<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM 10-Q
FOR THE FISCAL QUARTER ENDED SEPTEMBER 30, 1999
OF
GOSS GRAPHIC SYSTEMS, INC.
(Debtor-in-Possession as of July 30, 1999)
a Delaware Corporation
IRS Employer Identification No. 25-1200273
SEC File Number 333-08421
700 OAKMONT LANE
WESTMONT, ILLINOIS 60559-5546
(630) 850-5600
Goss (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12
months and (2) has been subject to such filing requirements for the
past 90 days.
Goss had 100 shares of Common Stock outstanding at November 15, 1999,
all of which were held by an affiliate.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
GOSS GRAPHIC SYSTEMS, INC.
INDEX
<TABLE>
<CAPTION>
Page
No.
----
<S> <C>
PART I - FINANCIAL INFORMATION:
Item 1 - Financial Statements
Consolidated Balance Sheets - September 30, 1999 and
December 31, 1998 2
Consolidated Statements of Operations - For the three month
and nine month periods ended September 30, 1999 and 1998 3
Consolidated Statements of Cash Flows - Nine months ended
September 30, 1999 and 1998 4
Notes to Consolidated Financial Statements 5
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 17
PART II - OTHER INFORMATION:
Item 3 - Defaults Upon Senior Securities 27
Item 4 - Submission of Matters to a Vote of Security Holders 27
Item 6 - Exhibits and Reports on Form 8-K 27
SIGNATURES 29
</TABLE>
1
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GOSS GRAPHIC SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 16.4 $ 57.1
Accounts receivable, net 137.0 125.3
Inventories, net 216.5 262.9
Other current assets 21.1 16.6
-------- --------
Total current assets 391.0 461.9
Property and equipment, net 177.7 186.2
Goodwill, net 301.2 308.0
Other assets 24.3 27.7
-------- --------
Total assets $ 894.2 $ 983.8
-------- --------
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 102.4 $ 170.9
Revolving credit facilities 50.8 178.9
Current portion of long-term debt 5.0 5.2
Advance payments from customers 134.9 161.8
Other current liabilities 164.0 194.5
-------- --------
Total current liabilities 457.1 711.3
Liabilities subject to compromise 460.7 0.0
Long-term debt, less current portion 49.0 275.5
Other liabilities 50.1 59.5
-------- --------
Total liabilities 1,016.9 1,046.3
Minority interest 8.1 8.8
Common stock, 100 shares authorized and
outstanding, $0.01 par value 0.0 0.0
Additional paid in capital 197.9 162.2
Retained earnings (322.3) (228.9)
Minimum pension obligation (5.3) (5.3)
Cumulative translation adjustment (1.1) 0.7
-------- --------
Total shareholders' equity (130.8) (71.3)
-------- --------
Total liabilities and shareholders' equity $ 894.2 $ 983.8
-------- --------
-------- --------
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
2
<PAGE>
GOSS GRAPHIC SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
---------------------- --------------------------
1999 1998 1999 1998
------ ------ ------- ------
<S> <C> <C> <C> <C>
Net sales $112.2 $311.9 $ 422.1 $ 658.1
Cost of sales 103.8 312.9 397.3 614.2
------ ------ ------- -------
Gross profit (loss) 8.4 (1.0) 24.8 43.9
Operating expenses 23.7 40.5 66.0 84.6
Reorganization items 11.3 0.0 12.6 0.0
Goodwill amortization 2.1 2.5 6.2 6.9
------ ------ ------- -------
Operating loss (28.7) (44.0) (60.0) (47.6)
Other (expense) income (0.2) 1.3 (1.9) 0.2
Write-off of investment in affiliate 0.0 (6.8) 0.0 (6.8)
Interest expense (10.5) (14.2) (34.3) (35.5)
------ ------ ------- -------
Loss before income taxes (39.4) (63.7) (96.2) (89.7)
Provision (benefit) for income taxes (1.5) 4.5 (2.7) 14.3
------ ------ ------- -------
Net loss $(37.9) $(68.2) $ (93.5) $(104.0)
------ ------ ------- -------
------ ------ ------- -------
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
3
<PAGE>
GOSS GRAPHIC SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
--------------------------
1999 1998
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (93.5) $(104.0)
Depreciation 17.8 12.4
Amortization of goodwill 6.2 6.9
Write-off of investment in affiliate 0.0 6.8
Changes in assets and liabilities:
Accounts receivable (3.8) (56.7)
Inventory 46.5 (25.5)
Accounts payable (9.9) 91.7
Customer advances (23.2) 6.1
Other current liabilities (22.6) 58.6
Other assets (5.3) (6.9)
Other liabilities (8.8) (3.4)
------- -------
Net cash used for operating activities (96.6) (14.0)
------- -------
INVESTING ACTIVITIES:
Capital expenditures (6.3) (22.8)
Investment in affiliate 0.0 (2.4)
------- -------
Net cash used for investing activities (6.3) (25.2)
------- -------
FINANCING ACTIVITIES:
Net borrowings under revolving credit facilities 11.5 55.2
Net borrowings under DIP credit facility 29.8 0.0
Other borrowings 0.0 4.3
Repayment of term loan 0.0 (12.8)
Capital contribution 24.0 0.0
Repayment of mortgage notes and other obligations (3.1) (3.4)
-------- --------
Net cash provided by financing activities 62.2 43.3
Net increase (decrease) in cash (40.7) 4.1
Cash at the beginning of the period 57.1 26.0
-------- --------
Cash at the end of the period $ 16.4 $ 30.1
-------- --------
-------- --------
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
4
<PAGE>
GOSS GRAPHIC SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
In the opinion of Goss Graphic Systems, Inc. ("Goss" or the "Company"), the
unaudited financial statements contain all adjustments, solely of a recurring
nature, necessary to present fairly the financial position, results of
operations, and cash flows for the periods presented. These statements should
be read in conjunction with Goss's Form 10-K for the year ended September 30,
1998. The results of operations for the nine months ended September 30, 1999
are not necessarily indicative of the results that may be expected for the
year ending December 31, 1999.
The Company's financial statements have been prepared on a going concern
basis, which contemplates continuity of operations, realization of assets and
liquidation of liabilities and commitments in the normal course of business.
The filing of the Chapter 11 case (see Note 11 to Consolidated Financial
Statements) and the Company's financial condition necessitating the Chapter
11 case raise substantial doubt with respect to the Company's ability to
continue as a going concern. The appropriateness of using the going concern
basis is dependent upon, among other things, confirmation of a plan of
reorganization, future profitable operations and the ability to generate cash
from operations and financing sources sufficient to meet obligations. As a
result of the filing of the Chapter 11 case and related circumstances,
realization of assets and liquidation of liabilities is subject to
significant uncertainty. While under the protection of Chapter 11, the
Company may sell or otherwise dispose of assets, and liquidate or settle
liabilities, for amounts other than those reflected in the financial
statements. Further, a plan or plans of reorganization could materially
change the amounts reported in the financial statements. The financial
statements do not include any adjustments relating to recoverability of the
value of recorded asset amounts or the amounts and classification of
liabilities that might be necessary as a consequence of a plan of
reorganization.
The Company's financial statements as of September 30, 1999 have been
presented in conformity with the American Institute of Certified Public
Accountant's Statement of Position 90-7, "Financial Reporting By Entities In
Reorganization Under the Bankruptcy Code", issued November 19, 1990 ("SOP
90-7"). The statement requires a segregation of liabilities subject to
compromise by the Bankruptcy Court as of the bankruptcy filing date and
identification of all transactions and events that are directly associated
with the reorganization of the Company. Prior years' comparative balances have
not been reclassified to conform to current year balances stated under SOP
90-7.
The Company is currently assessing the effect of the financial restructuring
and Chapter 11 filing on the recoverability of its long-lived assets,
including goodwill, for purposes of determining whether or not an impairment
in value has occurred according to Statement of Financial Accounting
Standards No. 121. It is possible that this assessment will result in a
material charge against earnings in the quarter ended December 31, 1999.
5
<PAGE>
GOSS GRAPHIC SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
1. BASIS OF PRESENTATION (CONTINUED)
In June 1998, the Board of Directors approved a change in Goss's fiscal
year-end from September 30 to December 31, effective for the calendar year
beginning January 1, 1999. This report is the third report of the Company
under its new fiscal year.
Certain reclassifications have been made to the 1998 financial statements to
conform to the classifications used in 1999.
2. INVENTORIES
Net inventories are summarized as follows (in millions):
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- ------------
<S> <S> <S>
Materials $ 95.0 $111.8
Work in process 83.4 94.6
Finished goods 13.1 27.7
Parts 25.0 28.8
------ ------
Total inventories, net $216.5 $262.9
------ ------
------ ------
</TABLE>
3. WORKFORCE REDUCTION CHARGE
During the quarter ended December 31, 1998, Goss initiated a five percent
reduction in its worldwide workforce. This reduction, which affected both
salaried and hourly jobs, resulted in a charge for severance costs of $7.1
million. As of September 30, 1999, approximately $4.0 million in severance
costs had been paid. The timing of the payment of the remaining severance
costs may be affected by Goss's recent financial restructuring activities,
including the filing for bankruptcy under Chapter 11 of the U. S. Bankruptcy
Code (See Note 11 to Consolidated Financial Statements and Part 2,
Management's Discussion and Analysis of Financial Condition and Results of
Operations).
6
<PAGE>
GOSS GRAPHIC SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
4. DEBT
The debt obligations of Goss are as follows (in millions):
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- ------------
<S> <C> <C>
Revolving credit facilities $190.2 $178.9
DIP credit facility 29.8 0.0
Mortgage loans 51.4 52.3
Senior subordinated notes 225.0 225.0
Other debt obligations 2.6 3.4
------ ------
Total debt 499.0 459.6
Less current portion 55.8 184.1
Less liabilities subject to compromise 394.2 0.0
------ ------
Long-term debt $ 49.0 $275.5
------ ------
------ ------
</TABLE>
Goss's $200 million revolving credit facility contains covenants which must
be satisfied at the end of each fiscal quarter and generally cover Goss's
performance during the preceding four fiscal quarters. On August 31, 1998,
Goss entered into the First Amendment to the credit facility which contained
revised covenants for the quarters ended September 30, 1998, and thereafter.
These covenants were predicated upon Goss's business plan at that time, and
subsequently it became apparent that Goss would not be able to fulfill those
covenants. As a result, Goss and its lenders amended these covenants in the
Second Amendment to the credit facility dated January 12, 1999. Goss was not
in compliance with these covenants at June 30, 1999 or at September 30, 1999,
which constitutes an event of default.
On July 30, 1999 the Bankruptcy Court approved a debtor-in-possession credit
facility (the "DIP Facility") for Goss with certain of its pre-petition bank
lenders and the principal shareholder of its parent company, Stonington
Partners. The DIP Facility provides for up to $50 million in financing. The
DIP Facility also contains covenants that must be satisfied at the end of
each month beginning in August 1999. Goss was in compliance with these
covenants in August and September 1999.
See Note 11 to Consolidated Financial Statements and Item 2, Management's
Discussion and Analysis of Financial Condition and Results of Operations for
additional detail.
7
<PAGE>
GOSS GRAPHIC SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
5. CONTINGENCIES
LEGAL CONTINGENCIES
In the normal course of its business, the Company is subject to various
claims and lawsuits. Typically, these matters consist of product liability
claims brought by the individuals who operate the equipment that the Company
sold, disputes with customers over the performance and completion of
installation of equipment, and workers' compensation claims by the Company's
own employees.
It is not presently possible to determine the outcome of the claims and
lawsuits against the Company. However, the Company maintains as an accrued
liability a reserve that is its present estimate of the total cost to resolve
all of these matters. Management does not believe that the ultimate
disposition of any of these matters will have a material adverse effect on
the Company's financial position or liquidity, although it is possible that
the resolution of these matters could be material to the results of
operations in a given period.
ENVIRONMENTAL CONTINGENCIES
The Company has received either notices of potential liability or third-party
claims under the Federal Comprehensive Environmental Response, Compensation,
and Liability Act at four off-site disposal facilities or so-called
"Superfund Sites". The Company's share of the responsibility for these
Superfund Sites generally is minor, and, although current law imposes joint
and several liability on any party deemed to be responsible at a Superfund
Site, management believes that the ultimate resolution of these matters will
not be material to the Company.
The Company's Reading, Pennsylvania, facility has been operating a
groundwater remediation system under a 1981 Consent Order with the
Commonwealth of Pennsylvania as a result of its and its predecessor's
historical waste disposal practices. The Company has completed remediation at
the site pursuant to a remediation proposal approved by the Commonwealth and
has submitted a monitoring proposal to the Commonwealth for approval.
Rockwell has agreed to indemnify the Company for expenses attendant to
environmental matters existing as of October 14, 1996 to the extent of
one-half of those expenses in excess of $1.0 million. The Company maintains
as an accrued liability a reserve that is its present estimate of the total
cost to resolve all of these matters.
8
<PAGE>
GOSS GRAPHIC SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
6. SEGMENT REPORTING
Information on Goss's reportable operating segments is detailed below. The
column labeled "Other" consists of corporate expenses that are not allocable
to the geographic operating segments and elimination of intersegment activity.
<TABLE>
<CAPTION>
AMERICAS EUROPE ASIA OTHER TOTAL
-------- ------ ---- ----- -----
<S> <C> <C> <C> <C> <C>
THREE MONTHS ENDED SEPTEMBER 30, 1999
Sales to external customers $ 43.0 $ 34.6 $ 34.6 $ 0.0 $112.2
Intersegment sales 2.3 1.1 0.0 (3.4) 0.0
Operating profit/(loss) (13.1) (4.8) 4.4 (15.2) (28.7)
Other (expense)/income (0.2) (0.2)
Interest expense (10.5) (10.5)
Income/(loss) before income taxes (39.4)
Total assets $257.0 $234.5 $152.6 $250.1 $894.2
THREE MONTHS ENDED SEPTEMBER 30, 1998
Sales to external customers $181.3 $ 81.0 $ 49.6 $ 0.0 $311.9
Intersegment sales 4.9 17.4 0.1 (22.4) 0.0
Operating profit/(loss) (55.0) 4.4 7.5 (0.9) (44.0)
Other (expense)/income (5.5) (5.5)
Interest expense (14.2) (14.2)
Income/(loss) before income taxes (63.7)
Total assets $362.4 $268.3 $134.0 $234.4 $999.1
NINE MONTHS ENDED SEPTEMBER 30, 1999
Sales to external customers $207.8 $130.2 $ 84.1 $ 0.0 $422.1
Intersegment sales 9.2 16.2 0.4 (25.8) 0.0
Operating profit/(loss) (44.8) (1.2) 5.7 (19.7) (60.0)
Other (expense)/income (1.9) (1.9)
Interest expense (34.3) (34.3)
Income/(loss) before income taxes (96.2)
Total assets $257.0 $234.5 $152.6 $250.1 $894.2
NINE MONTHS ENDED SEPTEMBER 30, 1998
Sales to external customers $352.3 $222.1 $ 83.7 $ 0.0 $658.1
Intersegment sales 15.2 53.3 0.1 (68.6) 0.0
Operating profit/(loss) (67.0) 23.0 5.0 (8.6) (47.6)
Other (expense)/income (6.6) (6.6)
Interest expense (35.5) (35.5)
Income/(loss) before income taxes (89.7)
Total assets $362.4 $268.3 $134.0 $234.4 $999.1
</TABLE>
9
<PAGE>
GOSS GRAPHIC SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
7. COMPREHENSIVE INCOME
As of October 1, 1998 Goss adopted SFAS No. 130 "Reporting Comprehensive
Income" which requires companies to report all changes in equity during a
period, except those resulting from investment by owners and distribution to
owners, in a financial statement for the period in which they are recognized.
Goss has chosen to disclose comprehensive income, which encompasses net
income and foreign currency translation adjustments, in the notes to the
consolidated financial statements.
Total comprehensive income is as follows (in millions):
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
-------------------- -------------------
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net loss $(37.9) $(68.2) $(93.5) $(104.0)
Other comprehensive income:
Foreign currency translation
adjustment 3.5 (2.3) (1.7) (2.9)
------ ------ ------ -------
Total comprehensive loss $(34.4) $(70.5) $(95.2) $(106.9)
------ ------ ------ -------
------ ------ ------ -------
</TABLE>
8. NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). SFAS 133, as amended by
SFAS No. 137, is effective for fiscal years beginning after June 15, 2000.
SFAS 133 requires all derivative instruments to be recorded on the balance
sheet at their fair value and that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting criteria
are met. Goss has not yet determined the impact that the adoption of SFAS 133
will have on its earnings or statement of financial position. However, Goss
anticipates that, due to its limited use of derivative instruments and the
nature of its derivative transactions, the adoption of SFAS 133 will not have
a significant effect on its results of operations or its financial position.
10
<PAGE>
GOSS GRAPHIC SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
9. COMBINED FINANCIAL STATEMENTS
The following combined financial statements are presented in accordance with SOP
90-7, Financial Reporting by Entities in Reorganization Under the Bankruptcy
Code:
GOSS GRAPHIC SYSTEMS, INC.
COMBINED CONSOLIDATING BALANCE SHEET
AT SEPTEMBER 30, 1999
(IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
ENTITIES IN ENTITIES NOT IN
REORGANIZATION REORGANIZATION
PROCEEDINGS PROCEEDINGS ELIMINATIONS CONSOLIDATED
---------------- ---------------- ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1.8 $ 14.6 $ 16.4
Accounts receivable, net 74.3 62.7 137.0
Intercompany receivable 52.1 (52.1) 0.0
Inventories, net 94.1 122.4 216.5
Other current assets 14.3 6.8 21.1
-------- ------- -------
Total current assets 236.6 154.4 391.0
Property and equipment, net 101.5 76.2 177.7
Goodwill, net 208.2 93.0 301.2
Investment in subsidiaries 89.7 0.0 $(89.7) 0.0
Other assets 14.0 10.3 0.0 24.3
-------- ------- ------- -------
Total assets $650.0 $333.9 $(89.7) $894.2
-------- ------- ------- -------
-------- ------- ------- -------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 32.3 $ 70.1 $102.4
Revolving credit facilities 29.8 21.0 50.8
Current portion of long-term debt 2.2 2.8 5.0
Advance payments from customers 80.9 54.0 134.9
Other current liabilities 103.3 60.7 164.0
-------- ------- -------
Total current liabilities 248.5 208.6 457.1
Liabilities subject to compromise 460.7 0.0 460.7
Long-term debt, less current portion 29.2 19.8 49.0
Other liabilities 32.6 17.5 50.1
-------- ------- -------
Total liabilities 771.0 245.9 1,016.9
Minority interest 7.7 0.4 8.1
Common stock, 100 shares authorized and
Outstanding, $0.01 par value 0.0 0.0 0.0
Additional paid in capital 189.4 98.2 $(89.7) 197.9
Retained earnings (317.6) (4.7) (322.3)
Minimum pension obligation 0.0 (5.3) (5.3)
Cumulative translation adjustment (0.5) (0.6) (1.1)
-------- ------- -------
Total shareholders' equity (128.7) 87.6 (89.7) (130.8)
-------- ------- ------- -------
Total liabilities and shareholders' equity $650.0 $333.9 $(89.7) $894.2
-------- ------- ------- -------
-------- ------- ------- -------
</TABLE>
11
<PAGE>
GOSS GRAPHIC SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
9. COMBINED FINANCIAL STATEMENTS (CONTINUED)
GOSS GRAPHIC SYSTEMS, INC.
COMBINED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
ENTITIES IN ENTITIES NOT IN
REORGANIZATION REORGANIZATION
PROCEEDINGS PROCEEDINGS ELIMINATIONS CONSOLIDATED
--------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Net sales $223.0 $238.2 $(39.1) $422.1
Cost of sales 232.8 203.6 39.1 397.3
----- ----- ---- -----
Gross profit (loss) (9.8) 34.6 0.0 24.8
Operating expenses 37.0 29.0 0.0 66.0
Reorganization items 12.6 0.0 0.0 12.6
Goodwill amortization 4.2 2.0 0.0 6.2
-------- -------- ------- -------
Operating profit (loss) (63.6) 3.6 0.0 (60.0)
Other (expense) income 5.6 (4.2) (3.3) (1.9)
Interest expense (31.8) (5.8) 3.3 (34.3)
-------- -------- ------- -------
Loss before income taxes (89.8) (6.4) 0.0 (96.2)
Provision (benefit) for income taxes 0.0 (2.7) 0.0 (2.7)
-------- -------- ------- -------
Net loss $(89.8) $ (3.7) $ (0.0) $(93.5)
-------- -------- ------- -------
-------- -------- ------- -------
</TABLE>
12
<PAGE>
GOSS GRAPHIC SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
9. COMBINED FINANCIAL STATEMENTS (CONTINUED)
GOSS GRAPHIC SYSTEMS, INC.
COMBINED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
ENTITIES IN ENTITIES NOT IN
REORGANIZATION REORGANIZATION
PROCEEDINGS PROCEEDINGS CONSOLIDATED
-------------- --------------- ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $(89.8) $(3.7) $(93.5)
Depreciation 11.0 6.8 17.8
Amortization of goodwill 4.2 2.0 6.2
Changes in assets and liabilities:
Accounts receivable (24.0) 20.2 (3.8)
Inventory 56.9 (10.4) 46.5
Accounts payable 2.8 (12.7) (9.9)
Customer advances (16.1) (7.1) (23.2)
Other current liabilities (14.6) (8.0) (22.6)
Other assets 4.6 (9.9) (5.3)
Other liabilities (6.4) (2.4) (8.8)
------ ------ ------
Net cash used for operating activities (71.4) (25.2) (96.6)
INVESTING ACTIVITIES:
Capital expenditures (4.7) (1.6) (6.3)
------ ------ ------
Net cash used for investing activities (4.7) (1.6) (6.3)
FINANCING ACTIVITIES:
Net borrowings under revolving credit facilities 11.5 0.0 11.5
Net borrowings under DIP credit facility 29.8 0.0 29.8
Capital contribution 24.0 0.0 24.0
Repayment of mortgage notes and other obligations (0.9) (2.2) (3.1)
------ ------ ------
Net cash provided by (used for) financing activities 64.4 (2.2) 62.2
Net decrease in cash (11.7) (29.0) (40.7)
Cash at the beginning of the period 13.5 43.6 57.1
------ ------ ------
Cash at the end of the period $ 1.8 $14.6 $ 16.4
------ ------ ------
------ ------ ------
</TABLE>
13
<PAGE>
GOSS GRAPHIC SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
10. REORGANIZATION ITEMS
Reorganization items are comprised of items of income, expense and loss that
were realized or incurred by the Company as a result of its decision to
reorganize under Chapter 11 of the Bankruptcy Code. Such items consisted of the
following (in millions):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, 1999 September 30, 1999
------------------ ------------------
<S> <C> <C>
Professional fees directly related to the filing $ 4.5 $ 5.8
Bank fees related to the DIP Facility 1.1 1.1
Write-off of deferred issue costs on
senior subordinated notes 5.7 5.7
------ ------
Total Reorganization items $11.3 $12.6
------ ------
------ ------
</TABLE>
11. CHAPTER 11 FILING
On July 30, 1999 Goss, GGS Holdings, Inc. ("Holdings", its parent company), and
Goss Realty LLC filed voluntary petitions for reorganization under Chapter 11 of
the U.S. Bankruptcy Code in the Bankruptcy Court for the District of Delaware.
Goss, its lenders under the pre-petition bank credit facility, and holders of as
least two-thirds of Goss's 12% Senior Subordinated Notes Due 2006 entered into a
Forbearance, Lock-up and Voting Agreement dated as of July 28, 1999. Pursuant to
that agreement, the lenders and the noteholders who are party to the agreement
agreed to forbear from exercising their rights and remedies under the credit
agreement and the indenture until the filing of the Chapter 11 case, and agreed
to vote their claims in favor of a plan of reorganization. Under the agreement,
the noteholders will exchange the $225 million principal amount of notes
currently outstanding for a new $112.5 million note issue and certain new stock
of Holdings. Certain of the company's lenders and Stonington Partners or an
affiliate ("Stonington") will jointly provide an additional $100 million of
liquidity and capital.
The parties agreed to implement the agreement through a prearranged Chapter 11
proceeding initiated in the U.S. Bankruptcy Court for the District of Delaware.
Goss's European and Asian subsidiaries are not included in the Chapter 11
proceeding.
Goss has entered into a debtor-in-possession credit facility (the "DIP
Facility") with certain of its pre-petition bank lenders and the principal
shareholder of its parent company, Stonington. The DIP Facility
provides for up to $50 million of financing. The Bankruptcy Court approved the
DIP Facility on an interim basis on July 30, 1999 and gave final approval in an
order dated August 20, 1999. Bridge loan borrowings under the DIP Facility bear
interest at a per annum rate equal to, at the Company's option: (1) the sum of
2.25% plus the higher of (a)
14
<PAGE>
GOSS GRAPHIC SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
11. CHAPTER 11 FILING (CONTINUED)
the prime rate or (b) a rate that is 0.5% higher than the federal funds rate,
or (2) the sum of 3.25% plus the average of quotations in the applicable
currencies for deposits with maturities comparable to the interest rate
period shown on Telerate Display Screen page number 3740 or 3750, plus any
additional costs to the lenders of complying with applicable reserve asset
ratios. Swing line borrowings bear interest at a per annum rate equal to the
rate described in clause (1) above less 0.5%. The DIP Facility provides for a
commitment fee equal to 0.5% of the undrawn loans, a facility fee equal to
2.0% of the total commitments, and an administrative fee of $100,000. The DIP
Facility is secured by all assets of the Company. Borrowings under the
facility are limited by a borrowing base formula, which considers U. S.-based
accounts receivable, inventory, equipment and real property. The lenders'
commitments terminate on the earliest of: (a) 6 months from the date of the
interim order of the Bankruptcy Court, (b) the effective date of a plan of
reorganization in the Chapter 11 case, (c) the date of distributions to any
class of creditors, equity holders or other claimants under a plan of
reorganization in the Chapter 11 case, (d) upon notice following an event of
default, (e) 45 days after July 30, 1999 if a final order of the Bankruptcy
Court approving the DIP Facility has not been entered. At September 30, 1999,
outstanding borrowings under the DIP Facility were $29.8 million.
During the Chapter 11 proceedings the company plans to continue to pay employee
wages, salaries and benefits as usual. The company will pay for the
post-petition delivery of goods and services in the ordinary course of business.
Under the restructuring plan, the claims of all creditors, including trade
creditors, will either not be impaired by the plan or will be paid in full over
time.
12. LIABILITIES SUBJECT TO COMPROMISE
The principal categories of claims classified as liabilities subject to
compromise under reorganization proceedings are identified below. All amounts
below may be subject to future adjustment depending on Bankruptcy Court action,
further developments with respect to disputed claims, or other events. Under an
approved final plan of reorganization, these claims may be settled at amounts
less than their allowed amounts.
Recorded liabilities subject to compromise under the Chapter 11 proceedings as
of September 30, 1999 consisted of the following (in millions):
<TABLE>
<CAPTION>
<S> <C>
Accounts payable $ 58.6
Pre-petition revolving credit facility 169.2
Senior subordinated notes-Principal 225.0
Senior subordinated notes-Accrued interest 7.9
------
Total $460.7
------
------
</TABLE>
15
<PAGE>
GOSS GRAPHIC SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
13. SUBSEQUENT EVENTS
At hearings held on October 19, 1999 and November 2, 1999, Goss, Holdings and
Goss Realty LLC received formal court confirmation of the plan of
reorganization, as amended, (the "Plan"). According to the Plan, the Company
will pay all claims owed to unsecured trade creditors, including all vendors and
suppliers in three equal installments at dates that are three, six and nine
months after the effective date of the Plan. Pursuant to the Plan, on November
19, 1999, the holders of the Company's 12% Senior Subordinated Notes Due 2006,
with a principal amount outstanding of $225 million, exchanged the notes for a
new note issue of Goss Holdings, Inc., the new holding company into which
Holdings was merged on the effective date of the Plan ("New Holdings"), with a
principal amount of $112.5 million and common stock in New Holdings representing
an ownership interest of approximately 31 percent. The new note issue will have
a maturity date of six years after the effective date of the Plan, and bear
interest at 12.25% per annum. Interest for the two year period immediately
following the effective date of the Plan will be payable by the issuance of
additional new notes and interest thereafter will be payable in cash.
Also pursuant to the Plan, on November 19, 1999, Stonington made a $50 million
cash investment in the common stock of New Holdings and received common shares
representing an ownership interest of approximately 65 percent in exchange
therefore. On November 19, 1999, New Holdings made a $50 million cash equity
investment in Goss (its wholly-owned subsidiary). The proceeds of the equity
investment were used by Goss to repay all outstanding borrowings under the DIP
Facility.
Additionally, on November 19, 1999, and also pursuant to the Plan, Goss and the
lenders under its revolving credit facility entered into an amended and restated
credit agreement. The new credit agreement, which amends and restates the $200
million pre-petition revolving credit facility, permits borrowings of up to $250
million, including up to $75 million in letters of credit. The new credit
facility requires payment of a facility fee of $3.75 million, which was paid on
the closing date, and provides for overall borrowing costs that are higher than
those of the pre-petition facility. The new facility also contains certain
financial covenants including, but not limited to, a minimum fixed charge
coverage test and a minimum Earnings Before Interest, Taxes, Depreciation, and
Amortization (EBITDA) test. The new facility also contains various limitations
on Goss's operation and borrowing, including a limitation on the amount that can
be borrowed by Goss based upon its accounts receivable, inventory, equipment and
real property, and provides for scheduled repayments beginning in 2002.
On November 19, 1999, the Company announced that it would transfer the assembly
operations of its U.S.-based single width press lines from its Reading,
Pennsylvania facility to its Cedar Rapids, Iowa facility, beginning in January
2000. The transfer will result in the closure of the Reading facility in 2000.
It is anticipated that the closure will result in a material charge against
earnings in the quarter ended December 31, 1999.
16
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Readers are urged to consider carefully the financial statements and related
notes contained elsewhere in this report and in Goss's Form 10-K for its fiscal
year ended September 30, 1998 as they read the discussion below.
Goss Graphic Systems, Inc. produces newspaper, insert, and commercial printing
press systems. In June of 1999, the Company began to negotiate a restructuring
of its capital structure with holders of its 12% Senior Subordinated Notes due
2006, certain lenders under its revolving credit facility and Stonington
Partners (hereinafter, along with any affiliated entities referred to as
"Stonington"), the principal stockholder of its parent company. On July 30, 1999
Goss announced that it had reached an agreement on a restructuring with
noteholders holding more than two-thirds of the Senior Subordinated Notes,
certain of its bank lenders, and Stonington. Pursuant to that agreement, on July
30, 1999, Goss, GGS Holdings, Inc. ("Holdings", its parent company), and Goss
Realty LLC, (collectively the "Debtors") filed voluntary petitions for
reorganization under Chapter 11 of the U.S. Bankruptcy Code in the Bankruptcy
Court of the District of Delaware. The Debtors are currently operating their
business as debtors-in-possession pursuant to the Bankruptcy Code.
Under the agreement, the noteholders, subject to satisfaction of certain
conditions, will exchange the $225 million principal amount of Senior
Subordinated Notes currently outstanding for a total of $112.5 million in new
notes and certain new stock of Holdings. Certain of the Company's lenders and
Stonington, subject to satisfaction of certain conditions, will jointly provide
an additional $100 million of liquidity and capital.
As a result of the bankruptcy filing, actions to collect pre-petition
indebtedness are stayed and other contractual obligations against the Debtors
may not be enforced. In addition, under the Bankruptcy Code the Debtors may
assume or reject executory contracts, including lease obligations. Parties
affected by these rejections may file claims with the Bankruptcy Court in
accordance with the reorganization process. Substantially all pre-petition
liabilities are subject to settlement under a plan of reorganization to be voted
upon by creditors and equity holders and approved by the Bankruptcy Court.
At the first day hearing held on July 30, 1999, the Bankruptcy Court entered
first day orders granting authority to the Debtors, among other things, to pay
pre-petition and post-petition employee wages, salaries, benefits and other
employee obligations, and to pay vendors and other providers in the ordinary
course for goods and services received from July 30, 1999.
Goss has entered into a debtor-in-possession credit facility (the "DIP
Facility") with certain of its pre-petition bank lenders and Stonington. The DIP
Facility provides for up to $50 million of financing. The Bankruptcy Court
approved the DIP Facility on an interim basis on July 30, 1999 and gave final
approval in an order dated August 20, 1999. Bridge loan borrowings under the DIP
Facility bear interest at a per annum rate equal to, at the Company's option:
(1) the
17
<PAGE>
sum of 2.25% plus the higher of (a) the prime rate or (b) a rate that is
0.5% higher than the federal funds rate, or (2) the sum of 3.25% plus the
average of quotations in the applicable currencies for deposits with maturities
comparable to the interest rate period shown on Telerate Display Screen page
number 3740 or 3750, plus any additional costs to the lenders of complying with
applicable reserve asset ratios. Swing line borrowings bear interest at a per
annum rate equal to the rate described in clause (1) above less 0.5%. The DIP
Facility provides for a commitment fee equal to 0.5% of the undrawn loans, a
facility fee equal to 2.0% of the total commitments, and an administrative fee
of $100,000. The DIP Facility is secured by all assets of the Company.
Borrowings under the facility are limited by a borrowing base formula, which
considers U.S.-based accounts receivable, inventory, equipment and real
property. The lenders' commitments terminate on the earliest of: (a) 6 months
from the date of the interim order of the Bankruptcy Court, (b) the effective
date of a plan of reorganization in the Chapter 11 case, (c) the date of
distributions to any class of creditors, equity holders or other claimants under
a plan of reorganization in the Chapter 11 case, (d) upon notice following an
event of default, (e) 45 days after July 30, 1999 if a final order of the
Bankruptcy Court approving the DIP Facility has not been entered. At September
30, 1999, outstanding borrowings under the DIP Facility were $ 29.8 million.
The Company's Consolidated Financial Statements have been prepared on a going
concern basis, which contemplates continuity of operations, realization of
assets and liquidation of liabilities and commitments in the normal course of
business. The filing of the Chapter 11 case and the Company's financial
condition necessitating the Chapter 11 case raise substantial doubt with respect
to the Company's ability to continue as a going concern. The appropriateness of
using the going concern basis is dependent upon, among other things,
confirmation of a plan of reorganization, future profitable operations and the
ability to generate cash from operations and financing sources sufficient to
meet obligations. As a result of the filing of the Chapter 11 case and related
circumstances, realization of assets and liquidation of liabilities is subject
to significant uncertainty. While under the protection of Chapter 11, the
Debtors may sell or otherwise dispose of assets, and liquidate or settle
liabilities, for amounts other than those reflected in the Consolidated
Financial Statements. Further, a plan or plans of reorganization could
materially change the amounts reported in the accompanying Consolidated
Financial Statements. The Consolidated Financial Statements do not include any
adjustments relating to recoverability of the value of recorded asset amounts or
the amounts and classification of liabilities that might be necessary as a
consequence of a plan of reorganization.
The Company is currently assessing the effect of the financial restructuring and
Chapter 11 filing on the recoverability of its long-lived assets, including
goodwill, for purposes of determining whether or not an impairment in value has
occurred according to Statement of Financial Accounting Standards No. 121. It is
possible that this assessment will result in a material charge against earnings
in the quarter ended December 31, 1999.
The Company's liquidity, capital resources, results of operations and ability to
continue as a going concern are subject to known and unknown risks and
uncertainties, including those set forth below under "Safe Harbor Statement
Under The Private Securities Litigation Reform Act of 1995."
18
<PAGE>
RESULTS OF OPERATIONS
Net Sales
Goss's net sales for the fiscal quarter ended September 30, 1999 decreased by
64.0% or $199.7 million to $112.2 million compared to the quarter ended
September 30, 1998. Sales in the Americas decreased by $138.3 million to $43.0
million. This decline is attributable to a lower order backlog at June 30, 1999
resulting in reduced shipments to large newspaper, small newspaper,
insert and commercial customers. Sales in Europe decreased by $46.4 million to
$34.6 million also as the result of a lower order backlog at June 30, 1999 for
both large and small newspaper customers. Sales in Asia decreased by $15.0
million to $34.6 million due to the timing of shipments to large newspaper
customers.
Net sales for the first nine months of 1999 were $422.1 million, a decrease of
$236.0 million or 35.9 % from the first nine months of 1998. Sales decreases in
the Americas and Europe of $144.5 and $91.9 million to $207.8 and $130.2
million, respectively, were partially offset by a sales increase in Asia of $0.4
million to $84.1 million. In the Americas decreased sales to large newspaper,
small newspaper, insert, and commercial customers were the result of a lower
order backlog as of December 31, 1998 in addition to lower current year orders.
The decrease in sales in Europe is also attributable to a lower order backlog at
December 31, 1998 in addition to lower current year orders from both large and
small newspaper customers. In addition, the 1998 period included a large
equipment newspaper sale of $35.1 million to one European customer.
Sales in the Americas for the quarter and nine months ended September 30, 1999
were also negatively affected by shipment delays resulting from Goss's inability
to access sufficient capital resources to purchase required materials and
services in the period leading up to its Chapter 11 filing, as well as
post-filing delays attributable to the time required to negotiate terms with
suppliers.
Gross Profit
Gross profit for the quarter ended September 30, 1999 increased by $9.4 million
to $8.4 million compared to the quarter ended September 30, 1998. The 1998
quarter included non-recurring charges of $1.5 million for manufacturing
restructuring, $17.1 million for inventory re-valuations and $22.9 million for
loss contract provisions substantially all of which were recorded in the
Americas. Excluding these 1998 non-recurring charges of $41.5 million, gross
profit decreased by $32.1 million and the gross profit margin decreased from
13.0% to 7.5%.
Gross profit for the nine months ended September 30, 1999 decreased $19.1
million to $24.8 million compared to the nine months ended September 30, 1998.
Results for the nine months ended September 30, 1999 included significant
charges totaling $14.4 million in the Americas. These significant charges
consist of $9.8 million for inventory write-downs related to reduced order
volume and costs to address certain product and contract performance issues
arising from
19
<PAGE>
management's ongoing assessment of the Americas business unit, and $4.6
million for anticipated cost over-runs on contracts as a result of delayed
shipments. The shipment delays were caused by Goss's inability to access
sufficient capital resources to purchase required materials and services
during the period leading up to its Chapter 11 filing as well as post-filing
delays attributable to the time required to negotiate terms with suppliers.
Margins on certain future period shipments may also be negatively affected by
these delays. Results for the nine months ended September 30, 1998 included
non-recurring charges of $9.4 million for manufacturing restructuring, $17.1
million for inventory re-valuations and $24.5 million for loss contract
provisions on newspaper contracts, substantially all of which were recorded
in the Americas. Excluding these non-recurring items of $51.0 million in 1998
and the $14.4 million of significant charges mentioned above for 1999, gross
profit decreased by $55.7 million and the gross profit margin decreased from
14.4% to 9.3%. The change in gross profit and gross profit margin, excluding
these non-recurring and significant charges, is explained below.
- For the quarter ended September 30, 1999, gross profit in the Americas
decreased by $13.5 million to a loss of $2.2 million and the gross
profit margin decreased from 6.2% to a negative 5.1%. The decrease in
gross profit is due to the reduced sales volume while the decrease in
gross profit margin is due to unrecovered fixed costs resulting from
unused capacity. In addition, results for the quarter ended September
30, 1998 included expense credits due to the timing of the
capitalization of contract-related engineering costs into inventory.
For the nine months ended September 30, 1999, gross profit decreased
in the Americas by $28.7 million to $3.8 million and the gross profit
margin decreased from 9.2% to 1.8%. These decreases in gross profit and
gross profit margin are attributable to the same factors that affected
gross profit for the quarter ended September 30, 1999 as well as income
from a property tax refund and a depreciation expense adjustment which
were recorded in 1998.
- For the quarter ended September 30, 1999, gross profit in Europe
decreased by $12.3 million to $2.6 million and the gross profit margin
decreased from 18.4% to 7.5%. For the nine months ended September 30,
1999, gross profit in Europe decreased $25.1 million to $18.7 million
and the gross profit margin decreased from 19.7% to 14.4%. These
decreases in gross profit and gross profit margin were due to lower
sales volume and lower margins on sales to large and small newspaper
customers.
- For the quarter ended September 30, 1999, gross profit in Asia
decreased by $2.9 million to $8.0 million, and the gross profit margin
increased from 22.0% to 23.1%. For the nine months ended September 30,
1999, gross profit in Asia increased $1.5 million to $16.7 million and
the gross profit margin increased from 18.2% to 19.9%. The increase in
gross profit and gross profit margin is due to increased sales volumes
to small newspaper customers and higher margins on sales to large
newspaper customers partially offset by a charge of $1.6 million for
revaluation of certain inventories.
20
<PAGE>
Operating Expenses
Operating expenses, which consist primarily of engineering, selling, general and
administrative expenses, decreased $16.8 million to $23.7 million for the
quarter ended September 30, 1999 compared to the quarter ended September 30,
1998. The 1998 quarter included provisions for bad debt expense of $8.3 million
and a charge to engineering expense for $2.9 million relating to the timing of
the capitalization of contract-related engineering costs into inventory. The
1999 quarter included provisions for bad debt expense of $1.8 million. Excluding
these items, operating expenses decreased by $7.4 million, or 25.3% from the
1998 quarter. The decrease is due to lower spending on development engineering,
agent commissions, selling expenses and administrative expenses as a result of
lower sales volumes and the 1998 workforce reduction, partly offset by increased
depreciation expense attributable to new information systems.
Operating expenses for the nine months ended September 30, 1999 decreased
$18.6 million to $66.0 million compared to the nine months ended September
30, 1998. The 1998 period included provisions for bad debt expense of $9.1
million and $4.3 million of engineering costs associated with the development
of a new insert press. The 1999 period includes provisions for bad debt
expense of $4.8 million in addition to a credit of $5.0 million relating to a
legal settlement. Excluding these items, operating expenses decreased by $5.1
million, or 7.1% from the 1998 period. This decrease is attributable to the
same reasons mentioned above for the quarter.
Reorganization Items
Results for the quarter and nine month period ended September 30, 1999 were
charged with $11.3 million and $12.6 million, respectively for expense items
that were incurred by the Company as a result of its decision to reorganize
under Chapter 11 of the Bankruptcy Code. These items consist of professional
fees, bank fees and the write-off of deferred issue costs on the senior
subordinated notes.
Interest Expense
Interest expense decreased by $3.7 million for the quarter and $1.2 million
for the nine month period ended September 30, 1999 compared to 1998. The
decrease for the quarter and nine month period is attributable to the
discontinuation of interest accruals on the Company's $225 million senior
subordinated notes since July 30, 1999 as a result of the Chapter 11 filing.
This reduction in expense is slightly offset by additional interest due to
increased borrowings at higher rates under the Company's revolving credit
facility and DIP Facility.
Income Taxes
For the quarter ended September 30, 1999, the provision for income taxes
decreased from $4.5 million in the 1998 period to a $1.5 million benefit in the
1999 period. For the nine month period ended September 30, 1999, the provision
decreased from $14.3 million in the 1998 period to a $2.7 million benefit in the
1999 period. The expense in 1998 arose from the reevaluation of the effective
income tax rate to be used for the year due to a change in the geographic mix of
income.
21
<PAGE>
FINANCIAL CONDITION AND LIQUIDITY
On July 30, 1999 the Debtors filed voluntary petitions for reorganization
under Chapter 11 of the U.S. Bankruptcy Code, which will affect the company's
liquidity and capital resources. See Note 11 of the Notes to Consolidated
Financial Statements.
For the nine months ended September 30, 1999, operating activities used $96.6
million of cash compared to the nine months ended September 30, 1998 when
operating activities used $14.0 million of cash. The increase in negative cash
flow from operations in the 1999 period is due to changes in working capital
largely due to a higher level of payments to suppliers and lower customer
advances. Cash used in investing activities decreased to $6.3 million in the
1999 period from $25.2 million in the 1998 period due to lower spending on
capital projects. Financing activities provided a net $62.2 million in cash in
the 1999 period, including collections of $24.0 million of the $35.6 million in
accounts receivable that were contributed to Goss's capital by Stonington
in January 1999.
Other than cash flow from operations, Goss's primary source of liquidity, prior
to its Chapter 11 filing, was its revolving credit facility. At June 30, 1999
and September 30, 1999, Goss was not in compliance with the financial covenants
contained in the revolving credit facility, which noncompliance constituted an
event of default. As a result, the lenders exercised their rights under the
facility agreement to prohibit additional borrowings under the facility.
Following the Chapter 11 filing, Goss' primary source of liquidity is the DIP
Facility. The pre-petition revolving credit facility permitted borrowings up to
$200 million, including up to $175 million in letters of credit and the DIP
Facility permits borrowings up to $50 million, including up to $20 million in
letters of credit. At September 30, 1999, borrowings and letters of credit
under this pre-petition facility, excluding $2.2 million of revolving credit
relating to Goss's joint venture in China, totaled $196.9 million, an increase
of $0.3 million from the end of the prior fiscal quarter. At September 30, 1999,
outstanding borrowings and letters of credit under the DIP Facility were $30.5
million.
Goss's revolving credit facility, as amended, contained certain financial
covenants, including, but not limited to, a minimum fixed charge coverage
test, a minimum Earnings Before Interest, Taxes, Depreciation and
Amortization (EBITDA) test, and a maximum leverage test. The DIP Facility
also contains certain covenants, including but not limited to, a minimum
EBITDA test, a minimum sales test and a maximum capital expenditure test.
Goss was not in compliance with the financial covenants in its revolving credit
facility as of the quarters ended March 31, 1998 and June 30, 1998. Goss's
lenders waived this non-compliance, and on August 31, 1998, Goss entered into
the First Amendment which contained revised covenants for the quarter ended
September 30, 1998 and thereafter. Subsequently it became apparent that Goss
would not be able to fulfill these covenants, which were further amended in the
Second Amendment. As part of the Second Amendment, the revolving credit facility
also was amended to include various limitations on Goss's operation and
borrowing, including a limitation on the amount that can be borrowed by Goss
based upon its accounts receivable,
22
<PAGE>
inventory, equipment, real property and intellectual property. Also as part
of the Second Amendment, Stonington made a capital contribution to Goss, in
the form of the purchase by Stonington and the contribution to Goss of the
accounts receivable previously sold to BT Commercial Corporation (see below).
On November 30, 1998, Goss sold approximately $35.6 million in accounts
receivable to BT Commercial Corporation. This sale was permitted by Goss's
revolving credit facility and was intended to provide Goss with additional
liquidity beyond what was then available under the revolving credit facility.
Generally, the receivables that were sold were expected to mature between
February and May, 1999. The sale was without recourse to Goss although the
collectibility of the receivables was guaranteed by Stonington, a related party.
Goss is party to an indenture under which it issued $225 million in
subordinated notes and mortgage loans on certain of its facilities. Copies of
these agreements are included as Exhibits 4.1, 4.4 and 4.5 to Goss's Form
10-K for its fiscal year ended September 30, 1997 and are incorporated herein
by reference. The indenture contains cross-default provisions under which an
event of default under the revolving credit facility would also be considered
an event of default under the indenture. At June 30, 1999 and September 30,
1999 Goss was therefore in default under the terms of the indenture. In
addition, filing a voluntary petition of bankruptcy is considered an event of
default under the Company's mortgage note on its Westmont, Illinois facility
and, therefore Goss was in default under the terms of the mortgage note when
it filed its Chapter 11 case on July 30, 1999.
Pursuant to Goss's financial restructuring activities (see Note 11 of the Notes
to Consolidated Financial Statements), Goss, Stonington and certain of Goss's
lenders under its revolving credit facility entered into an agreement whereby
the lenders and Stonington provided Goss with debtor-in-possession financing
(the DIP Facility) while Goss is in Chapter 11 proceedings. The DIP Facility
allows Goss to borrow, at costs slightly higher than those contained in the
revolving credit facility, an amount of up to $50 million, including up to $20
million in letters of credit. Borrowings under the DIP Facility are secured by a
first priority lien on substantially all of Goss's real, personal and mixed
property. The DIP Facility contains certain financial covenants, including, but
not limited to, a minimum Earnings Before Interest, Taxes, Depreciation and
Amortization (EBITDA) test, a minimum sales test, and a maximum capital
expenditures test. The DIP Facility also contains various limitations on Goss's
operations and borrowings, including a limitation on the amount that can be
borrowed by Goss based upon its U.S.- based accounts receivable, inventory,
equipment and real property. Goss was in compliance with the financial covenants
of the DIP Facility for the months ended August and September, 1999.
At hearings held on October 19, 1999 and November 2, 1999, the Debtors received
formal court confirmation of the plan of reorganization, as amended (the
"Plan"). According to the Plan, the Company will pay all claims owed to
unsecured trade creditors, including all vendors and suppliers in three equal
installments at dates that are three, six and nine months after the effective
date of the Plan.
23
<PAGE>
Pursuant to the Plan, on November 19, 1999, the holders of the Company's 12%
Senior Subordinated Notes Due 2006, with a principal amount outstanding of $225
million, exchanged the notes for a new note issue of Goss Holdings Inc., the new
holding company into which Holdings was merged on the effective date of the Plan
("New Holdings"), with a principal amount of $112.5 million and common stock in
New Holdings representing an interest of approximately 31 percent. The new note
issue will have a maturity date of six years after the effective date of the
Plan, and bear interest at 12.25% per annum. Interest for the two year period
immediately following the effective date of the Plan will be payable by the
issuance of additional new notes and interest thereafter will be payable in
cash.
Also pursuant to the Plan, on November 19, 1999, Stonington made a $50 million
cash investment in the common stock of New Holdings and received common shares
representing an interest of approximately 65 percent in exchange therefore. On
November 19, 1999 New Holdings made a $50 million cash equity investment in Goss
(its wholly-owned subsidiary). The proceeds of the equity investment were used
by Goss to repay all outstanding borrowings under the DIP Facility.
Additionally, on November 19, 1999, and also pursuant to the Plan, Goss and
the lenders under its revolving credit facility entered into an amended and
restated credit agreement. The new credit agreement, which amends and
restates the $200 million pre-petition revolving credit facility, permits
borrowings of up to $250 million, including up to $75 million in letters of
credit. The new credit facility requires payment of a facility fee of $3.75
million, which was paid on the closing date, and provides for overall
borrowing costs that are higher than those of the pre-petition facility. The
new facility also contains certain financial covenants including, but not
limited to, a minimum fixed charge coverage test and a minimum Earnings
Before Interest, Taxes, Depreciation, and Amortization (EBITDA) test. The new
facility also contains various limitations on Goss's operation and borrowing,
including a limitation on the amount that can be borrowed by Goss based upon
its accounts receivable, inventory, equipment and real property, and provides
for scheduled repayments beginning in 2002.
On November 19, 1999, the Company announced that it would transfer the assembly
operations of its U.S.-based single width press lines from its Reading,
Pennsylvania facility to its Cedar Rapids, Iowa facility, beginning in January
2000. The transfer will result in the closure of the Reading facility in 2000.
It is anticipated that the closure will result in a material charge against
earnings in the quarter ended December 31, 1999.
Goss, because of the acquisition, is a highly leveraged business. As a
consequence, it is dependent upon bank credit facilities to provide essential
liquidity. Should Goss fail to comply with the terms of its bank credit
facility at any time, it would significantly, and negatively, affect Goss's
business by, among other things, restricting growth in sales or necessitating
Goss's obtaining a replacement credit facility. Goss's ability to obtain a
replacement facility would be dependent on the financial markets and its
financial condition at that time.
24
<PAGE>
YEAR 2000
Goss uses software and related technologies throughout its business and in
certain of its products that will be affected by the Year 2000 issue which
involves the inability of date sensitive computer applications to process
dates beyond the year 1999. A comprehensive inventory and assessment of
business systems and processes that may be affected by Year 2000 issues has
been completed in each country in which Goss operates.
Goss has also completed an investigation of Year 2000 issues related to the
functionality of its press systems which included a comprehensive review of Goss
press models sold over a period of more than thirty years and has found no
date-related issues that would render presses inoperable on the arrival of the
year 2000. Certain date functionality issues were identified with some older
press systems and software upgrades have been developed to solve these issues.
Where necessary, customers have been notified of these issues and many presses
have already been upgraded.
Goss's U.S. manufacturing facilities have now completed the implementation of
new Year 2000 compliant manufacturing and financial applications which include
general ledger, accounts receivable, accounts payable, inventory, purchasing,
engineering and order entry. The Cedar Rapids implementation was completed on
May 3, 1999 and the Reading implementation was completed June 25, 1999. Goss's
headquarters and parts facility in Westmont, Illinois have already implemented
new manufacturing and financial systems that are Year 2000 compliant.
The majority of the Company's systems in Europe are already Year 2000 compliant
with the exception of Nantes, France where most systems will either have codes
changed on existing software or will be upgraded to Year 2000 compliant
versions. These modifications are expected to be completed by December 1999. In
Japan, system modification began in October 1998. Modification of individual
programs has been completed.
Certain non-IT systems, such as telephone and voice mail systems, time and labor
collection systems and other desktop computer systems, have been assessed and
all necessary upgrades have been scheduled for completion by the fourth quarter
of 1999.
The expected cost to convert all business systems to be Year 2000 compliant is
approximately $17.6 million, the majority of which are capital expenditures.
About 89% of these costs have been incurred as of September 30, 1999. These
costs do not include certain costs incurred in the U.K. over the last two years
to upgrade systems as part of an overall systems upgrade strategy as these costs
were not tracked separately.
As part of Goss's Year 2000 assessment, an evaluation is being performed of the
status of certain key suppliers regarding their Year 2000 issues and how Goss
may be affected.
25
<PAGE>
Although Goss's management believes that it will be successful in avoiding any
significant disruption in its business, given the complexity and number of
potential risks, there can be no guarantee that the Company's efforts will be
successful. If Goss's efforts to achieve Year 2000 compliance are unsuccessful,
the result could have a material adverse effect on Goss's results of operations
and financial condition. The potential adverse effects include the inability to
order materials, manufacture and distribute products and process daily business
transactions. In the event certain systems are not operational in time to avoid
a Year 2000 issue, Goss has planned to manually accumulate and process data
necessary to continue operations. At such time as these systems become Year 2000
compliant, the manually accumulated data will be loaded and processed into the
new systems.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Certain of the statements contained in this Report are forward-looking. While
Goss believes that these statements are accurate, Goss's business is dependent
upon general economic conditions, various conditions specific to its industry,
and future trends and these factors could cause actual results to differ
materially from the forward-looking statements that have been made.
These factors include, but are not limited to:
- the Company's ability to continue as a going concern;
- the availability of debtor-in-possession financing;
- the Company's ability to operate successfully under a Chapter 11
proceeding;
- the Company's ability to emerge from the Chapter 11 proceeding;
- the Company's ability to comply with financial covenants in credit
agreements;
- the risk of increase in newsprint costs, which have historically
negatively influenced newspaper press sales;
- general economic conditions, particularly in connection with sales
to newspapers, advertising expenditures and page count;
- competitive pressures, including excess industry capacity;
- changes in currency markets and long-term interest rates that have
provided foreign competitors with pricing advantages;
- the Company's ability to offer products that contain technological
features sought by its customers;
- changes in interest rates that would increase the Company's cost of
borrowing and could decrease its liquidity; and
- the Company's ability to implement operational restructuring
elements, improve efficiency and obtain components at favorable
prices.
26
<PAGE>
PART II. OTHER INFORMATION
Item 3. Defaults Upon Senior Securities
The Company's pre-petition bank credit facility requires that the
Company comply with specified financial covenants, which are measured at the end
of each fiscal quarter. On June 30 and September 30, 1999 the Company was not in
compliance with these covenants, which constituted an event of default under the
credit facility. The lenders under that facility exercised their rights to
prohibit additional borrowings under the facility.
The indenture under which the Company's 12% Senior Subordinated Notes
due 2006 were issued contains a cross-default provision. As a result, the event
of default under the credit facility resulted in an event of default under the
indenture.
In addition, the pre-petition bank credit facility, the indenture, and
a $30 million mortgage note on the Company's Westmont, Illinois facility provide
that certain bankruptcy events, including the filing of a voluntary petition
under Chapter 11, constitute events of default.
At September 30, 1999, the Company had outstanding borrowings and
letters of credit of $196.9 million under its pre-petition bank credit facility
and there were $225 million aggregate principal amount of 12% Senior
Subordinated Notes due 2006 outstanding. The balance outstanding on the mortgage
note at September 30, 1999, was $28.9 million.
The Company's bank lenders and holders of more than two-thirds of the
outstanding principal amount of the Senior Subordinated Notes due 2006 entered
into a Forbearance, Lock-Up and Voting Agreement with the Company and Stonington
Partners.
Item 4. Submission of Matters to a Vote of Security Holders
On September 7, 1999 the Company began the solcitation of noteholder
votes concerning the company's plan of reorganization. Voting on the plan of
reorganization closed on October 12, 1999. The holders of the Company's 12%
Senior Subordinated Notes Due 2006 who voted approved the plan of
reorganization.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 2.1 Second Amended Plan of Reorganization of Goss
Graphic Systems, Inc., GGS Holdings, Inc. and
Goss Realty, LLC Under Chapter 11 of the
Bankruptcy Code, dated as of September 7, 1999.
27
<PAGE>
PART II. OTHER INFORMATION - (CONTINUED)
(b) Exhibit 2.2 Amendment to Second Amended Plan of
Reorganization of Goss Graphic Systems, Inc.,
GGS Holdings, Inc. and Goss Realty, LLC Under
Chapter 11 of the Bankruptcy Code, dated as of
October 21, 1999.
(c) Exhibit 2.3 Second Amendment to Second Amended Plan of
Reorganization of Goss Graphic Systems, Inc.,
GGS Holdings, Inc. and Goss Realty, LLC Under
Chapter 11 of the Bankruptcy Code, dated as of
November 2, 1999.
(d) Exhibit 27.1 Financial Data Schedule
28
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GOSS GRAPHIC SYSTEMS, INC.
Date: November 22, 1999 By: /s/ Joseph P. Gaynor, III
-------------------------------------------
Joseph P. Gaynor, III, Executive Vice President
and Chief Financial Officer (Principal Financial
Officer and Principal Accounting Officer)
29
<PAGE>
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
IN RE: )
) CHAPTER 11
GOSS GRAPHIC SYSTEMS, INC., ET AL.,(1) )
) CASE NO. 99-2756 (PJW)
DEBTORS. ) (JOINTLY ADMINISTERED)
)
- --------------------------------------------------------------------------------
SECOND AMENDED PLAN OF REORGANIZATION
OF GOSS GRAPHIC SYSTEMS, INC.,
GGS HOLDINGS, INC. AND GOSS REALTY, LLC
UNDER CHAPTER 11 OF THE BANKRUPTCY CODE
- --------------------------------------------------------------------------------
James H.M. Sprayregen
Matthew N. Kleiman
James W. Kapp III
Chris L. Dickerson
KIRKLAND & ELLIS
200 E. Randolph Drive
Chicago, Illinois 60601
(312) 861-2000
Laura Davis Jones
Maureen D. Luke
Michael R. Nestor
YOUNG CONAWAY STARGATT &
TAYLOR, LLP
11th Floor, Rodney Square North
PO Box 391
Wilmington, Delaware 19899-0391
(302) 571-6600
Co-Counsel to
GOSS GRAPHIC SYSTEMS, INC.,
GGS HOLDINGS, INC. AND
GOSS REALTY, LLC
Debtors and Debtors in Possession
Dated: September 7, 1999
- ------------------------
(1) The Debtors are the following entities: Goss Graphic Systems, Inc., GGS
Holdings, Inc., and Goss Realty, L.L.C.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I.
DEFINED TERMS, RULES OF INTERPRETATION, COMPUTATION OF TIME AND GOVERNING LAW............................1
A. RULES OF INTERPRETATION, COMPUTATION OF TIME AND GOVERNING LAW.............................1
B. DEFINED TERMS..............................................................................1
ARTICLE II.
ADMINISTRATIVE AND PRIORITY TAX CLAIMS...................................................................9
A. ADMINISTRATIVE CLAIMS......................................................................9
B. PRIORITY TAX CLAIMS........................................................................9
ARTICLE III.
CLASSIFICATION AND TREATMENT OF CLASSIFIED CLAIMS AND EQUITY INTERESTS.................................. 9
A. SUMMARY....................................................................................9
B. CLASSIFICATION AND TREATMENT OF CLAIMS AGAINST HOLDINGS...................................11
C. Classification and Treatment of Claims against Systems ...................................13
D. CLASSIFICATION AND TREATMENT OF CLAIMS AGAINST REALTY.....................................15
E. SPECIAL PROVISION GOVERNING UNIMPAIRED CLAIMS.............................................17
ARTICLE IV.
ACCEPTANCE OR REJECTION OF THE PLAN.....................................................................18
A. VOTING CLASSES............................................................................18
B. ACCEPTANCE BY IMPAIRED CLASSES............................................................18
C. PRESUMED ACCEPTANCE OF PLAN...............................................................18
D. PRESUMED REJECTION OF PLAN................................................................18
E. NON-CONSENSUAL CONFIRMATION...............................................................18
ARTICLE V.
MEANS FOR IMPLEMENTATION OF THE PLAN....................................................................18
A. CONTINUED CORPORATE EXISTENCE AND VESTING OF ASSETS IN THE REORGANIZED DEBTORS............18
B. CANCELLATION OF NOTES, INSTRUMENTS, MEMBER INTERESTS,
COMMON STOCK AND STOCK OPTIONS............................................................19
C. ISSUANCE OF NEW SECURITIES; EXECUTION OF RELATED DOCUMENTS................................19
D. NEW HOLDINGS COMMON STOCK ................................................................19
E. NEW SYSTEMS COMMON STOCK .................................................................19
F. NEW REALTY MEMBER INTERESTS...............................................................19
G. CORPORATE GOVERNANCE, DIRECTORS AND OFFICERS, AND CORPORATE ACTION........................19
H. SOURCES OF CASH FOR PLAN DISTRIBUTION.....................................................20
ARTICLE VI.
TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES...................................................21
A. ASSUMPTION OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES....................................21
B. CLAIMS BASED ON REJECTION OF EXECUTORY CONTRACTS OR UNEXPIRED LEASES......................21
C. CURE OF DEFAULTS FOR EXECUTORY CONTRACTS AND UNEXPIRED LEASES ASSUMED.....................21
D. INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES......................................21
E. COMPENSATION AND BENEFIT PROGRAMS.........................................................21
ARTICLE VII.
PROVISIONS GOVERNING DISTRIBUTIONS......................................................................22
</TABLE>
i
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<TABLE>
<CAPTION>
PAGE
----
<S> <C>
A. DISTRIBUTIONS FOR CLAIMS ALLOWED AS OF THE EFFECTIVE DATE.................................22
B. DISTRIBUTIONS BY THE REORGANIZED DEBTORS; DISTRIBUTIONS WITH RESPECT TO DEBT SECURITIES...22
C. DELIVERY AND DISTRIBUTIONS AND UNDELIVERABLE OR UNCLAIMED DISTRIBUTIONS...................22
D. DISTRIBUTION RECORD DATE..................................................................23
E. TIMING AND CALCULATION OF AMOUNTS TO BE DISTRIBUTED.......................................23
F. MINIMUM DISTRIBUTION......................................................................23
G. SETOFFS...................................................................................24
H. SURRENDER OF CANCELED INSTRUMENTS OR SECURITIES...........................................24
I. LOST, STOLEN, MUTILATED OR DESTROYED DEBT SECURITIES......................................24
ARTICLE VIII.
PROCEDURES FOR RESOLVING DISPUTED CLAIMS................................................................25
A. PROSECUTION OF OBJECTIONS TO CLAIMS.......................................................25
B. ESTIMATION OF CLAIMS......................................................................25
C. PAYMENTS AND DISTRIBUTIONS ON DISPUTED CLAIMS.............................................25
ARTICLE IX.
CONDITIONS PRECEDENT TO CONFIRMATION AND CONSUMMATION OF THE PLAN.......................................25
A. CONDITION PRECEDENT TO CONFIRMATION.......................................................25
B. CONDITIONS PRECEDENT TO CONSUMMATION......................................................26
C. WAIVER OF CONDITIONS......................................................................26
D. EFFECT OF NON-OCCURRENCE OF CONDITIONS TO CONSUMMATION....................................26
ARTICLE X.
RELEASE, INJUNCTIVE AND RELATED PROVISIONS..............................................................26
A. SUBORDINATION.............................................................................26
B. LIMITED RELEASES BY THE DEBTORS...........................................................27
C. LIMITED RELEASES BY HOLDER OF CLAIMS......................................................27
D. PRESERVATION OF RIGHTS OF ACTION..........................................................27
E. EXCULPATION...............................................................................28
F. INJUNCTION................................................................................28
ARTICLE XI.
RETENTION OF JURISDICTION...............................................................................28
ARTICLE XII.
MISCELLANEOUS PROVISIONS................................................................................29
A. DISSOLUTION OF COMMITTEE(S)...............................................................29
B. PAYMENT OF STATUTORY FEES.................................................................29
C. FEES AND EXPENSES OF THE PREPETITION NOTEHOLDERS COMMITTEE................................29
D. DISCHARGE OF DEBTORS......................................................................30
E. MODIFICATION OF PLAN......................................................................30
F. REVOCATION OF PLAN........................................................................30
G. SUCCESSORS AND ASSIGNS....................................................................30
H. RESERVATION OF RIGHTS.....................................................................30
I. SECTION 1146 EXEMPTION....................................................................30
J. FURTHER ASSURANCES........................................................................30
K. SERVICE OF DOCUMENTS......................................................................31
L. FILING OF ADDITIONAL DOCUMENTS............................................................32
</TABLE>
ii
<PAGE>
- --------------------------------------------------------------------------------
PLAN OF REORGANIZATION
OF GOSS GRAPHIC SYSTEMS, INC.,
GGS HOLDINGS, INC. AND GOSS REALTY, LLC
UNDER CHAPTER 11 OF THE BANKRUPTCY CODE
- --------------------------------------------------------------------------------
Pursuant to chapter 11, title 11 of the United States Code,
11 U.S.C. Sections 101 et seq., Goss Graphic Systems, Inc., GGS Holdings, Inc.
and Goss Realty, LLC, debtors and debtors-in-possession in the
above-captioned and numbered cases, hereby respectfully propose the following
Plan of Reorganization under chapter 11 of the Bankruptcy Code:
ARTICLE I.
DEFINED TERMS, RULES OF INTERPRETATION,
COMPUTATION OF TIME AND GOVERNING LAW
A. RULES OF INTERPRETATION, COMPUTATION OF TIME AND GOVERNING LAW
1. For purposes of the Plan: (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, and pronouns stated in the
masculine, feminine or neuter gender shall include the masculine, feminine
and the neuter gender; (b) any reference in the Plan to a contract,
instrument, release, indenture 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 the Plan to an existing document or
exhibit Filed, or to be Filed, shall mean such document or exhibit, as it may
have been or may be amended, modified or supplemented; (d) unless otherwise
specified, all references in the Plan to Sections, Articles and Exhibits are
references to Sections, Articles and Exhibits of or to the Plan; (e) the
words "herein" and "hereto" refer to the Plan in its entirety rather than to
a particular portion of the Plan; (f) 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 the Plan; (g) the rules of
construction set forth in section 102 of the Bankruptcy Code shall apply; and
(h) any term used in capitalized form in the Plan that is not defined herein
but that is used in the Bankruptcy Code or the Bankruptcy Rules shall have
the meaning assigned to such term in the Bankruptcy Code or the Bankruptcy
Rules, as the case may be.
2. In computing any period of time prescribed or allowed by
the Plan, the provisions of Bankruptcy Rule 9006(a) shall apply.
3. Except to the extent that the Bankruptcy Code or Bankruptcy
Rules are applicable, and subject to the provisions of any contract,
instrument, release, indenture or other agreement or document entered into in
connection with the Plan, the rights and obligations arising under the Plan
shall be governed by, and construed and enforced in accordance with, the laws
of the State in which the Bankruptcy Court resides, without giving effect to
the principles of conflict of laws thereof.
B. DEFINED TERMS
Unless the context otherwise requires, the following terms shall
have the following meanings when used in capitalized form in the Plan:
1. "Administrative Claim" means a Claim for costs and expenses
of administration under section 503(b), 507(b) or 1114(e)(2) of the
Bankruptcy Code, including: (a) the actual and necessary costs and expenses
incurred after the Petition Date of preserving the Estates and
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<PAGE>
operating the businesses of the Debtors (such as wages, salaries or
commissions for services and payments for goods and other services and leased
premises); (b) compensation for legal, financial advisory, accounting and
other services and reimbursement of expenses awarded or allowed under section
330(a) or 331 of the Bankruptcy Code; and (c) all fees and charges assessed
against the Estates under chapter 123 of title 28 United States Code, 28
U.S.C. Sections 1911-1930.
2. "Allowed" means, with respect to any Claim, except as
otherwise provided herein: (a) a Claim that has been scheduled by the Debtors
in their schedules of liabilities as other than disputed, contingent or
unliquidated and as to which the Debtors or other party in interest have not
Filed an objection by the Effective Date; (b) a Claim that either is not a
Disputed Claim or has been allowed by a Final Order; (c) a Claim that is
allowed: (i) in any stipulation with the Debtors of amount and nature of
Claim executed prior to the Confirmation Date and approved by the Bankruptcy
Court; (ii) in any stipulation with the Debtors of amount and nature of Claim
executed on or after the Confirmation Date and, to the extent necessary,
approved by the Bankruptcy Court; or (iii) in any contract, instrument,
indenture or other agreement entered into or assumed in connection with the
Plan; (d) a Claim relating to a rejected executory contract or unexpired
lease that either (i) is not a Disputed Claim or (ii) has been allowed by a
Final Order, in either case only if a proof of Claim has been Filed by the
Bar Date or has otherwise been deemed timely Filed under applicable law; or
(e) a Claim that is allowed pursuant to the terms of this Plan.
3. "Allowed ... Claim" means an Allowed Claim in the
particular Class described.
4. "Amended Certificates of Incorporation" means the
Certificates of Incorporation of New Holdings and Systems as Reorganized
Debtors, as restated as described in Article V.G.1 of the Plan, the forms of
which shall be Filed on or before the Confirmation Date.
5. "Amended Certificate of Formation" means the Certificate of
Formation of Realty as a Reorganized Debtor, as restated as described in
Article V.G.1 of the Plan, the form of which shall be Filed on or before the
Conformation Date.
6. "Ballot Date" means the date stated in the Voting
Instructions by which all Ballots must be received.
7. "Ballots" mean the ballots accompanying the Disclosure
Statement upon which Holders of Impaired Claims shall indicate their
acceptance or rejection of the Plan in accordance with the Plan and the
Voting Instructions.
8. "Bankruptcy Code" means title I of the Bankruptcy Reform
Act of 1978, as amended from time to time, as set forth in sections 101 et
seq. of title 11 of the United States Code, and applicable portions of titles
18 and 28 of the United States Code.
9. "Bankruptcy Court" means the United States District Court
having jurisdiction over the Chapter 11 Cases and, to the extent of any
reference made pursuant to section 157 of title 28 of the United States Code
and/or the General Order of such District Court pursuant to section 151 of
title 28 of the United States Code, the bankruptcy unit of such District
Court.
10. "Bankruptcy Rules" means the Federal Rules of Bankruptcy
Procedure, as amended from time to time, as applicable to the Chapter 11
Cases, promulgated under 28 U.S.C. Section 2075 and the General, Local and
Chambers Rules of the Bankruptcy Court.
11. "Bar Date" means the Bar Date for filing of proofs of claim
with respect to executory contracts and unexpired leases which are rejected
pursuant to this Plan or otherwise pursuant to section 365 of the Bankruptcy
Code.
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<PAGE>
12. "Beneficial Holder" means the Person or Entity holding the
beneficial interest in a Claim or Equity Interest.
13. "Business Day" means any day, other than a Saturday, Sunday
or legal holiday (as defined in Bankruptcy Rule 9006(a)).
14. "By-Laws" mean the By-Laws of the Reorganized Debtors, the
forms of which shall be Filed on or before the Confirmation Date.
15. "Cash" means cash and cash equivalents.
16. "Causes of Action" mean all actions, causes of action,
suits, debts, dues, sums of money, accounts, reckonings, bonds, bills,
specialities, covenants, contracts, controversies, agreements, promises,
variances, trespasses, damages or judgments.
17. "Chapter 11 Cases" means the cases under chapter 11 of the
Bankruptcy Code, commenced by the Debtors in the Bankruptcy Court.
18. "Claim" means a claim (as defined in section 101(5) of the
Bankruptcy Code) against the Debtors, including, but not limited to: (a) any
right to payment from the Debtors whether or not such right is reduced to
judgment, liquidated, unliquidated, contingent, matured, unmatured, disputed,
undisputed, legal, equitable, secured or unsecured; or (b) any right to an
equitable remedy for breach of performance if such performance gives rise to
a right of payment from the Debtors, whether or not such right to an
equitable remedy is reduced to judgment, fixed, contingent, matured,
unmatured, disputed, undisputed, secured or unsecured.
19. "Claim Holder" or "Claimant" means the Holder of a Claim.
20. "Class" means a category of Holders of Claims or Equity
Interests as set forth in Article III of the Plan.
21. "Committee" or "Committees" means a statutory official
committee (or committees, if more than one) appointed in the Chapter 11 Cases
pursuant to section 1102 of the Bankruptcy Code, if any.
22. "Common Stock" means the authorized common stock of
Holdings, New Holdings and Systems.
23. "Confirmation" means the entry of the Confirmation Order,
subject to all conditions specified in Article IX.A of the Plan having been
(i) satisfied or (ii) waived pursuant to Article IX.C.
24. "Confirmation Date" means the date upon which the
Confirmation Order is entered by the Bankruptcy Court in its docket, within
the meaning of Bankruptcy Rules 5003 and 9021.
25. "Confirmation Order" means the order of the Bankruptcy
Court confirming the Plan pursuant to section 1129 of the Bankruptcy Code.
26. "Consummation" means the occurrence of the Effective Date.
27. "Creditor" means any Holder of a Claim.
28. "Creditors' Committee" means that certain official
committee of general unsecured creditors appointed August 20, 1999,
consisting of Alliance Capital Management L.P., C.S. First Boston, HSBC Bank
USA, Merrill Lynch Phoenix Fund, Inc., Megtec Systems, Baldwin Technology
Corp. and Trace-a-matic Corp.
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<PAGE>
29. "D&O Releasees" means all officers, directors, employees,
attorneys, financial advisors, accountants, investment bankers, agents and
representatives of the Debtors and their subsidiaries who served in such
capacity on or after August 1, 1998 in each case in their capacity as such.
30. "Debtors" means Goss Graphic Systems, Inc., GGS Holdings,
Inc. and Goss Realty L.L.C., as debtors in the Chapter 11 Cases.
31. "Debtors in Possession" means Goss Graphic Systems, Inc.,
GGS Holdings, Inc. and Goss Realty LLC, as debtors in possession in the
Chapter 11 Cases.
32. "Delaware General Corporation Law" means title 8 of the
Delaware Code, as now in effect or hereafter amended.
33. "Delaware LLC Law" means title 6 of the Delaware Code, as
now in effect or hereafter amended.
34. "DIP Facility" means, collectively, that certain
Debtor-in-Possession Multicurrency Credit Agreement with the DIP Lenders and
the Amendment to Multicurrency Credit Agreement with the Prepetition Lenders
and Bankers Trust Company, as agent.
35. "DIP Lenders" means those certain financial institutions
party to the DIP Facility.
36. "Disclosure Statement" means the Disclosure Statement for
the Plan of Reorganization for Goss Graphic Systems, Inc., GGS Holdings, Inc.
and Goss Realty L.L.C. under chapter 11 of the Bankruptcy Code, as amended,
supplemented, or modified from time to time, describing the Plan, that is
prepared and distributed in accordance with sections 1125, 1126(b) and/or
1145 of the Bankruptcy Code and Bankruptcy Rule 3018 and/or other applicable
law.
37. "Disputed" means, with respect to any Claim or Equity
Interest, any Claim or Equity Interest: (a) listed on the Schedules as
unliquidated, disputed or contingent; or (b) as to which the Debtors or any
other party in interest have interposed a timely objection or request for
estimation in accordance with the Bankruptcy Code and the Bankruptcy Rules or
is otherwise disputed by the Debtors in accordance with applicable law, which
objection, request for estimation or dispute has not been withdrawn or
determined by a Final Order.
38. "Distribution Record Date" means the close of business on
the Business Day immediately preceding the Effective Date.
39. "Effective Date" means the date selected by the Debtors
which is a Business Day after the Confirmation Date on which: (a) no stay of
the Confirmation Order is in effect, and (b) all conditions specified in both
Article IX.A and IX.B of the Plan have been (i) satisfied or (ii) waived
pursuant to Article IX.C.
40. "Entity" means an entity as defined in section 101(15) of
the Bankruptcy Code.
41. "Equity Interest" means any equity interest of the Debtors,
including, but not limited to, all issued, unissued, authorized or
outstanding shares or stock (including the Common Stock), together with any
warrants, options or contract rights to purchase or acquire such interests at
any time.
42. "Estates" means the estates of the Debtors created by
section 541 of the Bankruptcy Code upon the commencement of the Chapter 11
Cases.
43. "File" or "Filed" means file or filed with the Bankruptcy
Court in the Chapter 11 Cases.
44. "Final Decree" means the decree contemplated under
Bankruptcy Rule 3022.
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45. "Final Order" means an order or judgment of the Bankruptcy
Court, or other court of competent jurisdiction with respect to the subject
matter, which has not been reversed, stayed, modified or amended, and as to
which the time to appeal or seek certiorari has expired and no appeal or
petition for certiorari has been timely taken, or as to which any appeal that
has been taken or any petition for certiorari that has been or may be filed
has been resolved by the highest court to which the order or judgment was
appealed or from which certiorari was sought.
46. "General Unsecured Claim" means any Unsecured Claim that is
not a Pre-petition Bank Lender Claim or Old Note Claim.
47. "Goss France" means Goss Systemes Graphiques Nantes SA.
48. "Goss Japan" means Goss Graphic Systems Japan Corporation.
49. "Goss UK" means Goss Graphic Systems, Limited.
50. "Holder" means a Person or Entity holding an Equity
Interest or Claim, and with respect to a vote on the Plan, means the
Beneficial Holder as of the Voting Record Date or any authorized signatory
who has completed and executed a Ballot or on whose behalf a Master Ballot
has been completed and executed in accordance with the Voting Instructions.
51. "Holdings" or "Goss Holdings" means GGS Holdings, Inc.,
debtor and debtor in possession in the above-captioned and numbered case.
52. "HSBC" means HSBC Bank USA (f/k/a Marine Midland Bank).
53. "Impaired Claim" means a Claim classified in an Impaired
Class.
54. "Impaired Class" means each of Classes H2, H4, H5, H6, H7,
S2, S4, S5, S6, R4, R5, and R6 as set forth in Article III of the Plan.
55. "LaSalle Deficiency Claim" means the Unsecured Claim
arising from or related to the LaSalle Mortgage, as such Claim is determined
in accordance with section 506(a) of the Bankruptcy Code.
56. "LaSalle Mortgage" means that certain $30,000,000 mortgage
by Realty for the benefit of LaSalle National Bank dated July 25, 1997,
together with all related notes, certificates, security agreements,
mortgages, pledges, indemnities, collateral assignments, undertakings,
guaranties, and other instruments and documents, as each may have been
amended or modified from time to time.
57. "LaSalle Secured Claim" means the Secured Claim arising
from or related to the LaSalle Mortgage.
58. "Lock-Up Agreement" means that certain Forbearance,
Lock-Up, and Voting Agreement dated July 27, 1999, by and among the Debtors,
Stonington, certain of the lenders under the Prepetition Bank Credit
Facilities and certain Holders of Old Notes that are signatories thereto.
59. "Management Equity" means that certain New Holdings Common
Stock and related Equity Interests provided to certain management of the
Debtors and/or Reorganized Debtors pursuant to the terms of the Lock-Up
Agreement.
60. "Master Ballots" mean the master ballots accompanying the
Disclosure Statement upon which the Nominees of the Beneficial Holders of the
Old Notes shall indicate acceptances or rejections of the Plan by the
Beneficial Holders in accordance with the Voting Instructions.
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<PAGE>
61. "Member Interest" means the authorized member interest of
Realty.
62. "New Bank Credit Facilities" means, collectively, the
Tranche A Revolving Credit Facility, the Tranche B Revolving Credit Facility
and the Term Loan Facility.
63. "New Holdings" means the new Delaware corporation created
on the Effective Date through a merger with Holdings whose articles of
incorporation and by-laws will be substantially similar to those of Holdings.
64. "New Holdings Common Stock" means the 15,000,000 shares of
Common Stock of New Holdings authorized pursuant to the Certificate of
Incorporation of New Holdings.
65. "New Notes" means those certain 12.25% Subordinated Notes
due 2005 issued by New Holdings, issued to the Holders of Allowed Claims in
Class S5, with the terms and conditions set forth in the Lock-Up Agreement,
the form of which shall be Filed on or before the Confirmation Date.
66. "New Notes Indenture" means the indenture, dated as of the
Effective Date, with respect to the New Notes to be entered into by New
Holdings and the Old Note Indenture Trustee who shall serve as indenture
trustee under the New Note Indenture.
67. "New Realty Member Interest" means the member interest of
the Reorganized Realty authorized pursuant to the Amended Certificate of
Formation.
68. "New Systems Common Stock" means the 100 shares of Common
Stock of the Reorganized Systems authorized pursuant to the Amended
Certificate of Incorporation.
69. "Nominee" means any Beneficial Holder whose securities were
registered or held of record in the name of his broker, dealer, commercial
bank, trust company, savings and loan or other nominee.
70. "Noteholder Releasees" means the members of the Prepetition
Noteholders Committee and other holders of Old Notes that are signatories to
the Lock-Up Agreement and their attorneys, financial advisors, accountants,
investment banker, agents and representatives.
71. "Old Note Claims" means all Claims arising from or related
to the Old Notes or the Old Note Indenture.
72. "Old Notes" mean the 12% notes due 2006, issued by Systems
under the Old Note Indenture.
73. "Old Note Indenture" means the Indenture, dated as of
October 15, 1996, between Systems and The Bank of New York, as trustee and
HSBC Bank USA as successor trustee, relating to the Old Notes.
74. "Other Priority Claims" mean any Claim accorded priority in
right of payment under section 507(a) of the Bankruptcy Code, other than a
Priority Tax Claim or an Administrative Claim.
75. "Other Secured Claims" mean, collectively, all Secured
Claims against the Debtors held by any Person or Entity, other than Claims
classified in Class H2, S2 and R2.
76. "Person" means a person as defined in section 101(41) of
the Bankruptcy Code.
77. "Petition Date" means the date on which the Debtors filed
their petition for relief commencing the Chapter 11 Case.
78. "Plan" means this Chapter 11 Plan of Reorganization, either
in its present form or as it may be altered, amended, modified or
supplemented from time to time in accordance with the Plan, the Bankruptcy
Code and the Bankruptcy Rules.
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<PAGE>
79. "Prepetition Bank Credit Facility" means that certain $200
million Amended and Restated Credit Agreement dated January 29, 1998, by and
among Systems, Goss Japan, Goss France and Goss UK, the Lenders designated
therein, Bankers Trust Company, as Administrative Agent and Credit Suisse
First Boston, as Syndication Agent, together with all related notes,
certificates, security agreements, mortgages, pledges, indemnities,
collateral assignments, undertakings, guaranties, and other instruments and
documents, as each may have been amended or modified from time to time.
80. "Prepetition Bank Secured Claims" means all Claims arising
from or relating to the Prepetition Bank Credit Facility, which Claims shall
be deemed Allowed without the need to file any proof of Claim.
81. "Prepetition Bank Unsecured Claims" means all Claims of
Holders of Unsecured Claims against Realty arising from Realty's guarantee of
the Prepetition Bank Credit Facility.
82. "Prepetition Lenders" means those certain financial
institutions party to the Prepetition Bank Credit Facility.
83. "Prepetition Lender Releasees" means the Prepetition
Lenders, the Administrative Agent under the Prepetition Bank Credit Facility,
and their attorneys, financial advisors, accountants, investment banker,
agents and representatives.
84. "Prepetition Noteholder Committee" means that committee of
certain holders of the Old Notes and the Old Notes Indenture Trustee
established prior to the Petition Date.
85. "Priority Tax Claim" means a Claim of a governmental unit
of the kind specified in section 507(a)(8) of the Bankruptcy Code.
86. "Pro Rata" means proportionately so that with respect to an
Allowed Claim, the ratio of (a) (i) the amount of property distributed on
account of a particular Allowed Claim to (ii) the amount of the Allowed
Claim, is the same as the ratio of (b) (i) the amount of property distributed
on account of all Allowed Claims of the Class in which the particular Allowed
Claim is included to (ii) the amount of all Allowed Claims in that Class.
87. "Professionals" means a Person or Entity (a) employed
pursuant to a Final Order in accordance with sections 327 and 1103 of the
Bankruptcy Code and to be compensated for services rendered prior to the
Effective Date, pursuant to sections 327, 328, 329, 330 and 331 of the
Bankruptcy Code, or (b) for which compensation and reimbursement has been
allowed by the Bankruptcy Court pursuant to section 503(b)(4) of the
Bankruptcy Code.
88. "Realty" or "Goss Realty" means Goss Realty L.L.C., debtor
and debtor in possession in the above-captioned and numbered case.
89. "Reorganized Debtors" means the Debtors and the Debtors in
Possession, or any successor thereto, by merger, consolidation, or otherwise,
on and after the Effective Date.
90. "Reorganized Holdings" means Holdings, or any successor
thereto, by merger, consolidation, or otherwise, on and after the Effective
Date.
91. "Reorganized Realty" means Realty, or any successor
thereto, by merger, consolidation, or otherwise, on and after the Effective
Date.
92. "Reorganized Systems" means Systems, or any successor
thereto, by merger, consolidation, or otherwise, on and after the Effective
Date.
93. "Rockwell" means Rockwell International Corporation, a
Delaware corporation.
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<PAGE>
94. "Rockwell Preferred Stock" means the 6.5% Redeemable
Pay-in-Kind Preferred Stock of Holdings issued to Rockwell.
95. "Schedules" mean the schedules of assets and liabilities,
schedules of executory contracts, and the statement of financial affairs as
the Bankruptcy Court requires the Debtors to file pursuant to section 521 of
the Bankruptcy Code, the Official Bankruptcy Forms and the Bankruptcy Rules,
as they may be amended and supplemented from time to time.
96. "Secured Claim" means (a) a Claim that is secured by a lien
on property in which the Estates have an interest, which lien is valid,
perfected and enforceable under applicable law or by reason of a Final Order,
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 Estates' 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 (b) a Claim Allowed under this Plan as a Secured Claim.
97. "Securities Act" means the Securities Act of 1933, 15
U.S.C. sections 77a-77aa, as now in effect or hereafter amended.
98. "Stonington" means Stonington Partners, Inc., a Delaware
corporation.
99. "Stonington Capital Contribution" means that certain $50
million contribution of capital to the Debtors made pursuant to the terms of
the Lock-Up Agreement, and in exchange for which on the Effective Date
Stonington shall receive 6,750,000 shares of New Holdings Common Stock,
subject to dilution by the Management Equity as provided under the Lock-Up
Agreement.
100. "Stonington Preferred Stock" means the 15% Cumulative
Senior Convertible Preferred Stock of Holdings issued to Stonington.
101. "Stonington Releasees" means Stonington and their current
and former parents, subsidiaries and affiliates and their respective
officers, directors, employees, attorneys, financial advisors, accountants,
investment bankers, agents and representatives, in each case in their
capacity as such.
102. "Systems" or "Goss Graphic Systems" means Goss Graphic
Systems, Inc., debtor and debtor in possession in the above-captioned and
numbered case.
103. "Term Loan Facility" means that certain $150 million Term
Loan Facility, by and among Systems, certain of its affiliates, and the
Prepetition Lenders, the form of which shall be Filed on or before the
Confirmation Date and which is referenced in the Lock-Up Agreement.
104. "Tranche A Revolving Credit Facility" means that certain
$50 million Revolving Credit Facility, by and among Systems, certain of its
affiliates and the lender parties thereto (excluding Stonington), the form of
which shall be Filed on or before the Confirmation Date and which is
referenced in the Lock-Up Agreement.
105. "Tranche B Revolving Credit Facility" means that certain
$50 million Revolving Credit Facility, by and among Systems, certain of its
affiliates and the Prepetition Lenders, the form of which shall be Filed on
or before the Confirmation Date and which is referenced in the Lock-Up
Agreement.
106. "Unimpaired Claim" means an unimpaired Claim within the
meaning of section 1124 of the Bankruptcy Code.
107. "Unimpaired Class" means an unimpaired Class within the
meaning of section 1124 of the Bankruptcy Code.
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<PAGE>
108. "Unsecured Claim" means any Claim against the Debtors that
is not a Secured Claim, Administrative Claim, Priority Tax Claim or Other
Priority Claim.
109. "Voting Instructions" mean the instructions for voting on
the Plan contained in the section of the Disclosure Statement entitled
"PROCESS OF VOTING AND CONFIRMATION; VOTING ON THE PLAN" and in the Ballots
and the Master Ballots.
110. "Voting Record Date" means July 27, 1999.
ARTICLE II.
ADMINISTRATIVE AND PRIORITY TAX CLAIMS
A. ADMINISTRATIVE CLAIMS
Subject to the provisions of section 330(a) and 331 of the
Bankruptcy Code, each Holder of an Allowed Administrative Claim will be paid
the full unpaid amount of such Allowed Administrative Claim in Cash on the
Effective Date, or upon such other terms as may be agreed upon by such Holder
and the Reorganized Debtors or otherwise upon order of the Bankruptcy Court;
provided, however, that Allowed Administrative Claims representing
obligations incurred in the ordinary course of business or otherwise assumed
by the Debtors pursuant to the Plan will be assumed on the Effective Date and
paid or performed by the Reorganized Debtors when due in accordance with the
terms and conditions of the particular agreements governing such obligations.
B. PRIORITY TAX CLAIMS
On the Effective Date, each Holder of a Priority Tax Claim due and
payable on or prior to the Effective Date shall be paid Cash in an amount
equal to the amount of such Allowed Claim, or shall be paid on account of its
Allowed Claim on such other terms as have been or may be agreed upon by such
Holder and the Debtors. The amount of any Priority Tax Claim that is not an
Allowed Claim or that is not otherwise due and payable on or prior to the
Effective Date, and the rights of the Holder of such Claim, if any, to
payment in respect thereof shall (i) be determined in the manner in which the
amount of such Claim and the rights of the Holder of such Claim would have
been resolved or adjudicated if the Chapter 11 Cases had not been commenced,
(ii) survive the Effective Date and Consummation of the Plan as if the
Chapter 11 Cases had not been commenced, and (iii) not be discharged pursuant
to section 1141 of the Bankruptcy Code. In accordance with section 1124 of
the Bankruptcy Code, the Plan shall leave unaltered the legal, equitable, and
contractual rights of each Holder of a Priority Tax Claim.
ARTICLE III.
CLASSIFICATION AND TREATMENT
OF CLASSIFIED CLAIMS AND EQUITY INTERESTS
A. SUMMARY
The categories of Claims and Equity Interests listed below classify
Claims and Equity Interests for all purposes, including voting, confirmation
and distribution pursuant to the Plan and pursuant to sections 1122 and
1123(a)(1) of the Bankruptcy Code. A Claim or Equity Interest shall be deemed
classified in a particular Class only to the extent that the Claim or Equity
Interest qualifies within the description of that Class and shall be deemed
classified in a different Class to the extent that any remainder of such
Claim or Equity Interest qualifies within the description of such different
ClaSection A Claim or Equity Interest is in a particular Class only to the
extent that such Claim or Equity Interest is Allowed in that Class and has
not been paid or otherwise settled prior to the Effective Date.
THE ESTATES OF THE DEBTORS HAVE NOT BEEN CONSOLIDATED, SUBSTANTIVELY
OR OTHERWISE. EXCEPT AS PROVIDED IN THE LOCK-UP AGREEMENT, THE CLAIMS HELD
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<PAGE>
AGAINST ONE OF THE DEBTORS WILL BE SATISFIED SOLELY FROM THE CASH AND ASSETS
OF SUCH DEBTOR. EXCEPT AS SPECIFICALLY SET FORTH HEREIN, NOTHING IN THIS PLAN
OR THE DISCLOSURE STATEMENT SHALL CONSTITUTE OR BE DEEMED TO CONSTITUTE AN
ADMISSION THAT ONE OF THE DEBTORS IS SUBJECT TO OR LIABLE FOR ANY CLAIM
AGAINST THE OTHER DEBTOR. THE CLAIMS OF CREDITORS THAT HOLD CLAIMS AGAINST
ALL THREE DEBTORS WILL BE TREATED AS SEPARATE CLAIMS WITH RESPECT TO EACH
DEBTOR'S ESTATE FOR ALL PURPOSES (INCLUDING, BUT NOT LIMITED TO,
DISTRIBUTIONS AND VOTING), AND SUCH CLAIMS WILL BE ADMINISTERED AS PROVIDED
IN THE PLAN.
The classification of Claims and Equity Interests against Holdings
pursuant to this Plan is as follows:
<TABLE>
<CAPTION>
CLASS STATUS VOTING RIGHTS
----- ------ -------------
<S> <C> <C>
Class H1 -- Other Priority Claims Unimpaired -- not entitled to vote
Class H2 -- Prepetition Bank Secured Claims Impaired -- entitled to vote
Class H3 -- Other Secured Claims Unimpaired -- not entitled to vote
Class H4 -- General Unsecured Claims Impaired -- not entitled to vote
Class H5 -- Stonington Preferred Equity Interests Impaired -- not entitled to vote
Class H6 -- Rockwell Preferred Equity Interests Impaired -- not entitled to vote
Class H7 -- Equity Interests Impaired -- not entitled to vote
</TABLE>
The classification of Claims and Equity Interests against Systems
pursuant to this Plan is as follows:
<TABLE>
<CAPTION>
CLASS STATUS VOTING RIGHTS
----- ------ -------------
<S> <C> <C>
Class S1 -- Other Priority Claims Unimpaired -- not entitled to vote
Class S2 -- Prepetition Bank Secured Claims Impaired -- entitled to vote
Class S3 -- Other Secured Claims Unimpaired -- not entitled to vote
Class S4 -- General Unsecured Claims Impaired -- entitled to vote
Class S5 -- Old Note Claims Impaired -- entitled to vote
Class S6 -- Equity Interests Impaired -- not entitled to vote
</TABLE>
The classification of Claims and Equity Interests against Realty
pursuant to this Plan is as follows:
<TABLE>
<CAPTION>
CLASS STATUS VOTING RIGHTS
----- ------ -------------
<S> <C> <C>
Class R1 -- Other Priority Claims Unimpaired -- not entitled to vote
Class R2 -- LaSalle Secured Claims Unimpaired -- not entitled to vote
Class R3 -- Other Secured Claims Unimpaired -- not entitled to vote
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
CLASS STATUS VOTING RIGHTS
----- ------ -------------
<S> <C> <C>
Class R4 -- Bank Unsecured Claims Impaired -- entitled to vote
Class R5 -- General Unsecured Claims Impaired -- entitled to vote
Class R6 -- LaSalle Deficiency Claims Impaired -- entitled to vote
Class R7 -- Equity Interests Impaired -- not entitled to vote
</TABLE>
B. CLASSIFICATION AND TREATMENT OF CLAIMS AGAINST HOLDINGS
1. CLASS H1 -- OTHER PRIORITY CLAIMS
(a) CLASSIFICATION: Class H1 consists of all Other
Priority Claims against Holdings.
(b) TREATMENT: The legal, equitable and contractual
rights of the Holders of Class H1 Claims are unaltered by the Plan.
Unless the Holder of such Claim and Holdings agree to a different
treatment, each Holder of an Allowed Class H1 Claim shall receive one
of the following alternative treatments, at the election of the Debtor:
(i) to the extent then due and owing on the
Effective Date, such Claim will be paid in full in Cash by
Reorganized Holdings;
(ii) to the extent not due and owing on the
Effective Date, such Claim (A) will be paid in full in Cash by
Reorganized Holdings, or (B) will be paid in full in Cash by
Reorganized Holdings when and as such Claim becomes due and
owing in the ordinary course of business; or
(iii) such Claim will be otherwise treated in any
other manner so that such Claims shall otherwise be rendered
unimpaired pursuant to section 1124 of the Bankruptcy Code.
Any default with respect to any Class H1 Claim that existed immediately
prior to the filing of the Chapter 11 Case shall be deemed cured upon
the Effective Date.
(c) VOTING: Class H1 is not impaired and the Holders of
Class H1 Claims are conclusively deemed to have accepted the Plan
pursuant to section 1126(f) of the Bankruptcy Code. Therefore, the
Holders of Claims in Class H1 are not entitled to vote to accept or
reject the Plan.
2. CLASS H2 -- PREPETITION BANK SECURED CLAIMS
(a) CLASSIFICATION: Class H2 consists of the Bank Secured
Claims against Holdings.
(b) TREATMENT: In full and complete satisfaction of all
Claims in Class H2, the Holders of Class H2 Claims will receive the
treatment set forth for Holders of Class S2 Claims described below.
(c) VOTING: Class H2 is impaired and the Holders of Class
H2 Claims are entitled to vote to accept or reject the Plan.
3. CLASS H3 -- OTHER SECURED CLAIMS
(a) CLASSIFICATION: Class H3 consists of the Other
Secured Claims against Holdings.
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<PAGE>
(b) TREATMENT: The legal, equitable and contractual
rights of the Holders of Class H3 Claims are unaltered by the Plan.
Unless the Holder of such Claim and Holdings agree to a different
treatment, each Holder of an Allowed Class H3 Claim shall receive one
of the following alternative treatments, at the election of Holdings:
(i) the legal, equitable and contractual rights
to which such Claim entitles the Holder thereof shall be
unaltered by the Plan;
(ii) Holdings shall surrender all collateral
securing such Claim to the Holder thereof, without
representation or warranty by or recourse against the Debtor
or Reorganized Holdings; or
(iii) such Claim will be otherwise treated in any
other manner so that such Claims shall otherwise be rendered
unimpaired pursuant to section 1124 of the Bankruptcy Code.
Any default with respect to any Class H3 Claim that existed
immediately prior to the filing of the Chapter 11 Case shall be deemed
cured upon the Effective Date.
(c) VOTING: Class H3 is not impaired and the Holders of
Class H3 Claims are conclusively deemed to have accepted the Plan
pursuant to section 1126(f) of the Bankruptcy Code. Therefore, the
Holders of Claims in Class H3 are not entitled to vote to accept or
reject the Plan.
4. CLASS H4 -- GENERAL UNSECURED CLAIMS
(a) CLASSIFICATION: Class H4 consists of the Claims of
Holders of General Unsecured Claims against Holdings.
(b) TREATMENT: On the Effective Date, the Holders of
General Unsecured Claims shall neither receive any distributions nor
retain any property under the Plan.
(c) VOTING: Class H4 is impaired, but because no
distributions will be made to Holders of Class H4 General Unsecured
Claims nor will such Holders retain any property, such Holders are
deemed to reject the Plan pursuant to section 1126(g) of the Bankruptcy
Code. Class H4 is not entitled to vote to accept or reject the Plan.
5. CLASS H5 -- STONINGTON PREFERRED EQUITY INTERESTS
(a) CLASSIFICATION: Class H5 consists of all Equity
Interests held by Stonington relating to the 10% Cumulative Senior
Convertible Preferred Stock of Holdings.
(b) TREATMENT: On the Effective Date, the Holders of
Stonington Preferred Equity Interests shall neither receive any
distributions nor retain any property under the Plan. All Stonington
Preferred Stock issued before the Petition Date will be canceled.
(c) VOTING: Class H5 is impaired, but because no
distributions will be made to Holders of Class H5 Equity Interests nor
will such Holders retain any property, such Holders are deemed to
reject the Plan pursuant to section 1126(g) of the Bankruptcy Code.
Class H5 is not entitled to vote to accept or reject the Plan.
6. CLASS H6 -- ROCKWELL PREFERRED EQUITY INTERESTS
(a) CLASSIFICATION: Class H6 consists of all Equity
Interests held by Rockwell against Holdings relating to the 6.5%
Redeemable Preferred Stock.
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<PAGE>
(b) TREATMENT: On the Effective Date, the Holders of
Other Equity Interests shall neither receive any distributions nor
retain any property under the Plan. All Rockwell Preferred Stock issued
before the Petition Date will be canceled.
(c) VOTING: Class H6 is impaired, but because no
distributions will be made to Holders of Class H6 Equity Interests nor
will such Holders retain any property, such Holders are deemed to
reject the Plan pursuant to section 1126(g) of the Bankruptcy Code.
Class H6 is not entitled to vote to accept or reject the Plan.
7. CLASS H7 -- EQUITY INTERESTS
(a) CLASSIFICATION: Class H7 consists of all other Equity
Interests against Holdings.
(b) TREATMENT: On the Effective Date, the Holders of
other Equity Interests shall neither receive any distributions nor
retain any property under the Plan. All Common Stock issued before the
Petition Date will be canceled.
(c) VOTING: Class H7 is impaired, but because no
distributions will be made to Holders of Class H7 Equity Interests nor
will such Holders retain any property, such Holders are deemed to
reject the Plan pursuant to section 1126(g) of the Bankruptcy Code.
Class H7 is not entitled to vote to accept or reject the Plan.
C. CLASSIFICATION AND TREATMENT OF CLAIMS AGAINST SYSTEMS
1. CLASS S1 -- OTHER PRIORITY CLAIMS
(a) CLASSIFICATION: Class S1 consists of all Other
Priority Claims against Systems.
(b) TREATMENT: The legal, equitable and contractual
rights of the Holders of Class S1 Claims are unaltered by the Plan.
Unless the Holder of such Claim and Systems agree to a different
treatment, each Holder of an Allowed Class S1 Claim shall receive one
of the following alternative treatments, at the election of Systems:
(i) to the extent then due and owing on the
Effective Date, such Claim will be paid in full in Cash by the
Reorganized Systems;
(ii) to the extent not due and owing on the
Effective Date, such Claim (A) will be paid in full in Cash by
the Reorganized Systems, or (B) will be paid in full in Cash
by the Reorganized Systems when and as such Claim becomes due
and owing in the ordinary course of business; or
(iii) such Claim will be otherwise treated in any
other manner so that such Claims shall otherwise be rendered
unimpaired pursuant to section 1124 of the Bankruptcy Code.
Any default with respect to any Class S1 Claim that existed immediately
prior to the filing of the Chapter 11 Case shall be deemed cured upon
the Effective Date.
(c) VOTING: Class S1 is not impaired and the Holders of
Class S1 Claims are conclusively deemed to have accepted the Plan
pursuant to section 1126(f) of the Bankruptcy Code. Therefore, the
Holders of Claims in Class S1 are not entitled to vote to accept or
reject the Plan.
2. CLASS S2 -- PREPETITION BANK SECURED CLAIMS
(a) CLASSIFICATION: Class S2 consists of the Prepetition
Bank Secured Claims against Systems.
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<PAGE>
(b) TREATMENT: On or prior to the Effective Date, each
Prepetition Bank Secured Claim will be satisfied by the Holder
receiving and providing its Pro Rata share of the Tranche B Revolving
Credit Facility and the Term Loan Facility, so that each Class S2 Claim
is paid in full. The form and substance of the definitive documentation
constituting the Tranche B Revolving Credit Facility and the Term Loan
Facility shall be satisfactory to sufficient Holders of Class S2 claims
so that such Class will be deemed to accept such documentation.
(c) VOTING: Class S2 is impaired and the Holders of Class
S2 Claims are entitled to vote to accept or reject the Plan.
3. CLASS S3 -- OTHER SECURED CLAIMS
(a) CLASSIFICATION: Class S3 consists of the Other
Secured Claims against Systems.
(b) TREATMENT: The legal, equitable and contractual
rights of the Holders of Class S3 Claims are unaltered by the Plan.
Unless the Holder of such Claim and Systems agree to a different
treatment, each Holder of an Allowed Class S3 Claim shall receive one
of the following alternative treatments, at the election of Systems:
(i) the legal, equitable and contractual rights
to which such Claim entitles the Holder thereof shall be
unaltered by the Plan;
(ii) Systems shall surrender all collateral
securing such Claim to the Holder thereof, without
representation or warranty by or recourse against Systems or
the Reorganized Systems; or
(iii) such Claim will be otherwise treated in any
other manner so that such Claims shall otherwise be rendered
unimpaired pursuant to section 1124 of the Bankruptcy Code.
Any default with respect to any Class S3 Claim that existed immediately
prior to the filing of the Chapter 11 Case shall be deemed cured upon
the Effective Date.
(c) VOTING: Class S3 is not impaired and the Holders of
Class S3 Claims are conclusively deemed to have accepted the Plan
pursuant to section 1126(f) of the Bankruptcy Code. Therefore, the
Holders of Claims in Class S3 are not entitled to vote to accept or
reject the Plan.
4. CLASS S4 -- GENERAL UNSECURED CLAIMS
(a) CLASSIFICATION: Class S4 consists of the Claims of
Holders of General Unsecured Claims against Systems.
(b) TREATMENT: Unless the Holder of such Claim and
Systems agree to a different treatment, each Holder of an Allowed Class
S4 Claim shall be paid the full amount of its Allowed Class S4 Claim,
without interest, payable in three equal installments on the first
Business Day after the dates that are three, six and nine months after
the Effective Date, or on such dates thereafter if the Claim becomes
first payable in the ordinary course of business at such time. Unless
the Holder of such Claim and Systems agree to a different treatment,
and except as otherwise specifically provided herein, each Holder of a
non-Allowed Class S4 Claim shall preserve all of its rights, claims and
defenses against Systems; provided, however, that if any such
non-Allowed Class S4 Claim becomes a liquidated, undisputed, fixed
Claim (i) prior to the date that is three months after the Effective
Date, such Claim shall be paid as if such Claim were allowed as of the
Effective Date, or (ii) prior to the date that is six months after the
Effective Date, such Claim shall be paid two-thirds of the Allowed
amount on the date that is six months after the Effective Date and
one-third of the Allowed amount on the date that is nine months after
the Effective Date, or (iii)
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<PAGE>
prior to the date that is nine months after the Effective Date, such
Claim shall be paid in full on the date that is nine months after the
Effective Date; provided, further, that Systems shall preserve all of
its rights, claims and defenses against each Holder of a non-Allowed
Class S4 Claim. Any default with respect to any Class S4 Claim that
existed immediately prior to the filing of the Chapter 11 Cases shall
be deemed cured upon the Effective Date.
(c) VOTING: Class S4 is impaired and the Holders of Class
S4 Claims are entitled to vote to accept or reject the Plan.
5. CLASS S5 -- OLD NOTE CLAIMS
(a) CLASSIFICATION: Class S5 consists of the Claims of
Holders of Old Notes against Systems.
(b) TREATMENT: On or as soon as practicable after the
Effective Date, each Holder of an Allowed Old Note Claim shall receive,
in full and final satisfaction of such Claim, a Pro Rata distribution
of the New Notes and a Pro Rata share of 3,250,000 shares of New
Holdings Common Stock, subject to dilution by the Management Equity as
provided under the Lock-Up Agreement.
(c) VOTING: Class S5 is impaired and the Holders of
Allowed Class S5 Claims are entitled to vote to accept or reject the
Plan.
6. CLASS S6 -- EQUITY INTERESTS
(a) CLASSIFICATION: Class S6 consists of all Equity
Interests against Systems.
(b) TREATMENT: On the Effective Date, the Holders of
Equity Interests shall neither receive any distributions nor retain any
property under the Plan. All Common Stock issued before the Petition
Date will be canceled.
(c) VOTING: Class S6 is impaired, but because no
distributions will be made to Holders of Class S6 Equity Interests nor
will such Holders retain any property, such Holders are deemed to
reject the Plan pursuant to section 1126(g) of the Bankruptcy Code.
Class S6 is not entitled to vote to accept or reject the Plan.
D. CLASSIFICATION AND TREATMENT OF CLAIMS AGAINST REALTY
1. CLASS R1 -- OTHER PRIORITY CLAIMS
(a) CLASSIFICATION: Class R1 consists of all Other
Priority Claims against Realty.
(b) TREATMENT: The legal, equitable and contractual
rights of the Holders of Class R1 Claims are unaltered by the Plan.
Unless the Holder of such Claim and Realty agree to a different
treatment, each Holder of an Allowed Class R1 Claim shall receive one
of the following alternative treatments, at the election of Realty:
(i) to the extent then due and owing on the
Effective Date, such Claim will be paid in full in Cash by the
Reorganized Debtor;
(ii) to the extent not due and owing on the
Effective Date, such Claim (A) will be paid in full in Cash by
the Reorganized Debtor, or (B) will be paid in full in Cash by
the Reorganized Debtors when and as such Claim becomes due and
owing in the ordinary course of business; or
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(iii) such Claim will be otherwise treated in any
other manner so that such Claims shall otherwise be rendered
unimpaired pursuant to section 1124 of the Bankruptcy Code.
Any default with respect to any Class R1 Claim that existed immediately
prior to the filing of the Chapter 11 Case shall be deemed cured upon
the Effective Date.
(c) VOTING: Class R1 is not impaired and the Holders of
Class R1 Claims are conclusively deemed to have accepted the Plan
pursuant to section 1126(f) of the Bankruptcy Code. Therefore, the
Holders of Claims in Class R1 are not entitled to vote to accept or
reject the Plan.
2. CLASS R2 -- LASALLE SECURED CLAIMS
(a) CLASSIFICATION: Class R2 consists of the LaSalle
Secured Claim against Realty.
(b) TREATMENT: The legal, equitable and contractual
rights of the Holder of the Class R2 Claim is unaltered by the Plan.
Unless the Holder of such Claim and Realty agree to a different
treatment, the Holder of an Allowed Class R2 Claim shall receive one of
the following alternative treatments, at the election of Realty:
(i) the legal, equitable and contractual rights
to which such Claim entitles the Holder thereof shall be
unaltered by the Plan;
(ii) Realty shall surrender all collateral
securing such Claim to the Holder thereof, without
representation or warranty by or recourse against Realty or
the Reorganized Realty; or
(iii) such Claim will be otherwise treated in any
other manner so that such Claims shall otherwise be rendered
unimpaired pursuant to section 1124 of the Bankruptcy Code.
Any default with respect to any Class R2 Claim that existed immediately
prior to the filing of the Chapter 11 Case shall be deemed cured upon
the Effective Date.
(c) VOTING: Class R2 is not impaired and the Holder of
the Class R2 Claim is conclusively deemed to have accepted the Plan
pursuant to section 1126(f) of the Bankruptcy Code. Therefore, the
Holder of the Claim in Class R2 is not entitled to vote to accept or
reject the Plan.
3. CLASSES R3 -- OTHER SECURED CLAIMS
(a) CLASSIFICATION: Class R3 consists of the Other
Secured Claims against Realty.
(b) TREATMENT: The legal, equitable and contractual
rights of the Holders of Class R3 Claims are unaltered by the Plan.
Unless the Holder of such Claim and Realty agree to a different
treatment, each Holder of an Allowed Class R3 Claim shall receive one
of the following alternative treatments, at the election of Realty:
(i) the legal, equitable and contractual rights
to which such Claim entitles the Holder thereof shall be
unaltered by the Plan;
(ii) Realty shall surrender all collateral
securing such Claim to the Holder thereof, without
representation or warranty by or recourse against Realty or
the Reorganized Realty; or
(iii) such Claim will be otherwise treated in any
other manner so that such Claims shall otherwise be rendered
unimpaired pursuant to section 1124 of the Bankruptcy Code.
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Any default with respect to any Class R3 Claim that existed immediately
prior to the filing of the Chapter 11 Case shall be deemed cured upon
the Effective Date.
(c) VOTING: Class R3 is not impaired and the Holders of
Class R3 Claims are conclusively deemed to have accepted the Plan
pursuant to section 1126(f) of the Bankruptcy Code. Therefore, the
Holders of Claims in Class R3 are not entitled to vote to accept or
reject the Plan.
4. CLASS AND R4 -- PREPETITION BANK UNSECURED CLAIMS
(a) CLASSIFICATION: Class R4 consists of the Claims of
Holders of Unsecured Claims against Realty arising from Realty's
guarantee of the Prepetition Bank Credit Facility.
(b) TREATMENT: In full and complete satisfaction of all
claims in Class R4, the Holders of Class R4 Claims will receive the
treatment set forth for Holders of Class S2 Claims described above.
(c) VOTING: Class R4 is impaired and the Holders of Class
R4 Claims are entitled to vote to accept or reject the Plan.
5. CLASS R5 -- GENERAL UNSECURED CLAIMS
(a) CLASSIFICATION: Class R5 consists of the Claims of
Holders of General Unsecured Claims against Realty.
(b) TREATMENT: On the Effective Date, the Holders of
General Unsecured Claims shall share with Class R6, pro rata, pari
passu, all assets or property of the Estate after payment in full of
Classes R1 through R3.
(c) VOTING: Class R5 is impaired and is entitled to vote
to accept or reject the Plan.
6. CLASS R6 -- LASALLE DEFICIENCY CLAIM
(a) CLASSIFICATION: Class R6 consists of the LaSalle
Deficiency Claim against Realty.
(b) TREATMENT: On the Effective Date, the Holders of
LaSalle Deficiency claims shall share with Classes R5, pro rata, pari
passu, all assets or property of the Estate after payment in full of
Classes R1 through R3.
(c) VOTING: Class R6 is impaired and is entitled to vote
to accept or reject the Plan.
7. CLASS R7 -- EQUITY INTERESTS
(a) CLASSIFICATION: Class R7 consists of all Equity
Interests against Realty.
(b) TREATMENT: On the Effective Date, the Holders of
Equity Interests shall neither receive any distributions nor retain any
property under the Plan. All Member Interests issued before the
Petition Date will be canceled.
(c) VOTING: Class R7 is impaired, but because no
distributions will be made to Holders of Class R7 Equity Interests nor
will such Holders retain any property, such Holders are deemed to
reject the Plan pursuant to section 1126(g) of the Bankruptcy Code.
Class R7 is not entitled to vote to accept or reject the Plan.
E. SPECIAL PROVISION GOVERNING UNIMPAIRED CLAIMS
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Except as otherwise provided in the Plan, including as provided in
Article X, nothing under the Plan shall affect the Debtors or the Reorganized
Debtors rights in respect of any Unimpaired Claims, including, but not
limited to, all rights in respect of legal and equitable defenses to or
setoffs or recoupments against such Unimpaired Claims.
ARTICLE IV.
ACCEPTANCE OR REJECTION OF THE PLAN
A. VOTING CLASSES
Each Holder of an Allowed Claim in Classes H2, S2, S4, S5, R4, R5,
and R6 shall be entitled to vote to accept or reject the Plan.
B. ACCEPTANCE BY IMPAIRED CLASSES
An Impaired Class of Claims shall have accepted the Plan if (a) the
Holders (other than any Holder designated under section 1126(e) of the
Bankruptcy Code) of at least two-thirds in amount of the Allowed Claims
actually voting in such Class have voted to accept the Plan and (b) the
Holders (other than any Holder designated under section 1126(e) of the
Bankruptcy Code) of more than one-half in number of the Allowed Claims
actually voting in such Class have voted to accept the Plan.
C. PRESUMED ACCEPTANCE OF PLAN
Classes H1, H3, S1, S3, R1, R2 and R3 are unimpaired under the Plan,
and, therefore, conclusively are presumed to have accepted the Plan pursuant
to section 1126(f) of the Bankruptcy Code.
D. PRESUMED REJECTION OF PLAN
Classes H4, H5, H6, H7, S6, and R7 are impaired and shall receive no
distributions, and, therefore, are presumed to have rejected the Plan
pursuant to section 1126(g) of the Bankruptcy Code.
E. NON-CONSENSUAL CONFIRMATION
The Debtors will seek Confirmation of the Plan under section 1129(b)
of the Bankruptcy Code, to the extent applicable, in view of the deemed
rejection by Classes H4, H5, H6, H7, S5, S6, and R7. In the event that any
Impaired Class of Claims shall fail to accept the Plan in accordance with
section 1129(a)(8) of the Bankruptcy Code, the Debtors reserve the right to
request that the Bankruptcy Court confirm the Plan in accordance with section
1129(b) of the Bankruptcy Code.
ARTICLE V.
MEANS FOR IMPLEMENTATION OF THE PLAN
A. CONTINUED CORPORATE EXISTENCE AND VESTING OF ASSETS IN THE REORGANIZED
DEBTORS
Systems and Realty shall, as Reorganized Debtors, continue to exist
after the Effective Date as separate entities, with, in the case of Systems,
all the powers of a corporation or, in the case of Realty, a limited
liability company, under the laws of the State of Delaware and without
prejudice to any right to alter or terminate such existence (whether by
merger or otherwise) under such applicable state law. As of the Effective
Date, Holdings shall be merged into New Holdings with New Holdings becoming
the surviving entity. Except as otherwise provided in the Plan, the Lock-Up
Agreement, the New Bank Credit Facilities, the New Notes, or any agreement,
instrument or indenture relating thereto, on or after the Effective Date, all
property of the Estates, and any property
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acquired by the Debtors or the Reorganized Debtors under the Plan, shall vest
in the Reorganized Debtors, free and clear of all Claims, liens, charges, or
other encumbrances and Equity Interests. On and after the Effective Date, the
Reorganized Debtors may operate their businesses and may use, acquire or
dispose of property and compromise or settle any Claims or Equity Interests,
without supervision or approval by the Bankruptcy Court and free of any
restrictions of the Bankruptcy Code or Bankruptcy Rules, other than those
restrictions expressly imposed by the Plan and the Confirmation Order. In
accordance with section 1109(b) of the Bankruptcy Code, nothing in this
Article V shall preclude any party in interest from appearing and being heard
on any issue in the Chapter 11 Cases.
B. CANCELLATION OF NOTES, INSTRUMENTS, MEMBER INTERESTS, COMMON STOCK AND
STOCK OPTIONS
On the Effective Date, except to the extent provided otherwise in
the Plan, (i) all notes, instruments, certificates, and other documents of
the Debtors evidencing the Other Secured Claims, and Prepetition Bank Secured
Claims, (ii) the Old Notes, and (iii) all Equity Interests, including all
Common Stock and Member Interests, shall be canceled and the obligations of
the Debtors thereunder, shall be discharged. On the Effective Date, except to
the extent provided otherwise in the Plan, any indenture relating to any of
the foregoing, including, without limitation, the Old Note Indenture, shall
be deemed to be canceled, and the obligations of the debtors thereunder,
except for the obligation to indemnify the Old Notes Indenture Trustee, shall
be discharged; PROVIDED HOWEVER, that the indenture or other agreement that
governs the rights of the Holder of a Claim and that is administered by the
Old Notes Indenture Trustee, an agent or servicer shall, continue in effect
solely for the purposes of (i) allowing such Old Notes Indenture Trustee,
agent or servicer to make the distributions to be made on account of such
Claims under the Plan and (ii) permitting such Old Indenture Trustee, agent
or servicer to maintain any rights or liens it may have for fees, costs, and
expenses under such indenture or other agreement. Upon payment in full of the
fees and expenses of the Old Notes Indenture Trustee pursuant to Article
VII.B hereof, the liens (if any) of the Old Notes Indenture Trustee shall
terminate.
C. ISSUANCE OF NEW SECURITIES; EXECUTION OF RELATED DOCUMENTS
On the Effective Date, the Reorganized Debtors shall issue all
securities, notes, instruments, certificates, and other documents required to
be issued pursuant to the Plan, including, without limitation, the New Notes,
the New Bank Credit Facilities, the New Holdings Common Stock, the New
Systems Common Stock and the New Realty Member Interests, each of which shall
be distributed as provided in the Plan. The Reorganized Debtors shall execute
and deliver such other agreements, documents and instruments, including the
New Notes Indenture, as are required to be executed pursuant to the terms of
the Plan or the Lock-Up Agreement. The New Notes and the New Notes Indenture
shall be in a form and substance substantially similar to the Old Notes and
the Old Notes Indenture. Any changes to the Old Notes or the Old Notes
Indenture shall be reasonably satisfactory to the Creditors' Committee and
the postpetition lenders.
D. NEW HOLDINGS COMMON STOCK
In exchange for receiving the New Systems Common Stock and in
exchange for the treatment provided to Class H2 Claims by Systems, on the
Effective Date, New Holdings will transfer to Systems the New Holdings Common
Stock and the New Notes for distribution in accordance with the terms of the
Plan.
E. NEW SYSTEMS COMMON STOCK
In exchange for receiving the New Holdings Common Stock and the New
Notes, on the Effective Date, Systems will transfer to New Holdings the New
Systems Common Stock.
F. NEW REALTY MEMBER INTERESTS
In exchange for the treatment provided to Class R4 Claims by
Systems, on the Effective Date, Realty will transfer to Systems the New
Realty Member Interests.
G. CORPORATE GOVERNANCE, DIRECTORS AND OFFICERS, AND CORPORATE ACTION
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1. AMENDED CERTIFICATES OF INCORPORATION AND FORMATION
On the Effective Date, the Reorganized Debtors will file their
Amended Certificates of Incorporation or Formation with the Secretary of the
State of Delaware in accordance with sections 102 and 103 of the Delaware
General Corporation Law and section 201 of the Delaware LLC Law. The Amended
Certificates of Incorporation and Formation will, among other things,
prohibit the issuance of nonvoting equity securities to the extent required
by section 1123(a) of the Bankruptcy Code, change the number of authorized
shares of New Holdings Common Stock to 15,000,000, and eliminate the
authorization of preferred stock by Systems. After the Effective Date, the
Reorganized Debtors may amend and restate their Amended Certificates of
Incorporation and Formation and other constituent documents as permitted by
the Delaware General Corporation Law and the Delaware LLC Law.
2. DIRECTORS, OFFICERS, AND MEMBERS OF THE REORGANIZED DEBTORS
Subject to any requirement of Bankruptcy Court approval, pursuant to
section 1129(a)(5), the Debtors will disclose, on or prior to the
Confirmation Date, the identity and affiliations of any Person proposed to
serve (i) on the initial board of directors of New Holdings and Systems and
(ii) to serve as a member of the Reorganized Realty. To the extent any such
Person is an Insider, the nature of any compensation for such Person will
also be disclosed. The classification and composition of the boards of
directors and the membership shall be consistent with the Amended
Certificates of Incorporation or Formation and as set forth in the Lock-Up
Agreement. Each such director, officer and member shall serve from and after
the Effective Date pursuant to the terms of the Amended Certificates of
Incorporation or Formation, other constituent documents, the Delaware General
Corporation Law or the Delaware LLC Law. New Holdings will have a nine-person
board of directors consisting of the following designations: two management
directors; two independent directors; three directors appointed by Stonington
and two directors appointed by the Prepetition Noteholders Committee.
3. CORPORATE ACTION
On the Effective Date, the adoption of the Amended Certificates of
Incorporation, Certificates of Formation or similar constituent documents,
the amendment of the By-laws, the selection of directors, officers and
members for the Reorganized Debtors, and all actions contemplated by the Plan
shall be authorized and approved in all respects (subject to the provisions
of the Plan). All matters provided for in the Plan involving the corporate
structure of the Debtors or the Reorganized Debtors, and any corporate action
required by the Debtors or the Reorganized Debtors in connection with the
Plan, shall be deemed to have occurred and shall be in effect, without any
requirement of further action by the security holders or directors of the
Debtors or the Reorganized Debtors. On the Effective Date, the appropriate
officers and members of the Reorganized Debtors and members of the board of
directors of the Reorganized Debtors are authorized and directed to issue,
execute and deliver the agreements, documents, securities and instruments
contemplated by the Plan in the name of and on behalf of the Reorganized
Debtors.
H. SOURCES OF CASH FOR PLAN DISTRIBUTION
All Cash necessary for the Reorganized Debtors to make payments
pursuant to the Plan shall be obtained from existing Cash balances, the
operations of the Debtors or Reorganized Debtors, or post-confirmation
borrowing under other available facilities of the Debtors or Reorganized
Debtors including, without limitation, to the extent available, the New Bank
Credit Facilities and the Stonington Capital Contribution. The Reorganized
Debtors may also make such payments using Cash received from its subsidiaries
through the Reorganized Debtors consolidated cash management systems and from
advances or dividends from such subsidiaries in the ordinary course.
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ARTICLE VI.
TREATMENT OF EXECUTORY CONTRACTS
AND UNEXPIRED LEASES
A. ASSUMPTION OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES
Immediately prior to the Effective Date, all executory contracts or
unexpired leases of the Reorganized Debtors will be deemed assumed in
accordance with the provisions and requirements of sections 365 and 1123 of
the Bankruptcy Code except those executory contracts and unexpired leases
that (1) have been rejected by order of the Bankruptcy Court, (2) are the
subject of a motion to reject pending on the Effective Date, (3) are
identified on a list to be Filed with the Bankruptcy Court on or before the
Confirmation Date, as to be rejected, or (4) are rejected pursuant to the
terms of the Plan. Entry of the Confirmation Order by the Bankruptcy Court
shall constitute approval of such assumptions and rejections pursuant to
sections 365(a) and 1123 of the Bankruptcy Code.
B. CLAIMS BASED ON REJECTION OF EXECUTORY CONTRACTS OR UNEXPIRED LEASES
All proofs of claim with respect to Claims arising from the
rejection of executory contracts or unexpired leases, if any, must be Filed
with the Bankruptcy Court within sixty (60) days after the date of entry of
an order of the Bankruptcy Court approving such rejection. Any Claims arising
from the rejection of an executory contract or unexpired lease not Filed
within such times will be forever barred from assertion against the Debtors
or Reorganized Debtors, their estates and property unless otherwise ordered
by the Bankruptcy Court or provided in this Plan, all such Claims for which
proofs of claim are required to be Filed will be, and will be treated as,
General Unsecured Claims subject to the provisions of Article VIII hereof.
C. CURE OF DEFAULTS FOR EXECUTORY CONTRACTS AND UNEXPIRED LEASES ASSUMED
Any monetary amounts by which each executory contract and unexpired
lease to be assumed pursuant to the Plan is in default shall be satisfied,
pursuant to section 365(b)(1) of the Bankruptcy Code, by payment of the
default amount in Cash on the Effective Date or on such other terms as the
parties to such executory contracts or unexpired leases may otherwise agree.
In the event of a dispute regarding: (1) the amount of any cure payments, (2)
the ability of the Reorganized Debtors or any assignee to provide "adequate
assurance of future performance" (within the meaning of section 365 of the
Bankruptcy Code) under the contract or lease to be assumed, or (3) any other
matter pertaining to assumption, the cure payments required by section
365(b)(1) of the Bankruptcy Code shall be made following the entry of a Final
Order resolving the dispute and approving the assumption.
D. INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES
The obligations of the Debtors to indemnify any Person or Entity
serving at any time on or prior to the Effective Date as one of their
directors, officers, members or employees by reason of such Person's or
Entity's service in such capacity, or as a director, officer, member or
employee of any other corporation or legal entity, to the extent provided in
the Debtors' constituent documents, by a written agreement with the Debtors,
the Delaware General Corporation Law or the Delaware LLC Law, shall be deemed
and treated as executory contracts that are assumed by the Debtors pursuant
to the Plan and section 365 of the Bankruptcy Code as of the Effective Date.
Accordingly, such indemnification obligations shall be treated as General
Unsecured Claims, and shall survive unimpaired and unaffected by entry of the
Confirmation Order, irrespective of whether such indemnification is owed for
an act or event occurring before or after the Petition Date.
E. COMPENSATION AND BENEFIT PROGRAMS
Except as otherwise expressly provided hereunder, all employment and
severance policies, and all compensation and benefit plans, policies, and
programs of the Debtors applicable to their employees, retirees and
non-employee directors and the employees and retirees of its subsidiaries,
including, without limitation, all savings plans, retirement plans, health
care plans, disability plans, severance benefit plans, incentive plans, and
life,
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accidental death, and dismemberment insurance plans are treated as executory
contracts under the Plan and on the Effective Date will be assumed pursuant
to the provisions of sections 365 and 1123 of the Bankruptcy Code.
ARTICLE VII.
PROVISIONS GOVERNING DISTRIBUTIONS
A. DISTRIBUTIONS FOR CLAIMS ALLOWED AS OF THE EFFECTIVE DATE
1. Except as otherwise provided in this Article VII or as may
be ordered by the Bankruptcy Court, distributions to be made on the Effective
Date on account of Claims that are allowed as of the Effective Date and are
entitled to receive distributions under the Plan shall be made on the
Effective Date, or as soon as practicable thereafter. Distributions on
account of Claims that become Allowed Claims after the Effective Date shall
be made pursuant to Articles VII.C and VIII.C below.
2. For purposes of determining the accrual of interest or
rights in respect of any other payment from and after the Effective Date, the
New Notes, the New Bank Credit Facilities, the New Holdings Common Stock, the
New Systems Common Stock and the New Realty Member Interests to be issued
under the Plan shall be deemed issued as of the Effective Date regardless of
the date on which they are actually dated, authenticated or distributed;
provided, however, that the Reorganized Debtors shall withhold any actual
payment until such distribution is made and no interest shall accrue or
otherwise be payable on any such withheld amounts.
B. DISTRIBUTIONS BY THE REORGANIZED DEBTORS; DISTRIBUTIONS WITH RESPECT TO
DEBT SECURITIES
Except as provided herein, the Reorganized Debtors shall make all
distributions required under the Plan. Notwithstanding the provisions of
Article V.B above regarding the cancellation of the Old Note Indenture, the
Old Note Indenture shall continue in effect to the extent necessary to allow
the Old Notes Indenture Trustee to receive New Notes and New Holdings Common
Stock on behalf of the Holders of the Old Notes and make distributions
pursuant to the Plan on account of the Old Notes as agent for the Reorganized
Debtor. The Old Notes Indenture Trustee providing services related to
distributions to the Holders of Allowed Old Note Claims shall receive, from
the Reorganized Debtors, reasonable compensation for such services and
reimbursement of reasonable expenses incurred in connection with such
services and upon the presentation of invoices to the Reorganized Debtors.
These payments shall be made on terms agreed to with the Reorganized Debtors.
C. DELIVERY AND DISTRIBUTIONS AND UNDELIVERABLE OR UNCLAIMED DISTRIBUTIONS
1. DELIVERY OF DISTRIBUTIONS IN GENERAL
Distributions to Holders of Allowed Claims shall be made at the
address of the Holder of such Claim as indicated on records of the Debtors.
Except as otherwise provided by the Plan or the Bankruptcy Code with respect
to undeliverable distributions, distributions to Holders of Prepetition Bank
Secured Claims, and Old Note Claims shall be made in accordance with the
provisions of the applicable indenture, participation agreement, loan
agreement or analogous instrument or agreement, and distributions will be
made to Holders of record as of the Distribution Record Date.
2. UNDELIVERABLE DISTRIBUTIONS
(a) HOLDING OF UNDELIVERABLE DISTRIBUTIONS. If any
Allowed Claim Holder's distribution is returned to the Reorganized
Debtors as undeliverable, no further distributions shall be made to
such Holder unless and until the Reorganized Debtors are notified in
writing of such Holder's then-current addreSection Undeliverable
distributions shall remain in the possession of the Reorganized Debtors
pursuant to this Article VII.C until such time as a distribution
becomes deliverable. Undeliverable cash (including interest and
maturities on the New Notes) shall not be entitled to any interest,
dividends or other accruals of any kind.
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(b) AFTER DISTRIBUTIONS BECOME DELIVERABLE. Within 20
days after the end of each calendar quarter following the Effective
Date, the Reorganized Debtors shall make all distributions that become
deliverable during the preceding calendar quarter.
(c) FAILURE TO CLAIM UNDELIVERABLE DISTRIBUTIONS. In an
effort to ensure that all holders of valid claims receive their
allocated distributions, the Company will file with the Bankruptcy
Court, a listing of unclaimed distribution holders. This list will be
maintained for as long as the bankruptcy cases stay open. Any Holder of
an Allowed Claim that does not assert a Claim pursuant to the Plan for
an undeliverable distribution within five years after the Effective
Date shall have its Claim for such undeliverable distribution
discharged and shall be forever barred from asserting any such Claim
against the Reorganized Debtors or their property. In such cases: (i)
any Cash held for distribution on account of such Claims shall be
property of the Reorganized Debtors, free of any restrictions thereon;
and (ii) any New Notes held for distribution on account of such Claims
shall be canceled and of no further force or effect. Nothing contained
in the Plan shall require the Reorganized Debtors to attempt to locate
any Holder of an Allowed Claim.
(d) COMPLIANCE WITH TAX REQUIREMENTS. In connection with
the Plan, to the extent applicable, the Reorganized Debtors shall
comply with all tax withholding and reporting requirements imposed on
it by any governmental unit, and all distributions pursuant to the Plan
shall be subject to such withholding and reporting requirements.
D. DISTRIBUTION RECORD DATE
As of the close of business on the Distribution Record Date, the
transfer register for the Old Notes as maintained by Systems, the Old Notes
Indenture Trustee, or their respective agents, shall be closed and there
shall be no further changes in the record holders of any Old Notes. Moreover,
Reorganized Systems shall have no obligation to recognize the transfer of any
Old Notes occurring after the Distribution Record Date, and shall be entitled
for all purposes herein to recognize and deal only with those Holders of
record as of the close of business on the Distribution Record Date.
E. TIMING AND CALCULATION OF AMOUNTS TO BE DISTRIBUTED
Unless otherwise provided for in section III of the Plan or agreed
to by the Holder of a Claim and the Debtors, on the Effective Date, each
Holder of an Allowed Claim against the Debtors shall receive the full amount
of the distributions that the Plan provides for Allowed Claims in the
applicable Class Beginning on the date that is 20 calendar days after
the end of the calendar quarter following the Effective Date and 20 calendar
days after the end of each calendar quarter thereafter, distributions shall
also be made, pursuant to Article VIII.C below, to Holders of Disputed Claims
in any such Class whose Claims were allowed during the preceding calendar
quarter. Such quarterly distributions shall also be in the full amount that
the Plan provides for Allowed Claims in the applicable Class.
F. MINIMUM DISTRIBUTION
The New Notes will be issued in denominations of $1. No New Note
will be issued in a denomination of less than $1 (including any notes
reflecting payment in kind interest). In the event a Holder of an Allowed
Class S5 Claim is entitled to distribution of New Notes that is a fraction of
$1, the actual payment or issuance made will reflect a rounding of such
fraction down or up to the nearest whole dollar, but in any case not to
exceed the total issuance of notes.
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G. SETOFFS
The Reorganized Debtors may, pursuant to section 553 of the
Bankruptcy Code or applicable non-bankruptcy law, set off against any Allowed
Claim and the distributions to be made pursuant to the Plan on account of
such Claim (before any distribution is made on account of such Claim), the
claims, rights and causes of action of any nature that the Debtors or
Reorganized Debtors may hold against the Holder of such Allowed Claim;
provided, however, that neither the failure to effect such a setoff nor the
allowance of any Claim hereunder shall constitute a waiver or release by the
Debtors or Reorganized Debtors of any such claims, rights and causes of
action that the Debtors or Reorganized Debtors may possess against such
Holder.
H. SURRENDER OF CANCELED INSTRUMENTS OR SECURITIES
Except as set forth in subsection VII.I below, as a condition
precedent to receiving any distribution pursuant to the Plan on account of an
Allowed Claim evidenced by the instruments, securities or other documentation
canceled pursuant to Article V.B above, the Holder of such Claim shall tender
the applicable instruments, securities or other documentation evidencing such
Claim to the Reorganized Debtors. Any New Notes, New Holdings Common Stock,
New Systems Common Stock or New Realty Member Interests to be distributed
pursuant to the Plan on account of any such Claim shall, pending such
surrender, be treated as an undeliverable distribution pursuant to Article
VII.C above.
1. NOTES
Each Holder of an Old Note Claim shall tender its Old Note relating
to such Claim to the Reorganized Debtors in accordance with written
instructions to be provided to such Holders by the Reorganized Debtors as
promptly as practicable following the Effective Date. Such instructions shall
specify that delivery of such Old Note will be effected, and risk of loss and
title thereto will pass, only upon the proper delivery of such Old Notes with
a letter of transmittal in accordance with such instructions. All surrendered
Old Notes shall be marked as canceled.
2. FAILURE TO SURRENDER CANCELED INSTRUMENTS
Any Holder of Old Notes that fails to surrender or is deemed to have
failed to surrender the applicable Old Notes required to be tendered
hereunder within five years after the Effective Date shall have its Claim for
a distribution pursuant to the Plan on account of such Old Note discharged
and shall be forever barred from asserting any such Claim against the
Reorganized Debtors or its respective property. In such cases, any New Notes
held for distribution on account of such Claim shall be disposed of pursuant
to the provisions set forth above in Article VII.C.
I. LOST, STOLEN, MUTILATED OR DESTROYED DEBT SECURITIES
In addition to any requirements under the Old Note Indenture or any
related agreement (including the Prepetition Bank Credit Facility, if
required), any Holder of a Claim evidenced by an Old Note or a note issued
under the Prepetition Bank Credit Facility that has been lost, stolen,
mutilated or destroyed shall, in lieu of surrendering such Old Note or a note
issued under the Prepetition Bank Credit Facility, deliver to the Reorganized
Debtors: (1) an affidavit of loss reasonably satisfactory to the Reorganized
Debtors or the Old Notes Indenture Trustee, as applicable, setting forth the
unavailability of note or instrument; and (2) such additional security or
indemnity as may reasonably be required by the Reorganized Debtors to hold
the Reorganized Debtors or the Old Notes Indenture Trustee, as applicable,
harmless from any damages, liabilities or costs incurred in treating such
individual as a Holder of an Allowed Claim. Upon compliance with this Article
VII.I by a Holder of a Claim evidenced by an Old Note or a note issued under
the Prepetition Bank Credit Facility, such Holder shall, for all purposes
under the Plan, be deemed to have surrendered such note or debenture.
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ARTICLE VIII.
PROCEDURES FOR RESOLVING DISPUTED CLAIMS
A. PROSECUTION OF OBJECTIONS TO CLAIMS
After the Confirmation Date, the Debtors and the Reorganized Debtors
shall have the exclusive authority to File objections, settle, compromise,
withdraw or litigate to judgment objections to Claims. From and after the
Confirmation Date, the Debtors and the Reorganized Debtors may settle or
compromise any Disputed Claim without approval of the Bankruptcy Court. The
Debtors also reserve the right to resolve any Disputed Claims outside the
Bankruptcy Court under applicable governing law.
B. ESTIMATION OF CLAIMS
The Debtors or the Reorganized Debtors may, at any time, request
that the Bankruptcy Court estimate any contingent or unliquidated Claim
pursuant to section 502(c) of the Bankruptcy Code regardless of whether the
Debtors or the Reorganized Debtors have previously objected to such Claim or
whether the Bankruptcy Court has ruled on any such objection, and the
Bankruptcy Court will retain jurisdiction to estimate any Claim at any time
during litigation concerning any objection to any Claim, including during the
pendency of any appeal relating to any such objection. In the event that the
Bankruptcy Court estimates any contingent or unliquidated Claim, that
estimated amount will constitute either the allowed amount of such Claim or a
maximum limitation on such Claim, as determined by the Bankruptcy Court. If
the estimated amount constitutes a maximum limitation on such Claim, the
Debtors or Reorganized Debtors may elect to pursue any supplemental
proceedings to object to any ultimate payment on such Claim. All of the
aforementioned Claims objection, estimation and resolution procedures are
cumulative and not necessarily exclusive of one another. Claims may be
estimated and subsequently compromised, settled, withdrawn or resolved by any
mechanism approved by the Bankruptcy Court.
C. PAYMENTS AND DISTRIBUTIONS ON DISPUTED CLAIMS
Notwithstanding any provision in the Plan to the contrary, except as
otherwise agreed by the Reorganized Debtors in its sole discretion, no
partial payments and no partial distributions will be made with respect to a
Disputed Claim until the resolution of such disputes by settlement or Final
Order. Subject to the provisions of this Article VIII.C, as soon as
practicable after a Disputed Claim becomes an Allowed Claim, the Holder of
such Allowed Claim will receive all payments and distributions to which such
Holder is then entitled under the Plan. Notwithstanding the foregoing, any
Person or Entity who holds both an Allowed Claim(s) and a Disputed Claim(s)
will receive the appropriate payment or distribution on the Allowed Claim(s),
although, except as otherwise agreed by the Reorganized Debtors in their sole
discretion, no payment or distribution will be made on the Disputed Claim(s)
until such dispute is resolved by settlement or Final Order. In the event
there are Disputed Claims requiring adjudication and resolution, the Debtors
reserve the right, or upon order of the Court, to establish appropriate
reserves for potential payment of such claims.
ARTICLE IX.
CONDITIONS PRECEDENT TO CONFIRMATION
AND CONSUMMATION OF THE PLAN
A. CONDITION PRECEDENT TO CONFIRMATION
It shall be a condition to Confirmation of the Plan that the
following condition shall have been satisfied or waived pursuant to the
provisions of Article IX.C of the Plan: approval of all provisions, terms and
conditions of the Plan in the Confirmation Order.
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B. CONDITIONS PRECEDENT TO CONSUMMATION
It shall be a condition to Consummation of the Plan that the
following conditions shall have been satisfied or waived pursuant to the
provisions of Article IX.C of the Plan:
1. the Confirmation Order shall have been signed by the
Bankruptcy Court and duly entered on the docket for the Chapter 11 Case by
the Clerk of the Bankruptcy Court in form and substance acceptable to the
Debtor;
2. the Confirmation Order shall be a Final Order;
3. the Tranche A Revolving Credit Facility shall be available
to the Debtors in an amount not less than $50 million and on such terms and
conditions as set forth in the Lock-Up Agreement; and
4. the Tranche B Revolving Credit Facility shall be available
to the Debtors in an amount not less than $50 million and on such terms and
conditions as set forth in the Lock-Up Agreement;
5. the Term Loan Facility shall be available to the Debtors in
an amount not less than $150 million and on such terms and conditions as set
forth in the Lock-Up Agreement; and
6. the Stonington Capital Contribution shall be available to
the Debtors in an amount not less than $50 million and on such terms and
conditions as set forth in the Lock-Up Agreement.
C. WAIVER OF CONDITIONS
Except as otherwise required by the Lock-Up Agreement, the Debtors,
in their sole discretion, may waive any of the conditions to Confirmation of
the Plan and/or to Consummation of the Plan set forth in Articles IX.A and
IX.B of the Plan at any time, without notice, without leave or order of the
Bankruptcy Court, and without any formal action other than proceeding to
confirm and/or consummate the Plan.
D. EFFECT OF NON-OCCURRENCE OF CONDITIONS TO CONSUMMATION
If the Confirmation Order is vacated, the Plan shall be null and
void in all respects and nothing contained in the Plan or the Disclosure
Statement shall: (1) constitute a waiver or release of any Claims by or
against, or any Equity Interests in, the Debtor; (2) prejudice in any manner
the rights of the Debtor; or (3) constitute an admission, acknowledgment,
offer or undertaking by the Debtors in any respects.
ARTICLE X.
RELEASE, INJUNCTIVE AND RELATED PROVISIONS
A. SUBORDINATION
The classification and manner of satisfying all Claims and Equity
Interests and the respective distributions and treatments under the Plan take
into account and/or conform to the relative priority and rights of the Claims
and Equity Interests in each Class in connection with any contractual, legal
and equitable subordination rights relating thereto whether arising under
general principles of equitable subordination, section 510(b) of the
Bankruptcy Code or otherwise, and any and all such rights are settled,
compromised and released pursuant to the Plan. The Confirmation Order shall
permanently enjoin, effective as of the Effective Date, all Persons and
Entities from enforcing or attempting to enforce any such contractual, legal
and equitable subordination rights satisfied, compromised and settled
pursuant to this Article X.A.
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<PAGE>
B. LIMITED RELEASES BY THE DEBTORS
Except as otherwise specifically provided in the Plan, for good and
valuable consideration, including, but not limited to, the commitment and
obligation of Stonington to provide financial support necessary for
consummation of the Plan, including the obligations and undertakings of
Stonington Releasees and Noteholder Releasees set forth in the Lock-Up
Agreement, including Stonington's agreement to the treatment of its Claims
and Equity Interests as provided in the plan, the agreement of the
Prepetition Lenders to their treatment set forth in the Plan and their
financial support thereof, and the service of the D&O Releasees to facilitate
the expeditious reorganization of the Debtors and the implementation of the
restructuring contemplated by the Plan, Stonington Releasees, the D&O
Releasees, the Prepetition Lender Releasees and the Noteholder Releasees, on
and after the Effective Date, are released by the Debtors and the Reorganized
Debtors and their subsidiaries from any and all claims (as defined in section
101(5) of the Bankruptcy Code), obligations, rights, suits, damages, causes
of action, remedies and liabilities whatsoever, whether known or unknown,
foreseen or unforeseen, existing or hereafter arising, in law, equity or
otherwise, that the Debtors or their subsidiaries would have been legally
entitled to assert in their own right (whether individually or collectively)
or on behalf of the Holder of any Claim or Equity Interest or other Person or
Entity, based in whole or in part upon any act or omission, transaction,
agreement, event or other occurrence taking place on or before the Effective
Date, except in the case of the D&O Releasees, for claims or liabilities (i)
in respect of any loan, advance or similar payment by the Debtors or their
subsidiaries to any such Person, or (ii) in respect of any contractual
obligation owed by such Person to the Debtors or their subsidiaries.
C. LIMITED RELEASES BY HOLDER OF CLAIMS
On and after the Effective Date, each Holder of a Claim (i) who has
accepted the Plan, or (ii) who is entitled to receive a distribution of
property under the Plan other than the Holder of a claim in a Class who signs
and returns a timely Ballot and marks either Item 4 or Item 5 of the Ballot
(whichever is applicable), shall be deemed to have unconditionally released
the Stonington Releasees, the D&O Releasees, the Prepetition Lender Releasees
and the Noteholder Releasees from any and all claims (as defined in section
101(5) of the Bankruptcy Code), obligations, rights, suits, damages, causes
of action, remedies and liabilities whatsoever, whether known or unknown,
foreseen or unforeseen, existing or hereafter arising, in law, equity or
otherwise, that such Person or Entity would have been legally entitled to
assert (whether individually or collectively), based in whole or in part upon
any act or omission, transaction, agreement, event or other occurrence taking
place on or before the Effective Date in any way relating or pertaining to
(x) the Debtors or the Reorganized Debtors, (y) the Debtors Chapter 11 Cases,
or (z) the negotiation, formulation and preparation of the Plan, the Lock-Up
Agreement or any related agreements, instruments or other documents.
D. PRESERVATION OF RIGHTS OF ACTION
Except as otherwise provided in the Plan or in any contract,
instrument, release, indenture or other agreement entered into in connection
with the Plan, in accordance with section 1123(b) of the Bankruptcy Code, the
Reorganized Debtors shall retain and may exclusively enforce any claims,
rights and Causes of Action that the Debtors or Estates may hold against any
Person or Entity. The Reorganized Debtors may pursue such retained claims,
rights or causes of action, as appropriate, in accordance with the best
interests of the Reorganized Debtors. On the Effective Date, the Reorganized
Debtors shall be deemed to waive and release any claims, rights or Causes of
Action arising under sections 544, 547, 548, 549 and 550 of the Bankruptcy
Code held by the Reorganized Debtors against any Person or Entity.
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<PAGE>
E. EXCULPATION
The Debtors, the Reorganized Debtors, the Stonington Releasees, the
Noteholder Releasees, the D&O Releasees, the Prepetition Lender Releasees and
the Committee(s) and their members and Professionals (acting in such
capacity) shall neither have nor incur any liability to any Person or Entity
for any act taken or omitted to be taken in connection with or related to the
formulation, preparation, dissemination, implementation, administration,
Confirmation or Consummation of the Plan, the Disclosure Statement or any
contract, instrument, release or other agreement or document created or
entered into in connection with the Plan, including the Lock-Up Agreement, or
any other act taken or omitted to be taken in connection with the Debtors
Chapter 11 Cases; provided, however, that the foregoing provisions of this
Article X.E shall have no effect on the liability of any Person or Entity
that results from any such act or omission that is determined in a Final
Order to have constituted gross negligence or willful misconduct.
F. INJUNCTION
From and after the Effective Date, all Persons and Entities are
permanently enjoined from commencing or continuing in any manner, any suit,
action or other proceeding, on account of or respecting any claim,
obligation, debt, right, Cause of Action, remedy or liability released or to
be released pursuant to this Article X.
ARTICLE XI.
RETENTION OF JURISDICTION
Notwithstanding the entry of the Confirmation Order and the
occurrence of the Effective Date, the Bankruptcy Court shall retain such
jurisdiction over the Chapter 11 Cases after the Effective Date as legally
permissible, including jurisdiction to:
A. allow, disallow, determine, liquidate, classify, estimate
or establish the priority or secured or unsecured status of any Claim,
including the resolution of any request for payment of any Administrative
Claim and the resolution of any and all objections to the allowance or
priority of Claims;
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 the Debtors are parties or with respect to which the Debtors may be
liable and to hear, determine and, if necessary, liquidate, any Claims
arising therefrom, including those matters related to the amendment after the
Effective Date pursuant to Article VI above to add any executory contracts or
unexpired leases to the list of executory contracts and unexpired leases to
be rejected;
D. ensure that distributions to Holders of Allowed Claims are
accomplished pursuant to the provisions of the Plan, including ruling on any
motion Filed pursuant to Article VII;
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 that may be pending on the Effective Date;
F. enter such orders as may be necessary or appropriate to
implement or consummate the provisions of the Plan and all contracts,
instruments, releases, indentures and other agreements or documents created
in connection with the Plan or the Disclosure Statement;
G. resolve any cases, controversies, suits or disputes that
may arise in connection with the Consummation, interpretation or enforcement
of the Plan or any Person's or Entity's obligations incurred in connection
with the Plan;
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<PAGE>
H. issue injunctions, enter and implement other orders or take
such other actions as may be necessary or appropriate to restrain
interference by any Person or Entity with Consummation or enforcement of the
Plan, except as otherwise provided herein;
I. resolve any cases, controversies, suits or disputes with
respect to the releases, injunction and other provisions contained in Article
X and enter such orders as may be necessary or appropriate to implement such
releases, injunction and other provisions;
J. enter and implement such orders as are necessary or
appropriate if the Confirmation Order is for any reason modified, stayed,
reversed, revoked or vacated;
K. determine any other matters that may arise in connection
with or relate to the Plan, the Disclosure Statement, the Confirmation Order
or any contract, instrument, release, indenture or other agreement or
document created in connection with the Plan or the Disclosure Statement; and
L. enter an order and/or final decree concluding the Chapter
11 Cases.
ARTICLE XII.
MISCELLANEOUS PROVISIONS
A. DISSOLUTION OF COMMITTEE(S)
On the Effective Date, the Committee(s) shall dissolve and members
shall be released and discharged from all rights and duties arising from, or
related to, the Chapter 11 Cases.
B. PAYMENT OF STATUTORY FEES
All fees payable pursuant to section 1930 of title 28 of the United
States Code, as determined by the Bankruptcy Court at the hearing pursuant to
section 1128 of the Bankruptcy Code, shall be paid on or before the Effective
Date.
C. FEES AND EXPENSES OF THE PREPETITION NOTEHOLDERS COMMITTEE
The reasonable fees and expenses incurred after the Petition Date by
the Prepetition Noteholders Committee's counsel and financial advisor
(together with the reasonable fees and expenses of local counsel) through the
date of the appointment of the Creditors' Committee with respect to these
Chapter 11 Cases shall be paid (without application by or on behalf of any
such professionals to the Bankruptcy Court and without notice and a hearing)
by the Reorganized Debtors as an Administrative Claim under the Plan. If the
Reorganized Debtors and any such professional retained by the Prepetition
Noteholders Committee cannot agree on the amount of fees and expenses to be
paid to such professional, the amount of any such fees and expenses shall be
determined by the Bankruptcy Court.
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<PAGE>
D. DISCHARGE OF DEBTORS
Except as otherwise provided herein and the Lock-Up Agreement: (1)
the rights afforded in the Plan and the treatment of all Claims and Equity
Interests therein, shall be in exchange for and in complete satisfaction,
discharge and release of Claims and Equity Interests of any nature
whatsoever, including any interest accrued on such Claims from and after the
Petition Date, against the Debtors and the Debtors in Possession, or any of
their assets or properties, (2) on the Effective Date, all such Claims
against, and Equity Interests in the Debtors shall be satisfied, discharged
and released in full and (3) all Persons and Entities shall be precluded from
asserting against the Reorganized Debtors, their successors or their assets
or properties any other or further Claims or Equity Interests based upon any
act or omission, transaction or other activity of any kind or nature that
occurred prior to the Confirmation Date. Except as expressly provided herein,
the Plan does not impair the rights of any Holders of Class S4 Claims,
including, but not limited to: (i) Holders of Claims under executory and
nonexecutory contracts and leases; (ii) persons or entities entitled to
contractual or common law rights of indemnity, contribution and/or
reimbursement; or (iii) claims of any party or entity relating to any
environmental condition as to which any of the Debtors are or may be liable.
E. MODIFICATION OF PLAN
Subject to the limitations contained herein, (1) the Debtors reserve
the right, in accordance with the Bankruptcy Code and the Bankruptcy Rules,
to amend or modify the Plan prior to the entry of the Confirmation Order and
(2) after the entry of the Confirmation Order, the Debtors or the Reorganized
Debtors, as the case may be, may, upon order of the Bankruptcy Court, amend
or modify the Plan, in accordance with section 1127(b) of the Bankruptcy
Code, or remedy any defect or omission or reconcile any inconsistency in the
Plan in such manner as may be necessary to carry out the purpose and intent
of the Plan.
F. REVOCATION OF PLAN
The Debtors, subject to the Lock-Up Agreement, reserve the right, at
any time prior to the entry of the Confirmation Order, to revoke and withdraw
the Plan.
G. SUCCESSORS AND ASSIGNS
The rights, benefits and obligations of any Person or Entity named
or referred to in the Plan shall be binding on, and shall inure to the
benefit of any heir, executor, administrator, successor or assign of such
Person or Entity.
H. RESERVATION OF RIGHTS
Except as expressly set forth herein, this Plan shall have no force
or effect unless the Bankruptcy Court shall enter the Confirmation Orders.
None of the filing of this Plan, any statement or provision contained herein,
or the taking of any action by the Debtor with respect to this Plan shall be
or shall be deemed to be an admission or waiver of any rights of the Debtors
with respect to the Holders of Claims or Equity Interests prior to the
Effective Date.
I. SECTION 1146 EXEMPTION
Pursuant to section 1146(c) of the Bankruptcy Code, the issuance,
transfer, or exchange of any security under the Plan, or the making or
delivery of an instrument of transfer under this Plan, may not be taxed under
any law imposing a stamp tax or similar tax.
J. FURTHER ASSURANCES
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<PAGE>
The Debtors, the Reorganized Debtors and all Holders of Claims
receiving distributions under the Plan and all other parties in interest
shall, from time to time, prepare, execute and deliver any agreements or
documents and take any other actions as may be necessary or advisable to
effectuate the provisions and intent of this Plan.
K. SERVICE OF DOCUMENTS
Any pleading, notice or other document required by the Plan to be
served on or delivered to the Reorganized Debtors shall be sent by first
class U.S. mail, postage prepaid to:
Goss Holdings, Inc.
Goss Graphic Systems, Inc.
Goss Realty, L.L.C
700 Oakmont Lane
Westmont, Illinois 60559-5546
Attn: General Counsel
with copies to:
Kirkland & Ellis
200 E. Randolph Drive
Chicago, Illinois 60601
Attn: Matthew N. Kleiman, Esq.
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
590 Madison Avenue
20th Floor
New York, New York 10022
Attn: Daniel H. Golden, Esq.
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<PAGE>
L. FILING OF ADDITIONAL DOCUMENTS
On or before the Effective Date, the Debtors may file with the
Bankruptcy Court such agreements and other documents as may be necessary or
appropriate to effectuate and further evidence the terms and conditions of
the Plan.
Respectfully Submitted,
GOSS GRAPHIC SYSTEMS, INC. and
GGS HOLDINGS, INC.
By:
-------------------------------------
Name:
Title:
GOSS REALTY, L.L.C.
By:
-------------------------------------
Name:
Title:
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<PAGE>
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
IN RE: )
) CHAPTER 11
GOSS GRAPHIC SYSTEMS, INC., ET AL.,(1) )
) CASE NO. 99-2756 (PJW)
DEBTORS. ) (JOINTLY ADMINISTERED)
)
- --------------------------------------------------------------------------------
AMENDMENT TO SECOND AMENDED PLAN OF REORGANIZATION OF
GOSS GRAPHIC SYSTEMS, INC., GGS HOLDINGS, INC. AND
GOSS REALTY, L.L.C. UNDER CHAPTER 11 OF THE BANKRUPTCY CODE
- ------------------------------------------------------------------------------
The above-captioned debtors and debtors in possession in the
above-captioned chapter 11 cases (the "Debtors") as proponents of the Second
Amended Plan of Reorganization of Goss Graphic Systems, Inc., GGS Holdings,
Inc. and Goss Realty, L.L.C. under Chapter 11 of the Bankruptcy Code (the
"Plan") hereby make the following amendments to the Plan:
1. The following definition will be added to Article I.B. of the Plan:
"New Rockwell Equity Distribution" means the 350,000 shares of New
Holdings Common Stock issued to Rockwell International Corporation
or its designee, subject to dilution by the Management Equity as
provided under the Lock-Up Agreement.
2. The definition of Stonington Capital Contribution in Article I.B.
of the Plan will be deleted in its entirety and replaced with the following
language:
"Stonington Capital Contribution" means that certain $50 million
contribution of capital to the Debtors made pursuant to the terms
of the Lock-Up Agreement, and in exchange for which on the Effective
Date Stonington shall receive 6,513,750 shares of New Holdings Common
Stock, subject to dilution by the Management Equity as provided under
the Lock-Up Agreement.
3. Article III.C.5.(b), Treatment of Class S5 -- Old Note Claims will
be deleted in its entirety and replaced with the following language:
- ----------------------
(1) The Debtors are the following entities: Goss Graphic Systems, Inc.; GGS
Holdings, Inc.; and Goss Realty, L.L.C.
<PAGE>
TREATMENT: On or as soon as practicable after the Effective Date,
each Holder of an Allowed Old Note Claim shall receive, in full and
final satisfaction of such Claim, a Pro Rata distribution of the New
Notes and a Pro Rata share of 3,136,250 shares of New Holdings Common
Stock, subject to dilution by the Management Equity as provided under
the Lock-Up Agreement.
4. Article III.B.6.(b), Treatment of Class H6 -- Rockwell Preferred
Equity Interests will be deleted in its entirety and replaced with the following
language:
On or as soon as practicable after the Effective Date, the Holder of
the Rockwell Preferred Equity Interest shall receive, in full and
final satisfaction of such Claim, the New Rockwell Equity
Distribution.
KIRKLAND & ELLIS
James H.M. Sprayregen
Matthew N. Kleiman
200 East Randolph Drive
Chicago, Illinois 60601
(312) 861-2000
and
YOUNG CONAWAY STARGATT & TAYLOR, LLP
Laura Davis Jones (#2436)
Michael R. Nestor (No. 3526)
11th Floor, Rodney Square North
P.O. Box 391
Wilmington, Delaware 19899-0391
(302) 571-6600
Co-Counsel for the Debtors and Debtors
in Possession
Dated: October 21, 1999
<PAGE>
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
IN RE: )
) CHAPTER 11
GOSS GRAPHIC SYSTEMS, INC., ET AL.,(1) )
) CASE NO. 99-2756 (PJW)
DEBTORS. ) (JOINTLY ADMINISTERED)
)
- --------------------------------------------------------------------------------
SECOND AMENDMENT TO SECOND AMENDED PLAN OF REORGANIZATION
OF GOSS GRAPHIC SYSTEMS, INC., GGS HOLDINGS, INC. AND
GOSS REALTY, L.L.C. UNDER CHAPTER 11 OF THE BANKRUPTCY CODE
- --------------------------------------------------------------------------------
The above-captioned debtors and debtors in possession in the
above-captioned chapter 11 cases (the "Debtors") as proponents of the Second
Amended Plan of Reorganization of Goss Graphic Systems, Inc., GGS Holdings, Inc.
and Goss Realty, L.L.C. under Chapter 11 of the Bankruptcy Code (the "Plan")
hereby amend the Plan as set forth in the Stipulation and Plan Modification
attached hereto as Exhibit A.
Wilmington, Delaware Respectfully submitted,
Dated: November 2, 1999
KIRKLAND & ELLIS
James H.M. Sprayregen
Matthew N. Kleiman
200 East Randolph Drive
Chicago, IL 60601
(312) 861-2000
and
YOUNG CONAWAY STARGATT & TAYLOR, LLP
Laura Davis Jones (No. 2436)
Maureen D. Luke (No. 3062)
Michael R. Nestor (No. 3526)
11th Floor, Rodney Square North
P.O. Box 391
Wilmington, Delaware 19899-0391
(302) 571-6600
- ------------------------
(1) The Debtors are the following entities: Goss Graphic Systems, Inc., GGS
Holdings, Inc., and Goss Realty, L.L.C.
<PAGE>
Co-Counsel for the Debtors and Debtors in Possession
<PAGE>
EXHIBIT A
<PAGE>
STIPULATION AND PLAN MODIFICATION
The secured claim (Class R2) and deficiency claim (Class R6) of LaSalle Bank
National Association ("LaSalle") against Goss Realty, L.L.C. ("Realty"),
together with all other claims of LaSalle against Goss Graphic Systems, Inc.
("Systems"), GGS Holdings, Inc. ("Holdings") or any of their affiliates, shall
be fully settled and satisfied as follows:
1. On the Effective Date, that certain Mortgage Note dated July 25, 1997
in the original amount of $30 million made by Realty in favor of
LaSalle (the "Note") shall be reinstated by payment of the sums set
forth in paragraph 2 below.
The maturity date of the Note shall be November 30, 2001. The
Prepayment Premium shall be fixed at $4.30 million, $2.15 million of
which shall be part of the Compromised Note Balance (as defined in
paragraph 10.a. below) and paid as set forth in paragraph 3, and $2.15
million of which shall be paid (if at all) as set forth in paragraph
6.d.(ii).
The terms of the Mortgage, Assignment of Rents and all other Loan
Documents (as defined in the Note) shall remain in full force and
effect EXCEPT as specifically modified herein. In the event that there
is a conflict between the terms of this Plan Modification and the Note,
Mortgage, Loan Documents, or any other document by and between LaSalle,
Realty and/or Systems, the terms of this Plan Modification shall
govern.
All capitalized terms used herein not otherwise defined shall have the
meanings ascribed thereto in that certain Second Amended Plan of
Reorganization of Goss Graphic Systems, Inc. and Goss Realty, L.L.C.
under Chapter 11 of the Bankruptcy Code, and if not defined therein, as
ascribed thereto in the Loan Documents.
2. On the Confirmation Date, Realty shall pay LaSalle in cash the sum of
the following amounts to reinstate and cure, in full, the Note,
Mortgage and all related obligations and to pay the November 1, 1999
Note payment:
a. principal of $168,386.15; plus
b. interest of $645,006.45 (contract rate); plus
c. interest of $397,232.61 (default rate); plus
d. late fees of $39,508.92; plus
e. real estate tax escrow payments of $141,200 to be
deposited into the account set forth in paragraph
4(e) below for application as provided for in
paragraph 4(e) and the Loan Documents; plus
f. all reasonable attorney fees and costs incurred by
LaSalle's counsel, Schwartz, Cooper, Greenberger &
Krause and Klehr, Harrison, Harvey, Branzburg &
Ellers L.L.P. up to the Confirmation Date (which fees
and costs were estimated at $60,000 as of October 10,
1999); plus
-1-
<PAGE>
g. $9,210.70 in fees and costs of LaSalle's expert,
Michael Maglocci; plus
h. $3,541.12 in costs and expenses incurred by LaSalle
including without limitation that incurred in travel
to Delaware for Court hearings for LaSalle's officer,
counsel, expert, depositions, meetings and other
experts incurred in connection with the bankruptcy of
Realty and Systems.
3. As of the Confirmation Date, Systems, as lessee, shall reject that
certain Single Tenant Net lease dated July 25, 1997 (the "Old Lease")
for 700 Oakmont, Westmont, Illinois (the "Premises").
As of the Confirmation Date, Realty, as lessor, shall assume the Old
Lease.
The claim filed by LaSalle on behalf of Realty against Systems for
unpaid pre-petition rent in the approximate amount of $3.1 million
shall be disallowed with prejudice. Except as expressly set forth
herein, Realty shall have no pre-petition claim against Systems,
including, without limitation, any claim for monetary or non-monetary
cure costs associated with Realty's assumption of the Old Lease.
Systems represents and warrants as an inducement to Realty and LaSalle
that it is not in default with respect to the Old Lease except for the
claimed pre-petition Base Rent.
Realty shall have an allowed unsecured Class S4 Claim against Systems
in the amount of not less than $8 million (the "Rejection Claim"),
which shall be satisfied and paid by Systems with payments to LaSalle
as follows:
a. In the event Systems pays LaSalle, without default, $8 million
(the "Periodic Payment Amount") payable in forty-eight (48)
installments of $166,666.66 each (the "Periodic Payments"),
with each installment being paid on or before the first day of
each month commencing on December 1, 1999, then the Rejection
Claim shall be deem satisfied in full. The principal portion
of the Compromised Note Balance shall be reduced
dollar-for-dollar by the amount of all Periodic Payments paid
to LaSalle.
b. Systems shall be entitled to prepay all or any portion of the
Periodic Payment Amount without penalty at any time, and any
such payments shall reduce the principal portion of the
Compromised Note Balance on a dollar-for-dollar basis.
c. If Systems fails to make any Periodic Payment when due (a
"Periodic Payment Default"), LaSalle may declare the entire
Rejection Claim (less the amount of all Periodic Payments)
immediately due without further act or deed or notice.
d. After a Periodic Payment Default, LaSalle can take all action
it deems appropriate to liquidate, adjudicate and collect the
unpaid portion of the Rejection Claim, consistent with the
terms of the Note, Mortgage, Loan Documents and applicable
governing law including, without limitation, rights set forth
in paragraph 7 below.
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<PAGE>
(i) LaSalle reserves the right to assert that the Rejection Claim
equals an amount greater than $8 million, and Systems reserves
the right to contest that the Rejection Claim is any amount in
excess of $8 million.
(ii) Determination of whether the Rejection Claim exceeds $8
million and the amount by which it exceeds $8 million is
subject to final order of the Bankruptcy Court in accordance
with applicable provisions of state and bankruptcy law,
including without limitation, Section 502(b)(6) of the
Bankruptcy Code.
(iii) The unpaid portion of the Rejection Claim shall commence to
bear interest at the rate of 8.66% upon the occurrence of
either of the following events: (i) Realty defaults in any of
its obligations to LaSalle, including payment obligations,
under the Note or Loan Documents; or (ii) Systems defaults in
any of its payment obligations of the Periodic Payment Amount.
On the Effective Date, Realty shall assign all of its right, title and
interest in and to the Rejection Claim to LaSalle to secure payment of
the Compromised Note Balance and shall execute all documents reasonably
necessary to perfect said interest. Except as otherwise set forth in
this Plan Modification, LaSalle shall have all rights to enforce said
claim without further act or deed, and to the extent and on the terms
set forth in the Note, Mortgage and Loan Documents.
If the Compromised Note Balance has been (x) paid in full or (y) paid
in accordance with paragraph 6.d. below in the event of a sale of the
Premises generating Net Sale Proceeds in excess of the Compromised Note
Balance, at any time prior to the payment in full of the Periodic
Payment Amount or the Rejection Claim, then (i) the Periodic Payment
Amount and the Rejection Claim shall be deemed paid in full and
satisfied, and (ii) LaSalle shall have no further lien or interest in
the Periodic Payment Amount or the Rejection Claim.
4. On the Effective Date, Realty and Systems shall execute and enter into
a new lease for the Premises ("New Lease"), which New Lease shall have
an effective date as of the Petition Date. The New Lease shall be
identical to the Old Lease except as follows:
a. the installments of Base Rent payable monthly shall
be reduced to $263,392.92;
b. the Lease Term shall end on November 30, 2001 (the
"Lease Termination Date"); PROVIDED, HOWEVER, that in
the event LaSalle takes delivery of the Bill of Sale
and Deed (each, as defined below) for recording,
Systems shall have the option to extend the Lease
Termination Date for up 12 additional months by
giving LaSalle written notice of its exercise of the
option thirty (30) days before the Lease Termination
Date; PROVIDED, FURTHER, that during such extension
Systems shall continue to render performance to
LaSalle, as lessor, under the terms and conditions of
the New Lease;
-3-
<PAGE>
c. the New Lease shall not terminate prior to the
earlier of the Lease Termination Date or the date on
which the sale of the Premises is closed; and
d. Systems shall pay and deliver the base rent directly
to LaSalle by the first day of each month commencing
with December 1, 1999;
e. the monthly Installments to be paid under paragraph
5.4 of the New Lease shall be $35,300; said
Installments shall be delivered to LaSalle by the
first day of each month commencing with December 1,
1999 and deposited into Account # 8600769213; said
Account is in the name of Realty and bears no
interest; said monthly Installment amounts may be
adjusted from time to time to the extent and as
provided in the Loan Documents; and
f. the New Lease shall terminate upon a closing of a
sale of the Premises.
5. On the Effective Date, Realty shall execute in favor of LaSalle, or its
nominee as directed by LaSalle, and deliver to LaSalle for deposit in
Escrow (as hereinafter defined) (i) a special warranty deed for
Premises in recordable form subject only to customary easements and
restrictions ("Deed"), and (ii) a bill of sale ("Bill of Sale") for all
personal property of Realty.
In the event LaSalle or its nominee has the right to record the Deed
and take the Bill of Sale in accordance with the terms of the Modified
Plan, Realty shall also execute and deliver to LaSalle any and all
additional documents a title company or LaSalle may require to
effectuate the conveyance of the Premises and personalty contemplated
herein (collectively "Supplemental Documents").
In the event Realty refuses or is unable to execute such documents,
Realty grants to LaSalle as of the Effective Date a limited power of
attorney to execute any one or more of the Supplemental Documents in
its name.
6. At all times from and after the Effective Date, Realty shall use its
best efforts to sell the Premises for the best price possible subject
to the following conditions:
a. Any broker retained to sell the Premises shall be entitled
only to a customary and usual commission in the event of a
sale; PROVIDED, HOWEVER, that the commission shall not exceed
2% of the gross sale proceeds without the consent of LaSalle,
which consent shall not be unreasonably withheld, denied or
delayed.
b. Realty shall have the right to sell the Premises WITHOUT THE
CONSENT of LaSalle provided the Net Sale Proceeds are equal to
or greater than the then outstanding Compromised Note Balance.
c. In the event Realty has a contract to sell the Premises which
it wants to execute, the Net Sale Proceeds from which will be
LESS THAN the Compromised Note Balance, then, at the sole
option of LaSalle, (i) Realty will be allowed to proceed
with said sale
-4-
<PAGE>
with LaSalle retaining all of the Net Sale Proceeds and the
Compromised Note Balance shall be reduced by the amount of
such Net Sale Proceeds, or (ii) LaSalle will take delivery of
the Bill of Sale and Deed for recording and the Compromised
Note Balance shall be reduced (as of the outside date in the
contract for closing the sale) by an amount equal to the Net
Sale Proceeds under the contract to sell the Premises;
PROVIDED, HOWEVER, that LaSalle shall not have the right to
select option (ii) of this paragraph 6.c. if the aggregate of
(x) the Net Sale Proceeds under the contract to sell the
Premises calculated using the date of sale as the outside
closing date of the contract, plus (y) the then outstanding
Periodic Amount, exceeds (z) the Compromised Note Balance. In
either event, LaSalle shall have no further claim against
Realty, and LaSalle shall have no further claim against
Systems except for its right to be paid (if at all) the
remaining balance (if any) of the Periodic Amount and/or the
Rejection Claim and the Indemnity Claim in accordance with
paragraph 8 below.
d. In the event Realty has a contract to sell the Premises under
which the Net Sale Proceeds will be GREATER than the
Compromised Note Balance, the Net Sale Proceeds shall be paid
to LaSalle on closing and applied as follows:
(i) first, to the Compromised Note Balance until paid in
full; and
(ii) second, 50% of the remaining Net Sale Proceeds to the
$2.15 million balance of the Prepayment Premium until
paid in full.
After payment in full of the Compromised Note Balance and the
balance of the Prepayment Premium as set forth in paragraph
6.d.(ii) hereof, LaSalle shall have no further claim against
Realty or Systems or the remaining Net Sale Proceeds.
7. LaSalle shall have the absolute right to have the Deed recorded and the
Bill of Sale delivered to LaSalle immediately upon the occurrence of
any of the following events:
a. closing of the sale of the Premises has not occurred by
November 30, 2001;
b. Realty defaults in any of its obligations to LaSalle,
including payment obligations, under the Note or Loan
Documents;
c. Systems defaults in any of its payment obligations of the
Periodic Payment Amount;
d. Systems vacates the Premises prior to the close of a sale of
the Premises or the Lease Termination Date.
Upon the recording of the Deed, the Compromised Note Balance shall be
credited against all sums due under the Note, and LaSalle will have no
further claim against Realty or Systems except with respect to its
right to be paid (if at all) the remaining balance (if any)
-5-
<PAGE>
of Periodic Payment Amount and/or the Rejection Claim as set forth
herein and the Indemnity Claim in accordance with paragraph 8 below.
8. The claim filed by LaSalle against Systems based on the Indemnity
Agreement executed by Systems in favor of LaSalle dated July 25, 1997
("Indemnity Claim"), shall remain unadjudicated until default by
Systems or Realty of any payment or non-payment obligation under the
Note, New Lease or Rejection Claim or Modified Plan.
9. Notwithstanding the closing of the bankruptcy case for Realty and
Systems, the Bankruptcy Court shall retain the exclusive jurisdiction
to adjudicate all matters related to (i) the Plan Modification and (ii)
the Rejection Claim and the Indemnity Claim.
10. As used in this Plan Modification:
a. "Compromised Note Balance" shall be the sum of (i) the amount
of principal, interest, fees, expenses, and late charges (if
any) then due under the Note, plus (ii) $2.15 million.
b. "Net Sale Proceeds" shall be all consideration for which the
Premises is sold less (i) pro-rations for real estate taxes,
costs of sale (e.g., reasonable attorney fees and costs, title
insurance, survey, transfer taxes customarily charged to the
seller) and a brokerage commission not to exceed 2% of the
purchase price in accordance with paragraph 6.a. above.
c. "Escrow" shall mean the escrow established by written
agreement between a title company or other entity selected by
LaSalle and Realty, Realty and LaSalle. The terms of the
Escrow shall include that the Deed and Bill of Sale shall be
delivered to LaSalle upon receipt by escrow agent of an
affidavit from an officer of LaSalle that states as follows:
I hereby certify that the following circled event(s)
have occurred and, with respect to events in
paragraphs b through e below, notice of default was
given and said defaults were not cured within five
(5) calendar days of such notice:
(i) The Lease Termination Date has passed and
the Premises have not been sold; or
(ii) Realty is in default under the Note; or
(iii) Systems is in default under the New Lease;
or
-6-
<PAGE>
(iv) Systems has defaulted on its payment
obligations of the Periodic Payments or the
Rejection Claim; or
(v) Realty or Systems has violated a term of the
Plan Modification.
The terms of the Escrow shall also include a provision
requiring that the Deed and Bill of Sale shall be delivered to
Realty upon receipt by escrow agent of an affidavit from an
officer of Realty and an officer of LaSalle that states that
the Note has been discharged and satisfied in full.
11. The grace period with respect to any payment or non-payment obligations
in the Note, Loan Documents, New Lease or payment of the Periodic
Payments and/or Rejection Claim shall be as set forth in the Mortgage;
PROVIDED, HOWEVER, that a Late Charge as set forth in 6 of the Note
shall be immediately due and payable if a payment due to LaSalle is not
made on the day such payment is due, even though such payment is made
within the applicable grace period. Any notice required by the terms of
the Escrow, Note or Loan Documents shall be delivered to:
REALTY AND SYSTEMS:
Goss Graphic Systems, Inc.
Goss Realty, L.L.C.
700 Oakmont Lane
Westmont, Illinois 60559-5546
Telecopy: 630-850-5899
Attn: Joseph P. Gaynor, III, EVP & CFO
and
KIRKLAND & ELLIS:
Kirkland & Ellis
200 E. Randolph Drive
Chicago, Illinois 60601
Telecopy: 312-861-2200
Attn: James H.M. Sprayregen &
Matthew N. Kleiman
12. All payments to be made by Realty or Systems shall be by wire transfer
or personal delivery receipted for.
-7-
<PAGE>
13. Except as otherwise provided herein, all payments received by LaSalle,
whether on the Note, the New Lease, the Rejection Claim or from the
sale of the Premises, shall be applied as follows: first, to fees and
costs; second, to interest; and third, to principal.
14. If the Effective Date of the Plan and execution of all documents
necessary to consummate the transactions contemplated herein do not
occur by November 30, 1999, confirmation of the Plan for Realty shall
be null and void.
15. If Realty prepays the Compromised Note Balance in full other than by a
sale of the Premises, and within six (6) months of said payment date
Realty or its nominee, Systems or one of their affiliates enters into a
contract to sell the Premises, the Net Sale Proceeds of which would
exceed the Compromised Note Balance, then, Realty shall owe and pay
LaSalle the full remaining balance of the $4.30 million Prepayment
Premium.
(remainder of this page intentionally blank)
-8-
<PAGE>
GOSS REALTY, L.L.C.
By:
----------------------------------------
Its:
---------------------------------------
Printed Name:
------------------------------
GOSS GRAPHIC SYSTEMS, INC.
By:
----------------------------------------
Its:
---------------------------------------
Printed Name:
------------------------------
LASALLE BANK NATIONAL ASSOCIATION
By:
----------------------------------------
Its:
---------------------------------------
Printed Name:
------------------------------
-9-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GOSS
GRAPHIC SYSTEMS, INC. AND CONTAINS UNAUDITED FINANCIAL STATEMENTS FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 16
<SECURITIES> 0
<RECEIVABLES> 168
<ALLOWANCES> 31
<INVENTORY> 217
<CURRENT-ASSETS> 391
<PP&E> 247
<DEPRECIATION> 69
<TOTAL-ASSETS> 894
<CURRENT-LIABILITIES> 457
<BONDS> 279
0
0
<COMMON> 0
<OTHER-SE> 198
<TOTAL-LIABILITY-AND-EQUITY> 894
<SALES> 422
<TOTAL-REVENUES> 422
<CGS> 397
<TOTAL-COSTS> 482
<OTHER-EXPENSES> 2
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 34
<INCOME-PRETAX> (96)
<INCOME-TAX> (3)
<INCOME-CONTINUING> (93)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (93)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
