 of 8

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1 Pg 1 of 8 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK ) In re: ) Chapter 11 ) CORPORATE RESOURCES SERVICES, INC. ) Case No (MG) et al., 1 ) Debtors. ) RELATED DOC. NO. 153 ) STIPULATION AND ORDER TO LIFT THE AUTOMATIC STAY TO PERMIT PAYMENTS OF DEFENSE COSTS UNDER CERTAIN INSURANCE POLICY This stipulation and order (the Stipulation and Order ) is entered into by and between U.S. Specialty Insurance Company (the Insurer ), 2 James S. Feltman as the trustee for the Debtors in the above-captioned Chapter 11 cases, (the Chapter 11 Trustee ), John P Messina, Sr., Michael J. Golde, Jay H. Schecter, Scott Schecter, Joseph Cassera, Robert Cassera, James Altucher, James Foley, Karen Amato, Thomas J. Clarke, Jr., Larry Melby, Sylvan Holzer and Robert Riiska (the Individual Insured Defendants ). Each Individual Insured Defendant and each of the Debtors will collectively be referred to as the Insureds. The Insureds, the Insurer and the Chapter 11 Trustee will be collectively referred to as the Parties. This Stipulation and Order is based on the following facts and circumstances: WHEREAS, on October 9, 2015 the Insurer filed a motion for Relief from the Automatic Stay, to the Extent Applicable (the Motion, ECF No. 153), for entry of an order granting relief from the automatic stay, to the extent applicable, to permit it to advance and/or pay defense costs 1 2 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor s federal tax identification number, are (1) Corporate Resource Services, Inc. (1965); (2) Accountabilities, Inc. (5619); (3) Corporate Resource Development (1966); (4) Diamond Staffing Services, Inc. (7952); (5) Insurance Overload Services, Inc. (9798); (6) Integrated Consulting Services, Inc. (2385); (7) The CRS Group, Inc. (1458); and (8) TS Staffing Services, Inc. (8647). The Debtors principal offices are located at 160 Broadway, 13th Floor, New York, New York Capitalized terms used but not otherwise defined herein shall have the meaning ascribed to such terms in the Motion.

2 Pg 2 of 8 under that certain Directors, Officers and Corporate Liability Insurance Policy (For New York Insureds), Policy No. 14-MGU-14-A31725 (the Policy ); WHEREAS, to avoid unnecessary expense and delay and in order otherwise preserve the Policy, the Parties have agreed, subject to the reservation of rights contained herein, to consent to relief from the Automatic Stay, to the extent applicable, for the limited purpose of authorizing the Insurer to advance reasonable Defense Costs incurred by the Insureds under the Policy in connection with the Securities Class Action, the SEC Investigation, and the Goldstein Lawsuit. NOW, THEREFORE, subject to Bankruptcy Court approval, in consideration of the mutual covenants, promises, and obligations set forth herein, the parties to the Stipulation agree as follows: 1. To the extent applicable, the automatic stay imposed by section 362(a) of the Bankruptcy Code is hereby modified to the extent necessary to allow the Insurer to advance and/or make payments from the Policy for Defense Costs incurred by the Insureds and to pay counsel for each of the Insureds for the Defense Costs incurred in connection with the Securities Class Action, the SEC Investigation, and the Goldstein Lawsuit, which are estimated to be in excess of $4 million. 2. The aggregate payments permitted under the Policy shall be subject to the $5 million aggregate limit of liability under the Policy. 3. To the extent the Priority of Payments Provision in Endorsement No. 39 to the Policy (or any other provision of the Policy addressing the priority of payments under the Policy) applies, for the purpose of resolving the current dispute, each of the Insureds and the Chapter 11 Trustee expressly waives the right to object to the advancement and/or payment by the Insurer of Defense Costs (up to the Policy s $5 million aggregate limit of liability) based on such provision of the Policy. 2

3 Pg 3 of 8 4. Except as otherwise specified in this Stipulation and Order, in entering into this Stipulation and Order, each of the Parties hereto expressly reserves all rights it or he may have to make any contention whatsoever concerning the Policy, its coverage or scope, the Insurer s duty, if any, to make interim advancements of Defense Costs, and all other matters connected with the Policy and the claims submitted thereunder. Nothing herein shall prejudice the current or future position of the Insurer, Chapter 11 Trustee, and/or any of the Insureds, and the Parties reserve all rights, with respect to (i) future motions to lift or modify the automatic stay in these proceedings, or (ii) the application of any portion of the Policy, including but not limited to any provision of the Policy addressing the priority of payments under the Policy (except, for the avoidance of doubt, the Parties have waived such arguments with regards to the advancement and/or payment of Defense Costs made by the Insurer pursuant to this Stipulation and Order to the extent specifically addressed in paragraph 3 above). 5. Each Insured and the Chapter 11 Trustee hereby agrees that it or he does not object to the Insurer s advancement of Defense Costs under the Policy to any other Insured, including without limitation the Debtors, to the extent that such advancements are made subject to the terms of this Stipulation and Order. The Insureds and the Chapter 11 Trustee understand and agree that advancements by the Insurer to counsel for each Insured and to counsel for other Insured Persons under the Policy will reduce and may exhaust the Policy s limit of liability, and no advancements and/or payments made in accordance with this Stipulation and Order shall be deemed improper or a breach of the Policy. 6. Nothing herein shall constitute a finding by the Court or an admission by the Insurer, Chapter 11 Trustee, and/or any of the Insureds that the proceeds of the Policy are or are not property of the Debtors estates, and the Court makes no finding as to the applicability of the automatic stay imposed by section 362(a) of the Bankruptcy Code to the Policy s proceeds. 3

4 Pg 4 of 8 7. The Insureds acknowledge and agree that advancements of Defense Costs under this Stipulation and Order are made pursuant to the Policy and properly are credited by the Insurer against the $5 million aggregate Policy limit and shall be applied toward exhaustion of such Policy limit unless and until repayment to the Insurer actually is made of any amount previously advanced. 8. Except as set forth herein, nothing in this Order shall constitute (i) a waiver, modification or limitation of the Insurer s reservation of all of its rights, remedies and defenses under the Policy, and/or (ii) a finding that such sums are due and owing, or in what amount, under the Policy. 9. Upon the Insurer s payment of the $5 million limit of liability under the Policy, the Insurer, each of the Insureds and the Chapter 11 Trustee, on behalf of themselves and their respective parents, affiliates, divisions and direct and indirect subsidiaries, and its/their respective present or former directors, officers, partners, members, associates, employees, shareholders, owners, attorneys, accountants, auditors, advisors, lenders, insurers, reinsurers, representatives, trustees, heirs, executors, estates, administrators, creditors, liquidators, principals, agents, successors, assigns, predecessors and successors in interest and persons acting by, through, under or in concert with all of the foregoing (the Parties respective Related Persons and Entities ), hereby release and forever discharge each other and each other s Related Persons and Entities, separately and jointly, of and from any and all claims (including without limitation any claims for contract or tort damages, punitive damages, fraud, misrepresentation, violation of statute, breach of the duty of good faith, extra-contractual damages, and any other damages or loss or other form of relief), debts, liens, contracts, agreements, promises, demands, payments, rights, obligations, loss, judgments, awards, attorneys fees, costs, expenses, interest, damages, liabilities, benefits and causes of action, at law or in equity, of whatever kind or 4

5 Pg 5 of 8 character, known or unknown, suspected, fixed, or contingent, that they have, have had, or may have in the future against each other or each other s Related Persons and Entities in connection with (i) the Policy, (ii) the Defense Costs, and (iii) the manner in which the claims for Defense Costs in the Securities Class Action, the SEC Investigation, and the Goldstein Lawsuit were handled and resolved under the Policy by the Insurer. 10. This Stipulation may be executed in any number of counterparts, and each such counterpart is to be deemed an original for all purposes, but all counterparts shall collectively constitute one agreement. Further, electronic signatures or transmissions of an originally signed document by facsimile or Adobe.pdf shall be as fully binding on the parties as an original document. 11. Each of the parties to the Stipulation represents and warrants that it has full and requisite power and authority to execute, deliver and perform its obligations under this Stipulation. 12. This Court shall retain jurisdiction with respect to implementation and enforcement of the terms of this Stipulation, and all parties submit to the jurisdiction of this Court for purposes of implementing and enforcing this Stipulation. 13. This Stipulation and Order is immediately valid and fully effected upon its entry and the parties stipulate to the waiver of the 14-day stay pursuant to Fed. R. Bankr. Proc. 4001(a). [The remainder of this page has been intentionally left blank] 5

6 Pg 6 of 8 TROUTMAN SANDERS LLP October 29, 2015 TOGUT, SEGAL & SEGAL LLP s/brett D. Goodman Brett D. Goodman 875 Third Avenue New York, NY Telephone: (212) Facsimile: (212) brett.goodman@ptroutmansanders.com s/steven S. Flores Steven S. Flores One Penn Plaza, Suite 3335 New York, New York Telephone: (212) Facsimile: (212) sflores@teamtogut.com Counsel for U.S. Specialty Insurance Company Proposed Counsel for JAMES S. FELTMAN Not Individually But Solely in His Capacity as Chapter 11 Trustee October 29, 2015 PHILLIPSON & URETSKY LLP Dated: Washington, DC October 29, 2015 HUGHES HUBBARD & REED LLP s/jonathan Uretsky Jonathan Uretsky 111 Broadway, 8th Floor New York, NY Telephone: (212) Facsimile: (212) uretsky@phillipson-uretsky.com Counsel for Individual Insured Defendant James Foley s/dustin P. Smith Dustin P. Smith Benjamin Britz Nicolas Swerdloff Kevin T. Abikoff 1775 I Street, N.W., Suite 600 Washington, D.C Telephone: (202) Fax: (202) dustin.smith@hugheshubbard.com Counsel for Individual Insured Defendants Karen Amato, Larry Melby, Thomas J. Clarke, Jr., Sylvan Holzer, and James Altucher 6

7 Pg 7 of 8 WINSTON & STRAWN LLP s/james P. Smith III James P. Smith III 200 Park Avenue New York, NY Telephone: (212) Facsimile: (212) jpsmith@winston.com Counsel for Individual Insured Defendant Michael J. Golde BRAFMAN & ASSOCIATES, P.C. s/marc A. Agnifilo Marc A. Agnifilo Andrea Zellan 767 Third Avenue, 26th Floor New York, NY Telephone: (212) Facsimile: (212) marc@braflaw.com AZellan@braflaw.com Counsel for Individual Insured Defendants Robert Cassera and Joseph Cassera October 29, 2015 BACHNER & ASSOCIATES, P.C. BRYAN CAVE LLP s/scott Splittgerber Scott Splittgerber 39 Broadway, Suite 1610 New York, NY Tel: (212) Fax: (212) ss@bhlawfirm.com s/eric Rieder Eric Rieder Daniel P. Waxman 1290 Avenue of the Americas New York, NY Tel.: (212) Fax: (212) erieder@bryancave.com Counsel for Individual Insured Defendant John P. Messina. Sr. Counsel for Individual Insured Defendant Scott Schecter 7

8 Pg 8 of 8 REED SMITH LLP s/richard A. Robinson Richard A. Robinson Ann V. Kramer 599 Lexington Avenue New York, NY Telephone: (212) Facsimile: (212) rrobinson@reedsmith.com akramer@reedsmith.com Counsel for Individual Insured Defendant Robert Riiska Dated: White Plains, NY BENOWICH LAW, LLP s/leonard Benowich Leonard Benowich 1025 Westchester Avenue White Plains, NY Telephone: (914) Facsimile: (914) leonard@benowichlaw.com Counsel for Individual Insured Defendant Jay Schecter CARTER LEDYARD & MILBURN LLP s/justin A. Greenblum Justin A. Greenblum Two Wall Street New York, NY Telephone: (212) Facsimile: (212) greenblum@clm.com Proposed Special Securities Counsel for Debtors Date: New York, New York October, 2015 PROPOSED THE HONORABLE MARTIN GLENN UNITED STATES BANKRUPTCY JUDGE 8