Exhibit 99.3
ANNEX A
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NO BANKRUPTCY CASE HAS BEEN FILED AS OF THE DATE
OF THIS DISCLOSURE STATEMENT
DISCLOSURE STATEMENT
Dated: July 6, 2000
THIS DISCLOSURE STATEMENT IS PART OF A PREPETITION
SOLICITATION OF VOTES FOR, IF NECESSARY, THE
PREPACKAGED PLAN OF REORGANIZATION OF GLENOIT
UNIVERSAL, LTD.; GLENOIT CORPORATION; GLENOIT
ASSETS CORPORATION; AMERICAN PACIFIC ENTERPRISES,
INC.; GRAND AVENUE CORPORATION; EX-CELL HOME
FASHIONS, INC.; EX-CELL OF BENTONVILLE, INC.; AND EX-
CELL LINDE OF CAROLINA, INC.
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INTRODUCTION TO THE PREPACKAGED PLAN AND THE TENDER OFFER
The management of Glenoit Corporation ("Glenoit") has concluded that
Glenoit and its affiliates must reduce their overall indebtedness and increase
their equity if they are to continue operations. Accordingly, in recent months,
Glenoit, in conjunction with its attorneys and financial advisors, has had
numerous discussions with the members, attorneys, and financial advisors to a
committee (the "Unofficial Noteholders Committee") of holders of beneficial
interests in Glenoit's $95 million outstanding principal amount 11% Senior
Subordinated Notes due 2007 (the "Notes"). Holders of such beneficial interests
will have claims ("Note Claims") against Glenoit in a bankruptcy case in which
Glenoit is a debtor; each holder will be referred to in this Disclosure
Statement as a "Noteholder." The Unofficial Noteholders Committee represents
over 83% of the outstanding principal amount of Note Claims.
Through these discussions, the parties agreed that Glenoit would
attempt to retire all the Notes for cash, at a price equal to $0.17 per dollar
of principal. No additional consideration would be paid for any accrued or
unpaid interest on the Notes. The agreement further contemplated that the Notes
would be retired either through the Offer to Purchase and Consent Solicitation
Statement and the Letter of Transmittal accompanying that Statement (together,
the "Tender Offer") or through consummation of the Prepackaged Plan that is the
subject of this Disclosure Statement. Glenoit`s preference is to retire the
Notes by acquiring them in the Tender Offer, the other terms and conditions of
which are described in that Tender Offer, which accompanies this Disclosure
Statement.
Even if the Tender Offer is successful (which, unless reduced by
consent of certain parties, means at least 99% of the outstanding principal
amount of the Notes must be tendered), Glenoit, along with certain of its
affiliates, may commence bankruptcy cases. In those cases, Glenoit and those
affiliates will
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propose confirmation of the Joint Prepackaged Plan of Reorganization (the
"Prepackaged Plan") attached as Appendix A to this Disclosure Statement. If the
Prepackaged Plan is accepted by the requisite amount of Noteholders and holders
of Credit Agreement Claims (which is the other Class that will vote on the
Prepackaged Plan), and if the Prepackaged Plan is confirmed by the Bankruptcy
Court, all Noteholders will still receive cash equal to $0.17 per dollar of
principal provided such consideration is received by the earlier of (i) November
15, 2000 and (ii) ten Business Days after the Confirmation Date of the
Prepackaged Plan. If that consideration is not received by that time,
Noteholders would receive all of the issued and outstanding New Common Stock of
Reorganized Glenoit Universal, Ltd. ("Holdings"), which is the parent of
Glenoit. In this scenario, the Prepackaged Plan also calls for the issuance of
New Warrants to purchase up to 10% of the authorized New Common Stock. These New
Warrants would likely be given to a Replacement Lender under the Replacement
Facility, which would be designed to take the place of the Citicorp Mezzanine
Debt Arrangement, described below. Finally, if Noteholders receive the New
Common Stock, they will not receive any cash on account of the Notes.
In addition, if bankruptcy cases are commenced, the rights of some
other Creditors, Equity Security holders, and other parties may be altered,
adversely affected or cancelled altogether, as described in this Disclosure
Statement and in the Prepackaged Plan. Thus, you should review this Disclosure
Statement and the Prepackaged Plan in their entirety.
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Management encourages you to support the Prepackaged Plan, and if you
hold a Note Claim or a Credit Agreement Claim, Management encourages you to vote
in favor of the Prepackaged Plan.
Further, the professionals for the Unofficial Noteholders Committee
have engaged in a thorough review of the Companies' financial data, business
plan, and industry and competition factors, and have evaluated other strategic
options that might be available to the Companies. See "V. Relationships with
Certain Insiders, Formation of the Unofficial Noteholders Committee, and Their
Role in These Cases--5.2 The Role of Certain Insiders and the Unofficial
Noteholders Committee in Formulating the Tender Offer and the Prepackaged Plan."
Based on this analysis, the Unofficial Noteholders Committee has concluded that
the consideration being offered to the Noteholders under the Tender Offer and,
if necessary, the Prepackaged Plan, is reasonable and appropriate under the
circumstances. To that end, the members of the Unofficial Noteholders Committee
have entered into an agreement with Glenoit pursuant to which they agreed to
vote for and support the Tender Offer and the Prepackaged Plan. Accordingly, the
Unofficial Noteholders Committee supports the Tender Offer and the Prepackaged
Plan, and encourages Noteholders to both tender their Notes under the Tender
Offer and vote in favor of the Prepackaged Plan.
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Summary of the Various Parts of the Prepackaged Plan
The following summary, as well as all other parts of this Disclosure
Statement, is subject in all respects to the terms of the Prepackaged Plan.
Capitalized terms not defined herein shall have the meaning ascribed to them in
the Prepackaged Plan.
Holdings, Glenoit, Glenoit Assets Corporation, American Pacific
Enterprises, Inc., Grand Avenue Corporation, Ex-Cell Home Fashions, Inc.,
Ex-Cell of Bentonville, Inc., and Ex-Cell Linde of Carolina, Inc. (collectively,
the "Companies"), upon the terms and subject to the conditions set forth in this
Disclosure Statement, the Prepackaged Plan, and the accompanying forms of
Prepackaged Plan Ballot or Prepackaged Plan Master Ballot, hereby solicit a vote
in favor of the Prepackaged Plan. This solicitation seeks votes from all (i)
parties holding Note Claims, and (ii) holders of Claims under the Third Amended
and Restated Credit Agreement dated as of February 12, 1999, among Glenoit, the
Agent, Fleet National Bank, as Syndication Agent, LaSalle National Bank, as
Documentation Agent, and the Restatement
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Lenders named therein (as amended to date, the "Credit Agreement"). The votes
sought shall be binding if bankruptcy cases are commenced for the Companies.
As stated above, the Companies hope to effectuate their restructuring
with respect to the Notes by way of the Tender Offer and without having to file
bankruptcy cases. (The Tender Offer, by itself, will not alter the rights of
holders of other Claims against or Interests in the Companies.) But if the
Companies do not receive a requisite amount of Tenders or if other events
require it, the Companies intend to file bankruptcy cases under Chapter 11 of
Title 11 of the United States Code, as amended (the "Bankruptcy Code"). In those
cases, the Companies intend to obtain confirmation of the Prepackaged Plan
attached to this Disclosure Statement. As indicated above and as described in
this Disclosure Statement, the Prepackaged Plan will affect several types of
Creditors of and Equity Security Holders in the Companies. In the event a
bankruptcy case for the Companies is filed, this solicitation of votes in favor
of the Prepackaged Plan shall be deemed to apply to the Prepackaged Plan.
In the event of bankruptcy, the Companies will not hold a creditors' or
stockholders' meeting to vote on the Prepackaged Plan. Rather, the Companies
are, as a group, soliciting acceptances of the Prepackaged Plan as an
alternative to the Tender Offer by means of separate ballots. See "Prepackaged
Plan Voting Procedures and Deadlines," below. Under the Prepackaged Plan, all
Claims and Equity Interests have been placed in various classes, based on the
nature and priority of the Claim or Equity Interest. Each Class is either
impaired or unimpaired under the Prepackaged Plan. See "III - Overview of The
Prepackaged Plan of Reorganization." Each Class of unimpaired Claims or
Interests is conclusively presumed to have accepted the Prepackaged Plan under
the Bankruptcy Code. On the other hand, each Class of Claims or Interests that
is impaired may vote to accept or reject the Prepackaged Plan, unless such Class
is receiving no distribution, in which case the Class is conclusively presumed
to have rejected the Prepackaged Plan and thus will not vote. Accordingly,
acceptances of the Prepackaged Plan are being solicited only from holders of
impaired Claims that are not deemed to have already rejected the Prepackaged
Plan. Those Classes are the Class of Note Claims and the Class of Credit
Agreement Claims. These Classes of impaired Claims will have accepted the
Prepackaged Plan if Creditors that hold at least two-thirds in dollar amount and
a majority in number of the Claims in that Class who cast ballots (or, in the
case of certain Noteholders, who have a master ballot cast on their behalf) vote
to accept the Prepackaged Plan. Only those holders who vote to accept or reject
the Prepackaged Plan will be counted for purposes of determining whether the
requisite number and amount of Claims have accepted or rejected the Prepackaged
Plan. Therefore, the Prepackaged Plan could be accepted by any Class of impaired
Claims with the affirmative vote of significantly less than two-thirds in dollar
amount and a majority in number of Claims in a Class. The Bankruptcy Court may
confirm the Prepackaged Plan at the Companies' request if at least one Class of
Impaired Claims has accepted the Prepackaged Plan (with such acceptance
determined without including the acceptance of any "insider" in such Class).
The Classes of Impaired Claims and Interests under the Prepackaged
Plan, and their treatment thereunder, are set forth below:
Impaired Claims Entitled to Vote:
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i. Noteholders: In the event of a bankruptcy, the Prepackaged Plan
provides for the same cash distribution to this Class, which consists of holders
of Note Claims and is denominated Class 5 by the Prepackaged Plan, as set forth
in the Tender Offer (i.e., seventeen cents for each $1.00 in principal amount of
Note Claims), provided they receive such distribution by the earlier of (i)
November 15, 2000 and (ii) ten Business Days after Confirmation. In the event
they do not receive their distribution by that time, the Prepackaged Plan calls
for the holders of Note Claims to receive all of the issued and outstanding New
Common Stock of Reorganized Holdings. The Prepackaged Plan also calls for the
issuance of New Warrants to purchase up to 10% of the New Common Stock
authorized under the Prepackaged Plan; these New Warrants would likely be given
to the Replacement Lender under the Replacement Facility, which
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would be designed to take the place of the Citicorp Mezzanine Debt Arrangement,
as discussed in the section on the next page entitled "Means of Funding the
Payments Required under the Prepackaged Plan." Consistent with the Tender Offer,
under the Prepackaged Plan holders of Note Claims shall receive no distribution
on account of any accrued or unpaid interest under the Notes, and all such
Claims on account of interest shall be disallowed under the Prepackaged Plan.
ii. Holders of Credit Agreement Claims: To the extent not previously
paid as allowed by the Bankruptcy Court, each Credit Agreement Claim that is or
becomes an Allowed Claim shall be paid in full on the Effective Date. Credit
Agreement Claims are placed in Class 2 and its subclasses by the Prepackaged
Plan.
Impaired Claims and Interests Not Entitled to Vote:
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i. Holders of Shareholder Note Claims: Members of this Class
(denominated Class 6 by the Prepackaged Plan) will not receive any distribution
on account of their Claims, and all Shareholder Notes will be cancelled on the
Effective Date of the Prepackaged Plan. Thus, they are impaired and deemed to
have rejected the Prepackaged Plan, and the votes of the Class of Shareholder
Notes are not being solicited as to the Prepackaged Plan.
However, certain persons, including some holders of Shareholder Notes,
may become "Participating Investors" and be allowed to purchase some of the New
Common Stock and New Preferred Stock of Reorganized Holdings. See "Means of
Funding the Payments under the Prepackaged Plan," below, and "III. Overview of
the Prepackaged Plan of Reorganization--3.3 Detailed Discussion of the Terms of
the Prepackaged Plan--(b) Means for Implementation of the Prepackaged Plan and
Other Provisions of the Prepackaged Plan.--(ii) Funding to Satisfy Note Claims
or Alternative Consideration for Class 5 Claims."
ii. Interests in and Related Claims against Holdings: Members of this
Class (denominated Class 7a by the Prepackaged Plan), which consist primarily of
holders of Old Common Stock, will not receive any distribution on account of
their Interests, and all Interests will be cancelled on the Effective Date of
the Prepackaged Plan. Thus they are impaired and deemed to have rejected the
Prepackaged Plan, and the votes of this Class of Interests and related Claims
are not being solicited as to the Prepackaged Plan.
However, certain persons, including some holders of Old Common Stock
may also become "Participating Investors" and be allowed to purchase some of the
New Common Stock and New Preferred Stock of Reorganized Holdings. See "Means of
Funding the Payments under the Prepackaged Plan," below, and "III. Overview of
the Prepackaged Plan of Reorganization--3.3 Detailed Discussion of the Terms of
the Prepackaged Plan--(b) Means for Implementation of the Prepackaged Plan and
Other Provisions of the Prepackaged Plan.--(ii) Funding to Satisfy Note Claims
or Alternative Consideration for Class 5 Claims."
Confirmation of the Prepackaged Plan would be pursuant to Sections
1129(a) and 1129(b) of the Bankruptcy Code and would be subject to judicial
approval of this solicitation and the terms of the Prepackaged Plan.
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As stated above, the members of the Unofficial Noteholders Committee
have agreed to vote for and support the Prepackaged Plan if a bankruptcy case is
filed with respect to one or all of the Companies, and the Unofficial
Noteholders Committee urges all Noteholders to vote in favor of the Prepackaged
Plan. Further, CVC, which is a holder of Shareholder Notes and Old Common Stock,
has indicated its willingness to provide all of the funds necessary to make the
cash distributions to the Noteholders. Further, Citicorp Mezzanine III, L.P.
("Citicorp Mezzanine") has indicated its intention to lend $15,000,000 to
Reorganized Glenoit on a subordinated basis in connection with consummation of
the Prepackaged Plan, provided CVC and its affiliates receive a majority of the
equity of Reorganized Holdings under the Prepackaged Plan. Although there is no
assurance at this time that such funds would be available, the Companies are
confident that funding will be in place in advance of the Confirmation Date. If
these funds from Citicorp Mezzanine are not available, either because CVC and
its affiliates do not receive a majority of Reorganized Holdings' equity or for
any other reason, then the Companies will need to find other sources of
financing to consummate the Prepackaged Plan. Accordingly, the Prepackaged Plan
contemplates the use of a "Replacement Facility" with "Replacement Lenders," in
order for Glenoit to obtain the additional unsecured loan it needs, although
there can be no assurance that a Replacement Lender or Lenders could be found.
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Means of Funding the Payments Required under the Prepackaged Plan
There will be three different components of financing for the
Prepackaged Plan. First, the Companies must negotiate and enter into a New
Working Capital/Term Debt Facility, which must provide, inter alia, the funds
necessary to pay the Credit Agreement Claims and additional liquidity for the
Companies upon their emergence from bankruptcy. See "III. Overview of the
Prepackaged Plan of Reorganization--3.3 Detailed Discussion of the Terms of the
Prepackaged Plan--(b) Means for Implementation of the Prepackaged Plan and Other
Provisions of the Prepackaged Plan--(iv) New Financing." The Companies have
initiated discussions regarding the New Working Capital/Term Debt Facility, but
have not yet reached an agreement as to its terms.
Second, CVC has indicated its willingness, subject to the satisfaction
of certain conditions, to provide up to 100% of the $16,150,000 needed to pay
all Allowed Note Claims. Glenoit has reserved its right to allow other
"Participating Investors" to provide up to 10% of the amount needed to pay
Allowed Note Claims, however. In return, CVC and any other Participating
Investors shall be entitled to receive all of the issued and outstanding New
Common Stock of Reorganized Holdings and all of the issued and outstanding New
Preferred Stock of Reorganized Holdings. (For a description of the New Common
Stock and New Preferred Stock under the Prepackaged Plan, see "III. Overview of
the Prepackaged Plan of Reorganization--3.3 Detailed Discussion of the Terms of
the Prepackaged Plan--(b) Means for Implementation of the Prepackaged Plan and
Other Provisions of the Prepackaged Plan--(iii) Issuance of New Common Stock,
New Preferred Stock, and New Warrants, and Cancellation of Interests.") One of
the conditions to CVC's willingness to provide the $16.15 million is the
consummation of the Citicorp Mezzanine Debt Arrangement, discussed below.
Third, Citicorp Mezzanine has indicated its intention to invest $15
million in new subordinated debt of Glenoit, subject to the satisfaction of
certain conditions which include, among others, that CVC and its affiliates will
own a majority of the equity of Reorganized Holdings. A portion of these funds
will be used to pay costs associated with the Tender Offer and the Prepackaged
Plan, but the bulk will be used to reduce outstanding debt under the New Working
Capital/Term Debt Facility in order to provide liquidity. The Citicorp Mezzanine
Debt Arrangement will likely have a maturity date no earlier than one year after
the latest maturity date of the loans to be advanced pursuant to the New Working
Capital/Term Debt Facility, with a 12% per annum cash interest coupon paid
semi-annually and a 6% per annum payment in kind, or PIK, interest coupon issued
semi-annually. Further, the Citicorp Mezzanine Debt Arrangement will likely not
have debt amortization prior to maturity of the New Working Capital/Term Debt
Facility. See "III. Overview of the Prepackaged Plan of Reorganization--3.3
Detailed Discussion of the Terms of the
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Prepackaged Plan--(b) Means for Implementation of the Prepackaged Plan and Other
Provisions of the Prepackaged Plan--(iv) New Financing." Finally, Citicorp
Mezzanine will receive New Warrants allowing it to purchase up to 10% of the New
Common Stock of Reorganized Holdings, on a fully diluted basis. It is the
Companies' opinion that the additional liquidity resulting from the Citicorp
Mezzanine Debt Arrangement is essential to the Companies continued operations.
Each of the CVC and Citicorp Mezzanine financings is expressly
dependent upon the consummation of the other; thus it is unlikely that either
will occur unless both occur. If the Citicorp Mezzanine Debt Arrangement is not
made, and if Glenoit is unable to find a Replacement Lender for a Replacement
Facility that would then be necessary, the Companies will very likely not have
sufficient liquidity for continued operations, and it is unlikely that the
Companies will be able to consummate the New Working Capital/Term Debt Facility.
Accordingly, even though the Prepackaged Plan would provide the Noteholders with
100% of the issued and outstanding New Common Stock, if CVC and any other
Participating Investors do not provide the $16,150,000 needed to pay Allowed
Note Claims, it is unlikely the Prepackaged Plan could be confirmed unless the
Companies could find a Replacement Lender for Citicorp Mezzanine. Moreover, if a
Replacement Lender is found, it is likely that such lender would demand an
equity participation in Reorganized Holdings similar to the New Warrants.
The Companies' Recommendation
The Companies believe that acceptance of both the Tender Offer and the
Prepackaged Plan are necessary to ensure the Companies have the flexibility to
achieve a successful reorganization. There can be no assurance, however, that
the Companies will be able to consummate the restructuring contemplated by the
Tender Offer or the Prepackaged Plan. If neither of these options are achieved,
holders of Claims (including holders of Note Claims, holders of Credit Agreement
Claims, and others holding Claims under Section 101(5) of the Bankruptcy Code)
against the Companies would likely receive less than they would receive pursuant
to the Tender Offer or the Prepackaged Plan. For a discussion of certain factors
that should be considered in connection with a vote on the Tender Offer and the
Prepackaged Plan, see "IX - Certain Factors to be Considered."
Each Company's Board of Directors has approved the restructuring
contemplated by the Tender Offer or, if necessary, the Prepackaged Plan. Each
Board recommends that all holders of Note Claims vote to accept the Tender Offer
and the Prepackaged Plan, and that all holders of Credit Agreement Claims vote
to accept the Prepackaged Plan.
Prepackaged Plan Voting Procedures and Deadlines
To vote in favor of, or against, the Prepackaged Plan, you must be a
holder of record of a Class 2 or Class 5 claim as of July 3, 2000. To vote, you
must fill out and sign a separate ballot. Enclosed herewith are:
(i) A Prepackaged Plan Class 2 Ballot (for Credit Agreement Claims);
and
(ii) A Prepackaged Plan Class 5 Ballot and a Prepackaged Plan Class 5
Master Ballot (both for Note Claims).
For holders of Note Claims, your acceptance or rejection of the Tender
Offer will not count in any way toward the acceptance or rejection of the
Prepackaged Plan--you must fill out the
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separate Prepackaged Plan Class 5 Ballot or have the Prepackaged Plan Class 5
Master Ballot completed to accept or reject the Prepackaged Plan.
Once you have completed your ballot, send it to the Information and
Balloting Agent at the following address:
Beacon Hill Partners, Inc.
90 Broad Street
New York, New York 10004
Telephone: (212) 843-8500 or (800) 755-5001
Ballots may also be faxed to the Information and Balloting Agent at
212-843-4384, provided the original is mailed to the above address and received
there prior to five Business Days after the expiration of the Voting Deadline
(below).
The Voting Deadline to accept or reject the Prepackaged Plan is 5:00 p.m., New
York City Time, on August 3, 2000 unless extended by the Companies. All votes
must be received by the above-listed party by that time on that date, or they
will not be counted. Note also that if your Ballot is sent to the Information
and Balloting Agent by facsimile, that facsimile transmission must be received
by the Voting Deadline and the original of such Ballot must be received by mail
or other form of delivery by the end of five Business Days after the Voting
Deadline.
Reservations and Disclaimers
IN THE EVENT OF BANKRUPTCY, AT ALL TIMES THE COMPANIES RESERVE THE
RIGHT IN THEIR SOLE DISCRETION NOT TO FILE THE PREPACKAGED PLAN, OR, IF THEY
FILE THE PREPACKAGED PLAN, TO WITHDRAW THE PREPACKAGED PLAN AT ANY TIME PRIOR TO
CONFIRMATION, IN WHICH CASE THE PREPACKAGED PLAN WILL BE DEEMED TO BE NULL AND
VOID.
NEITHER THE TENDER OFFER NOR THE PREPACKAGED PLAN HAVE BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES
COMMISSION OR ANY BANKRUPTCY COURT, NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION, ANY STATE SECURITIES COMMISSION OR THE BANKRUPTCY COURT PASSED UPON
THE FAIRNESS OR MERITS OF THESE TRANSACTIONS OR THE ACCURACY OR ADEQUACY OF THIS
DISCLOSURE STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
SINCE NO BANKRUPTCY CASE HAS BEEN FILED (AND NONE MAY BE FILED, IF THE
TENDER OFFER IS SUCCESSFUL AND THE COMPANIES DEEM IT APPROPRIATE NOT TO FILE),
THIS DISCLOSURE STATEMENT HAS NOT BEEN APPROVED BY ANY BANKRUPTCY COURT.
HOWEVER, IF THE PREPACKAGED CHAPTER 11 CASES ARE COMMENCED, THE COMPANIES INTEND
TO PROMPTLY SEEK AN ORDER FROM THE BANKRUPTCY COURT THAT THE SOLICITATION OF
VOTES FOR THE PREPACKAGED PLAN BY MEANS OF THIS DISCLOSURE STATEMENT WAS IN
COMPLIANCE WITH THE BANKRUPTCY CODE.
Available Information
Glenoit and its wholly-owned subsidiaries are subject to certain of the
informational requirements of the Securities Exchange Act of 1934, as amended,
and in accordance therewith, file periodic reports and
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other information with the Securities and Exchange Commission (the
"Commission"). Such reports and other information filed with the Commission can
be inspected and copied at the public reference facilities of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549. Copies of such material can also
be obtained by mail from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates, or by calling
the Commission at 1-800-SEC-0330. The Commission also maintains an Internet web
site at http://www.sec.gov that contains the foregoing information.
No person has been authorized to give any information or make any
representation not contained in this Disclosure Statement and, if given or made,
such information or representation must not be relied upon. This Disclosure
Statement does not constitute an offer to sell or the solicitation of an offer
to buy any securities other than those to which it relates, or an offer to sell
or a solicitation of an offer to buy any securities in any jurisdiction in
which, or to any person to whom, it is unlawful to make such offer or
solicitation. The delivery of this Disclosure Statement after the date hereof
shall not, under any circumstances, create an implication that there has been a
change in the affairs of the Companies or in the information contained herein
since the date hereof.
Cautionary Statement Concerning Forward-Looking Statements
Certain statements in this Disclosure Statement are forward-looking
statements that involve known and unknown risks, uncertainties and other factors
which may cause the actual results of the Companies to be materially different
from any future results expressed or implied by such forward-looking statements.
Forward-looking statements include, among others, statements regarding the
ability of the Companies to successfully complete the restructuring outlined in
the Disclosure Statement and achieve the business plan projections and the
projected or assumed future operations and financial results of the Companies.
Factors that may cause actual results of the Companies to differ from future
results expressed or implied by forward-looking statements include, among
others, the following: the likelihood of the Companies' success in developing
and expanding their businesses and maintaining financing on reasonable terms;
general economic and business conditions, both in the United States and other
countries in which the Companies sell or purchase products; the effect of
competition in the markets served by the Companies; the risks described under
the caption "Certain Factors to be Considered"; and in the event of bankruptcy,
the ability of the Companies to obtain confirmation of the Prepackaged Plan.
Some of these assumptions inevitably will not materialize, and unanticipated
events may occur which could materially affect the Companies' results and
financial performance. Given these uncertainties, holders of Note Claims and
Credit Agreement Claims, as well as anyone considering becoming a Participating
Investor, are cautioned not to place undue reliance on any forward-looking
statements in determining whether to vote to accept or reject the Tender Offer
and the Prepackaged Plan or to take other action under the Prepackaged Plan.
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TABLE OF CONTENTS
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Introduction to the Prepackaged Plan and the Tender Offer............................................i
Summary of the Various Parts of the Prepackaged Plan........................................ii
Means of Funding the Payments Required under the Prepackaged Plan...........................v
The Companies' Recommendation...............................................................vi
Prepackaged Plan Voting Procedures and Deadlines............................................vi
Reservations and Disclaimers................................................................vii
Available Information.......................................................................viii
Cautionary Statement Concerning Forward-Looking Statements..................................viii
I. Information Regarding This Disclosure Statement...................................................1
II. Overview Of The Tender Offer....................................................................2
III. Overview Of The Prepackaged Plan Of Reorganization.............................................2
3.1 Explanation of Chapter 11..............................................................2
3.2 Overview of the Terms of the Prepackaged Plan of Reorganization........................4
(a) General.......................................................................4
(b) Classification And Treatment Summary..........................................4
3.3 Detailed Discussion of the Terms of the Prepackaged Plan...............................6
(a) Treatment of Classes..........................................................6
(b) Means for Implementation of the Prepackaged Plan and Other Provisions of
the Prepackaged Plan...............................................................9
(c) Anticipated "First Day" Orders to be Sought in the Bankruptcy Cases...........13
3.4 Securities Law Matters.................................................................14
(a) Issuance of Plan Securities under the Prepackaged Plan........................14
(b) Transfer of Plan Securities...................................................15
IV. General Information.............................................................................16
4.1 The Companies..........................................................................16
(a) The History and Business of the Companies.....................................16
(b) Recent Operational and Financial Difficulties.................................17
(c) Risks of the Industries in Which the Companies Operate.........................19
(d) Legal Proceedings.............................................................19
4.2 Current Board of Directors and Management...............................................20
4.3 Description of Old Debt.................................................................22
(a) The Credit Agreement..........................................................22
(b) The Notes.....................................................................22
(c) Trade Debt....................................................................22
(d) The Shareholder Notes.........................................................22
V. Relationships with Certain Insiders, Formation of the Unofficial Noteholders Committee, and
Their Role in These cases............................................................................23
5.1 Security Ownership of Certain Beneficial Owners........................................23
5.2 The Role of Certain Insiders and the Unofficial Noteholders Committee in
Formulating the Tender Offer and the Prepackaged Plan.......................................23
VI. Certain Federal Income Tax Consequences Of The Prepackaged Plan.................................24
6.1 Federal Income Tax Consequences to Noteholders and Holders of Credit Agreement
Claims......................................................................................24
6.2 Federal Income Tax Consequences to the Companies.......................................25
VII. Financial Information...........................................................................26
7.1 Financial Data.........................................................................26
7.2 Pro Forma Financial Information........................................................26
VIII. Liquidation Value of Assets...................................................................27
IX. Certain Factors To Be Considered................................................................27
9.1 Risks Relating to the Projections......................................................27
9.2 Market for New Common Stock, New Preferred Stock and Warrants..........................28
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9.3 General Business Risks.................................................................28
9.4 Continuing Leverage; Future Refinancings...............................................28
9.5 No Dividends...........................................................................29
9.6 Certain Federal Income Tax Considerations..............................................29
9.7 Applicable Law and Regulation..........................................................29
X. Alternatives To Confirmation And Consummation Of The Prepackaged Plan............................29
10.1 Sale Alternative......................................................................29
10.2 Liquidation Alternative...............................................................29
10.3 Alternatives if the Prepackaged Plan is Not Confirmed.................................30
XI. Voting Procedures And Requirements For Confirmation.............................................30
11.1 Acceptance of the Prepackaged Plan....................................................30
11.2 Parties in Interest Entitled to Vote..................................................30
11.3 Securities Held in Nominee Name.......................................................30
11.4 Vote Required for Acceptance by Class of Claims or Interests..........................31
11.5 Confirmation Without Acceptance by All Impaired Classes...............................31
XII. Confirmation Of The Prepackaged Plan...........................................................31
12.1 Confirmation Hearing..................................................................31
12.2 Requirements for Confirmation of the Prepackaged Plan..................................31
(a) Feasibility of the Prepackaged Plan...........................................32
(b) Best Interests Test...........................................................33
12.3 Conditions Precedent to the Effective Date of the Prepackaged Plan....................34
12.4 Amendments to or Modification of the Prepackaged Plan.................................35
12.5 Cram down.............................................................................35
XIII. Conclusion....................................................................................36
</TABLE>
x
<PAGE>
Appendix A Prepackaged Plan of Reorganization.
Appendix B Pro Forma Financial Statements and Liquidation Analysis
xi
<PAGE>
I. INFORMATION REGARDING THIS DISCLOSURE STATEMENT
This Disclosure Statement is being circulated as a separate
solicitation of acceptances of the Prepackaged Plan attached hereto as Appendix
A if bankruptcy cases for the Companies are commenced. As noted above, the
Companies may decide not to file bankruptcy cases if, among other things, the
Tender Offer is successful. A copy of the Tender Offer is enclosed with these
materials.
The purpose of this Disclosure Statement is to enable you, if you are a
Noteholder or hold a Credit Agreement Claim, or if your rights are impaired or
otherwise affected by the Prepackaged Plan, to make an informed decision in
exercising your right to accept or reject or otherwise act on the Prepackaged
Plan. No solicitation of votes to accept or reject the Prepackaged Plan may be
made except pursuant to this Disclosure Statement and, to the extent applicable,
Section 1125 of the Bankruptcy Code. This Disclosure Statement contains
important information that may bear upon your decision to accept or reject the
Prepackaged Plan proposed by the Companies. Please read this document and its
attachments. Please also note that you may be bound by the Prepackaged Plan
regardless of your vote or failure to vote if it is accepted by the requisite
holders of Claims. See "XI. Voting Procedures and Requirements for
Confirmation--11.4 Vote Required for Acceptance by Class of Claims or
Interests."
Except as may be set forth in the Disclosure Statement and the
exhibits, appendices and schedules attached hereto or incorporated by reference
or referred to herein, no representations concerning the Companies and the value
of their assets are authorized. Any representations or inducements made to
secure acceptance or rejection of the Prepackaged Plan by holders of Claims
other than as contained in the Disclosure Statement should not be relied upon
when voting on the Prepackaged Plan.
The confirmation of the Prepackaged Plan is subject to material
conditions precedent, some of which may not be satisfied. There can be no
assurance that those conditions will be satisfied.
The Disclosure Statement may not be relied upon for any purposes other
than to determine how to vote on the Prepackaged Plan, and, if relevant, to make
the elections described in the Prepackaged Plan. Nothing contained in the
Disclosure Statement shall be deemed conclusive advice on the legal, tax or
other effects of the Companies' restructuring on holders of Claims or Interests.
Nothing contained in the Disclosure Statement shall prejudice the right of the
Companies to contest the validity or enforceability of any Claim against, or
Interest in, the Companies. With the exception of the financial statements
attached as Appendix B to the Disclosure Statement, there has been no
independent audit of the financial information contained in the Disclosure
Statement. You should consult your personal counsel and tax advisor on any
questions or concerns respecting legal or tax consequences of the Prepackaged
Plan.
The statements contained in the Disclosure Statement are made as of the
date hereof unless another time is specified, and neither delivery of the
Disclosure Statement nor any exchange of information made in connection with the
Disclosure Statement shall, under any circumstances, create an implication that
there has been no change in the facts set forth herein since the date the
Disclosure Statement was compiled.
Although the management of the Companies believes that the Disclosure
Statement is complete and accurate to the best of its knowledge, information and
belief, the Companies and their management are unable to and do not warrant or
represent that the information contained herein may not be without any omission
or inaccuracy.
THIS DISCLOSURE STATEMENT HAS NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION OR THE
1
<PAGE>
BANKRUPTCY COURT PASSED UPON THE ACCURACY OR ADEQUACY OF THE STATEMENTS
CONTAINED HEREIN.
The Companies support confirmation of the Prepackaged Plan and urge all
Noteholders to vote in favor of the Prepackaged Plan. The Companies also urge
all holders of Credit Agreement Claims to accept the Prepackaged Plan.
II. OVERVIEW OF THE TENDER OFFER
Apart from the Prepackaged Plan and outside of bankruptcy, Glenoit is
attempting to purchase the Notes pursuant to the terms of the Tender Offer. If
the Companies enter bankruptcy, then they shall no longer pursue the Tender
Offer. If, however, the Companies receive tenders of the requisite amounts of
Notes and management concludes that consummation of the Tender Offer would be in
the best interest of the Companies, their shareholders, and their creditors,
then the Tender Offer may be accepted, in which event no bankruptcy cases would
be filed.
The Tender Offer, if successful and consummated, will have the effect
of, among other things, Glenoit purchasing most (if not all) of the Notes, and
the sellers of the Notes agreeing to a substantial alteration of the terms of
the Indenture, so as to remove most of the covenants and defaults currently
contained therein. See the Section entitled "The Proposed Amendments" in the
Statement. The Companies may then take other actions relative to other Claims
against or Interests in them, but those would be the subject of separate
corporate or legal action.
III. OVERVIEW OF THE PREPACKAGED PLAN OF REORGANIZATION
3.1 Explanation of Chapter 11.
If the Companies cannot successfully complete the Tender Offer, or if
other reasons arise, some or all of the Companies may file petitions for relief
under Chapter 11 of the Bankruptcy Code. Chapter 11 is the principal business
reorganization chapter of the Bankruptcy Code. Under Chapter 11 of the
Bankruptcy Code, a debtor is authorized to reorganize its business for the
benefit of itself, its creditors and stockholders. In addition to permitting
rehabilitation of a debtor, another goal of Chapter 11 is to promote equality of
treatment of creditors and equity security holders of equal rank with respect to
the distribution of a debtor's assets.
The consummation of a plan of reorganization is the principal objective
of a Chapter 11 reorganization case. A plan of reorganization sets forth the
means for satisfying claims against, and equity interests in, a debtor.
Confirmation of a plan of reorganization by the Bankruptcy Court makes the plan
binding upon a debtor, any issuer of securities under the plan, any person
acquiring property under the plan and any creditor or equity security holder of
a debtor. Subject to certain limited exceptions, the confirmation order
discharges a debtor from any debt that arose prior to the date of confirmation
of the plan and substitutes therefor the obligations specified under the
confirmed plan.
After a plan of reorganization has been filed, the holders of claims
against or interests in a debtor are permitted to vote to accept or reject the
plan. Before soliciting acceptances of the proposed plan, however, Section 1125
of the Bankruptcy Code requires a debtor to prepare a disclosure statement
containing adequate information of a kind, and in sufficient detail, to enable a
hypothetical reasonable investor to make an informed judgment about the plan.
This Disclosure Statement is presented to holders of Claims against and
Interests in the Companies to satisfy the requirements of Section 1125 of the
Bankruptcy Code.
-2-
<PAGE>
Because the Companies have not yet filed bankruptcy, they will rely on
Section 1126 of the Bankruptcy Code to use this pre-bankruptcy solicitation to
confirm the Prepackaged Plan, if bankruptcy becomes necessary.
Chapter 11 does not require that each holder of a claim against or
interest in a debtor vote in favor of a plan of reorganization in order for the
bankruptcy court to confirm the plan. At a minimum, however, the plan of
reorganization must be accepted by a majority in number and two-thirds in amount
of those claims actually voting in at least one class of impaired claims under
the plan of reorganization. Holders of impaired claims or interests who fail to
vote will not be counted as either accepting or rejecting the plan.
In general, a class is "impaired" if the legal, equitable, or
contractual rights attaching to the claims or equity interests of that class are
modified under the plan of reorganization. Classes of claims that are not
impaired under a plan of reorganization are conclusively presumed to have
accepted the plan of reorganization and thus are not entitled to vote. Classes
of claims or equity interests receiving no distribution under a plan are
impaired and are conclusively presumed to have rejected the plan and thus are
not entitled to vote. Acceptances of the Prepackaged Plan in this case are being
solicited only from those persons who hold claims or interests in an impaired
class that is not a deemed accepting or rejecting class.
Even if all classes of claims and equity interests accept a plan of
reorganization, the bankruptcy court may nonetheless find such a plan
unconfirmable. Section 1129 of the Bankruptcy Code sets forth the requirements
for confirmation of a plan of reorganization and, among other things, requires
that a plan of reorganization meet the "best interests" test and be feasible.
The "best interests" test generally requires that the value of the consideration
to be distributed to the holders of claims or equity interests under a plan may
not be less than those parties would receive if the debtor were liquidated under
a hypothetical liquidation occurring under Chapter 7 of the Bankruptcy Code.
Under the "feasibility" requirement, the court must find that there is a
reasonable probability that the debtor will be able to meet its obligations
under its plan of reorganization without the need for further financial
reorganization. The Companies believe that both of these requirements are
satisfied by the Prepackaged Plan. See "XII. Confirmation of the Prepackaged
Plan--12.2 Requirements for Confirmation of the Prepackaged Plan--(a)
Feasibility of the Prepackaged Plan and (b) Best Interests Test."
The proponents of the plan of reorganization (in this case, the
Companies) also must meet all other applicable requirements of Section 1129(a)
of the Bankruptcy Code (except Section 1129(a)(8) if the proponent proposes to
seek confirmation of the plan under the provisions of Section 1129(b) of the
Bankruptcy Code). These other requirements include, among other things, that the
plan comply with applicable provisions of Title 11 and other applicable law,
that the plan be proposed in good faith and that at least one impaired class of
creditors has voted to accept the plan. The Companies believe that the
Prepackaged Plan satisfies all of these and any other applicable requirements of
Section 1129(a) of the Bankruptcy Code.
The bankruptcy court may confirm a plan of reorganization even though
fewer than all the classes of impaired claims and interests accept it. For a
plan of reorganization to be confirmed despite the rejection of a class of
impaired claims or interests, the proponent of the plan of reorganization must
show, among other things, that the plan of reorganization does not discriminate
unfairly and that the plan of reorganization is fair and equitable with respect
to each impaired class of claims or interests that has not accepted the plan of
reorganization.
Under Section 1129(b) of the Bankruptcy Code, a plan is "fair and
equitable" as to a class if, among other things, the plan provides: (a) with
respect to secured claims, that each holder of a claim included in the rejecting
class will receive or retain, on account of its claim, property that has a
value, as of the effective date of the plan of reorganization, equal to the
allowed amount of such claim; and (b) with respect to unsecured claims and
equity interests, that the holder of any claim or equity interest that is junior
to the claims or equity interests of such class will not receive or retain, on
account of such junior claim or
-3-
<PAGE>
equity interests, any property at all unless the senior class is paid in full.
The bankruptcy court must further find that the economic terms of the plan of
reorganization do not unfairly discriminate, as provided in Section 1129(b) of
the Bankruptcy Code, with respect to the particular objecting class. The
Companies believe they will be able to satisfy these requirements of Section
1129(b) of the Bankruptcy Code, as well.
3.2 Overview of the Terms of the Prepackaged Plan of Reorganization.
(a) General.
The purpose of the restructuring is to effect the changes to the
Companies' capital structure that the Companies believe are necessary to permit
them to implement fully their business plan and to return to profitability. The
Companies believe that the Prepackaged Plan, if approved, will alleviate the
problems caused by the Companies' excessive debt and repayment obligations and
will help assure the Companies' long-term viability.
(b) Classification And Treatment Summary.
The following table provides a summary of the classification and
treatment under the Prepackaged Plan of the Claims against and Interests in the
Companies. Reference should be made to the entire Disclosure Statement and to
the Prepackaged Plan for a complete description of the classification and
treatment of Claims and Interests.
Note also that the Prepackaged Plan will not effect a substantive
consolidation of the Companies. Thus, holders of Claims and Interests are placed
in subclasses, indicating their rights against each particular Company.
<TABLE>
<CAPTION>
------------------------- ------------------------------------------------------ ---------------- -----------------
Class Treatment Estimated Prepackaged
Recovery Plan Section
------------------------- ------------------------------------------------------ ---------------- -----------------
<S> <C> <C> <C>
Priority Payment in full by the Company that is obligated on 100% Sec. 2.2
Administrative such Priority Administrative Claim.
Claims
------------------------- ------------------------------------------------------ ---------------- -----------------
Priority Tax Claims Payment in full by the Company that is obligated on 100% Sec. 2.3
such Priority Administrative Claim or treatment in
accordance with Section 1129(a)(9)(C) of the
Bankruptcy Code, also by the Company that is
obligated on such Priority Administrative Claim.
------------------------- ------------------------------------------------------ ---------------- -----------------
Class 1 (and its At the option of the holder of such Allowed Claim, 100% Sec. 4.2
subclasses): All other it shall receive from the Company obligated on such
Priority Claims Claim either (i) all legal, equitable and
contractual rights to which such Allowed Claim
entitles the holder thereof, or (ii) payment in full
by the Company that is obligated on such Allowed
Claim, on the later of (y) the Effective Date and (z)
a date within 31 days of allowance.
------------------------- ------------------------------------------------------ ---------------- -----------------
Class 2 (and its Payment in full by Reorganized Glenoit. 100% Sec. 5.2
subclasses): Credit
Agreement Claims
against each of the
Companies
------------------------- ------------------------------------------------------ ---------------- -----------------
</TABLE>
-4-
<PAGE>
<TABLE>
<CAPTION>
------------------------- ------------------------------------------------------ ---------------- -----------------
<S> <C> <C> <C>
Class 3 (and its To the extent not previously paid as allowed by the 100% Sec. 4.3
subclasses): Other Bankruptcy Court, each such Claim shall, at the
Secured Claims against option of the obligated Debtor, either (i) receive
each of the Companies all the legal, equitable, and contractual rights to
which an Allowed Claim entitles the holder thereof,
or (ii) be paid in full.
------------------------- ------------------------------------------------------ ---------------- -----------------
Class 4 (and its At the option of the holder of such Allowed Claim, 100% Sec. 4.4
subclasses): it shall receive from the Company obligated on such
Ordinary Course Claim either (i) all legal, equitable and
Trade and Other contractual rights to which such Allowed Claim
Unsecured Claims entitles the holder thereof, or (ii) payment in full
by the Company that is obligated on such Allowed
Claim, on the later of (y) the Effective Date and (z)
a date within 31 days of allowance.
------------------------- ------------------------------------------------------ ---------------- -----------------
Class 5: Note Claims Payment of 17 cents for each $1.00 of the Allowed 17% Sec. 5.3
amount of such holder's Note Claim, provided such
payment is made by the earlier of (i) November 15,
2000 and (ii) ten Business Days after the
Confirmation Date; if it is not, then the holders of
the Note Claims will receive all of the issued and
outstanding shares of New Common Stock in
Reorganized Holdings, with each holder receiving its
pro rata share of such New Common Stock.
------------------------- ------------------------------------------------------ ---------------- -----------------
Class 6: Shareholder No distribution. However, certain individuals 0% Sec. 5.4
Note Claims and/or entities who are also members of this Class
may be permitted to become Participating Investors
under Section 6.5 of the Prepackaged Plan, if Holdings
agrees.
------------------------- ------------------------------------------------------ ---------------- -----------------
Class 7a: Interests There shall be no distribution to members of this 0% Sec. 5.5
and Related Claims class, which are primarily the holders of Old Common
in Holdings Stock and other Interests and other Claims
represented thereby. However, certain individuals
and/or entities who are also members of this Class may
be permitted to become Participating Investors under
Section 6.5 of the Prepackaged Plan, if Holdings
agrees.
------------------------- ------------------------------------------------------ ---------------- -----------------
Classes 7b, 7c, 7d, Unimpaired--retention of all rights and interests. 100% Sec. 4.5
7e, 7f, 7g, and 7h:
Interests and Related
Claims in all of the
Companies except
Holdings
------------------------- ------------------------------------------------------ ---------------- -----------------
</TABLE>
As indicated above, the Claims of trade creditors and employees of the
Companies, and other unsecured Claims (other than Shareholder Note Claims) are
not affected by the Prepackaged Plan. Promptly following commencement of any
Chapter 11 case, the Companies will seek Bankruptcy Court approval of various
measures designed to ensure that the trade creditors and employees of the
Companies would be unaffected by the filing and paid in the ordinary course of
business during the bankruptcy cases.
-5-
<PAGE>
3.3 Detailed Discussion of the Terms of the Prepackaged Plan
(a) Treatment of Classes
(i) Overview
-------------
The Prepackaged Plan classifies Claims and Interests that are subject
to classification under the Bankruptcy Code, and describes the treatment that
Claims and Interests and their respective Classes will receive under the
Prepackaged Plan. Under the Bankruptcy Code, two types of Claims are not subject
to classification - priority administrative claims and priority tax claims.
(ii) Priority Administrative Claims
------------------------------------
Priority Administrative Claims are claims of the kind described in
Section 507(a)(1) of the Bankruptcy Code, which are (i) administrative expenses
allowed under Section 503(b) of the Bankruptcy Code, and (ii) any fees and
charges assessed against the estate under Chapter 123 of Title 28 of the United
States Code. Administrative expenses allowed under Section 503(b) of the
Bankruptcy Code include (x) the actual, necessary costs and expenses of
preserving the estate, including wages, salaries, or commissions for services
rendered after the commencement of the case; (y) certain taxes; and (z)
compensation and reimbursement of professionals awarded by the Bankruptcy Court.
With the possible exception of the compensation of professionals, the Companies
will, in the event of a bankruptcy, pay substantially all Priority
Administrative Claims as the cases progress. Any unpaid Priority Administrative
Claim that is or becomes an Allowed Claim will be paid in full on the Effective
Date or within 31 days of becoming an Allowed Claim.
(iii) Priority Tax Claims
--------------------------
Priority Tax Claims are any Allowed Claims of the kind described in
Section 507(a)(8) of the Bankruptcy Code, which includes certain income taxes,
certain property taxes, certain withholding taxes, certain employment taxes,
certain excise taxes and certain penalties related to such taxes that are for
compensation for actual pecuniary loss. The Companies expect that in the event
of a bankruptcy, they will be authorized to pay taxes during the Chapter 11
cases as though no bankruptcy had been filed. To the extent that such Claims
still exist as of the Effective Date, they shall, at the option of the
Companies, be paid (i) in full on the later of (A) the Effective Date and (B) a
date within 31 days after the date such Priority Tax Claim becomes an Allowed
Claim; (ii) in full by deferred cash payments over a period not exceeding six
years after the date of assessment of such Claim including an interest component
as required by the provisions of Section 1129(a)(9)(C) of the Bankruptcy Code;
or (iii) on such other terms as have been or may be agreed to between such
holder and the Company.
(iv) Other Priority Claims
---------------------------
Class 1 consists of all Priority Claims, which is defined to include
all claims entitled to priority of payment under Section 507 of the Bankruptcy
Code (except for Priority Tax Claims and Priority Administrative Claims). The
Companies expect that in the event of a bankruptcy, they will be authorized to
pay most of the Claims of this Class, which include most Claims for employee
wages, as if no bankruptcy cases had been filed. To the extent that such Claims
still exist as of the Effective Date, they shall, at the option of the holder
thereof, either (i) receive from the Debtor obligated on the Allowed Claim all
the legal, equitable, and contractual rights to which such an Allowed Claim
entitles the holder thereof, or (ii) be paid in full by the Debtor obligated on
the Allowed Claim on the later of (y) the Effective Date and (z) a date within
31 days of the date such Claim becomes an Allowed Claim.
-6-
<PAGE>
(v) Class 2 (and its subclasses) - Credit Agreement Claims.
------------------------------------------------------------
The Credit Agreement Claims are all Claims represented by, related to,
or arising under or in connection with the Credit Agreement Notes or the Credit
Agreement, including, without limitation, Claims in the principal amount of the
outstanding "Advances," as such term is defined in the Credit Agreement, plus
accrued and unpaid interest thereon through and including the Effective Date,
plus all other "Obligations" of the "Loan Parties" as those terms are defined in
the Credit Agreement, including, but not limited to, the reasonable fees and
expenses of counsel to the "Lender Parties," as such term is defined in the
Credit Agreement, as provided in Section 8.04 of the Credit Agreement. Credit
Agreement Claims does not, however, include the Agent's Expenses.
A Credit Agreement Note is a promissory note executed and delivered by
the Company pursuant to the Credit Agreement.
Under the Prepackaged Plan, the Credit Agreement Claims shall be deemed
Allowed Claims in an amount equal to, as of the Effective Date, the full
outstanding principal amount of such Claims plus any unpaid interest and any
other amounts included in the definition of Credit Agreement Claims in the
Prepackaged Plan. It is estimated that Allowed Credit Agreement Claims will
exceed approximately $141 million as of the Effective Date, assuming the
Effective Date occurs on or about September 30, 2000. All other Credit Agreement
Claims are disallowed.
Each holder of an Allowed Credit Agreement Claim shall receive, on the
Effective Date, cash in the full Allowed amount of the Claim.
(vi) Class 3 (and its subclasses) - Other Secured Claims
---------------------------------------------------------
Class 3 consists of all Secured Claims against the Companies (other
than Credit Agreement Claims), with each such Claim to be deemed a separate
subclass. To the extent not previously paid as allowed the Bankruptcy Court,
each Class 3 Claim (including all subclasses of Class 3) that is or becomes an
Allowed Claim shall, at the option of the obligated Company, either (i) receive
from the Company obligated on the Allowed Claim all the legal, equitable, and
contractual rights to which such an Allowed Claim entitles the holder thereof,
or (ii) be paid in full by the Company obligated on the Allowed Claim on the
later of (y) the Effective Date and (z) a date within 31 days of the date such
Claim becomes an Allowed Claim. Class 3 Claims are unimpaired, are conclusively
deemed to have accepted the Prepackaged Plan, and will not vote on the
Prepackaged Plan.
(vii) Class 4 (and its subclasses) - Ordinary Course Trade and Other
--------------------------------------------------------------------
Unsecured Claims.
-----------------
Class 4 consists of all prepetition Claims arising in the ordinary
course of the Companies' business for (i) goods and services, including utility
services, supplied to the Companies on account, (ii) wages, salary, bonus or
commissions, including vacation, severance, and sick leave pay (to the extent
they are not Priority Claims); (iii) contributions to any employee benefit plan
(to the extent they are not Priority Claims); (iv) all General Liability Claims,
(v) all Rejection Claims, and (vi) all unsecured Claims not otherwise classified
by the Prepackaged Plan. Because the Companies expect to obtain Court authority
to pay their employees and trade creditors after the filing of the
Reorganization Case as though no bankruptcy case had been filed, the Companies
do not believe that there will be any substantial Class 4 Claims remaining as of
the Effective Date. To the extent that there are any such Claims that are or
become Allowed, they shall be paid in full on the later of the Effective Date
and within 31 days of the date any such Claim becomes an Allowed Claim or shall
otherwise receive all of their legal, equitable and contractual rights. Class 4
Claims are unimpaired, are conclusively deemed to have accepted the Prepackaged
Plan, and will not vote on the Prepackaged Plan.
-7-
<PAGE>
(viii) Class 5 - Note Claims.
------------------------------
Note Claims are all Claims represented by, relating to, or arising
under or in connection with the Notes or the Note Indenture, including, without
limitation, Claims in the outstanding principal amount of the Notes, plus
accrued and unpaid interest thereon to the Petition Date, and all Claims, if
any, with respect to securities, fraudulent conveyance or other laws relating to
the rights of creditors, but not including the Indenture Trustee Fees. As stated
above, the Notes are the 11% Senior Subordinated Notes due 2007 in the aggregate
principal amount of $95,000,000, issued pursuant to the Note Indenture between
Glenoit Corporation and United States Trust Company of New York, as indenture
trustee.
Under the Prepackaged Plan, each holder of a Note Claim shall be deemed
to have an Allowed Claim equal to the aggregate principal amount of all Note
Claims it holds as of the Distribution Record Date (all of which Allowed Claims
shall not exceed, in the aggregate, $95,000,000). All other Note Claims are
disallowed, including, but not limited to, all accrued or unpaid interest on the
Notes.
Each holder of a Note Claim that is or becomes an Allowed Claim shall
receive payment of 17 cents for each $1.00 of the Allowed amount of such
holder's Note Claim, provided that such consideration is paid by no later than
the earlier of (i) November 15, 2000 and (ii) ten Business Days after the
Confirmation Date. In the event this Noteholders Distribution is not timely
paid, then holders of Note Claims will receive all of Reorganized Holdings'
issued and outstanding New Common Stock, with each holder receiving its pro rata
share of such New Common Stock. (Note, however, that it is likely New Warrants
to purchase up to 10% of the authorized New Common Stock will also be given to
the Replacement Lender(s) under the Replacement Facility, if one is executed.)
Again, under either scenario, holders of Note Claims will only receive property
under the Prepackaged Plan for the principal amount of their Note Claims; all
accrued or unpaid interest on the Notes shall be disallowed.
(ix) Class 6 - Shareholder Note Claims.
----------------------------------------
No distribution. On the Effective Date, all Shareholder Notes shall be
cancelled, and Holdings shall be discharged from all obligations under the
Shareholder Note Claims. However, pursuant to Section 6.5 of the Prepackaged
Plan, certain individuals and/or entities, who may also be holders of Claims in
this Class, will be given the opportunity to become Participating Investors in
Reorganized Holdings. See "III. Overview of the Prepackaged Plan of
Reorganization--3.3 Detailed Discussion of the Terms of the Prepackaged
Plan--(b) Means for Implementation of the Prepackaged Plan and Other Provisions
of the Prepackaged Plan.--(ii) Funding to Satisfy Note Claims or Alternative
Consideration for Class 5 Claims." Class 6 Claims are impaired and are
conclusively presumed to have rejected the Prepackaged Plan, and will not vote
on the Prepackaged Plan.
(x) Class 7a - Interests and Related Claims in Holdings.
---------------------------------------------------------
No property or assets of any kind shall be distributed to, or retained
by, the holders of Interests or Claims classified in Class 7a in respect of any
such Interest or Claim so classified, whether or not such Interest or Claim is
an Allowed Claim or an Allowed Interest, and on the Effective Date, all
Interests and Claims in this Class will be canceled. Class 7a Interests and
related Claims are impaired and are conclusively presumed to have rejected the
Prepackaged Plan, and will not vote on the Prepackaged Plan. However, Holdings
may allow certain individuals and/or entities, including certain holders of Old
Common Stock (which fall under this Class), the opportunity to become
"Participating Investors" so as to purchase some of the New Common Stock and New
Preferred Stock of Reorganized Holdings. See "Means of Funding the Payments
under the Prepackaged Plan," below, and "III. Overview of the Prepackaged Plan
of Reorganization--3.3 Detailed Discussion of the Terms of the Prepackaged
Plan--(b) Means for Implementation of the Prepackaged Plan and Other Provisions
of the Prepackaged Plan.--(ii) Funding to Satisfy Note Claims or Alternative
Consideration for Class 5 Claims."
-8-
<PAGE>
(xi) Classes 7b, 7c, 7d, 7e, 7f, 7g, and 7h: Interests and Related
------------------------------------------------------------------
Claims in all of the Companies except Holdings.
-----------------------------------------------
Unimpaired--entities holding Interests and other Claims in Classes 7b,
7c, 7d, 7e, 7f, 7g, and 7h shall retain all rights and interests on account
thereof. Accordingly, the Interests and other Claims in these classes are
conclusively deemed to have accepted the Prepackaged Plan, and will not vote on
the Prepackaged Plan.
(b) Means for Implementation of the Prepackaged Plan and Other Provisions
of the Prepackaged Plan.
(i) Vesting of Assets.
-----------------------
On the Effective Date the property of the Companies' Estates will vest
in the respective Reorganized Companies, free and clear of liens not
specifically contemplated to either survive the Reorganization Cases or be
created or granted in connection therewith. Claims of the estate not released
under the Prepackaged Plan are preserved for the benefit of the respective
Reorganized Company.
Included in the assets that will vest in the Reorganized Companies
after the Effective Date will be various rights and claims that arise in the
ordinary course of the Companies' business, such as credits, chargebacks, and
other rights and claims against their vendors and customers. Without limiting
the foregoing, the Companies also reserve and will retain certain rights against
the former owners of Ex-Cell Home Fashions, Inc. ("Ex-Cell"), on account of
disputed funds held in escrow from Glenoit's purchase of Ex-Cell. This dispute
centers on the classification of certain deferred taxes, as the Companies
contend that the escrowed funds (which total less than $1,000,000) should not be
part of the purchase price to be paid to the former owners, but rather, should
be returned to the Companies or Glenoit specifically.
(ii) Funding to Satisfy Note Claims or Alternative Consideration for
--------------------------------------------------------------------
Class 5 Claims.
---------------
If holders of Class 5 Claims are to receive their cash distribution,
then the Participating Investors must supply $16,150,000 to make that
distribution. CVC has agreed to provide all of this amount but Holdings has
reserved the right to offer other parties the right to provide up to 10% (or
$1,615,000) of this amount and thereby become Participating Investors. CVC has
also agreed to provide any amount not subscribed to by other parties.
Within fifteen Business Days after the Petition Date, Holdings shall
notify these other parties by a letter or other form of written communication of
their right to become a Participating Investor. It is anticipated that Holdings
will allow certain individuals and/or entities who are also holders of
Shareholder Notes or Old Common Stock or other Interests in Holdings, as well as
certain officers and directors of the Companies, and perhaps others, to become a
Participating Investor.
Once a Participating Investor is notified, such party must then
determine whether to provide some of the funds necessary to make the Noteholders
Distribution. If an authorized party wishes to become a Participating Investor,
it must transfer to Holdings, no later than ten Business Days prior to the
Confirmation Hearing, the amount it wishes to invest to become a Participating
Investor, provided that no investment by a Participating Investor shall be less
than $10,000. After $1,615,000 is received from Participating Investors other
than CVC, no further investments by Participating Investors will be allowed. If
less than $1,615,000 is received from the Participating Investors, CVC has
indicated its intention to make up the difference that is needed.
Then, provided CVC and the other Participating Investors, if any, have
raised the full $16,150,000 necessary to pay Class 5 Claims under the
Prepackaged Plan, the Participating Investors shall transfer that amount (to the
extent they have not already done so) to Holdings no later than five Business
Days prior to
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the Confirmation Hearing. Any funds received by Holdings shall be held in trust
pending the Effective Date and promptly returned to the relevant Participating
Investors if either the Effective Date fails to occur by November 15, 2000 or
the full amount of $16,150,000 is not provided, in which event the Participating
Investors shall not receive anything else under the Prepackaged Plan.
10% of the funds invested by each Participating Investor shall be
allocable to New Common Stock and 90% shall be allocable to New Preferred Stock.
Each Participating Investor shall then receive, on the Effective Date
immediately following the payment of the Noteholders Distribution, (y) 58.823
shares of New Common Stock for each $100 of their investment that is allocated
to New Common Stock and (z) 1 share of New Preferred Stock for each $100 of
their investment that is allocated to New Preferred Stock.
--------------------------------------------------------------------------------
Example 1: Holdings allows ABC Corp. to become a Participating
Investor. ABC Corp. timely provides $300,000 to Holdings. Other Participating
Investors timely provide the rest of the funds needed, and CVC provides its
share of $16,150,000 necessary for the payment of Class 5 Claims under the
Prepackaged Plan. Of ABC Corp.'s investment, 10%, or $30,000, would be allocated
to New Common Stock, and 90%, or $270,000, would be allocated to New Preferred
Stock. Thus, ABC Corp. would receive 17,646 shares of New Common Stock (58.823
shares of New Common Stock for each $100 of its $30,000 investment in New Common
Stock) and 2,700 shares of New Preferred Stock (1 share of New Preferred Stock
for each $100 of its $270,000 investment in New Preferred Stock).
--------------------------------------------------------------------------------
If Class 5 does not receive its cash by the date specified above,
either because the Prepackaged Plan cannot become Effective, or the
Participating Investors have not provided the full $16,150,000 needed, or for
any other reason, then the holders of Class 5 Claims will receive all of the
issued and outstanding New Common Stock of Reorganized Holdings, with each
Noteholder receiving 1 share of New Common Stock for each $100 in allowed Note
Claims. In this event, no New Preferred Stock will be issued. However, in this
event, the Companies will likely also have to find a Replacement Lender to enter
into a Replacement Facility, as Citicorp Mezzanine's loan is contingent on CVC
or its affiliates owning a majority of the equity of Reorganized Holdings. See
"III. Overview of the Prepackaged Plan of Reorganization--3.3 Detailed
Discussion of the Terms of the Prepackaged Plan--(b) Means for Implementation of
the Prepackaged Plan and Other Provisions of the Prepackaged Plan--(iv) New
Financing."
--------------------------------------------------------------------------------
Example 2: XYZ Corp. holds 2,000,000 in principal amount of Note
Claims. Holdings does not receive the full $16,150,000 needed to pay Class 5
Claims under the Prepackaged Plan. Thus, on the Effective Date of the
Prepackaged Plan, ABC Corp. receives 20,000 shares of New Common Stock for its
Note Claims (1 share of New Common Stock for each $100 in allowed Note Claims).
It receives nothing for any accrued or unpaid interest on the Notes, and since
no New Preferred Stock is being issued, it does not receive any of that stock.
--------------------------------------------------------------------------------
(iii) Issuance of New Common Stock, New Preferred Stock, and New
----------------------------------------------------------------
Warrants, and Cancellation of Interests.
----------------------------------------
On the Effective Date, Reorganized Holdings will have authorized
1,200,000 shares of New Common Stock. Of this amount, 950,000 shares of New
Common Stock will be issued and outstanding, and will be distributed as provided
in the Prepackaged Plan. If the Companies enter into the Citicorp Mezzanine Debt
Arrangement, then Reorganized Holdings will also give to Citicorp Mezzanine the
New Warrants to purchase up to 10% of the authorized shares of New Common Stock.
If Citicorp Mezzanine does not fund the Citicorp Mezzanine Debt Arrangement and
the Companies are able to find a
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Replacement Lender, it is likely that such Replacement Lender will also demand
under such a Replacement Facility an equity participation in Reorganized
Holdings similar to the New Warrants.
On the Effective Date, all Interests, including all Old Common Stock,
all outstanding warrants and all options to purchase Old Common Stock will be
cancelled. Reorganized Holdings does not expect to pay any dividends on the New
Common Stock, nor does it intend to register the New Common Stock for trading on
any exchange or quotation system in the near future after the Effective Date.
As stated above, if the Participating Investors provide the funds
necessary to pay Class 5 Claims, they will receive all of the issued and
outstanding shares of New Common Stock of Reorganized Holdings. Also,
Reorganized Holdings will be deemed to have authorized all 145,350 shares of New
Preferred Stock, which shall then be received by the Participating Investors.
The New Preferred Stock shall be entitled to a dividend of $14 per share for the
first year after the Effective Date, and a dividend of $8 per share each year
thereafter. However, all of these dividends will be "PIK," that is, Reorganized
Holdings need not pay the dividends in cash, but rather, may pay the dividends
in kind through the issuance of a like amount of additional Preferred Stock.
As stated above, if the Participating Investors do not provide the
funds needed to pay Class 5 Claims, then no New Preferred Stock will be issued.
The Certificate of the Reorganized Companies will provide that the
Companies will not issue any nonvoting equity securities to the extent
prohibited by Section 1123 of the Bankruptcy Code. This prohibition will have no
further force and effect beyond that required by Section 1123, will have such
force and effect only for so long as Section 1123 is in effect and applicable to
the Companies, and in any event, the Certificate may be amended in accordance
with applicable law to remove the prohibition.
(iv) New Financing
-------------------
On the Effective Date, the Companies expect to execute the New Working
Capital/Term Debt Facility. This would be a debt facility entered into by
Reorganized Holdings (and guaranteed by all subsidiaries thereof) and
BNP/Paribas (in such context, the "New Agent"), as agent for the New Lenders,
effective as of the Effective Date. The new facility would be in form and
substance mutually acceptable to the Companies, the New Agent and the New
Lenders, and would provide agented loans (revolving and/or term) to fund certain
cash payments required by the Prepackaged Plan and the Reorganized Companies'
post-Effective Date working capital requirements, and trade and standby letters
of credit. Under it, the Reorganized Companies would be able to borrow in
accordance with a formula tied to cash, eligible accounts receivable, eligible
inventory and perhaps other assets, and the loans outstanding under it would be
secured on a first priority basis by substantially all of the assets of
Reorganized Holdings and its subsidiaries. It would require payment of interest
rates, fees, and charges, and would contain covenants, obligations and
representations customary in a transaction and financing of this nature. It
would also provide substantially equivalent liquidity to the Reorganized
Companies as enjoyed by the Companies under the Credit Agreement prior to the
Companies' default thereunder, and with payment terms and a payment schedule no
shorter or otherwise more restrictive to the Reorganized Companies than that
currently contained in the Credit Agreement.
Also on the Effective Date, provided CVC or its affiliates receive a
majority of the equity of Reorganized Holdings, Glenoit would enter into the
Citicorp Mezzanine Debt Arrangement, which would be an unsecured term debt
facility to be entered into by Glenoit and Citicorp Mezzanine, in form and
substance satisfactory to the Agent and the New Lenders, in the aggregate
principal amount of $15 million. The payment of the obligations under the
Citicorp Mezzanine Debt Arrangement would be subordinated in all respects to the
obligations under the New Working Capital/Term Debt Facility. The Citicorp
Mezzanine Debt Arrangement would probably have a maturity date no earlier than
one year after the latest maturity date of the loans to be advanced pursuant to
the New Working Capital/Term Debt Facility, with a
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12% per annum cash interest coupon paid semi-annually and a 6% per annum payment
in kind, or PIK, interest coupon paid semi-annually. Further, the Citicorp
Mezzanine Debt Arrangement would probably not have debt amortization until the
maturity of the New Working Capital/Term Debt Facility. Also under the Citicorp
Mezzanine Debt Arrangement, if consummated, Citicorp Mezzanine would receive the
New Warrants, which would entitle it to receive up to 10% of the authorized New
Common Stock of Reorganized Holdings, on a fully-diluted basis.
If the Citicorp Mezzanine Debt Arrangement is not consummated, either
because CVC and its affiliates do not receive at least a majority of the equity
of Reorganized Holdings or for any other reason, then the Companies will seek
other financing similar to the Citicorp Mezzanine Debt Arrangement for liquidity
after the Effective Date and to make other payments necessary for consummation
of the Prepackaged Plan. The Prepackaged Plan contemplates this being done
through a "Replacement Facility" with one or more "Replacement Lenders."
(v) Operations of the Companies.
---------------------------------
On and after the Effective Date, the Reorganized Companies will
continue to operate their businesses, and shall implement the terms of the
Prepackaged Plan.
(vi) Management and Board of Directors.
----------------------------------------
Unless a written notice stating otherwise is Filed by the Companies
prior to confirmation of the Prepackaged Plan, the executive officers of the
Companies immediately before Confirmation of the Prepackaged Plan shall continue
to serve after Confirmation of the Prepackaged Plan in their respective
capacities. For a listing of such parties and their backgrounds, see "IV.
General Information--4.2 Current Board of Directors and Management."
As to directors, on the Effective Date, all directors of the
Companies shall be deemed to have resigned, without any further action on the
part of any Person. On the Effective Date, the boards of directors of each
Reorganized Company shall consist of the parties designated in a "Notice of
Filing of Initial Board Members" to be filed five business days prior to the
Confirmation Hearing. Provided CVC has purchased at least a majority of the
equity of Reorganized Holdings and the Participating Investors have satisfied
Section 6.5 of the Prepackaged Plan (i.e., contributed all funds necessary to
pay all holders of Allowed Note Claims their distribution under the Prepackaged
Plan), then the Companies and the Participating Investors shall agree as to the
persons who will serve as the directors of the Reorganized Companies. If the
Participating Investors have not satisfied Section 6.5 of the Prepackaged Plan,
then the rights of the Participating Investors hereunder shall inure to the
Committee.1
Although it is unknown whether any of such parties will be reappointed
pursuant to the above paragraph, the current directors of Holdings and Glenoit
and their backgrounds are in "IV. General Information--4.2 Current Board of
Directors and Management," hereof.
-----------------
(1) The Prepackaged Plan refers to "the Committee" on the assumption that the
Unofficial Noteholders Committee will be appointed as the official committee for
the bankruptcy cases. Thus, certain references in this document to the rights of
"the Committee" shall be deemed to apply to the Unofficial Noteholders
Committee.
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(vii) Assumption of Contracts and Leases.
-----------------------------------------
All contracts and leases not expressly rejected by the Companies
pursuant to a Bankruptcy Court order entered prior to the Confirmation Date, or
subject to a motion for rejection filed on or before the Confirmation Date,
shall be deemed assumed.
(viii) Indemnification Obligations.
-----------------------------------
The obligations of the Companies to indemnify their present or former
directors and officers survive Confirmation and are unaffected thereby, and are
not discharged irrespective of whether indemnification is owed in connection
with an event occurring before, on or after the Petition Date. The Companies are
not aware of any outstanding Claims for indemnification. As of the Confirmation
Date, the Reorganized Companies shall provide customary compensation,
indemnification arrangements and insurance coverage to each of its directors
designated to take office pursuant to Section 6.11 of the Prepackaged Plan.
(ix) Discharge of Debtors.
--------------------------
On the Effective Date, the Reorganized Companies will be discharged
from liability on all Claims which arose prior to Confirmation.
(x) Exculpations.
-----------------
Under the Prepackaged Plan, the Companies, the Committee, CVC, the
other Participating Investors, the Agent, and the Lenders and each of their
respective members, ex-officio members and any of their respective officers,
directors, employees, agents, distributions agents, attorneys, accountants and
other professionals shall neither have nor incur any liability to the Companies
or any holder of a Claim or Interest for any act or omission in connection with,
or arising out of, the Reorganization Case or the Prepackaged Plan, including
without limitation, the negotiation, formulation, preparation, confirmation,
consummation or the administration of the Reorganization Case, the Prepackaged
Plan, the Disclosure Statement, or any contract, instrument, release or other
agreement, document, or election made, created or entered into or any other
action taken in connection with the Reorganization Case, the Prepackaged Plan
(including any such act or omission which occurred prior to the Petition Date)
or the property to be distributed under the Prepackaged Plan, except, in each
case, on account of willful misconduct or gross negligence on the part of the
specific Person sought to be held so liable.
(c) Anticipated "First Day" Orders to be Sought in the Bankruptcy Cases.
It is difficult to predict what motions or other applications will be
needed once the Bankruptcy Cases are commenced. However, upon the commencement
of the cases, the Companies expect they will, at a minimum, seek several "first
day" orders that will allow them to make a smooth transition into bankruptcy.
These first day orders may include orders authorizing the Companies to pay all
allowed prepetition claims of their trade creditors, customers and employees in
the ordinary course of business. In addition, the Companies anticipate seeking
the following first day orders: (i) an order authorizing them to keep certain
prepetition bank accounts open and to continue to use existing business forms,
such as checks, without the debtor in possession designation; (ii) an order
authorizing them to continue to use their consolidated cash management system,
which facilitates the movement of cash among various types of accounts and among
the Companies and their other subsidiaries; (iii) an order directing joint
administration of the Companies' bankruptcy cases for procedural purposes only
in order to avoid duplicative dockets, orders and notices; (iv) an order
granting the Companies an additional 90 days for filing schedules of assets and
liabilities, executory contracts and statements of financial affairs, subject to
a permanent waiver of the filing of such schedules and statements if the
Prepackaged Plan is confirmed within such 90-day period; (v) an order allowing
an extension of the 20-day period during which utilities may not alter services
they
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provide to the Companies and determining that such utilities have adequate
assurance of payment unless and until the Bankruptcy Court orders additional
assurance of payment; (vi) orders authorizing retention of various professionals
by the Companies, including Alston & Bird LLP as bankruptcy counsel, Young,
Conaway, Stargatt & Taylor LLP as local bankruptcy counsel,
PriceWaterhouseCoopers LLP as financial advisors, and Kirkland & Ellis LLP as
special corporate counsel, (vii) an order authorizing retention of other
professionals, such as accountants, actuaries, consultants and attorneys,
utilized by the Companies in the ordinary course of their business, without the
need to file individual retention applications for each such professional; and
(vii) an order fixing the dates for the hearings on approval of the Disclosure
Statement, the solicitation and the confirmation of the Prepackaged Plan. The
first day orders will be sought pursuant to accompanying applications and/or
motions. The foregoing list is subject to change based on the needs of the
Companies in connection with their operations throughout the cases.
To maintain the Companies' operations, the Companies will also need the
ability during the cases to obtain a post-petition Debtor in Possession, or
"DIP" Facility. On the Petition Date, the Companies will submit an order for
approval by the Bankruptcy Court of the DIP Facility, with some or all of the
lenders under the current Credit Agreement. Although the terms of the DIP
Facility have yet to be finalized, it is anticipated that the borrowings under
the DIP Facility will be secured by a lien on substantially all of the assets of
the Companies pursuant to Section 364(d) of the Bankruptcy Code, which lien will
be junior only to the properly perfected liens on the assets of the Companies
existing on the Petition Date, and will be entitled to a superpriority pursuant
to Section 364(c)(1) of the Bankruptcy Code, in each case subject only to a
"carveout" for payment of the Companies' professionals.
3.4 Securities Law Matters.
With respect to the New Common Stock, New Preferred Stock and New
Warrants (collectively, the "Plan Securities") to be issued pursuant to the
Prepackaged Plan, the Companies intend to rely upon the exemptions from the
registration requirements of the Securities Act of 1933 (as amended, the
"Securities Act"), and of equivalent state securities or "blue sky" laws,
provided by Section 1145(a)(1) and (a)(2) of the Bankruptcy Code.
(a) Issuance of Plan Securities under the Prepackaged Plan.
Sections 1145(a)(1) and 1145(a)(2) of the Bankruptcy Code exempts the
issuance of securities, including warrants, options, rights to subscribe or
conversion privileges, under a plan of reorganization from registration under
the Securities Act and under equivalent state securities or "blue sky" laws if
three principal requirements are satisfied: (i) the securities must be issued
"under a plan" of reorganization by the debtor or its successor under a plan;
(ii) the recipients of the securities must hold a claim against the debtor, an
interest in the debtor or a claim for an administrative expense against the
debtor; and (iii) the securities must be issued entirely in exchange for the
recipient's claim against or interest in the debtor, or "principally" in such
exchange and "partly" for cash or property. The Companies believe that the
exchange of the Plan Securities for Claims under the Prepackaged Plan satisfies
the requirements of Section 1145(a)(1) or 1145(a)(2) of the Bankruptcy Code and
is, therefore, exempt from registration under federal and state securities laws.
(b) Transfer of Plan Securities.
(i) Plan Securities Issued Pursuant to Section 1145 Exemption
--------------------------------------------------------------
The Plan Securities (all of which will be issued under the Section
1145(a)(1) or 1145(a)(2) exemptions discussed above) may be freely transferred
by most recipients thereof, and all resales and subsequent transactions for the
Plan Securities are exempt from registration under federal and state securities
laws, unless the holder is an "underwriter" with respect to such securities.
Section 1145(b)(1) of the Bankruptcy Code defines four types of underwriters:
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(i) persons who purchase a claim against, an interest in, or a
claim for administrative expense in a case concerning a debtor with a
view to distributing any security received in exchange for such a claim
or interest;
(ii) persons who offer to sell securities issued under a
bankruptcy plan on behalf of the holders of such securities;
(iii) persons who offer to buy securities issued under a
bankruptcy plan from the persons receiving such securities, if the
offer to buy is made with a view to distributing such securities and
under an agreement made in connection with the plan, with the
consummation of the plan, or with the offer of securities under the
plan; and
(iv) a person who is an "issuer" with respect to the
securities, as the term "issuer" is used in Section 2(11) of the
Securities Act.
Under Section 2(11) of the Securities Act, an "issuer" includes any
person directly or indirectly controlling or controlled by the issuer, or any
person under direct or indirect common control with the issuer. "Control" (as
such term is defined in Rule 405 of Regulation C under the Securities Act) means
the possession, direct or indirect, of the power to direct or cause the
direction of the policies of a person, whether through the ownership of voting
securities, by contract, or otherwise. Accordingly, an officer or director of a
reorganized debtor (or its affiliate or successor) under a plan of
reorganization may be deemed to "control" such debtor (and therefore be an
underwriter for purposes of Section 1145), particularly if such management
position is coupled with the ownership of a significant percentage of the
debtor's (or affiliate's or successor's) voting securities. Moreover, the
legislative history of Section 1145 of the Bankruptcy Code suggests that a
creditor who owns at least 10% of the securities of a reorganized debtor may be
presumed to be a "control person."
To the extent that persons deemed to be "underwriters" receive Plan
Securities pursuant to the Prepackaged Plan, resales by such persons would not
be exempted by Section 1145(a)(1) of the Bankruptcy Code from registration under
the Securities Act or other applicable law. Persons deemed to be underwriters,
however, may be able to sell such securities without registration subject to
other exemptions available under the Securities Act, including the provisions of
Rule 144 under the Securities Act as discussed below.
(ii) New Securities and Common Stock Held by Underwriters.
----------------------------------------------------------
Holders of Plan Securities who are deemed to be "underwriters" within
the meaning of Section 1145(b)(1) of the Bankruptcy Code or who may otherwise be
deemed to be "affiliates" of, or to exercise "control" over, the Companies
within the meaning of Rule 405 of Regulation C under the Securities Act, may, in
addition to any other exemptions that may be available under federal and state
securities laws, under certain circumstances, be able to sell their securities
pursuant to the more limited safe harbor resale provisions of Rule 144 under the
Securities Act. Generally, Rule 144 provides that if certain conditions are met
(e.g., volume limitations, manner of sale, availability of current information
about the issuer, etc.), specified persons who resell such securities and are
"affiliates" of the issuer of the securities sought to be resold, will not be
deemed to be "underwriters" as defined in Section 2(11) of the Securities Act.
The foregoing summary discussion is general in nature and has been
included in the Disclosure Statement solely for informational purposes. The
Companies do not make any representations concerning, and do not provide any
opinion or advice with respect to, the securities law and bankruptcy law matters
described above. In view of the uncertainty concerning the availability of
exemptions from the registration requirements of the Securities Act and
equivalent state securities or "blue sky" laws to a recipient of Plan Securities
who may be deemed to be an
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"underwriter" (within the meaning of Section 1145(b)(1) of the Bankruptcy Code)
and/or an "affiliate" of, or a person who exercises "control" over, the
Companies under applicable federal and state securities laws, the Companies
encourage each person who is to receive Plan Securities pursuant to the
Prepackaged Plan to consider carefully and consult with its own legal advisor(s)
with respect to such (and any related) matters.
IV. GENERAL INFORMATION
4.1 The Companies.
(a) The History and Business of the Companies.
Glenoit was incorporated in 1954 as a Delaware corporation, and it
became a wholly-owned subsidiary of Holdings during 1995. In October 1998,
Glenoit acquired American Pacific Enterprises, Inc., and in February 1999,
Glenoit acquired Ex-Cell Home Fashions, Inc. As a result of these acquisitions,
the Companies had transformed from a specialty textile manufacturer focused on
profitable niche segments to a diversified manufacturer and distributor of
consumer goods, with the majority of its revenues derived from the home textile
market.
Currently, the Companies' products are divided in two segments: the
Decorative Home Furnishings group and the Fabrics group. These groups
collectively operate six domestic production facilities and, through certain
non-debtor subsidiaries, three foreign production facilities, as well as six
domestic warehouses. In addition, the Decorative Home Furnishings group has
sales and/or design offices in San Francisco, California and New York, New York.
As of January 1, 2000, the Companies' combined operations employed
1,660 employees, 1,280 of which were paid hourly and 380 of which were salaried.
Glenoit Canada, Inc., an affiliate that is not expected to file bankruptcy, has
certain unionized employees, but otherwise, none of the Companies' workforce is
unionized.
The Decorative Home Furnishings Group: The Decorative Home Furnishings
group designs, manufactures, imports and distributes a wide array of textile
products for the home. Its products consist of decorative bedding accessories,
quilts, duvet covers, window treatments, kitchen rugs, shower curtains, table
linens, area rugs and decorative pillows. These products are manufactured
domestically as well as sourced from an affiliated foreign manufacturing
facility or from established, independent contractors located primarily in
China. The Decorative Home Furnishings group supplies products across all
distribution channels including the large national discount retailers, specialty
retailers and department stores.
The Decorative Home Furnishings group operates multiple manufacturing
facilities that are either owned or leased. These are located in Tarboro, North
Carolina, Goldsboro, North Carolina, Bentonville, Arkansas, Miami, Florida, and,
through a foreign subsidiary, in mainland China. This group also operates
several warehouses, either owned or leased, which are located in Goldsboro,
North Carolina, Tarboro, North Carolina, and Columbus, Ohio. The Decorative Home
Furnishings group also leases a design office in San Francisco, California, and
a sales office, a design office and showrooms in New York, New York.
The Fabrics Group: The Fabrics group develops fabrics to target the
increasing consumer preference towards more casual and comfortable dress and a
growing emphasis on outdoor activities and styling related to outdoor
activities. Beginning with Glenaura(TM) in 1993, the Fabrics group introduced a
series of branded, performance-oriented fabrics that have transformed the
Fabrics group from a traditional deep-pile fabric manufacturer dependent upon
the coat market into a diversified fabric producer serving a broader range of
end-use markets. In addition to performance-oriented fabrics, the Fabrics group
is a
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manufacturer and marketer of faux furs in the United States, as well as fabrics
used to cover audio speakers in certain models of automobiles, fireproof fabric
marketed under the Glentec(TM) name used by the United States Navy, and a wide
variety of other fabrics used in the manufacture of toys, golf club head covers,
powder puffs, case linings and other end-use products.
The Fabrics group owns and operates two manufacturing facilities. One
is located in Tarboro, North Carolina and the other, owned by a foreign
subsidiary, is located in Elmira, Canada. The Fabrics group also leases a
facility in Jacksboro, Tennessee, which was formerly a manufacturing facility
and is now partially subleased to an unrelated non-debtor entity.
For the fiscal year ending January 1, 2000, the Companies reported
consolidated net sales of approximately $294.7 million, and a net loss of $13.2
million (including a restructuring charge of $13.1 million related to the
closure of the Jackboro, Tennessee facility). As of January 1, 2000, the
Companies owned, on a consolidated basis, assets of approximately $216.9 million
at book value, and had total current and long-term consolidated liabilities of
approximately $276 million.
(b) Recent Operational and Financial Difficulties
While the Fabrics group continues to develop new and innovative
fabrics, there has been an overall decline in the sourcing of apparel fabric
manufactured in the United States. As a result, the Fabrics group took steps in
1999 to consolidate operations and eliminate excess capacity. In connection with
those actions, Glenoit consolidated its Tennessee facility into its North
Carolina and, through a subsidiary, its Canadian facilities, to support current
and future sales volumes. The Fabrics group also began marketing finished
garments in 1999 made from apparel fabric to help further product offerings and
strengthen sales in the Fabric Division. During the first quarter of fiscal
1999, Glenoit recorded a restructuring charge totaling $13.1 million to cover
the estimated costs associated with the closing of the Tennessee facility.
During September 1999, two of the Companies' Tarboro, North Carolina
facilities were temporarily shut down as a result of the extensive flooding
caused by Hurricane Floyd. While the facilities did not sustain significant
damage, the shortage of utilities and the dramatic impact to the local workforce
resulted in work stoppage and a delay in shipments for approximately ten days.
The Companies continued to pay the effected employees during the shutdown. It is
estimated that operating losses from this event exceeded anticipated insurance
recoveries by approximately $800,000.
Recently, the Companies have been faced with financial difficulties as
well. By way of background, in April 1997, concurrently with Glenoit's issuance
of the Notes, Glenoit also entered into a $70 million senior credit facility
with a syndicate of lenders led by Banque National de Paris, pursuant to the
Credit Agreement. The parties subsequently amended the Credit Agreement first in
October 1998 and again in February 1999 to provide liquidity to purchase
American Pacific and Ex-Cell Home Fashions. As of February 1999, the Credit
Agreement entitled Glenoit to borrow an aggregate of $200 million, comprised of
a $90 million working capital commitment, a $40 million Term A loan, and a $70
million Term B loan.
Principal payments under the Term A and Term B loans began on September
30, 1999 at a total of $1.7 million per quarter and increase over the life of
the loans. Borrowings under the Term A loan and working capital commitment are
required to be fully repaid by December 31, 2003, and borrowings under the Term
B loan are required to be fully repaid by June 30, 2004. At the time of
Glenoit's acquisition of Ex-Cell in February 1999, both the Term A and Term B
loans were fully drawn. During November 1999, Glenoit prepaid a total of
approximately $1 million of loans outstanding under the Term A and Term B
facilities with excess cash proceeds from the sale of fixed assets related to
the closure of its Tennessee facility.
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As of June 29, 1999, Glenoit's senior lenders waived the requirement to
maintain and meet certain financial covenants contained in the Credit Agreement
for the period ending July 3, 1999. In connection with obtaining the waiver, the
working capital commitment was reduced to $65 million and certain financial
covenants were amended, including an amendment to require monthly testing of
Glenoit's total leverage and senior leverage ratios.
Glenoit was not in compliance with these ratios for the month of July,
1999. At that time, Glenoit received a waiver with respect to such
non-compliance and amended certain of the covenants under the Credit Agreement.
As a result of the temporary shut down of the two facilities in Tarboro, North
Carolina in September 1999, Glenoit was not in compliance with the revised
covenants as of October 2, 1999, but it received a waiver for such
non-compliance as of October 29, 1999. On November 19, 1999, Glenoit received a
waiver which eliminated the requirement to meet certain financial covenants for
the month of October and amended existing covenants for November and December
1999, as well as created monthly covenants for January and February 2000.
On February 23, 2000, Glenoit acknowledged it was unable to repay
approximately $2 million of borrowings required to be repaid as of February 1,
2000 under the working capital commitment because of an insufficient borrowing
base, which resulted in a default under the Credit Agreement. The insufficient
borrowing base was the result of missed shipments during the last week of
January 2000 due to a blizzard in Eastern North Carolina that closed operating
facilities and restricted shipments. On March 16, 2000, Glenoit's lenders waived
this default until April 10, 2000 and limited Glenoit's available credit under
the working capital commitment during this period.
Based on the February payment default and various covenant defaults
existing at April 1, 2000, the banks delivered a blocking notice on April 14,
2000, which prohibited Glenoit from making a semi-annual interest payment of
$5.2 million due under the Notes. Subsequently, Glenoit entered into a number of
amendments to the Credit Agreement in which the banks agreed for a specified
time to continue in their discretion to provide funding under the Credit
Agreement. These amendments limit the amount of working capital loans and
letters of credit under the Credit Agreement, require Glenoit to provide weekly
cash reports and provide that Glenoit will diligently pursue a financial
restructuring. For a discussion of negotiations with Noteholders and other
during this time, see "V. Relationships with Certain Insiders, Formation of the
Unofficial Noteholders Committee, and Their Role in These Cases--5.2 The Role of
Certain Insiders and the Unofficial Noteholders Committee in Formulating the
Tender Offer and the Prepackaged Plan."
On or about June 30, 2000, Glenoit entered into a Tenth Amendment to
the Credit Agreement, which increased the amount of working capital loans
available to the Companies to accommodate forecasted liquidity needs through
July 18, 2000. In addition, the banks have agreed to defer through July 25, 2000
principal amortization payments in the amount of approximately $1.7 million
under the Term A and Term B loans due on July 1, 2000.
(c) Risks of the Industries in Which the Companies Operate.
The Fabrics Group faces a variety of risks, many from the fact that
cheaper (albeit lower quality) alternatives are available from foreign
manufacturers. Glenoit cannot compete with these manufacturers' operating costs,
and has in the past made up for that with higher quality, brand awareness, and
its strong relationship with its customers. Notwithstanding that, the industry
trend in recent years has been to obtain more fabrics and finished garments from
foreign manufacturers, and many companies like Glenoit have suffered financially
from this trend. Further, consumer preferences have been known to change
rapidly, and although the Fabrics Group has been able to respond quickly to
those changes in the past, there can be no guarantee this will continue in the
future.
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The Home Furnishings Group is also subject to consumer tastes, as well
as general economic conditions. As with the Fabrics Group, consumer tastes will
have a strong impact on the performance of the Home Furnishings Group in the
future, and although the products of the Home Furnishings Group have proven
popular in the past, there is no guarantee this will continue. As to economic
factors, the Home Furnishings Group has benefited from the increased purchasing
power of U.S. consumers in recent years, and the trend among consumers to
purchase more high-quality goods for the home. Thus, any negative changes to the
U.S. economy would likely result in lower earnings for the Home Furnishings
Group, as well. The Home Furnishings Group also sources a significant amount of
product from China and other nations in that region. Certain of these products
are controlled by quotas and other trade related factors. The sourcing of these
products could be negatively impacted by economic conditions in those regions or
by international trade restrictions. Further, positive financial performance for
the Home Furnishings Group is also dependant on strong relations with the retail
chains that carry the Home Furnishing Group's products; although the Companies
believe they will maintain such relations in the future, the bankruptcy cases or
other factors could strain or negatively affect these relationships.
(d) Legal Proceedings.
As of the date of this Disclosure Statement, American Pacific, one of
the Companies subject to this Disclosure Statement, was a defendant to certain
litigation pending in the United States District Court for the Northern District
of California. That litigation was commenced in June of 1999 by High Country
Linens, Inc. ("High Country"), a competitor to American Pacific. In it, High
Country alleges that American Pacific has committed various business torts,
including trademark and copyright infringement, unfair competition, false
advertising, slander, and interference with contractual relations. High Country
alleges several million dollars in damages, and although American Pacific
believes this entire case lacks merit, High Country's claim, if allowed, would
be unimpaired under the Prepackaged Plan. Thus, in the event High Country was
awarded damages, it would cause material financial harm to American Pacific.
Certain of the Companies are also involved with arbitration with two
former owners (and current managers) of American Pacific. This arbitration deals
with certain payments or bonuses alleged to be owed by American Pacific to such
parties. As with the High Country litigation, claims under this arbitration are
unimpaired. Thus, although the Companies believe they owe nothing to these
former owners, and damages would not likely exceed $1,000,000, the results of
this arbitration could adversely impact American Pacific.
The Companies are also involved in litigation from time to time that
arises from the ordinary operation of their businesses. Unlike the High Country
litigation and the arbitration referenced above, which each carry with them
substantial risk, such other litigation matters are customary and unlikely to
have any material effect on the Companies' operations during or after the
Reorganization Cases.
4.2 Current Board of Directors and Management.
As indicated above, unless a written notice stating otherwise is Filed
by the Companies prior to confirmation of the Prepackaged Plan, the executive
officers of the Companies immediately before Confirmation of the Prepackaged
Plan shall continue to serve after Confirmation of the Prepackaged Plan in their
respective capacities. Currently, these executive officers, a brief biography of
each, and their salaries for the past fiscal year are as follows:
<TABLE>
<CAPTION>
Name Age Position Salary & Bonus - Fiscal 1999
<S> <C> <C> <C>
Thomas J. O'Gorman 65 President, Chief Executive Salary: $400,000
Officer and Director Bonus: $800,000 ($400,000 of which has
not been paid)
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C> <C>
Samuel Samelson 59 President - Ex-Cell Home Salary: $437,500
Fashions, Inc. Bonus: $1,600,000 (has not been paid)
Gregory D. Block 34 President - American Pacific Salary: $300,000
Enterprises, Inc. Bonus: None
Kevin R. Kennedy 45 President - Consumer Rugs Salary: $208,000
Bonus: $37,500 (has not been paid)
Gary L. Mazzie 40 President - Fabric Group Salary: $162,212
Bonus: $32,813 (has not been paid)
Lester D. Sears 51 Executive Vice President and Salary: $191,008
Chief Financial Officer Bonus: $127,975 (has not been paid)
</TABLE>
Thomas J. O'Gorman: Mr. O'Gorman has served as the President, Chief
Executive Officer and a Director of Glenoit and Holdings since 1991. Mr.
O'Gorman has been in the textile industry since 1956 and has served as the
General Manager of the Menswear Business of Milliken & Co., President of
Knit-Away, and President of the Denim, Corduroy and Blended Fabrics Divisions of
Burlington Industries, Inc., and Burlington's International Denim operations
headquartered in London. Subsequently, Mr. O'Gorman was the President and a
Director of Greenwood Mills Marketing Company, Inc. Mr. O'Gorman has served on
the Market Committee of the American Textile Manufacturers Institute and as a
member of the Steering Committee of Crafted With Pride in the U.S.A. Council.
Gregory D. Block: In connection with the acquisition of American
Pacific Enterprises, Inc. ("American Pacific"), Mr. Block joined American
Pacific in his current position. Prior to that date, Mr. Block was part owner
and served as Co-CEO of American Pacific primarily responsible for product
development and merchandise sourcing. Mr. Block joined APE in 1991 after serving
two years in the U.S. Central Intelligence Agency.
Samuel Samelson: In connection with the acquisition of Ex-Cell Home
Fashions, Inc. ("Ex-Cell"), Mr. Samelson joined Ex-Cell in his current position.
Mr. Samelson has been with Ex-Cell since 1965 serving in various positions
including overall responsibility for the manufacturing operations. Mr. Samelson
was promoted to President of Ex-Cell in 1987 and was a minority shareholder
prior to the acquisition.
Gary J. Mazzie: Mr. Mazzie was promoted to President of the Fabrics
Group during 1999 after serving as the Fabrics Group's Director of Operations
and two years as its Business Manger. Prior to joining Glenoit, Mr. Mazzie
served in various management positions with Inman Mills from 1986 to 1995.
Kevin R. Kennedy: Mr. Kennedy joined Glenoit in 1997 as President of
the consumer rug product group. Prior to that, Mr. Kennedy served in various
executive positions with Couristan, Inc., most recently as Executive Vice
President of Sales and Marketing. Mr. Kennedy was also employed by Abraham &
Strauss as a buyer for the area rug business and participated in A & S's
executive management training program.
Lester D. Sears: Mr. Sears joined Glenoit in 1996 as Executive Vice
President and Chief Financial Officer. From 1989 to 1996, Mr. Sears was the
Executive Vice President, Chief Financial Officer and an equity owner of Perfect
Fit Industries, Inc., a privately held company. Prior to 1989, Mr. Sears was
employed in various positions including as Controller of the Consumer Products
Division of Springs Industries, Inc., Vice President and Controller of Mill
Fabrics, Inc., and as a certified public accountant for Deloitte, Haskins and
Sells.
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<PAGE>
As to directors, on the Effective Date, all directors of the Companies
shall be deemed to have resigned, without any further action on the part of any
Person. On the Effective Date, the boards of directors of each Reorganized
Company shall consist of the parties designated in a "Notice of Filing of
Initial Board Members" to be filed five business days prior to the Confirmation
Hearing. Provided the Participating Investors have satisfied Section 6.5 of the
Prepackaged Plan (i.e., contributed all funds necessary to pay all Allowed Note
Claims their distribution under the Prepackaged Plan), then the Companies and
the Participating Investors shall agree as to the persons who will serve as the
directors of the Reorganized Companies. If the Participating Investors have not
satisfied Section 6.5 of the Prepackaged Plan, then the rights of the
Participating Investors shall inure to the Committee.
It is unknown whether any of the current directors will be re-appointed
after they have resigned pursuant to the above. However, the current directors
of Glenoit and Holdings are as follows:
Thomas J. O'Gorman: See above.
John Mowbray O'Mara: Mr. O'Mara has been a management consultant and
private investor since January 1990. From July 1990 to May 1993, he served as
Chairman of the Executive Committee of Quality Care Systems, Inc., a provider of
computer-based "expert" medical cost containment systems. From August 1988
through December 1989, Mr. O'Mara served as Chairman of the Board and Chief
Executive Officer of Global Natural Resources, Inc. Prior to serving as Chairman
of Global Natural Resources, Inc., Mr. O'Mara spent 22 years as an investment
banker, serving most recently as Managing Director for Chase Securities Inc., a
subsidiary of The Chase Manhattan Bank. Mr. O'Mara is a director of Baldwin &
Lyons, Inc., Plantronics, Inc. and The Midland Company.
Saleem Muqaddam: Mr. Muqaddam has served as a Vice President of CVC and
its affiliated investment companies since 1989. Previously he spent 15 years
with Citibank, N.A. and its affiliates in senior management positions. Mr.
Muqaddam is a director of Pamida Holdings Corporation, Plantronics, Inc.,
Chromcraft Remington Inc. and Fairwood Corporation.
Isaac Schapira: Mr. Schapira has served as a director of Sterling
Investment Holding, Inc. since December 1994. In addition, Mr. Schapira is the
President of Glenoit (U.K.) Limited, and has been in the position for over 15
years.
Joseph M. Silvestri. Mr. Silvestri has been a director of Glenoit and
Holdings since his appointment by CVC in 1995. Mr. Silvestri has been employed
by CVC since 1990 and has been a Vice President since 1995. Mr. Silvestri served
as Assistant Vice President of CVC from 1990 to 1995. Mr. Silvestri serves on
the Board of Directors of International Media Group, Triumph Group, Polyfibron
Technologies, Inc., The GNI Group, ISG Resources, Inc. and Euramax
International, Inc.
The directors of the other Debtors, which will also be deemed to have
resigned consistent with the above, are Thomas O'Gorman and Lester Sears, joined
by, in the case of Glenoit Assets Corporation, Peter Winnington, an accountant
located in Wilmington Delaware.
4.3 Description of Old Debt.
(a) The Credit Agreement.
The Companies' Credit Agreement provided for a revolving line of credit
and two term loans to Glenoit and its subsidiaries. As of May 27, 2000,
approximately $150.0 million was outstanding under this Credit Agreement as well
as $3.1 million in letters of credit issued and outstanding, but which had not
been drawn upon as of the date of this Disclosure Statement. Obligations under
the Credit Agreement are secured by substantially all of the Companies' assets.
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<PAGE>
(b) The Notes.
Glenoit's Notes are outstanding in the principal amount of $95 million
and are unsecured obligations of certain of the Companies subordinated to all
senior indebtedness of those Companies, as defined in the Note Indenture. Senior
indebtedness includes, without limitation, the Credit Agreement Claims. As of
May 27, 2000, the interest accrued under the terms of the Notes was $6,500,000.
(c) Trade Debt.
As of May 27, 2000, Glenoit and its subsidiaries had, on a consolidated
basis, approximately $14.1 million in accounts payable and $31.3 million in
accrued expenses. Not reflected in this amount is an additional approximately
$19.8 million owed on a contingent basis to certain entities that factor some of
the accounts receivable of the Companies.
(d) The Shareholder Notes.
As of June 14, 2000, Holdings had issued approximately $33.3 million in
subordinated notes to certain of its stockholders or their affiliates. These
notes carry interest rates of between 5% and 12.5%, with such interest payable,
at Holdings' option, in cash or through the issuance of additional notes, unless
consolidated cash flows reach a certain level, upon which some of the interest
must be paid in cash. The principal on these notes is due during 2004 and 2005.
As of June 30, 2000, Glenoit was not in default under these notes.
V. RELATIONSHIPS WITH CERTAIN INSIDERS, FORMATION OF THE UNOFFICIAL NOTEHOLDERS
COMMITTEE, AND THEIR ROLE IN THESE CASES
5.1 Security Ownership of Certain Beneficial Owners.
As of January 1, 2000, the identity and the amounts of the holders of
Old Common Stock of Holdings were as follows: CVC held approximately 58% of the
Old Common Stock, CCT Partners held approximately 10.4% of the Old Common Stock,
Stirling Investment Holdings, Inc. held approximately 9.3% of the Old Common
Stock, Thomas O'Gorman held approximately 8% of the Old Common Stock, Soannes
Investments Corp. held approximately 4.7% of the Old Common Stock, 63 BR
Partnership held approximately 3.1% of the Old Common Stock, and approximately
24 other parties held small amounts of the Old Common Stock, with most or all of
those parties each holding less than 1% of the Old Common Stock each.
Although the Companies cannot at this time determine the nature and
amounts of holdings of New Common Stock and New Preferred Stock, in the event of
bankruptcy, the Companies will file a notice of same within five Business Days
of the confirmation hearing on the Prepackaged Plan, provided the Participating
Investors have completed the transfer of funds needed to determine the amount of
each of their holdings.
5.2 The Role of Certain Insiders and the Unofficial Noteholders Committee in
Formulating the Tender Offer and the Prepackaged Plan.
CVC, one of the holders of Old Common Stock of Holdings, has played a
substantial role in formulating the Tender Offer and the Prepackaged Plan. Since
the early part of 2000, the Companies have sought ways to address the
indebtedness under the Notes. Yet because of certain restrictive covenants under
the Notes, the Companies had limited access to other capital, and the Companies'
operating results in the last eighteen months have not been as positive as
expected, further hampering the Companies' ability to borrow other funds.
Accordingly, in the past several months the Companies have found that the
alternatives that would allow for a financial restructuring were very few.
During this time, the Companies
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<PAGE>
began to work with CVC on a plan by which CVC may consider purchasing the Notes
and relieving the Companies from the Note Claims. CVC's position as a
significant creditor and majority owner of Holdings has resulted in it having a
thorough knowledge of the Companies, and its equity interest in and Shareholder
Note Claims against Holdings provided it with a strong incentive to work with
the Companies on addressing the Notes.
In May of 2000, after Glenoit had not made an interest payment due on
the Notes, certain Noteholders formed the Unofficial Noteholders Committee to
negotiate with the Companies and determine alternatives that would allow for
partial or full repayment of the Notes. The members of the Unofficial
Noteholders Committee have informed the Companies that they collectively hold or
control over 83% of the outstanding principal amount of Note Claims. The members
of the Unofficial Noteholders Committee include AIM Funds, Financial Management
Advisors, Federated Investors, Eaton Vance Management, Orix USA Corporation and
Gem Capital, among others. The Unofficial Noteholders Committee retained
Houlihan, Lokey, Howard & Zukin ("Houlihan, Lokey") as its financial advisor and
Stroock & Stroock & Lavan LLP as its legal advisor.
Houlihan, Lokey entered into confidentiality agreements with the
Companies, and was given access to various financial information and projections
prepared by the Companies. The Unofficial Noteholders Committee also
participated in several discussions with the Companies' management over business
conditions and other matters. Through this process, the Unofficial Noteholders
Committee began negotiating with CVC regarding a price at which the Notes would
be purchased, while at the same time Glenoit had discussions with CVC regarding
whether and on what terms CVC would provide the funds needed to effectuate the
Tender Offer for the Notes. These negotiations formed the basis of the Tender
Offer and the Prepackaged Plan, including the treatment of Class 5 Claims under
the Prepackaged Plan. Finally, after much negotiation, in mid-June, 2000,
members of the Unofficial Noteholders Committee entered into an agreement with
the Companies pursuant to which they have agreed to vote for and support the
Tender Offer and the Prepackaged Plan.
During this time, CVC also attempted to contact certain other holders
of Shareholder Notes and holders of Old Common Stock, in an attempt to determine
whether those parties would be willing to participate in any infusion of capital
to fund the repurchase of the Notes through the Tender Offer or the Prepackaged
Plan. These communications, which have not been successful to date, are ongoing,
and thus it is unknown at this time who exactly will be "Participating
Investors" under the Prepackaged Plan. However, the Prepackaged Plan does
require that CVC and any Participating Investors must provide the funds needed
to pay Class 5 Claims by five business days prior to the Confirmation Hearing.
If this does not occur, then the Prepackaged Plan calls for holders of Class 5
Claims to receive all of the issued and outstanding New Common Stock of
Reorganized Holdings.
Finally, also during this time the Companies made arrangement to obtain
a commitment from Citicorp Mezzanine to provide the Citicorp Mezzanine Debt
Arrangement. Citicorp Mezzanine is part of the same corporate group as CVC,
although neither one exercises control over the other.
VI. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PREPACKAGED PLAN.
The following is a general discussion of certain material U.S. federal
income tax consequences of the Prepackaged Plan to the Companies and to
Noteholders and holders of Credit Agreement Claims.
This discussion is based on the provisions of the Internal Revenue Code
of 1986, as amended (the "Internal Revenue Code"), final, temporary and proposed
Treasury regulations promulgated thereunder ("Treasury Regulations") and
administrative and judicial interpretations thereof, all as in effect as of the
date hereof and all of which are subject to change at any time (possibly on a
retroactive basis). Any such changes could significantly alter the federal
income tax consequences of the Prepackaged Plan. There can be no assurance that
the Internal Revenue Service (the "Service") will agree with the federal income
tax consequences described below.
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This discussion provides general information regarding certain federal
income tax consequences and does not purport to address all of the federal
income tax consequences that may be applicable to any particular holder in light
of such holder's particular facts and circumstances, nor does it purport to
address the federal income tax consequences of the Prepackaged Plan to special
classes of taxpayers (such as financial institutions, mutual funds,
broker-dealers, tax-exempt entities, insurance companies, foreign persons and
persons to whom property was or is transferred in connection with the
performance of services). In addition, this discussion does not address any
aspects of state, local or foreign tax laws. This discussion assumes all
Noteholders and holders of Credit Agreement Claims compute income under the
accrual method of accounting and that they hold their respective Claims as
capital assets within the meaning of Section 1221 of the Internal Revenue Code.
THE FEDERAL INCOME TAX CONSEQUENCES OF THE PREPACKAGED PLAN ARE
COMPLEX. ALL NOTEHOLDERS AND HOLDERS OF CREDIT AGREEMENT CLAIMS ARE STRONGLY
URGED TO CONSULT THEIR OWN TAX ADVISERS AS TO THE PARTICULAR TAX CONSEQUENCES TO
THEM OF THE MATTERS DISCUSSED HEREIN, INCLUDING THE APPLICABILITY AND EFFECT OF
ANY STATE, LOCAL AND FOREIGN TAX LAWS.
6.1 Federal Income Tax Consequences to Noteholders and Holders of Credit
Agreement Claims.
A Noteholder that receives cash or New Common Stock in exchange for the
Note Claim will "realize" gain or loss for federal income tax purposes equal to
the difference between: (i) the amount of cash and the fair market value of New
Common Stock received, and (ii) the Noteholder's adjusted tax basis in the Note
Claim.
In the case of a Noteholder that receives cash in exchange for the Note
Claim, any such "realized" gain or loss on the exchange will be "recognized" for
federal income tax purposes and will be long-term capital gain or loss if the
Noteholder's holding period with respect to the Note Claim exceeds one year at
the time of the exchange.
In the event that the Noteholders receive New Common Stock instead of
cash, the transaction should be treated, for federal income tax purposes, as if
(i) the Noteholders contributed the Notes to Holdings in exchange for all of the
New Common Stock, and (ii) Holdings contributed the Notes to Glenoit, thereby
canceling the Notes. If the transaction is so treated, the Noteholders would not
recognize any loss realized on the exchange. The Noteholder's tax basis of the
New Common Stock received in the exchange would be equal to the Noteholder's
adjusted tax basis in the Note Claim surrendered in the exchange, increased by
the gain, if any, recognized on the exchange. The holding period of a holder of
New Common Stock received in the exchange would include the holder's holding
period in the Note Claim surrendered in the exchange. Any gain recognized on the
exchange would be long-term capital gain if the holder's holding period with
respect to the Note Claim exceeds one year at the time of the exchange.
Notwithstanding the foregoing, there can be no assurance that the Service will
not attempt to characterize the exchange of the Notes for New Common Stock in a
different manner. If the Service is successful in imposing an alternative
characterization, it may be possible that Noteholders (or the Companies) could
be required to recognize gain or loss on the exchange.
A holder of a claim generally will recognize ordinary income to the
extent it receives cash, stock or other property in respect of claims for unpaid
interest that has not already been included in such holder's income under its
method of accounting.
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<PAGE>
Holders of Credit Agreement Claims should consult with their own tax
advisors to determine whether they will recognize any taxable income (other than
interest) upon the receipt of cash pursuant to the Prepackaged Plan.
In the event a Noteholder that is not a corporation receives cash (and
not New Common Stock), such Noteholder may be subject to backup withholding at
the rate of 31% on the proceeds from the exchange of his or her Note. Glenoit
will be required to deduct and withhold this amount if: (i) the Noteholder fails
to furnish a proper taxpayer identification number ("TIN") to Glenoit; (ii) the
IRS notifies Glenoit that the TIN furnished by the Noteholder is incorrect;
(iii) the Noteholder fails to certify under penalty of perjury that he or she is
not subject to backup withholding under Code Section 3406(a)(1)(C); or (iv) the
IRS notifies such Noteholder that he or she is subject to backup withholding.
Any amount withheld by Glenoit is not an additional tax, but will be credited
against such Noteholder's U.S. federal income tax liability.
6.2 Federal Income Tax Consequences to the Companies.
Realization of Cancellation of Indebtedness Income. Subject to certain
exceptions, a debtor realizes income (referred to herein as "cancellation of
debt" or "COD" income) upon the discharge or cancellation of its outstanding
indebtedness in an amount equal to the excess of: (i) the amount of the
indebtedness discharged over (ii) the amount of cash plus the issue price of any
new indebtedness issued plus the fair market value of any other consideration
(including stock of the debtor) given in satisfaction of the indebtedness.
One of the exceptions to this general rule provides that a debtor is
not required to include COD income in gross income if the debt discharge occurs
in a case filed under the Bankruptcy Code (the "Bankruptcy Exception"). In lieu
of realizing COD income, however, a debtor in such a case generally must reduce
certain of its tax attributes (beginning with net operating loss carryforwards
("NOLs"), then certain tax credits, capital loss carryovers and, ultimately, the
tax basis of its assets) by the amount of COD income excluded from gross income
by the Bankruptcy Exception. Notwithstanding the general order of attribute
reduction, the Internal Revenue Code provides a debtor with the election to
reduce its tax basis in depreciable assets prior to reducing NOLs. The reduction
in tax attributes takes place as of the conclusion of the tax year in which the
debt discharge occurs.
As of the end of their 2000 tax year, the Companies expect to have
federal NOLs of approximately $15 million. The Companies further anticipate that
the COD income arising from the implementation of the Prepackaged Plan
(including the issuance of cash or New Common Stock in exchange for the Notes
and the cancellation of the Shareholder Notes) will cause substantially all of
these NOLs to be eliminated under the Bankruptcy Exception. Accordingly, it is
anticipated that these NOLs will not be available to reduce the Companies' taxes
in tax years after the Effective Date. However, the Companies will investigate
the benefit of making the election to reduce their tax basis in their
depreciable assets rather than losing their NOLs, taking into account projected
income and other potential limitations on the use of NOLs.
THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE PREPACKAGED PLAN ARE
COMPLEX. THE FOREGOING SUMMARY DOES NOT DISCUSS ALL ASPECTS OF U.S. FEDERAL
INCOME TAXATION THAT MAY BE RELEVANT TO A PARTICULAR HOLDER OF NOTES OR OTHER
CLAIMS OR EQUITY INTERESTS IN LIGHT OF SUCH HOLDER'S PARTICULAR CIRCUMSTANCES
AND INCOME TAX SITUATION. ALL HOLDERS SHOULD CONSULT WITH THEIR TAX ADVISORS AS
TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE TRANSACTIONS CONTEMPLATED BY
THE PREPACKAGED PLAN, INCLUDING THE APPLICABLITY AND EFFECT OF ANY STATE, LOCAL
OR FOREIGN TAX LAWS, AND OF ANY CHANGE IN APPLCIABLE TAX LAWS.
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VII. FINANCIAL INFORMATION
7.1 Financial Data.
The Companies' Consolidated Financial Statements for the fiscal years
ending January 3, 1998, January 2, 1999, and January 1, 2000 are attached as
Appendix B to this Disclosure Statement. This past information is for background
only, and does not include the notes that would ordinarily accompany such
statements. For a full copy of the statements with their notes, you may consult
the most recent From 10-K/A filed by Glenoit for the fiscal year ending January
1, 2000.
7.2 Pro Forma Financial Information.
Attached as a part of Appendix B to this Disclosure Statement is a
consolidated pro forma balance sheet as of September 30, 2000 reflecting the
effects of a successful Prepackaged Plan.
The Companies do not generally publish their business plans and
strategies or make public projections of anticipated financial positions or
results of operations. Accordingly, after the Effective Date, the Reorganized
Companies do not intend to update or otherwise revise the projections to reflect
circumstances existing since their preparation or to reflect the occurrence of
unanticipated events, even in the event that any or all of the underlying
assumptions are shown to be in error. Furthermore, the Reorganized Companies do
not intend to update or revise the projections to reflect changes in general
economic or industry conditions.
The feasibility of the Tender Offer, the Prepackaged Plan, and the
Companies' ability to meet their obligations in the future are premised upon
their anticipated financial performance after the Effective Date. The financial
projections are provided to demonstrate the feasibility of the Tender Offer or,
if necessary, the Prepackaged Plan. Although all projections are based on
assumptions of future events and circumstances that necessarily are uncertain in
nature, the Companies' management believes the financial projections are
reasonable. Inclusion of these projections in this Disclosure Statement should
not be regarded as a representation by any person that the projected results
would be achieved.
Nevertheless, the actual results achieved from time to time during the
projection period may vary from projected results and no assurance can be
provided that these projections will be realized. The financial projections are
based generally upon overall economic assumptions, and specifically on certain
assumptions regarding the general demand for the goods of the Companies and the
competitive position of the Companies in meeting that demand, and the ability to
operate profitably under the anticipated conditions that the Companies will face
in the near and long-term. These projections do not attempt to quantify any
adverse effect on projected operations or cash flows that may result from any
bankruptcy filing by the Companies, if necessary.
Certain of the assumptions on which the financial projections are based
may not materialize and unanticipated events and circumstances beyond the
Companies' control may occur subsequent to the Effective Date, that may
materially affect the Companies actual financial results. In the past, the
Companies' actual results have varied, at times significantly, from its
forecasts. Actual profitability achieved during any period may also vary from
year to year due to factors that are exceedingly difficult to predict.
Although the Companies believe that their assumptions are reasonable in
light of the circumstances under which they were made, no assurance can be given
that the financial projections will be realized. The Companies urge that the
financial projections be examined carefully by each party in evaluating the
Prepackaged Plan. The Companies' independent auditors have not examined or
compiled the financial forecast presented herein and, accordingly, assume no
responsibility for it.
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VIII. LIQUIDATION VALUE OF ASSETS
See Appendix B hereto for a liquidation value of the Companies.
IX. CERTAIN FACTORS TO BE CONSIDERED
In determining whether to tender Notes under the Tender Offer or vote
in favor of the Prepackaged Plan, each holder of a Claim should carefully
consider the following factors, together with all of the other information
contained in this Disclosure Statement.
9.1 Risks Relating to the Projections.
The Companies have prepared projections of the financial performance of
their business following the consummation of the Prepackaged Plan. The
projections represent the Companies' best estimate of the most likely results of
their operations following consummation of the Prepackaged Plan. However,
consistent with the disclaimers and statements in "VII. Financial Information,"
above, the projections were based on numerous assumptions with respect to
industry performance, general business and economic conditions and other
matters, such as interest rates, that are beyond the Companies' control. See
also, for instance, "IV. General Information--4.1 The Companies--(c) Risks of
the Industries in Which the Companies Operate" and the "Cautionary Statement
Concerning Forward-Looking Statements" in the introduction to this Disclosure
Statement. Accordingly, holders of Claims and Interests and other interested
parties are cautioned not to place undue reliance on the projections.
9.2 Market for New Common Stock, New Preferred Stock and Warrants.
The Companies will not apply for listing of their New Common Stock or
any other securities on any major exchange, and thus there will likely be little
or no market for the Companies' New Common Stock, the New Preferred Stock, or
the New Warrants.
9.3 General Business Risks.
After the Prepackaged Plan is confirmed, the Companies' principal
business risk is whether they can achieve the financial results the Prepackaged
Plan requires, under certain adverse circumstances. Such a shortfall could
result in the Companies being unable to pay the amounts called for under the
Prepackaged Plan. See also "IV. General Information--4.1 The Company--(c) Risks
of the Industries in which the Companies Operate."
In addition to the various uncertainties described above, the Companies
will continue to be subject to the normal operational risks associated with its
operations. Such risks include, among others, the possibility of demographic and
economic factors causing certain of the Companies' operations to be less
successful, the difficulty in attracting and retaining a sufficient quality
workforce and the ability to obtain and maintain necessary liquidity. While the
Companies do not feel such risks are extraordinary and they have historically
acted in ways to minimize such risks, there can be no assurance that such risks
will remain minimal and not have a material adverse effect on the business or
results of operations of the Companies.
9.4 Continuing Leverage; Future Refinancings.
The Companies are now highly leveraged and, although completion of the
restructuring will significantly reduce the Companies' debt obligations, the
Companies will remain highly leveraged after consummation of the Prepackaged
Plan. After consummation of the Prepackaged Plan, a substantial amount of the
Companies' long term debt will be secured by virtually all of the assets of the
Companies.
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The Company had approximately $319.7 million in liabilities,
including approximately $33.3 million of Shareholder Notes, at May 27, 2000 and
an additional $19.8 million due, on a contingent basis, under their factoring
agreements. After giving effect to the Prepackaged Plan, the Companies'
estimated aggregate liabilities as of September 30, 2000, excluding the New
Preferred Stock, would total approximately $197.5 million (not including the
contingent claim that will still be held by the factors), which poses a risk to
holders of debt and equity securities in the Companies. In addition, the
restrictions to be contained in the Company's new debt instruments will limit
the Company's operational and financial flexibility, including its ability to
refinance its debt. The Companies' management believes that, following the
consummation of the Prepackaged Plan and upon execution of the New Working
Capital/Term Debt Facility, the Companies will have sufficient cash flow from
operations to pay interest on all outstanding debt as those payments become due.
However, even if the restructuring is completed, the Companies' ability to meet
debt service obligations will depend on a number of factors, including their
ability to implement the business plan.
9.5 No Dividends.
In the event of the confirmation of the Prepackaged Plan, the Company
does not anticipate that it will be able to pay any significant dividends on the
New Common Stock in the foreseeable future.
9.6 Certain Federal Income Tax Considerations.
See "VI. Certain Federal Income Tax Consequences of the Prepackaged
Plan" for a summary of certain federal income tax aspects of the Prepackaged
Plan.
9.7 Applicable Law and Regulation
The Companies' businesses are not subject to as much regulation as
other industries, but since the Companies do a substantial amount of foreign
business, changes in tariffs, excise taxes, or trade regulations could adversely
effect the Companies.
Many of the intellectual property licenses held by the Companies by
their terms are non-transferable and may be subject to termination under prior
court rulings. The Companies do not believe many of the parties to the licenses
will seek to enforce any such rights, but if they do, and are successful, it
could negatively impact the Companies' operations.
X. ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE PREPACKAGED PLAN
10.1 Sale Alternative.
The Companies do not believe that there is a realistic opportunity for
a sale of their operations as a whole, or even in large blocks, that would
result in a better recovery than that under the Tender Offer or the Prepackaged
Plan.
10.2 Liquidation Alternative.
If no plan can be confirmed, the Companies' Chapter 11 cases may be
converted to cases under Chapter 7 of the Bankruptcy Code. Under Chapter 7, a
trustee would be elected or appointed to liquidate the assets of the Companies
for distribution to the creditors in accordance with priorities established by
the Bankruptcy Code. Discussion of the effect that a Chapter 7 liquidation would
have on the recovery of holders of impaired claims and interests is set forth
above at Article VIII, which refers to the liquidation analysis attached as part
of Appendix B. The Companies believe that liquidation under Chapter 7 would
result in smaller distributions being made to creditors than those provided for
in the Prepackaged Plan
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because of (a) additional administrative expenses involved in the appointment of
a trustee, attorneys and other professionals to assist such trustee, (b)
additional expenses and claims, some of which would be entitled to priority,
which would be generated during the liquidation and from operating losses and
the rejection of leases and other executory contracts in connection with the
cessation of the Companies' operations and (c) the likelihood that the assets of
the Companies would have to be sold or otherwise disposed of expeditiously.
In a liquidation under Chapter 11, the Companies' assets would be sold
in an orderly fashion over a more extended period of time than in a liquidation
under Chapter 7, probably resulting in somewhat greater recoveries and
distributions. Further, if a trustee were not appointed, as one is not required
under a Chapter 11 case, the expenses for professional fees may be lower than in
a Chapter 7 case. Although preferable to a Chapter 7 liquidation, the Companies
still believe that a liquidation under Chapter 11 would still not realize the
full going-concern value of the Companies' assets and, as it is likely to be a
more protracted proceeding than the Chapter 11 case effected by the Prepackaged
Plan, would involve greater administrative expenses. Consequently, the Companies
believe that a liquidation under Chapter 11 is a much less attractive
alternative to creditors than the Prepackaged Plan because the Prepackaged Plan
provides for a greater return to creditors than what would likely be realized in
a Chapter 11 liquidation. As to holders of Shareholder Notes and equity interest
holders of Holdings, the Companies believe that under a Chapter 7 or 11
liquidation, they would receive nothing on account of their interests.
10.3 Alternatives if the Prepackaged Plan is Not Confirmed.
If the Prepackaged Plan is not confirmed, the Companies could attempt
to formulate a different plan, as could any other party in interest, if the
Companies' exclusive right to file a plan is lost during the cases. Such a plan
might involve either reorganization or continuation of the Companies' business
or an orderly liquidation of their assets. With respect to an alternative plan,
the Companies and their financial advisors have explored various other
alternatives in connection with the formulation and development of the
Prepackaged Plan. The Companies believe the Prepackaged Plan as described herein
enables creditors to realize greater value under the circumstances than
available alternatives.
XI. VOTING PROCEDURES AND REQUIREMENTS FOR CONFIRMATION
11.1 Acceptance of the Prepackaged Plan.
As a condition to confirmation, the Code requires that each impaired
class of claims or interests accept a plan of reorganization, except as
described at Section 12.5 hereof relating to "cram down." Classes of claims or
interests that are not "impaired" under a plan are deemed to have accepted the
plan and are not entitled to vote.
11.2 Parties in Interest Entitled to Vote.
Chapter 11 of the Code does not require or entitle each holder of a
claim against a debtor or each equity interest holder to vote in favor of the
plan of reorganization in order for the Bankruptcy Court to confirm the plan.
Pursuant to the Code, only classes of claims or interests that are "impaired"
are entitled to vote on the plan. Generally speaking, a claim or interest is
impaired under a plan of reorganization if the plan provides that such claim or
interest will not be repaid in full or that the legal, equitable or contractual
rights of the holder of such claim or interest are altered. Only Claims in
Classes 2 and 5 are impaired under the Prepackaged Plan and are therefore
entitled to vote.
Claims and Interests in Classes 1, 3, 4 (and each of the foregoing
classes' subclasses), 7b, 7c, 7d, 7e, 7f, 7g, and 7h (but not 7a) are unimpaired
under Section 1124 of the Bankruptcy Code and holders of
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Claims or Interests in these unimpaired Classes are deemed to have accepted the
Prepackaged Plan pursuant to Section 1126(f) of the Code.
Classes 6 and 7a receive nothing under the Prepackaged Plan, but are
deemed to have rejected the Prepackaged Plan because the members of these
Classes will receive or retain nothing on account of their Claims and Interests.
11.3 Securities Held in Nominee Name.
Bank and broker nominees will transmit a ballot with a copy of this
Disclosure Statement, the Tender Offer, and the Prepackaged Plan to each
beneficial owner of Notes held in the name of such nominees. Each beneficial
owner should return its ballots to its bank or broker nominee. If you have a
question concerning the voting procedure for beneficial owners of Notes, contact
your bank or broker, or Ed McCarthy at Beacon Hill Partners, Inc., at (212)
843-8500.
11.4 Vote Required for Acceptance by Class of Claims or Interests
The Code defines acceptance of a plan of reorganization by a class of
claims as acceptance by a majority in number and at least two-thirds in amount
of the claims of that class allowed under the Code that have actually been voted
on the plan. The Code defines acceptance of a plan of reorganization by a class
of holders of interests as acceptance by the holders of at least two-thirds in
number of the shares of that class allowed under the Code that have actually
voted on the plan. Because, under the Code, only those who vote to accept or to
reject the Prepackaged Plan will be counted for purposes of determining
acceptance or rejection of the Prepackaged Plan by any impaired class of claims
or interests, the Prepackaged Plan could be approved by any impaired class of
claims with the affirmative vote of significantly less than two-thirds in
principal amount and a majority in number of the claims in such class.
If the Bankruptcy Court confirms the Prepackaged Plan, each holder of
an Allowed Claim or Allowed Interest in a Class will receive the same
consideration in respect of such Allowed Claim or Allowed Interest as the other
members of such Class receive in respect of their Allowed Claims or Allowed
Interests in such Class, whether such holder voted to accept the Prepackaged
Plan. Moreover, upon Confirmation, the Prepackaged Plan will be binding on all
Creditors and Interest Holders of the Companies regardless of whether such
Creditors or Interest Holders voted to accept the Prepackaged Plan, or voted at
all.
11.5 Confirmation Without Acceptance by All Impaired Classes.
In the event that any impaired class or classes reject the Prepackaged
Plan, Section 1129(b) of the Code provides that, so long as at least one
impaired class has accepted the Prepackaged Plan, the Companies may seek
confirmation of the Prepackaged Plan under a process known as "cram down." To
obtain such confirmation, the Companies must demonstrate to the Bankruptcy Court
that the Prepackaged Plan "does not discriminate unfairly" and is "fair and
equitable" with respect to any dissenting class. The "unfair discrimination"
test requires, among other things, that the Prepackaged Plan recognize the
relative priorities among unsecured creditors and equity interest holders. See
also "XII. Confirmation of the Prepackaged Plan--12.2 Requirements for
Confirmation of the Prepackaged Plan--(b) Best Interests Test." The Companies
believe that the Prepackaged Plan satisfies all of the prerequisites to
confirmation of the Prepackaged Plan through the "cram down" process.
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XII. CONFIRMATION OF THE PREPACKAGED PLAN
12.1 Confirmation Hearing.
In the event of a bankruptcy filing, the Companies will ask the
Bankruptcy Court to confirm the Prepackaged Plan. Creditors and other parties in
interest will have an opportunity to object to confirmation, but only if they
have filed and served a timely objection.
12.2 Requirements for Confirmation of the Prepackaged Plan.
The Companies will request that the Bankruptcy Court hold a
confirmation hearing as promptly as practicable, upon such notice to parties in
interest as is required by the Bankruptcy Code and the Bankruptcy Court. Section
1128(b) of the Code provides that any party in interest may object to
confirmation of the Prepackaged Plan. Any procedures established by the
Bankruptcy Court for the filing and service of objections to confirmation of the
Prepackaged Plan will be provided to parties in interest.
In order for the Prepackaged Plan to be confirmed, and regardless of
whether all impaired classes of Claims vote to accept the Prepackaged Plan, the
Bankruptcy Code requires that the Bankruptcy Court determine that the
Prepackaged Plan complies with the requirements of Section 1129 of the Code.
Section 1129 of the Code requires for confirmation, among other things, that:
(i) the Prepackaged Plan be accepted by the requisite votes of holders of
impaired claims and interest, except to the extent that confirmation, despite
dissent, is available under Section 1129(b) of the Bankruptcy Code (see Section
12.5 hereof) (ii) the Prepackaged Plan is feasible (that is, there is a
reasonable probability that the Companies will be able to perform their
obligations under the Prepackaged Plan and continue to operate their businesses
without further financial reorganization) (see Section 12.2(a)); and (iii) the
Prepackaged Plan meets the requirements of Section 1129(a)(7) of the Bankruptcy
Code, which requires that with respect to each impaired class, each holder of a
Claim or Interest either (a) accepts the Prepackaged Plan or (b) receives at
least as much pursuant to the Prepackaged Plan as such holder would receive in a
liquidation of the Companies under Chapter 7 of the Code.
Although the Companies believe that the Prepackaged Plan will meet such
tests, as well as the other requirements of Section 1129, there can be no
assurance that the Bankruptcy Court will reach the same conclusion.
(a) Feasibility of the Prepackaged Plan.
The Code requires that, in order to confirm the Prepackaged Plan, the
Bankruptcy Court find that confirmation of the Prepackaged Plan will not likely
be followed by the liquidation or the need for further financial reorganization
of the Companies (the "Feasibility Test"). For the Prepackaged Plan to meet the
Feasibility Test, the Bankruptcy Court must find that the Companies will possess
the resources and working capital necessary to operate profitably and will be
able to meet the obligations under the Prepackaged Plan.
The Companies have analyzed their ability to meet their obligations
under the Prepackaged Plan. As part of this analysis, the Companies have
prepared projections of their financial performance for the three-year period
ending 2003. These projections, and the significant assumptions, on which they
are based, are included in Article VII of this Disclosure Statement. The
Companies believe, based on this analysis, that the Prepackaged Plan provides a
feasible means of reorganization and operation from which there is a reasonable
expectation that, subject to the risks disclosed in this Disclosure Statement,
the Companies will be able to make all payments required to be made pursuant to
the Prepackaged Plan. Neither the Companies' nor the Unofficial Noteholders
Committee's professionals have performed an independent investigation of the
accuracy or completeness of such financial projections. Creditors are cautioned
not to place undue reliance on the projections. See Section 7.2 hereof.
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The Companies do not as a matter of course make public projections as
to future sales, earnings or other results. However, the management of the
Companies have prepared the projected consolidated information set forth herein
to present the anticipated effects of the restructuring contemplated by the
Prepackaged Plan.
THE PROJECTIONS IN THIS DISCLOSURE STATEMENT WERE NOT PREPARED WITH A
VIEW TOWARD PUBLIC DISCLOSURE, OR WITH A VIEW TOWARD COMPLYING WITH THE
GUIDELINES ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
WITH RESPECT TO PROSPECTIVE FINANCIAL INFORMATION, BUT, IN THE VIEW OF THE
COMPANIES' MANAGEMENT, WERE PREPARED ON A REASONABLE BASIS, REFLECT THE BEST
CURRENTLY AVAILABLE ESTIMATES AND JUDGMENTS AND PRESENT, TO THE BEST OF
MANAGEMENT'S KNOWLEDGE AND BELIEF, THE EXPECTED COURSE OF ACTION AND EXPECTED
FURTURE FINANCIAL PERFORMANCE OF THE COMPANIES ASSUMING THE CONSUMMATION OF A
RESTRUCTURING. HOWEVER, THIS INFORMATION IS NOT FACT AND SHOULD NOT BE RELIED
UPON AS NECESSARILY INDICATIVE OF FUTURE RESULTS, AND READERS OF THIS DISCLOSURE
STATEMENT ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THE PROJECTED
CONSOLIDATED FINANCIAL INFORMATION.
The projections indicate that the Reorganized Companies should have
sufficient cash flow to make the payments required under the Prepackaged Plan on
the Effective Date and to repay and service their debt obligations to maintain
their operations. Accordingly, the Companies believe that the Prepackaged Plan
complies with the standard of Section 1129(a)(11) of the Bankruptcy Code. As
noted in the projections, however, the Companies caution that no representation
can be made as to the accuracy of the projections or as to the Companies'
ability to achieve the projected results after the Effective Date. Many of the
assumptions upon which the projections are based are subject to uncertainties
outside the control of the Companies. Some assumptions inevitably will not
materialize, and events and circumstances occurring after the date on which the
projections were prepared may be different from those assumed or may be
unanticipated, and may adversely affect the Companies' financial results, both
during and after any bankruptcy case.
(b) Best Interests Test.
With respect to each impaired class, confirmation of the Prepackaged
Plan requires that each holder of a Claim or Interest either (a) accept the
Prepackaged Plan or (b) receive or retain under the Prepackaged Plan property of
a value, as of the Effective Date, that is not less than the value such holder
would receive or retain if the Companies were liquidated under Chapter 7 of the
Code (the "Best Interests Test").
To determine what holders of each impaired class of Claims and
Interests would receive if the Companies were liquidated, the Bankruptcy Court
must determine the dollar amount that would be generated from the liquidation of
the Companies' assets and properties in the context of a Chapter 7 liquidation
case. Secured Claims and the costs and expenses of the liquidation case or
resulting from the original Chapter 11 case would be paid in full from the
liquidation proceeds before the balance of those proceeds would be made
available to pay prepetition unsecured Claims and Interests.
In applying the Best Interests Test, it is possible that Claims and
Interests in the Chapter 7 case may not be classified according to the
classification provided in the Prepackaged Plan. In the absence of a contrary
determination by the Bankruptcy Court, all unsecured Claims arising prior to the
Petition Date which have the same rights upon liquidation would be treated as
one class for purposes of determining the potential distribution of the
liquidation proceeds resulting from the Companies' Chapter 7 case. The
distributions from the liquidation proceeds would be calculated ratably
according to the amount of the
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claim held by each creditor holding a claim. Therefore, creditors who claim to
be third-party beneficiaries of any contractual subordination provisions might
be required to seek to enforce such contractual subordination in the Bankruptcy
Court or otherwise. Section 510 of the Code specifies that such contractual
subordination provisions are enforceable in a Chapter 7 liquidation case.
Certain creditors, including holders of Credit Agreement Claims have the benefit
of certain contractual subordination provisions contained in the Note Indenture.
Section 510(b) also requires, among other things, that any claim for damages
arising from the purchase or sale of a security of the debtor shall be
subordinated to all claims or interests that are senior to or equal the claim or
interest represented by such security.
After consideration of the effect that a Chapter 7 liquidation would
have on the ultimate proceeds available for distribution to the Companies'
Creditors and equity interest holders, including (i) increased costs and
expenses of liquidation under Chapter 7 arising from fees payable to a trustee
in bankruptcy and professional advisors to such trustee, in the erosion in value
of assets in the context of the expeditious liquidation required under Chapter 7
and the "forced sale" atmosphere that would prevail, (iii) the adverse effects
on the salability of business segments that could result from the probable
departure of key employees, (iv) the costs attributable to the time value of
money resulting from what is likely to be a more protracted proceeding than if
the Prepackaged Plan is confirmed (because of the time required to liquidate the
assets of the Companies, resolve Claims and related litigation and prepare for
distributions) and (v) the application of the rules of distribution under a
Chapter 7 liquidation, the Companies have determined that confirmation of the
Prepackaged Plan will provide each Creditor or holder of an Interest in an
impaired class with a greater recovery (or in the case of holders of Shareholder
Notes or Interests in Holdings, the same recovery) than such Creditor or
Interest holder would receive pursuant to a liquidation of the Companies under
Chapter 7 of the Code.
The Liquidation Analysis for the Companies is found at Article VIII of
the Disclosure Statement. The Liquidation Analysis was substantially completed
as of June 28, 2000 and the Companies are not aware of any events subsequent to
such date that would materially impact the Liquidation Analysis.
Accordingly, while the analyses that follow are necessarily presented
with numerical specificity, there can be no assurances that the values assumed
would be realized if the Debtors were in fact liquidated, nor can there be any
assurance that a Bankruptcy Court would accept these analyses or concur with
such assumptions in making its determination under Section 1129(a) of the
Bankruptcy Code.
ACTUAL LIQUDATION PROCEEDS COULD BE MATERIALLY LOWER OR HIGHER THAN THE
AMOUNTS SET FORTH BELOW. NO REPRESENTATION OR WARRANTY CAN BE OR IS BEING MADE
WITH RESPECT TO THE ACTUAL PROCEEDS THAT COULD BE RECEIVED IN CHAPTER 7
LIQUIDATIONS OF THE COMPANIES.
The liquidation valuations have been prepared solely for purposes of
estimating the proceeds available in Chapter 7 liquidations of the Companies'
Estates and do not represent values that may be appropriate for any other
purpose. Nothing contained in these valuations is intended to constitute a
concession or admission of the Companies for any other purposes.
Management believes that conversion to Chapter 7 and resulting pendency
of liquidation sales of the Companies' business operations and assets would
adversely affect the Companies and the morale of their employees as well as
significantly impair their ability to maintain adequate working capital.
Further, there can be no assurance that the conversion to Chapter 7 liquidations
would result in the Companies' ability to continue to raise working capital
under any credit facilities. As a result, secured creditors may not voluntarily
finance efforts to maximize assets beyond that necessary to satisfy secured
creditor's claims, and recoveries could therefore be even lower than set forth
on the liquidation analysis.
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12.3 Conditions Precedent to the Effective Date of the Prepackaged Plan.
Except as expressly waived by the Companies with the prior written
consent of the Committee, the following conditions must occur and be satisfied
before the Effective Date may take place:
(a) Entry of Confirmation Order. The Confirmation Order shall have been
signed by the Bankruptcy Court and duly entered on the docket for the
Reorganization Cases by the Clerk.
(b) No Stay. There shall not be any stay in effect with respect to the
Confirmation Order.
(c) Final Order. The Confirmation Order shall be a Final Order.
(d) Effectiveness of Documents. All the following documents listed
below shall have become effective prior to or contemporaneously with the
occurrence of the Effective Date: (i) the New Working Capital/Term Debt
Facility, (ii) if the Participating Investors satisfy Section 6.5 of the
Prepackaged Plan, the Citicorp Mezzanine Debt Arrangement, (iii) if the
Participating Investors do not satisfy Section 6.5 of the Prepackaged Plan, the
Replacement Facility, if needed.
12.4 Amendments to or Modification of the Prepackaged Plan.
The Companies reserve the right to amend or modify the terms of the
Prepackaged Plan in accordance with the provisions of Section 1127 of the Code,
including the right to amend the treatment of any rejecting class to meet the
minimum requirements of Section 1129(b) of the Bankruptcy Code. Under the
Bankruptcy Rules, such amendments or modifications may be approved by the
Bankruptcy Court at confirmation without resolicitation of the votes of the
members of any class whose treatment is not adversely affected by such amendment
or modification. The Companies will give holders of Claims and Interests such
notice of such amendments or waivers as may be required by applicable law. The
Companies reserve the right to use acceptances of the prepackaged Plan to
confirm any amendment of the Prepackaged Plan to the extent permitted by law.
After the date on which the Prepackaged Plan has been confirmed by the
Bankruptcy Court and the Confirmation Order has been entered by the Clerk, the
Companies may institute proceedings in the Bankruptcy Court to remedy any
defects or omissions or reconcile any inconsistencies in the Prepackaged Plan or
the Confirmation Order as may be necessary to carry out the purposes and intent
of the Prepackaged Plan so long as the holders of Claims and Interests are not
adversely affected and prior notice of such proceeding is served as may be
required by applicable law or Bankruptcy Court order.
12.5 Cram down.
To obtain confirmation under the concept known as "cram down," the
Companies must demonstrate to the Bankruptcy Court that the Prepackaged Plan
"does not discriminate unfairly" and is "fair and equitable" with respect to any
dissenting class. The "unfair discrimination" test requires, among other things,
that the Prepackaged Plan recognize the relative priorities among unsecured
creditors and equity interest holders. The Code establishes different "fair and
equitable" tests for secured creditors, unsecured creditors and equity interest
holders. The respective tests are as follows:
(a) Secured Creditors. Either (i) each impaired creditor of the
rejecting class (x) retains its liens in the collateral securing such creditor's
claim or in the proceeds thereof to the extent of the Allowed amount of its
secured claim and (y) receives deferred cash payments in at least the Allowed
amount of such secured claim with a present value at the Effective Date at least
equal to such creditor's interest in its collateral or in the proceeds thereof
or (ii) the plan provides each impaired secured creditor with the indubitable
equivalent of its claim.
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(b) Unsecured Creditors. Either (i) each impaired unsecured creditor of
the rejecting class receives or retains under the plan property of a value equal
to the amount of its Allowed Claim or (ii) the holders of claims and interests
that are junior to the claim of the dissenting class do not receive or retain
any property under the plan.
(c) Equity Interest Holders. Either (i) each equity interest holder of
the rejecting class receives or retains under the plan property of a value equal
to the greater of (x) the fixed liquidation preference or redemption price, if
any, of the equity interest it holds or (y) the value of such equity interest or
(ii) the holders of interests that are junior to such equity interest do not
receive or retain any property under the plan.
If all other conditions to confirmation are met, the Companies will
seek to apply Section 1129(b) of the Code to the extent the Prepackaged Plan is
not accepted by any impaired class of unsecured claims or interests.
XIII. CONCLUSION
The Companies believe that the Tender Offer, and if necessary, the
Prepackaged Plan are in the best interests of the Companies' creditors, equity
security holders and all other parties in interest. If you are a member of Class
5, the Companies urge you to tender your Notes under the Tender Offer and to
vote in favor of the Prepackaged Plan. If you are a member of Class 2, the
Companies likewise urge you to vote in favor of the Prepackaged Plan.
GLENOIT UNIVERSAL, LTD.
GLENOIT CORPORATION
GLENOIT ASSETS CORPORATION
AMERICAN PACIFIC ENTERPRISES, INC.
GRAND AVENUE CORPORATION
EX-CELL HOME FASHIONS, INC.
EX-CELL OF BENTONVILLE, INC.
EX-CELL LINDE OF CAROLINA, INC.
By: /s/Thomas J. O'Gorman
-------------------------
Thomas J. O'Gorman
Chief Executive Officer and President
Date: July 6, 2000
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Appendix A Joint Prepackaged Plan of Reorganization
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re:
GLENOIT UNIVERSAL, LTD. Chapter 11 - Judge ______
Federal Tax ID No. 13-3528146, Case No. 00-_____
GLENOIT CORPORATION
Federal Tax ID No. 13-3862561,
GLENOIT ASSETS CORPORATION
Federal Tax ID No. 51-0343206,
AMERICAN PACIFIC ENTERPRISES, INC.
Federal Tax ID No. 31-1125457,
GRAND AVENUE CORPORATION
Federal Tax ID No. 31-1402054,
EX-CELL HOME FASHIONS, INC.
Federal Tax ID No. 13-2953275
EX-CELL OF BENTONVILLE, INC.
Federal Tax ID No. 13-2963510,
EX-CELL LINDE OF CAROLINA, INC.
Federal Tax ID No. 56-1303090,
Debtors.
DEBTORS' JOINT PREPACKAGED PLAN OF REORGANIZATION
Dated: July 6, 2000
GLENOIT UNIVERSAL, LTD., a Delaware corporation, GLENOIT CORPORATION, a Delaware
corporation, GLENOIT ASSETS CORP., a Delaware corporation, AMERICAN PACIFIC
ENTERPRISES, INC., an Ohio corporation, GRAND AVENUE CORPORATION, a California
corporation, EX-CELL HOME FASHIONS, INC., a New York corporation, EX-CELL OF
BENTONVILLE, INC., an Arkansas corporation, and EX-CELL LINDE OF CAROLINA, INC.,
a North Carolina corporation, may file bankruptcy cases and become Debtors and
Debtors in Possession, upon which they may propose the following joint
prepackaged plan of reorganization (the "Plan") pursuant to Section 1121(a) of
Title 11 of the United States Code, as amended. Reference is made to the
Disclosure Statement accompanying the Plan, which discusses the Debtors and
their management, business, assets and liabilities, and which contains a summary
and description of the Plan.
All holders of impaired Claims (as that term is hereinafter defined) against the
Debtors are encouraged to read the Plan and the Disclosure Statement in their
entirety before voting to accept or reject the Plan or making any elections
under the Plan.
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I. DEFINITIONS 1
SECTION 1.1 DEFINED TERMS. 1
SECTION 1.2 UNDEFINED TERMS. 6
ARTICLE II. TREATMENT OF CLAIMS NOT SUBJECT TO CLASSIFICATION 6
SECTION 2.1 NO SUBSTANTIVE CONSOLIDATION 6
SECTION 2.2 PRIORITY ADMINISTRATIVE CLAIMS. 6
SECTION 2.3 PRIORITY TAX CLAIMS. 6
ARTICLE III. CLASSIFICATION OF CLAIMS AND INTERESTS 7
SECTION 3.1 CLASS 1 - PRIORITY CLAIMS. 7
SECTION 3.2 CLASS 2 - CREDIT AGREEMENT CLAIMS. 7
SECTION 3.3 CLASS 3 - OTHER SECURED CLAIMS 7
SECTION 3.4 CLASS 4 - ORDINARY COURSE TRADE CLAIMS AND OTHER UNSECURED CLAIMS. 7
SECTION 3.5 CLASS 5 -NOTE CLAIMS. 8
SECTION 3.6 CLASS 6 - SHAREHOLDER NOTE CLAIMS 8
SECTION 3.7 CLASS 7 - INTERESTS AND RELATED CLAIMS. 8
ARTICLE IV. IDENTIFICATION AND TREATMENT OF CLASSES NOT IMPAIRED UNDER PLAN 8
SECTION 4.1 IDENTIFICATION OF UNIMPAIRED CLASSES. 8
SECTION 4.2 CLASS 1 (AND ALL OF ITS SUBCLASSES) - PRIORITY CLAIMS 9
SECTION 4.3 CLASS 3 (AND ALL OF ITS SUBCLASSES) - OTHER SECURED CLAIMS 9
SECTION 4.4 CLASS 4 (AND ALL OF ITS SUBCLASSES) - ORDINARY COURSE TRADE CLAIMS AND OTHER
UNSECURED CLAIMS. 9
SECTION 4.5 CLASSES 7B, 7C, 7D, 7E, 7F, 7G, AND 7H - INTERESTS AND RELATED CLAIMS IN ALL OF
THE DEBTORS EXCEPT HOLDINGS. 9
ARTICLE V. IDENTIFICATION AND TREATMENT OF CLASSES AND INTERESTS IMPAIRED UNDER THE PLAN 9
SECTION 5.1 IDENTIFICATION OF IMPAIRED CLASSES AND IMPAIRED INTERESTS. 9
SECTION 5.2 CLASS 2 (AND ALL OF ITS SUBCLASSES) - CREDIT AGREEMENT CLAIMS 9
SECTION 5.3 CLASS 5 - NOTE CLAIMS. 10
SECTION 5.4 CLASS 6 - SHAREHOLDER NOTE CLAIMS. 10
SECTION 5.5 CLASS 7A - INTERESTS AND RELATED CLAIMS IN HOLDINGS. 10
ARTICLE VI. MEANS FOR EXECUTION OF THE PLAN 10
SECTION 6.1 TERMINATION OF EQUITABLE, LEGAL AND CONTRACTUAL SUBORDINATION RIGHTS. 10
SECTION 6.2 VESTING OF ASSETS. 10
SECTION 6.3 FINAL ORDER. 11
SECTION 6.4 ISSUANCE OF THE NEW COMMON STOCK AND NEW PREFERRED STOCK. 11
SECTION 6.5 SELECTION OF, AND FUNDING BY, THE PARTICIPATING INVESTORS. 11
SECTION 6.6 LOAN FROM CITICORP MEZZANINE OR THE REPLACEMENT LENDER. 12
SECTION 6.7 EXECUTION OF NEW REVOLVING CREDIT AND TERM LOAN AGREEMENT 12
SECTION 6.8 NEGATION OF OBLIGATIONS UNDER THE CREDIT AGREEMENT, CREDIT AGREEMENT NOTES,
NOTE INDENTURE, NOTES, SHAREHOLDER NOTES AND RELATED DOCUMENTS; TRANSFER OF TITLE. 12
SECTION 6.9 AMENDMENTS TO HOLDINGS'S CERTIFICATE AND BYLAWS. 12
SECTION 6.10 OPERATIONS OF DEBTORS. 12
SECTION 6.11 MANAGEMENT AND BOARD OF DIRECTORS. 12
SECTION 6.12 MANNER OF PAYMENTS UNDER THE PLAN 13
SECTION 6.13 DISTRIBUTION OF CONSIDERATION. 13
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
SECTION 6.14 TERM OF INJUNCTIONS OR STAYS. 14
SECTION 6.15 DATE FOR OBJECTIONS TO CLAIMS OR INTERESTS. 14
SECTION 6.16 CORPORATE ACTION. 14
SECTION 6.17 COMPLIANCE WITH TAX REQUIREMENTS. 14
ARTICLE VII. EXECUTORY CONTRACTS AND UNEXPIRED LEASES 14
SECTION 7.1 ASSUMPTION. 14
SECTION 7.2 BAR DATE FOR REJECTION CLAIMS. 15
SECTION 7.3 INDEMNIFICATION OBLIGATIONS. 15
ARTICLE VIII. DISCHARGE OF DEBTORS 15
SECTION 8.1 PLAN BINDING. 15
SECTION 8.2 DISCHARGE. 15
ARTICLE IX. COMPROMISE AND RELEASE OF CERTAIN CLAIMS 15
ARTICLE X. NOTICES 15
ARTICLE XI. RETENTION OF JURISDICTION 17
SECTION 11.1 CLAIMS AND ACTIONS. 17
SECTION 11.2 RETENTION OF ADDITIONAL JURISDICTION. 17
SECTION 11.3 MODIFICATIONS OF THE PLAN. 18
SECTION 11.4 REVOCATION AND WITHDRAWAL OF THE PLAN. 18
SECTION 11.5 SECTION 1146 EXEMPTION. 18
SECTION 11.6 SURVIVAL OF THE COMMITTEE. 19
ARTICLE XII. RESERVE FOR DISPUTED CLAIMS OR INTERESTS 19
ARTICLE XIII. CONDITIONS TO CONFIRMATION AND TO THE EFFECTIVENESS OF THE PLAN 19
SECTION 13.1 CONDITIONS TO EFFECTIVE DATE. 19
SECTION 13.2 NOTICE OF EFFECTIVE DATE. 19
ARTICLE XIV. MISCELLANEOUS 19
SECTION 14.1 HEADINGS. 19
SECTION 14.2 BINDING EFFECT, SUCCESSORS AND ASSIGNS. 19
SECTION 14.3 CRAM DOWN. 20
SECTION 14.4 GOVERNING LAW. 20
SECTION 14.5 SEVERABILITY. 20
SECTION 14.6 TIME. 20
SECTION 14.7 OBJECTIONS TO CLAIMS OR INTERESTS. 20
SECTION 14.8 EXCULPATIONS. 20
SECTION 14.9 DISCHARGE OF INDENTURE TRUSTEE. 20
SECTION 14.10 DE MINIMIS DISTRIBUTIONS. 21
SECTION 14.11 CONSTRUCTION. 21
</TABLE>
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ARTICLE I. DEFINITIONS
Section 1.1 Defined Terms.
The following terms used in the Plan, unless the context clearly
requires otherwise, shall have the meanings specified below, and such meanings
shall be equally applicable to both the singular and plural forms of such terms.
Agent means BNP Paribas, as agent under the Credit Agreement.
Agent's Expenses means any unpaid reasonable out-of-pocket costs or
expenses and reasonable fees of legal counsel to the Agent for which the Agent
has a right to indemnification from the holders of claims under the Credit
Agreement and related loan documents, or that are payable by any Debtor pursuant
to the Credit Agreement or any related document.
Allowed Claim shall mean any Claim (i) (a) proof of which has been
Filed on or before the earlier of (y) the Effective Date and (z) the date, if
any, designated by the Bankruptcy Court as the last date for filing proofs of
claim (or, if not Filed by such date, any Claim proof of which has been Filed
with leave of the Bankruptcy Court, after notice and a hearing) to the extent it
has not been withdrawn, paid or otherwise deemed satisfied, or, if no proof of
claim is Filed, which Claim, as of the Confirmation Date, is listed by a Debtor
in its Schedules Filed pursuant to Section 521(1) of the Bankruptcy Code as
liquidated in amount, not disputed and not contingent, to the extent it has not
been withdrawn, paid or otherwise deemed satisfied and (b) as to which no
objection to the allowance thereof has been interposed within the applicable
period of limitation fixed by the Plan, the Bankruptcy Code, the Bankruptcy
Rules or the Bankruptcy Court, or, if an objection has been interposed, to the
extent that any such Claim has been allowed by a Final Order, or (ii) to the
extent represented by a Fee Request, in the amount as shall be approved by the
Bankruptcy Court; provided however, that, notwithstanding the provisions of
sub-clauses (i) and (ii) of this definition, any Claim specifically deemed
allowed or disallowed in this Plan shall be, or not be (as the case may be), an
Allowed Claim to the extent so specifically provided in this Plan. Unless
otherwise specified, an Allowed Claim shall not include (w) interest on the
principal amount of such Claim maturing or accruing from and after the Petition
Date, (x) attorneys' fees, (y) punitive or exemplary damages, or (z) any fine,
penalty or forfeiture.
Allowed Interest shall mean any Interest in a Debtor in the amount (i)
set forth in the proof of such Interest that has been Filed prior to the
Confirmation Date, as to which no objection has been timely Filed, or in the
absence of such proof, set forth in the listing of each Debtor's stockholders
Filed by the Debtors as of the Distribution Record Date except to the extent any
Interest is shown in such listing as disputed, unliquidated or contingent; or
(ii) as allowed by a Final Order if such Interest has been objected to or listed
as disputed, contingent or unliquidated.
APE shall mean American Pacific Enterprises, Inc., an Ohio corporation
and a Debtor herein.
Bankruptcy Code shall mean the Bankruptcy Reform Act of 1978, as
amended, as set forth in Title 11 of the United States Code, as the same was in
effect on the Petition Date, together with all later amendments to the extent
applicable to the Reorganization Cases. Reference to any specific section of the
Bankruptcy Code shall be in the form "11 U.S.C. ss. ____" or "Section ___ of the
Bankruptcy Code."
Bankruptcy Court shall mean the United States Bankruptcy Court for the
District of Delaware.
Bankruptcy Rules shall mean the Federal Rules of Bankruptcy Procedure,
as amended and promulgated under Section 2075, Title 28, United States Code, as
the same were in effect on the Petition Date, together with all later amendments
to the extent applicable to the Reorganization Case. Reference to any specific
rule of the Bankruptcy Rules shall be in the form "F.R.Bankr.P. ___."
Business Day shall mean a day of the year on which commercial banks are
not required or authorized by law to close for business in Tarboro, North
Carolina or New York, New York.
By-Laws shall mean the Amended and Restated By-Laws for Holdings, to be
filed by the Debtors ten Business Days prior to the Confirmation Hearing, that
shall be reasonably acceptable to the
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Participating Investors (or, if the Participating Investors have not satisfied
Section 6.5 hereof, the Committee).
Certificate shall mean the Restated Certificate of Incorporation of
Holdings, to be Filed by the Debtors ten Business Days prior to the Confirmation
Hearing, that shall be reasonably acceptable to the Participating Investors (or,
if the Participating Investors have not satisfied Section 6.5 hereof, the
Committee).
Citicorp Mezzanine Debt Arrangement shall mean an unsecured term debt
facility that, in the event CVC and its affiliates own a majority of the equity
of Reorganized Holdings, shall be entered into by Glenoit and Citicorp
Mezzanine. This facility shall be in form and substance satisfactory to the
Agent and the New Lenders, and shall be in the aggregate principal amount of $15
million, the payment of the obligations under which shall be subordinated in all
respects to the obligations under the New Working Capital/Term Debt Facility and
the maturity date of which shall be no earlier than one year after the latest
maturity date of the loans to be advanced pursuant to the New Working
Capital/Term Debt Facility.
Citicorp Mezzanine shall mean Citicorp Mezzanine III, L.P., a Delaware
limited partnership.
Claim shall mean (i) any right to payment from a Debtor, whether or not
such right is reduced to judgment, liquidated, unliquidated, fixed, contingent,
matured, unmatured, disputed, undisputed, legal, equitable, secured or
unsecured; or (ii) any right to an equitable remedy for breach of performance if
such breach gives rise to a right to payment from a Debtor, whether or not such
right to an equitable remedy is reduced to judgment, liquidated, unliquidated,
fixed, contingent, matured, unmatured, disputed, undisputed, secured or
unsecured.
Class shall mean a class or subclass of Claims or Interests designated
in Article III of the Plan.
Clerk shall mean the Clerk of the Bankruptcy Court.
Committee shall mean the Official Committee of Noteholders appointed in
the Reorganization Cases (as modified by the addition, resignation or removal of
members from time to time), or, until such time as an Official Committee is
appointed or if no Official Committee is appointed, the Unofficial Noteholders
Committee.
Confirmation Date shall mean the date on which the Confirmation Order
is entered on the docket of the Bankruptcy Court.
Confirmation Hearing shall mean the hearing held before the Bankruptcy
Court in which the Debtors will seek Confirmation of the Plan, including any and
all adjournments thereof.
Confirmation Order shall mean an order of the Bankruptcy Court
confirming the Plan pursuant to Section 1129 of the Bankruptcy Code, in a form
reasonably acceptable to the Participating Investors (or, if the Participating
Investors have not satisfied Section 6.5 hereof, the Committee) and the Agent,
and, to the Committee as to the requirements of Section 5.3(b) hereof and as to
any terms relating to payment of fees of the Committee's professionals.
Confirmation shall mean the entry of the Confirmation Order by the
Bankruptcy Court pursuant to Section 1129 of the Bankruptcy Code.
Credit Agreement shall mean the Third Amended and Restated Credit
Agreement dated as of February 12, 1999, among Glenoit, the Agent, Fleet
National Bank, as Syndication Agent, LaSalle National Bank, as Documentation
Agent, and the Restatement Lenders named therein, as the same has been amended
by Amendments Nos. 1 through 10 and as the same may be amended from time to time
through the Effective Date.
Credit Agreement Claims shall mean all Claims represented by, related
to, or arising under or in connection with the Credit Agreement Notes or the
Credit Agreement, including, without limitation, Claims in the principal amount
of the outstanding "Advances," as such term is
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defined in the Credit Agreement, plus accrued and unpaid interest thereon
through and including the Effective Date, plus all other "Obligations" of the
"Loan Parties" as those terms are defined in the Credit Agreement, including,
but not limited to, the reasonable fees and expenses of counsel to the "Lender
Parties," as such term is defined in the Credit Agreement, as provided in
Section 8.04 of the Credit Agreement; provided, however, that Credit Agreement
Claims shall not include the Agent's Expenses.
Credit Agreement Note shall mean any promissory note executed and
delivered by Glenoit pursuant to the Credit Agreement.
Creditor shall mean any entity that is the holder of any Claim against
a Debtor that arose (or is based on an obligation incurred) on or before the
Petition Date or any Claim against a Debtor's Estate of a kind specified in
Sections 502(g), 502(h), or 502(i) of the Bankruptcy Code.
CVC shall mean Citicorp Venture Capital, Ltd., a New York corporation.
Debtor Subsidiary shall mean (a) any corporation (other than a Debtor)
of which more than 50% of the outstanding voting securities is owned, directly
or indirectly through one or more intermediaries, by Glenoit and (b) any entity
(other than a Debtor) which is controlled or by contract capable of being
controlled by Glenoit, or by one or more Debtor Subsidiaries, or by Glenoit and
one or more Debtor Subsidiary. For purposes of this definition, the term
"control," when used with respect to any specified Person, means the power to
direct or cause the direction of the management and policies of that Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise, and the terms "controlling" and "controlled" shall have
meanings correlative to the foregoing.
Debtors In Possession shall mean the Debtors, when exercising their
rights, powers, and duties under Sections 1107(a) and 1108 of the Bankruptcy
Code in the Reorganization Case.
Debtors shall mean collectively, Holdings, Glenoit, GAC, APE, Grand
Avenue, Ex-Cell, Ex-Cell Bentonville and Ex-Cell Linde in their corporate or
other capacities and in their capacities as debtors and debtors in possession
under Chapter 11 of the Bankruptcy Code.
Disclosure Statement shall mean the Debtors' disclosure statement
accompanying the Plan.
Disputed Claim shall mean any Claim (including a Fee Request) that is
the subject of a pending application, motion, objection, complaint or any other
legal proceeding seeking to disallow, subordinate or estimate such Claim.
Distribution Record Date shall be the date approximately ten Business
Days prior to the Confirmation Date, to be set by the Bankruptcy Court as the
record date for determining the Creditors entitled to receive distributions
pursuant to the Plan.
Effective Date shall mean the first Business Day on which each of the
conditions set forth in Section 13.1 of the Plan are satisfied or waived
pursuant to the Plan, or such other date, within five Business Days of such
Business Day, chosen by the Debtors and the Agent.
Equity Security shall have the meaning given by the Bankruptcy Code.
Estate shall mean the respective Debtor's estate created by Section 541
of the Bankruptcy Code upon commencement of the Reorganization Cases.
Ex-Cell shall mean Ex-Cell Home Fashions, Inc., a New York corporation
and a Debtor herein.
Ex-Cell Bentonville shall mean Ex-Cell of Bentonville, Inc., an
Arkansas corporation and a Debtor herein.
Ex-Cell Linde shall mean Ex-Cell Linde of Carolina, a North Carolina
corporation and a Debtor herein.
Fee Request shall mean a request for compensation or reimbursement of
expense pursuant to Sections 327, 328, 330, 331, 503(b), 506 or 1103 of the
Bankruptcy Code in connection with an application made to the Bankruptcy Court
in the Reorganization Case.
Filed shall mean filed with the Bankruptcy Court pursuant to Bankruptcy
Rule 5005.
Final Order shall mean a docketed order or judgment of the Bankruptcy
Court or of another court of competent jurisdiction that the Bankruptcy Court
has specifically permitted to proceed to enter such order or judgment, to the
extent that it has (i) been deemed final under applicable Bankruptcy Rules or
(ii)
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not been reversed, stayed, modified, vacated or amended and as to which any
appeal, reargument or petition for certiorari that has been or may be taken has
been finally resolved and as to which the time for further appeal, reargument or
for filing any petition for certiorari has expired.
GAC shall mean Glenoit Assets Corp., a Delaware corporation and a
Debtor herein.
General Liability Claims shall mean all Claims for personal injury,
property damage, breach of contract, or violation of securities laws (other than
any such Claims of the type described in Section 510(b) of the Bankruptcy Code).
Glenoit shall mean Glenoit Corporation, a Delaware corporation and a
Debtor herein.
Grand Avenue shall mean Grand Avenue Corporation, a California
corporation and a Debtor herein.
Holdings shall mean Glenoit Universal, Ltd., a Delaware corporation and
a Debtor herein.
Indenture Trustee Fees shall mean any unpaid Indenture Trustee's fees
and reasonable unpaid out-of-pocket costs or expenses incurred through the
Effective Date by the Indenture Trustee, including, without limitation,
reasonable out-of-pocket costs and expenses and reasonable fees of legal counsel
to the Indenture Trustee (as determined in accordance with the Note Indenture).
Indenture Trustee shall mean United States Trust Company of New York,
as indenture trustee under the Note Indenture.
Interest Holder shall mean any holder of an Interest.
Interest shall mean any right, interest or benefit related to or
represented by any Equity Security of Holdings, including, without limitation,
any Old Common Stock.
New Common Stock shall mean the 1,200,000 shares of Reorganized
Holdings's common stock, $.01 par value, which are to be authorized as of the
Effective Date.
New Lenders shall mean the lenders under the New Working Capital/Term
Debt Facility.
New Preferred Stock shall mean the 145,350 shares of Reorganized
Holdings's preferred stock, which are to be authorized as of the Effective Date
only if the Participating Investors satisfy Section 6.5 hereof. The New
Preferred Stock, if authorized, shall be entitled to a payment in kind, or PIK,
dividend of $14 per share for the first year after the Effective Date, and a PIK
dividend of $8 per share each year thereafter.
New Warrants shall mean those warrants that may be issued by
Reorganized Holdings through the Citicorp Mezzanine Debt Arrangement or the
Replacement Facility, authorizing the holder thereof to obtain, on a fully
diluted basis, up to 10% of the authorized New Common Stock.
New Working Capital/Term Debt Facility shall mean a debt facility,
unless otherwise agreed to by the Debtors and the Agent, (i) to be entered into
by Reorganized Holdings (and guaranteed by all subsidiaries thereof) and
BNP/Paribas (in such context, the "New Agent"), as agent for the New Lenders,
effective as of the Effective Date, (ii) in form and substance mutually
acceptable to the Debtors, the New Agent and the New Lenders, (iii) to provide
agented loans (revolving and/or term) to fund certain cash payments required by
the Plan and the Reorganized Debtors' post-Effective Date working capital
requirements, and trade and standby letters of credit, (iv) pursuant to which
the Reorganized Debtors will or will be able to borrow in accordance with a
formula tied to cash, eligible accounts receivable, eligible inventory and
perhaps other assets, (v) the loans outstanding under which shall be secured on
a first priority basis by substantially all of the assets of Reorganized
Holdings and its subsidiaries, (vi) which shall include interest rates, fees,
charges, covenants, obligations and representations customary in a transaction
and financing of this nature, (vii) which will provide substantially equivalent
liquidity to the Reorganized Debtors as enjoyed by the Debtors under the Credit
Agreement prior to the Debtors' default thereunder, and (viii) with payment
terms and a payment schedule no shorter or otherwise more restrictive to the
Debtors than that currently contained in the Credit Agreement.
Note Claims shall mean all Claims represented by, related to, or
arising under or in connection with the Notes or the Note Indenture, including,
without limitation, (i) Claims in the outstanding principal
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amount of the Notes, (ii) Claims for accrued and unpaid interest on the Notes to
the Petition Date, (iii) all Claims, if any, with respect to securities,
fraudulent conveyance or other laws relating to the rights of creditors and (iv)
Claims against any Debtor as a guarantor of the Notes, but shall exclude the
Indenture Trustee Fees.
Note Indenture shall mean that certain indenture, dated as of April 1,
1997, as amended, between Glenoit and United States Trust Company of New York,
as indenture trustee.
Noteholders Distribution shall mean $0.17 per $1.00 of outstanding
principal amount of the Notes.
Noteholders shall mean holders of Notes.
Notes shall mean the Senior Subordinated Notes due 2007 in the
aggregate outstanding principal amount of $95,000,000, issued by Glenoit
pursuant to the Note Indenture.
Old Common Stock shall mean all issued shares (regardless of the class)
of Holdings's issued and outstanding Common Stock, $.01 par value.
Old Stockholder means a holder of Old Common Stock other than Holdings
as a holder of treasury stock.
Other Secured Claims means all Allowed Claims, other than Credit
Agreement Claims, that are (i) secured by a valid, perfected and enforceable
security interest, lien, mortgage or other encumberance, that is not subject to
avoidance under applicable bankruptcy or non-bankruptcy law, in or upon any
right, title or interest of any of the Debtors in and to property of such
Debtor's Estate, to the extent of the value of the holder's interest in such
Debtor's interest in such property as of the Confirmation Date, or (ii) subject
to setoff under Section 553 of the Bankruptcy Code, to the extent of the amount
subject to setoff, each as determined by Sections 506(a) and 1111(b) of the
Bankruptcy Code and Bankruptcy Rule 3012.
Participating Investors means CVC, as well as such other individuals
and/or institutions that are authorized by Holdings to purchase, and do elect to
purchase, a total of up to 10% of the issued and outstanding New Common Stock
and 10% of the issued and outstanding New Preferred Stock pursuant to Section
6.5 of the Plan. If no other individual and/or institution so authorized elects
to become a Participating Investor in accordance with Section 6.5 of the Plan,
the sole Participating Investor shall be CVC.
Person shall mean an individual, a corporation, a partnership, an
association, a joint stock company, a joint venture, an estate, a trust, an
unincorporated organization, a government or any political subdivision thereof
or other entity.
Petition Date shall mean the date upon which the petitions for relief
under Chapter 11 of the Bankruptcy Code with respect to the Debtors were Filed.
Plan shall mean the Debtors' plan of reorganization as set forth herein
and all exhibits thereto, as the same may be amended or modified by the Debtors
from time to time pursuant to the Plan, the Bankruptcy Code and the Bankruptcy
Rules.
Prepetition shall mean arising or accruing before the Petition Date.
Priority Administrative Claim shall mean any Allowed Claim of the kind
described in Section 507(a)(1) of the Bankruptcy Code, and shall include,
without limitation, all Fee Requests to the extent approved and allowed by the
Bankruptcy Court and all Agent's Expenses.
Priority Claim shall mean any Claim (other than an Priority
Administrative Claim or a Priority Tax Claim) to the extent such Claim is
entitled to a priority in payment under Section 507(a) of the Bankruptcy Code.
Priority Tax Claim shall mean any Allowed Claim for an amount entitled
to priority under Section 507(a)(8) of the Bankruptcy Code.
Rejection Claims shall mean any Claims arising from the rejection of
any executory contract or unexpired lease pursuant to the Bankruptcy Code.
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Reorganization Case shall mean each Debtor's reorganization case under
Chapter 11 of the Bankruptcy Code pending in the Bankruptcy Court.
Reorganized followed by the name of one of the Debtors, as defined
herein, shall refer to the Debtor or Debtors named therein, after the Effective
Date.
Replacement Facility shall mean an unsecured term debt facility that
may be entered into by Glenoit and the Replacement Lender if the Participating
Investors do not satisfy Section 6.5 of the Plan. This facility shall be in form
and substance satisfactory to the Debtors, the Agent, the New Lenders, and the
Committee.
Replacement Facility shall mean the Person or Persons providing the
Replacement Facility.
Shareholder Agreement shall mean the Shareholder Agreement dated
December 14, 1995, among Holdings and certain of the Old Stockholders.
Shareholder Note Claims shall mean all Claims represented by, related
to, or arising under or in connection with the Shareholder Notes or any loan or
other agreements relating thereto, including, without limitation, Claims in the
outstanding principal amount of the Shareholder Notes, plus accrued and unpaid
interest thereon to the Petition Date, and all Claims, if any, with respect to
securities, fraudulent conveyance or other laws relating to the rights of
creditors.
Shareholder Notes shall mean the approximately $33.3 million principal
amount of promissory notes issued by Holdings to various of the Old
Stockholders, such notes bearing interest at stated rates from 5% per annum to
12.5% per annum and maturing in 2004 and 2005.
Unofficial Noteholders Committee shall mean that committee of
Noteholders formed prior to the commencement of the Reorganization Cases,
consisting of AIM Funds, Financial Management Advisors, Federated Investors,
Eaton Vance Management, Orix USA Corporation, and Gem Capital, among others.
Section 1.2 Undefined Terms.
A capitalized term used in the Plan that is not defined in the Plan or
the Disclosure Statement, but that is defined in the Bankruptcy Code or the
Bankruptcy Rules, has the meaning defined in the Bankruptcy Code or the
Bankruptcy Rules.
ARTICLE II. TREATMENT OF CLAIMS NOT SUBJECT TO CLASSIFICATION
Section 2.1 No Substantive Consolidation
The Debtors' estates shall remain separate, and there shall be no
substantive consolidation of these cases. Section 2.2 Priority Administrative
Claims.
Each Priority Administrative Claim that is or becomes an Allowed Claim
against a particular Debtor shall be paid in full in cash by the particular
Debtor on the later of (i) the Effective Date or (ii) a date within 31 days
after the date such Priority Administrative Claim becomes an Allowed Claim;
provided however, that any Priority Administrative Claims representing
liabilities incurred by a Debtor in the ordinary course of business during the
Reorganization Case shall be paid by the respective Debtor in accordance with
the terms and provisions of the particular transactions and agreements and
orders of the Bankruptcy Court, if any, relating thereto. All Fee Requests shall
be Filed no later than 60 days after the Effective Date, or by such other date
established by the Bankruptcy Court.
Section 2.3 Priority Tax Claims.
Each Priority Tax Claim that is or becomes an Allowed Claim against a
particular Debtor, shall, at the option of that Debtor, be paid (i) in full on
the later of (A) the Effective Date and (B) a date within 31 days after the date
such Priority Tax Claim becomes an Allowed Claim; (ii) in full by deferred cash
payments over a period not exceeding six years after the date of assessment of
such Claim including an
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interest component as required by the provisions of 11 U.S.C. ss.1129(a)(9)(C);
or (iii) on such other terms as have been or may bE agreed to between the holder
of such Claim and that Debtor.
ARTICLE III. CLASSIFICATION OF CLAIMS AND INTERESTS
Section 3.1 Class 1 - Priority Claims.
Class 1 consists of all Priority Claims. Class 1 is subdivided as
follows:
(a) Class 1a shall consist of all Priority Claims against
Holdings.
(b) Class 1b shall consist of all Priority Claims against
Glenoit.
(c) Class 1c shall consist of all Priority Claims against GAC.
(d) Class 1d shall consist of all Priority Claims against APE.
(e) Class 1e shall consist of all Priority Claims against
Grand Avenue.
(f) Class 1f shall consist of all Priority Claims against
Ex-Cell.
(g) Class 1g shall consist of all Priority Claims against
Ex-Cell Bentonville.
(h) Class 1h shall consist of all Priority Claims against
Ex-Cell Linde.
Section 3.2 Class 2 - Credit Agreement Claims.
Class 2 consists of all Credit Agreement Claims. Class 2 is subdivided
as follows:
(a) Class 2a shall consist of all Credit Agreement Claims
against Holdings.
(b) Class 2b shall consist of all Credit Agreement Claims
against Glenoit.
(c) Class 2c shall consist of all Credit Agreement Claims
against GAC.
(d) Class 2d shall consist of all Credit Agreement Claims
against APE.
(e) Class 2e shall consist of all Credit Agreement Claims
against Grand Avenue.
(f) Class 2f shall consist of all Credit Agreement Claims
against Ex-Cell.
(g) Class 2g shall consist of all Credit Agreement Claims
against Ex-Cell Bentonville.
(h) Class 2h shall consist of all Credit Agreement Claims
against Ex-Cell Linde
Section 3.3 Class 3 - Other Secured Claims
Class 3 consists of all Other Secured Claims. Each Other Secured Claim
against each Debtor shall be deemed a different subclass of that particular
Debtor.
Section 3.4 Class 4 - Ordinary Course Trade Claims and Other Unsecured Claims.
Class 4 consists of all Prepetition Claims arising in the ordinary
course of the Debtors' business for (i) goods and services, including utility
services, supplied to the Debtors on account, (ii) wages, salary, bonus or
commissions, including deferred compensation, vacation, severance, and sick
leave pay(to the extent they are not Priority Claims); (iii) contributions to
any employee benefit plan (to the extent they are not Priority Claims); (iv) all
General Liability Claims, (v) all Rejection Claims, and (vi) all unsecured
Claims not otherwise classified by the Plan. Class 4 is subdivided as follows:
(a) Class 4a shall consist of all Ordinary Course Trade Claims
and Other Unsecured Claims against Holdings.
(b) Class 4b shall consist of all Ordinary Course Trade Claims
and Other Unsecured Claims against Glenoit.
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(c) Class 4c shall consist of all Ordinary Course Trade Claims
and Other Unsecured Claims against GAC.
(d) Class 4d shall consist of all Ordinary Course Trade Claims
and Other Unsecured Claims against APE.
(e) Class 4e shall consist of all Ordinary Course Trade Claims
and Other Unsecured Claims against Grand Avenue.
(f) Class 4f shall consist of all Ordinary Course Trade Claims
and Other Unsecured Claims against Ex-Cell.
(g) Class 4g shall consist of all Ordinary Course Trade Claims
and Other Unsecured Claims against Ex-Cell Bentonville.
(h) Class 4h shall consist of all Ordinary Course Trade Claims
and Other Unsecured Claims against Ex-Cell Linde
Section 3.5 Class 5 -Note Claims.
Class 5 consists of all Note Claims.
Section 3.6 Class 6 - Shareholder Note Claims
Class 6 consists of all Shareholder Note Claims against Holdings.
Section 3.7 Class 7 - Interests and Related Claims.
Class 7 consists of all Interests (including those represented by Old
Common Stock), and all Claims represented thereby and all Interests not
otherwise classified by the Plan and all Claims represented thereby, related to,
arising thereunder or in connection therewith, including claims of the type
described in Section 510(b) of the Bankruptcy Code. Class 7 is subdivided as
follows:
(a) Class 7a shall consist of all Interests in and Related
Claims against Holdings.
(b) Class 7b shall consist of all Interests in and Related
Claims against Glenoit.
(c) Class 7c shall consist of all Interests in and Related
Claims against GAC.
(d) Class 7d shall consist of all Interests in and Related
Claims against APE.
(e) Class 7e shall consist of all Interests in and Related
Claims against Grand Avenue.
(f) Class 7f shall consist of all Interests in and Related
Claims against Ex-Cell.
(g) Class 7g shall consist of all Interests in and Related
Claims against Ex-Cell Bentonville.
(h) Class 7h shall consist of all Interests in and Related
Claims against Ex-Cell Linde.
ARTICLE IV. IDENTIFICATION AND TREATMENT OF CLASSES NOT IMPAIRED UNDER PLAN
Section 4.1 Identification of Unimpaired Classes.
The Claims and Interests in Classes 1a, 1b, 1c, 1d, 1e, 1f, 1g, 1h, 3
(and all of its subclasses), 4a, 4b, 4c, 4d, 4e, 4f, 4g, 4h, and 7b, 7c, 7d, 7e,
7f, 7g, and 7h (but not 7a) are unimpaired under the Plan, and, therefore, the
holders of Claims or Interests in such Classes are conclusively presumed
pursuant to Section 1126(f) of the Bankruptcy Code to have accepted the Plan.
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Section 4.2 Class 1 (and all of its subclasses) - Priority Claims
To the extent not previously paid as allowed by the Bankruptcy Court,
each Class 1 Claim (including all subclasses of Class 1) that is or becomes an
Allowed Claim shall, at the option of the holder thereof, either (i) receive
from the Debtor obligated on the Allowed Claim all the legal, equitable, and
contractual rights to which such an Allowed Claim entitles the holder thereof,
or (ii) be paid in full by the Debtor obligated on the Allowed Claim on the
later of (y) the Effective Date and (z) a date within 31 days of the date such
Claim becomes an Allowed Claim.
Section 4.3 Class 3 (and all of its subclasses) - Other Secured Claims
To the extent not previously paid as allowed by the Bankruptcy Court,
each Class 3 Claim (including all subclasses of Class 3) that is or becomes an
Allowed Claim shall, at the option of the obligated Debtor, either (i) receive
from the Debtor obligated on the Allowed Claim all the legal, equitable, and
contractual rights to which such an Allowed Claim entitles the holder thereof,
or (ii) be paid in full by the Debtor obligated on the Allowed Claim on the
later of (y) the Effective Date and (z) a date within 31 days of the date such
Claim becomes an Allowed Claim.
Section 4.4 Class 4 (and all of its subclasses) - Ordinary Course Trade Claims
and Other Unsecured Claims.
To the extent not previously paid as allowed by the Bankruptcy Court,
each Class 4 Claim (including all subclasses of Class 4) that is or becomes an
Allowed Claim shall, at the option of the holder thereof, either (i) receive
from the Debtor obligated on the Allowed Claim all the legal, equitable, and
contractual rights to which such an Allowed Claim entitles the holder thereof,
or (ii) be paid in full by the Debtor obligated on the Allowed Claim on the
later of (y) the Effective Date and (z) a date within 31 days of the date such
Claim becomes an Allowed Claim.
Section 4.5 Classes 7b, 7c, 7d, 7e, 7f, 7g, and 7h - Interests and Related
Claims in all of the Debtors except Holdings.
Each holder of an Allowed Class 7b, 7c, 7d, 7e, 7f, 7g, or 7h Interest
or Claim shall retain such Interest or Claim.
ARTICLE V. IDENTIFICATION AND TREATMENT OF CLASSES AND INTERESTS IMPAIRED
UNDER THE PLAN
Section 5.1 Identification of Impaired Classes and Impaired Interests.
The Claims in Classes 2a, 2b, 2c, 2d, 2e, 2f, 2g, 2h, and 5 are
impaired under the Plan and, therefore, the holders of Claims in such Classes
are entitled to vote to accept or reject the Plan. The Claims in Class 6 and the
Interests and related Claims in Class 7a are impaired under the Plan and are
conclusively presumed pursuant to Section 1126(g) of the Bankruptcy Code to have
rejected the Plan.
Section 5.2 Class 2 (and all of its subclasses) - Credit Agreement Claims
To the extent not previously paid as allowed by the Bankruptcy Court,
each Class 2 Claim that is or becomes an Allowed Claim shall be paid in full by
Reorganized Glenoit on the Effective Date, or satisfied by other means
satisfactory to the Agent. The Credit Agreement Claims shall be deemed Allowed
Claims under this Plan in an amount equal to, as of the Effective Date, the full
outstanding principal amount of such Claims plus any unpaid interest and any
other amounts included in the definition of Credit Agreement Claims in this
Plan.
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Section 5.3 Class 5 - Note Claims.
(a) On the Effective Date, the Note Claims shall be deemed to be
Allowed Claims as follows: each holder of a Note Claim as of the Distribution
Record Date shall be deemed to have an Allowed Claim in an amount equal to the
aggregate principal amount of the Notes represented by such Claim (which for all
such Claims shall not exceed, in the aggregate, the principal amount of
$95,000,000). All other Note Claims shall be deemed disallowed and no
distributions whatsoever shall be made by the Debtors in respect of such Claims.
(b) On the Effective Date, each holder of an Allowed Class 5 Claim
(calculated as set forth in Section 5.3(a) above) shall receive the Noteholders
Distribution in full satisfaction of all rights under its Class 5 Claim, unless,
by no later than the earlier of ten Business Days after Confirmation and
November 15, 2000, Holdings fails to irrevocably transfer the amount collected
pursuant to Section 6.5(a) for timely payment of all Allowed Note Claims, to be
received by Noteholders on or before November 15, 2000. If no such transfer is
made, then each holder of an Allowed Note Claim shall not receive the
Noteholders Distribution, but rather, shall receive 1 share of New Common Stock
for each $100 of its Allowed Note Claim (calculated as set forth in Section
5.3(a) above) in full satisfaction of all rights under its Class 5 Claim.
Section 5.4 Class 6 - Shareholder Note Claims.
No property or assets of any kind shall be distributed to, or retained
by, the holders of Claims classified in Class 6 in respect of any such Claim so
classified, regardless of whether such Claim is an Allowed Claim.
Section 5.5 Class 7a - Interests and related Claims in Holdings.
No property or assets of any kind shall be distributed to, or retained
by, the holders of Interests or Claims classified in Class 7a in respect of any
such Interest or Claim so classified, regardless of whether such Interest or
Claim is an Allowed Claim or an Allowed Interest.
ARTICLE VI. MEANS FOR EXECUTION OF THE PLAN
Section 6.1 Termination of Equitable, Legal and Contractual Subordination
Rights.
The classification and manner of satisfying all Claims and Interests
under the Plan takes into consideration all contractual, legal and equitable
subordination and subrogation rights, whether arising under general principles
of equitable subordination, Section 510(c) of the Bankruptcy Code or otherwise,
that any Creditor or Interest Holder may have against any other Creditor or
Interest holder to any distribution made pursuant to the Plan. Upon
Confirmation, all contractual, legal or equitable subordination or subrogation
rights that a Creditor or Interest Holder may have with respect to any
distribution to be made pursuant to the Plan shall be discharged and terminated,
and all actions related to the enforcement of such subordination or subrogation
rights shall be permanently enjoined. Accordingly, holders of Allowed Claims
shall not be subject to payment to a beneficiary of such terminated
subordination or subrogation rights, or to levy, garnishment, attachment or
other legal process by any such beneficiary, on account of such terminated
subordination or subrogation rights.
Section 6.2 Vesting of Assets.
On the Effective Date all assets and property of each Estate shall vest
in each respective Reorganized Debtor free and clear of all liens and other
encumbrances not specifically contemplated by the Plan to either survive the
Reorganization Cases or to be created or granted in connection therewith. Except
as provided in Article IX hereof, all causes of action recoverable under Chapter
5 of the Bankruptcy Code, all claims against third parties on account of, and
all other causes of action owed to or in favor of, the Debtors are hereby
preserved, retained for enforcement solely and exclusively and in the discretion
of each Reorganized Debtor and are vested in the respective Reorganized Debtor
on the Effective Date, with each Reorganized Debtor designated as the
representative of its Estate pursuant to 11 U.S.C. ss. 1123(b)(3)(B). After the
Effective Date, eacH Reorganized Debtor may operate its business and buy, use,
acquire and dispose of its assets, free of any restrictions contained in the
Bankruptcy Code.
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Section 6.3 Final Order.
Any requirement in the Plan for a Final Order may be waived by the
Debtors with the prior written consent of the Agent upon written notice to the
Bankruptcy Court, provided that nothing contained herein or elsewhere in the
Plan, including Section 13.2 hereof, shall prejudice the right of any party in
interest to seek a stay pending appeal with respect to such order.
Section 6.4 Issuance of the New Common Stock and New Preferred Stock.
On the Effective Date, Reorganized Holdings will be deemed to have
authorized all 1,200,000 shares of the New Common Stock. Also on the Effective
Date, Reorganized Holdings will issue 950,000 shares of New Common Stock and
distribute the same as provided in the Plan. All shares of New Common Stock
distributed pursuant to the terms of this Plan shall, be deemed to be and shall
be, validly issued and fully paid.
(a) If the Participating Investors satisfy Section 6.5 of the Plan,
they shall be issued 950,000 shares of this New Common Stock, according to the
formulae in that Section. Also, if the Participating Investors satisfy Section
6.5 of the Plan, then Reorganized Holdings will be deemed to have authorized all
145,350 shares of New Preferred Stock, which shall then also be issued to the
Participating Investors under Section 6.5. If the Participating Investors do not
satisfy Section 6.5 of the Plan, the Noteholders will contribute their Note
Claims to Holdings in exchange for 950,000 shares of the New Common Stock which
shall be allocated to the Noteholders according to the formula in Section 5.3(b)
of the Plan. In either case, except as provided by the Plan, no additional
shares of New Common Stock may be issued other than as directed by the Board of
Directors after the Effective Date.
(b) On the Effective Date, all Interests in Class 7a, including without
limitation, any Interests, Old Common Stock and all currently outstanding
warrants and options to purchase Old Common Stock of Holdings, shall be deemed
canceled and terminated and the obligations of the Debtors relating to or
arising under any Old Option Plans (and all Old Options issued thereunder) shall
be deemed canceled. The Shareholder Agreement will also be cancelled.
Section 6.5 Selection of, and Funding by, the Participating Investors.
(a) No later than five Business Days prior to the Confirmation Hearing,
the Participating Investors shall transfer to Holdings an amount sufficient to
pay the aggregate Noteholders Distribution.
(b) CVC, as a Participating Investor, shall provide to Holdings 90% of
the funds necessary to satisfy Section 6.5(a) hereof (or $14,535,000), at least
ten Business Days prior to the Confirmation Hearing. The remaining 10% of the
funds necessary to satisfy Section 6.5(a) (or $1,615,000) shall either come from
(y) other parties that are authorized and elect to become Participating
Investors pursuant to Section 6.5(c) hereof or (z) CVC, if the total received
from other Participating Investors pursuant to the preceding clause does not
equal the remaining amount of funds needed to satisfy Section 6.5(a) hereof. Any
funds received pursuant to this Section 6.5(b) shall be held in trust by the
Debtors pending the Effective Date and promptly returned to the relevant
Participating Investors if the Effective Date fails to occur by November 15,
2000, in which event the Participating Investors shall not receive anything else
under this Plan. Upon receipt of the full amount of funds from Participating
Investors needed to satisfy Section 6.5(a), Holdings shall immediately
contribute such funds to Glenoit in order to enable it to make the Noteholders
Distribution.
(c) Within fifteen Business Days after the Petition Date, Holdings
shall notify certain parties of their right to become a Participating Investor.
A party that is so authorized to become a Participating Investor shall then
determine whether to provide some of the funds necessary to make the Noteholders
Distribution. If an authorized party wishes to become a Participating Investor,
it must transfer to Holdings, no later than ten Business Days prior to the
Confirmation Hearing, the amount it wishes to invest to become a Participating
Investor, provided that no investment by a Participating Investor shall be less
than $10,000. After $1,615,000 is received under this Section 6.5(c) from
Participating Investors other than CVC, no further investments by Participating
Investors will be allowed.
(d) If the Participating Investors satisfy Section 6.5(a) hereof, then
10% of the funds invested by each Participating Investor shall be allocable to
New Common Stock and 90% shall be allocable to New
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Preferred Stock. Each Participating Investors shall then receive, on the
Effective Date immediately following the payment of the Noteholders
Distribution, (y) 58.823 shares of New Common Stock for each $100 of their
investment that is allocated to New Common Stock and (z) 1 share of New
Preferred Stock for each $100 of their investment that is allocated to New
Preferred Stock.
Section 6.6 Loan from Citicorp Mezzanine or the Replacement Lender.
On the Effective Date, provided the Participating Investors have
satisfied Section 6.5 of the Plan, Citicorp Mezzanine shall enter into the
Citicorp Mezzanine Debt Arrangement, by which Citicorp Mezzanine shall advance
to Glenoit $15 million (less any fees required by the Citicorp Mezzanine Debt
Arrangement) as subordinated debt, and receive the New Warrants, both pursuant
to the terms thereof. If the Participating Investors have not satisfied Section
6.5 of the Plan, then Glenoit may enter into the Replacement Facility with the
Replacement Lender.
Section 6.7 Execution of New Revolving Credit and Term Loan Agreement
On the Effective Date, Glenoit, the New Agent and the New Lenders shall
enter into the New Working Capital/Term Debt Facility.
Section 6.8 Negation of Obligations under the Credit Agreement, Credit Agreement
Notes, Note Indenture, Notes, Shareholder Notes and Related Documents; Transfer
of Title.
As of the Effective Date, (i) all obligations of the Debtors and the
Debtor Subsidiaries under the Credit Agreement, the Credit Agreement Notes and
related documents will be extinguished, (ii) upon making the distribution to
Noteholders set forth in Section 5.3(b) of the Plan, all obligations of the
Debtors and the Debtor Subsidiaries under the Notes or the Note Indenture will
be extinguished, and (iii) all obligations of Holdings under the Shareholder
Notes and related documents will be extinguished; provided, however, that
nothing contained in this Plan or in the Confirmation Order shall in any way
affect (x) the obligations of the parties under this Plan and the rights of the
Agent against the holders of claims under the Credit Agreement for
indemnification or reimbursement of the Agent's Expenses to the extent such
Agent's Expenses are not paid by the Debtors as provided for in the Plan or (y)
the obligations of the parties under this Plan and the rights of the Indenture
Trustee against the holders of Note Claims under the Note Indenture for
indemnification or reimbursement of Indenture Trustee Fees to the extent such
Indenture Trustee Fees are not paid by the Debtors as provided for in the Plan.
Section 6.9 Amendments to Holdings's Certificate and Bylaws.
On the Effective Date, Holdings's certificate of incorporation and
Holdings's by-laws will be deemed to be amended and restated in their entirety
as provided in the Certificate and the By-Laws respectively. The Certificate
shall include a provision which prohibits the issuance of non-voting equity
securities to the extent required by Section 1123(a)(6) of the Bankruptcy Code,
subject to later amendment as provided by law.
Section 6.10 Operations of Debtors.
On and after the Effective Date, each Reorganized Debtor shall continue
to operate its business and shall implement the terms of the Plan. Section 6.11
Management and Board of Directors.
(a) Executive Officers.
Provided the Participating Investors have satisfied Section 6.5 hereof,
then prior to Confirmation of the Plan, the Debtors and the Participating
Investors shall agree as to the persons who will serve as executive officers of
Reorganized Holdings and the employment or retention by Reorganized Holdings of
any insider (as defined in Section 101(13) of the Bankruptcy Code), and unless a
written notice stating otherwise is Filed by the Debtors prior to Confirmation
of the Plan, the executive officers of the Debtors immediately before
Confirmation of the Plan shall continue to serve after Confirmation of the Plan
in their
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respective capacities. If the Participating Investors have not satisfied Section
6.5 hereof, then the rights of the Participating Investors under this Section
6.11(a) shall inure to the Committee.
(b) Directors.
On the Effective Date, all directors of the Debtors shall be deemed to
have resigned, without any further action on the part of any Person. Five
Business Days prior to the Confirmation Hearing, the Debtors shall File a notice
with the Bankruptcy Court stating who shall be the members of each of their
boards of directors on and after the Effective Date, and such notice shall
include, in accordance with Section 1129(a)(5) of the Bankruptcy Code, (i) the
identity of and affiliations of any individual proposed to serve as a director,
officer or voting trustee of the Debtors after Confirmation of the Plan, and
(ii) the identity of any insider (as such term is defined in Section 101(13) of
the Bankruptcy Code) that will be employed and retained by Reorganized Holdings,
and the nature of any compensation for such insider. If, on the Effective Date,
any Person named to be a Director of Reorganized Holdings is unable or unwilling
to take office, then, the Debtors and the Participating Investors shall jointly
designate a replacement director, provided the Participating Investors have
transferred the sum referenced in Section 6.5(a) of the Plan; if not, then the
Debtors and the Committee shall jointly designate a replacement director.
Section 6.12 Manner of Payments Under the Plan
At the option of the applicable Reorganized Debtor, any cash payment to
be made by a Reorganized Debtor pursuant to the Plan may be made by a check or
wire transfer or as otherwise required or provided in applicable agreements.
Except as otherwise provided in the Plan, any payment or other distribution
which a Reorganized Debtor is required, by the Plan, to make to the holder of an
Allowed Claim on the Effective Date shall be deemed timely made if made on such
Effective Date or, except with respect to Claims in Class 2 or Class 5, within
ten Business Days thereafter. Any distributions under the Plan of property other
than cash shall be made by the applicable Reorganized Debtor, as the case may
be, in accordance with the terms of the Plan.
Section 6.13 Distribution of Consideration.
(a) Fractional Shares of New Common Stock.
No fractional shares of New Common Stock will be issued. Fractional
shares of New Common Stock shall be rounded to the next greater or next lower
number of shares as follows: (i) fractions of 1/2 or greater shall be rounded to
the next whole number, and (ii) fractions of less than 1/2 shall be rounded to
the next lower whole number. All calculations relating to rounding shall be made
based on beneficial ownership. (b) Surrender and Cancellation of Instruments.
As a condition to receiving any distribution pursuant to the Plan, each
holder of a Note must surrender such instrument, (or establish the
unavailability thereof to Reorganized Glenoit's satisfaction) and shall deliver
such other documents as are necessary to effectuate this Plan, in all cases, in
proper form for transfer. (Hereinafter the Notes will sometimes be referred to,
collectively, as the "Old Documents.") In accordance with the provisions of
Section 1143 of the Bankruptcy Code, any Person that is required pursuant hereto
to surrender Old Documents as a condition to receiving a distribution that fails
to surrender such Old Documents within six months from the Effective Date will
be deemed to have forfeited all rights, Claims and Interests and will not
participate in any distribution under the Plan. On the Effective Date, except to
the extent provided to the contrary herein (i) all Old Documents will be
canceled and (ii) all of the Debtors' obligations under the agreements,
indentures and certificates, as the case may be, governing all Old Documents, as
the case may be, will be discharged.
(c) Unclaimed Property and Unissued New Securities and Canceled
Distributions.
If any Person entitled to receive cash or securities under the Plan
cannot be located within six months of the Effective Date, any such cash or
securities and accrued interest or dividends thereon will become the property of
the applicable Reorganized Debtor. None of the Reorganized Debtors shall be
required to attempt to locate such Person beyond six months after the Effective
Date.
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Section 6.14 Term of Injunctions or Stays.
Unless otherwise provided, all injunctions or stays provided for in the
Reorganization Case pursuant to Sections 105 or 362 of the Bankruptcy Code or
otherwise in effect on the Confirmation Date shall remain in full force and
effect until the Effective Date. All distributions and transfers of property
pursuant to the terms of the Plan shall be made free and clear of all Claims and
upon the Confirmation of the Plan all holders of Claims or Interests will be
permanently enjoined from and restrained against commencing or continuing any
suit, action or proceeding, or asserting against any of the Reorganized Debtors
or their assets or property, any Claim, Interest or cause of action based upon
any act or omission, transaction or other activity of any kind or nature that
occurred before the Confirmation Date.
Section 6.15 Date for Objections to Claims or Interests.
Unless an earlier date has been set by the Bankruptcy Court or a later
date is set by the Bankruptcy Court upon a motion (that may be filed ex parte by
the Debtors), all objections to Claims or Interests shall be Filed by the later
of (i) one hundred twenty days after the Effective Date and (ii) one hundred
twenty days after a particular proof of Claim or Interest is Filed, provided
however, that all proofs of Claim or proofs of Interest Filed after thirty days
after the Effective Date shall be deemed disallowed by operation of this Plan
and without any Person having to file an objection thereto, and provided further
however, (A) that any objection of a party in interest (other than the Debtors)
to Claims or Interests deemed allowed by the Plan shall be filed no later than
ten Business Days prior to the Confirmation Hearing, and (B) the Debtors shall
file no objection to Claims or Interests deemed allowed by the Plan unless the
Plan is withdrawn, is not confirmed or the conditions of Section 13.1 are not
satisfied or waived. The objecting party shall serve a copy of each objection
upon the holder of the Claim or Interest to which it pertains and upon the
Debtors.
Section 6.16 Corporate Action.
On the Effective Date, the cancellation of all Interests, including but
not limited to the Old Common Stock, the issuance of securities pursuant to
Section 6.4 of the Plan, the amendments to Holdings' certificate of
incorporation and by-laws described in Section 6.9 of the Plan, the execution
and delivery of all documents contemplated by the Plan or any Exhibit thereto to
be executed and delivered in connection with the Plan and all other matters
provided for by the Plan involving corporate action by the Debtors or the
Reorganized Debtors shall be deemed to have occurred and shall be in effect from
and after the Effective Date pursuant to Section 303 of the Delaware General
Corporation Law and any other applicable law without any requirement of further
action by the stockholders or directors of the Debtors or the Reorganized
Debtors. The Debtors and the Reorganized Debtors may execute such documents and
take such action as is necessary to effectuate the transactions provided for in
the Plan.
Section 6.17 Compliance with Tax Requirements.
To the extent applicable, the Debtors will comply with all tax
withholding and reporting requirements imposed on them in connection with any
distribution made pursuant to the Plan.
ARTICLE VII. EXECUTORY CONTRACTS AND UNEXPIRED LEASES
Section 7.1 Assumption.
All executory contracts (including the prepetition retention agreement
contracts with the professionals retained by the Unofficial Noteholders
Committee) and unexpired leases shall be deemed assumed (and assigned, as the
case may be) by the Debtors on the Effective Date unless expressly rejected
prior to the Confirmation Date or subject to a motion by the Debtors to reject
Filed on or before the Confirmation Date. All cure payments which may be
required under Section 365(b)(1) of the Bankruptcy Code in connection with such
assumption (or assignment) shall be made on the Effective Date. In the event of
a dispute regarding the amount of any such cure payments, the ability of the
Debtors to provide adequate assurance of future performance or any other matter
relating to such assumption or any assignment, the Debtors shall make such cure
payments in accordance with Final Orders of the Bankruptcy Court.
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Section 7.2 Bar Date for Rejection Claims.
Unless an order of the Bankruptcy Court provides otherwise, any proof
of claim with respect to a Rejection Claim must be Filed by the later of 30 days
after the Confirmation Date or a date within 30 days after the rejection by the
Debtors of such contract or lease.
Section 7.3 Indemnification Obligations.
For purposes of the Plan, the obligations of the Debtors to indemnify
its present and any former directors or officers against any obligations
pursuant to Holdings's certificate of incorporation or by-laws, applicable state
law or specific agreement or any combination of the foregoing, shall survive
Confirmation, remain unaffected thereby, and not be discharged, irrespective of
whether indemnification is owed in connection with an event occurring before, on
or after the Petition Date. As of the Confirmation Date, the Reorganized Debtors
shall provide customary compensation, indemnification arrangements and insurance
coverage to each of its directors designated to take office pursuant to Section
6.11 of the Plan.
ARTICLE VIII. DISCHARGE OF DEBTORS
Section 8.1 Plan Binding.
The provisions of the Plan shall bind all Creditors and Interest
Holders, regardless of whether they accept the Plan.
Section 8.2 Discharge.
Pursuant to Sections 524 and 1141(d)(1) of the Bankruptcy Code, as of
the Effective Date Confirmation shall discharge and release the Debtors and
their Estates and all property of the Debtors and their Estates from any and all
Claims, debts, liens, security interests, encumbrances and Interests that arose
before the Confirmation Date including, but not limited to, all principal and
any interest accrued thereon, and all liabilities in respect thereof shall be
extinguished completely. The distributions of New Common Stock, cash and other
property or other performance under the Plan shall be in exchange for and in
complete satisfaction, discharge and release of all Claims against and Interests
in the Debtors or any of its assets or properties that arose prior to the
Confirmation Date, including any Claim for interest accruing after the Petition
Date and prior to the Effective Date of the Plan. On and after the Effective
Date of the Plan, except as provided in the Plan, all holders of Claims and
Interests arising prior to the Confirmation Date shall be permanently barred and
enjoined from asserting against any Reorganized Debtor or its respective assets
any other or further Claims or Interest that arose prior to the Confirmation
Date, including Claims based on any act or omission, transaction or other
activity of any kind or nature that occurred prior to the Confirmation Date.
ARTICLE IX. COMPROMISE AND RELEASE OF CERTAIN CLAIMS
Any and all claims and causes of action of the Debtors or the Estate
against the Agent or the Indenture Trustee, any current or prior holder of a
Credit Agreement Note or Note, or a Participating Investor, including, but not
limited to, all preference and fraudulent conveyance claims and actions and all
claims and actions of the type arising under Chapter 5 of the Bankruptcy Code
(including, but not limited to, claims recoverable pursuant to Sections 544,
547, 548 and 550 thereof) (other than any cause of action or claim against any
such Person in its capacity other than (a) as a current or prior holder of a
Credit Agreement Note or Note, (b) the Agent under the Credit Agreement or the
Indenture Trustee for the Notes, (c) as a Participating Investor), shall be
deemed to be compromised and settled by the Plan and shall be extinguished and
released on the Effective Date.
ARTICLE X. NOTICES
Any notice given in connection herewith shall be as follows:
If to one or all of the Debtors:
Tom O'Gorman
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Glenoit Corporation
111 West 40th Street
New York, New York 10018
Phone: 212-391-3915
Facsimile: 212-391-2341
With a copy to:
Neal Batson, Esq.
Mark Duedall, Esq.
Alston & Bird LLP
1201 West Peachtree Street
Atlanta, Georgia 30329
Phone: 404-881-7000
Facsimile: 404-881-7887
If to the Agent or the New Lenders:
Edward Canale
Alan Mustacchi
David Barcus
BNP Paribas
787 7th Avenue New
York, New York 10019
Phone: 212-841-2070
Facsimile: 212-841-3565
With a copy to:
Saul Burian, Esq.
Kramer, Levin, Naftalis & Frankel LLP 919 Third
Avenue New York, New York 10022 Phone: 212-715-9100
Facsimile: 212-715-8000
If to the Unofficial Noteholders Committee:
Wendell Adair, Esq.
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038-4982
Phone: 212-806-5400
Facsimile: 212-806-6006
If to CVC:
Saleem Muqaddam
Citicorp Venture Capital
399 Park Avenue
14th Floor
New York, New York 10043
Phone: 212-559-2754
Facsimile: 212-888-2940
With a copy to:
Adrian Van Schie, Esq.
Kirkland & Ellis
Citicorp Center
153 East 53rd Street
New York, New York 10022-4675
Phone: 212-446-4800
Facsimile: 212-446-4900
16
<PAGE>
If to Citicorp Mezzanine:
Rick Mayberry
Citicorp Venture Capital
399 Park Avenue
14th Floor
New York, New York 10043
Phone: 212-559-2754
Facsimile: 212-888-2940
With a copy to:
Eunu Chun, Esq.
Kirkland & Ellis
Citicorp Center
153 East 53rd Street
New York, New York 10022-4675
Phone: 212-446-4800
Facsimile: 212-446-4900
ARTICLE XI. RETENTION OF JURISDICTION
Section 11.1 Claims and Actions.
The Bankruptcy Court shall retain jurisdiction over the Reorganization
Cases, including, without limitation, such jurisdiction as is necessary to
ensure that the purposes and intent of this Plan are carried out and that all
distributions to holders of Allowed Claims are made as provided herein. The
Bankruptcy Court shall also expressly retain jurisdiction: (i) to hear and
determine all Claims and Interests and objections thereto; and (ii) to
adjudicate and enforce all causes of action which may exist on behalf of the
Debtors.
Section 11.2 Retention of Additional Jurisdiction.
The Bankruptcy Court shall also retain jurisdiction for the purpose of
classification of the Claims or Interests, the re-examination of Claims and
Interests which have been allowed for purposes of voting and the determination
of such objections as may be Filed to the Claims and Interests, including
Section 502(c) proceedings for estimation of Claims. The Bankruptcy Court shall
further retain jurisdiction for the following additional purposes:
(i) to determine all questions and disputes regarding title to the
assets of the Debtors, all causes of action, controversies, disputes or
conflicts, regardless of whether subject to any pending action as of the
Effective Date, between the Debtors and any other party, including, without
limitation, any right to recover assets pursuant to the provisions of the
Bankruptcy Code;
(ii) to modify the Plan after the Effective Date pursuant to the
Bankruptcy Code and the Bankruptcy Rules;
(iii) to enforce and interpret the terms and conditions of the Plan;
(iv) to enter such orders, including, but not limited to, such future
injunctions as are necessary to enforce the respective title, rights and powers
of the Debtors, and to impose such limitations, restrictions, terms and
conditions on such title, rights and powers as the Bankruptcy Court may deem
necessary;
(v) to enter an order closing the Reorganization Cases;
(vi) to correct any defect, cure any omission or reconcile any
inconsistency in the Plan or the Confirmation Order as may be necessary to
implement the purposes and intent of the Plan;
(vii) to determine any and all applications for allowances of
compensation and reimbursement of expenses and the reasonableness of any fees
and expenses authorized to be paid or reimbursed under the Bankruptcy Code or
the Plan;
17
<PAGE>
(viii) to determine any applications or motions pending on the
Effective Date for the rejection, assumption or assumption and assignment of any
executory contract or unexpired lease and to hear and determine, and, if need
be, to liquidate any and all Claims arising therefrom;
(ix) to determine any and all applications, adversary proceedings and
contested matters that may be pending on the Effective Date;
(x) to consider any modification of the Plan or to remedy any defect or
omission or reconcile any inconsistency in any order of the Bankruptcy Court, to
the extent authorized by the Plan or the Bankruptcy Court;
(xi) to determine all controversies, suits and disputes that may arise
in connection with the interpretation, enforcement or consummation of the Plan;
(xii) to consider and act on the compromise and settlement of any Claim
against or cause of action by or against the Debtors arising under or in
connection with the Plan;
(xiii) to issue such orders in aid of execution of the Plan to the
extent authorized by Section 1142 of the Bankruptcy Code;
(xiv) to determine such other matters or proceedings as may be provided
for under Title 28 or any other title of the United States Code, the Bankruptcy
Code, the Bankruptcy Rules, other applicable law, the Plan, in any order or
orders of the Bankruptcy Court, the Confirmation Order or any order which may
arise in connection with the Plan or the Confirmation Order;
(xv) to enter and implement such orders as may be necessary or
appropriate in the event the Confirmation Order is for any reason stayed,
revoked, modified or vacated,
(xvi) to determine such other matters as may be provided, or may be
related to matters provided for in the Confirmation Order;
(xvii) to resolve all disputes concerning the releases and compromises
of claims and causes of action contained in the Plan or granted pursuant to the
Plan, and enter all orders necessary or appropriate in connection with such
resolution; and
(xviii) to hear and determine federal, state and local tax matters in
accordance with Sections 346, 505 and 1146 of the Bankruptcy Code.
Section 11.3 Modifications of the Plan.
The Plan may be modified at any time or from time to time by the
Debtors to the extent allowed by 11 U.S.C.ss.1127.
Section 11.4 Revocation and Withdrawal of the Plan.
The Debtors reserve the right to revoke or withdraw this Plan at any
time before the Confirmation Date. If the Debtors revoke or withdraw this Plan
prior to the Confirmation Date, or if the Confirmation Date or the Effective
Date does not occur despite the satisfaction of all the Conditions to the
Effective Date set forth in Section 13.1 hereof, then this Plan shall be deemed
null and void. In such event, nothing contained herein or in the Disclosure
Statement shall be deemed to constitute an admission of validity of any Claims
or Interests, or waiver or release of any claims or causes of action of the
Debtors or any other Person or prejudice in any manner any right of the Debtors
or any Person in any proceeding.
Section 11.5 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
any and all instruments evidencing the transfer of property interests executed
pursuant to, in implementation of or as contemplated by this Plan including,
without limitation, deeds and mortgages to which the Debtors or a Debtor
Subsidiary is a party whether as grantor or grantee, shall not be taxed under
any law imposing a stamp tax or similar tax.
18
<PAGE>
The exempt transfer instruments shall include, without limitation, all
instruments evidencing the Reorganized Debtors' granting of security interests,
mortgages, deeds of trust or deeds in favor of the New Lenders to secure debts
owed to the New Lenders.
Section 11.6 Survival of the Committee.
Notwithstanding Confirmation, the Committee shall continue to exist,
and each of its professionals shall continue to be retained (unless notified to
the contrary by the Committee), until the Debtors have made all distributions
required by this Plan to be made by the Debtors on account of Class 5 Claims on
the Effective Date.
ARTICLE XII. RESERVE FOR DISPUTED CLAIMS OR INTERESTS
On the Effective Date, each Reorganized Debtor may, but shall not be
obligated to, reserve for the account of any holder of a Disputed Claim property
that such Reorganized Debtor estimates to be the property that would be
distributable to such holder on the Effective Date in accordance with the Plan
if such Disputed Claim were an Allowed Claim. In the event, and to the extent,
such Disputed Claim becomes an Allowed Claim, the property so reserved, if any,
for the holder thereof shall be distributed to such holder pursuant to the Plan.
Property reserved, if any, shall be set aside, segregated and, to the extent
practicable, held in interest bearing deposits or certificates of deposit of
banks and trust companies having an aggregate capital and surplus in excess of
$100,000,000 or such other investments as shall be consistent with Section 345
of the Bankruptcy Code or an order of the Bankruptcy Court governing such
investments. Any amounts reserved for Allowed Claims in a Class after all
Allowed Claims in such Class have received the distributions to which they are
entitled under the Plan shall revert to the applicable Reorganized Debtor.
ARTICLE XIII. CONDITIONS TO CONFIRMATION AND TO THE EFFECTIVENESS OF THE PLAN
Section 13.1 Conditions to Effective Date.
Except as expressly waived by the Debtors with the prior written
consent of the Committee, the following conditions must occur and be satisfied
before the Effective Date may take place:
(a) Entry of Confirmation Order. The Confirmation Order shall have been
signed by the Bankruptcy Court and duly entered on the docket for the
Reorganization Case by the Clerk.
(b) No Stay. There shall not be any stay in effect with respect to the
Confirmation Order.
(c) Final Order. The Confirmation Order shall be a Final Order.
(d) Effectiveness of Documents. The following agreements and related
documents shall have become effective prior to or contemporaneously with the
occurrence of the Effective Date: (i) the New Working Capital/Term Debt
Facility, (ii) if the Participating Investors have satisfied Section 6.5 of the
Plan, the Citicorp Mezzanine Debt Arrangement, and (iii) if necessary, the
Replacement Facility.
Section 13.2 Notice of Effective Date.
Promptly following the occurrence of the Effective Date, the Debtors
shall file a written notice regarding the occurrence of same with the Bankruptcy
Court.
ARTICLE XIV. MISCELLANEOUS
Section 14.1 Headings.
The headings used in the Plan are inserted for convenience only and
neither constitute a portion of this Plan nor in any manner affect the
provisions of this Plan.
Section 14.2 Binding Effect, Successors and Assigns.
The rights and obligations of any Person named or referred to in the
Plan shall be binding upon such Person and shall be binding upon and inure to
the benefit of the successors and assigns of such Person.
19
<PAGE>
Section 14.3 Cram Down.
If all of the applicable requirements for Confirmation are met as set
forth in Section 1129(a) of the Bankruptcy Code except subsection (8) thereof,
the Debtors shall, in their discretion, request the Bankruptcy Court to confirm
the Plan pursuant to Section 1129(b) of the Bankruptcy Code, notwithstanding the
requirements of subsection (8) thereof, on the basis that the Plan is fair and
equitable and does not discriminate unfairly with respect to any non-accepting,
impaired Class or Classes, and, if necessary, the Debtors, may, at the
Confirmation Hearing, alter the proposed treatment of any Class that has voted
to reject the Plan so as to provide treatment of such Class of a type consistent
with the minimal treatment required to satisfy the requirements of Section
1129(b) of the Bankruptcy Code with respect to such Class.
Section 14.4 Governing Law.
Except to the extent that the Bankruptcy Code or Bankruptcy Rules are
applicable or a rule of law or procedure is supplied by other federal law or by
the Delaware General Corporation Law, and subject to the provisions of any
contract, instrument, release, indenture or other agreement or document entered
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 of New York, without giving effect to the principles of conflicts of
law thereof.
Section 14.5 Severability.
Should any non-material provision in this Plan be determined to be
unenforceable, such determination shall in no way limit or affect the
enforceability and operative effect of any or all other provisions of this Plan.
To the extent that any provision of the Plan would, by its inclusion in the
Plan, prevent or preclude the Bankruptcy Court from entering the Confirmation
Order, the Bankruptcy Court, on the request of the Debtors, may modify or amend
or permit the modification or amendment of such provision, in whole or in part
as necessary to cure any defect or remove any impediment to the Confirmation
existing by reason of such provision.
Section 14.6 Time.
Bankruptcy Rule 9006 shall be used to compute any period of time
prescribed or allowed by this Plan.
Section 14.7 Objections to Claims or Interests.
The failure by the Debtors or other Persons to object to or examine any
Claim or Interest for purposes of voting shall not be deemed a waiver of the
Debtors' or such other Person's rights to object to, or re-examine, such Claim
or Interest, in whole or in part, for purposes of allowance or distribution.
Section 14.8 Exculpations.
The Debtors, the Committee, CVC, the Participating Investors, the
Agent, and the Lenders and any of their respective officers, directors,
employees, agents, distributions agents, attorneys, accountants and other
professionals shall neither have nor incur any liability to the Debtors or any
holder of a Claim or Interest for any act or omission in connection with, or
arising out of, the Reorganization Case or the Plan, including without
limitation, the negotiation, formulation, preparation, confirmation,
consummation or the administration of the Reorganization Case, the Plan, the
Disclosure Statement, or any contract, instrument, release or other agreement,
document, or election made, created or entered into or any other action taken in
connection with the Reorganization Case, the Plan (including any such act or
omission which occurred prior to the Petition Date) or the property to be
distributed under the Plan, except, in each case, on account of willful
misconduct or gross negligence on the part of the specific Person sought to be
held so liable.
Section 14.9 Discharge of Indenture Trustee.
Subsequent to the performance by the Indenture Trustee or its agents of
all duties and obligations provided in the Plan, the Confirmation Order or other
order of the Bankruptcy Court for the Indenture
20
<PAGE>
Trustee to perform, but in no event later than five Business Days after the
Effective Date, the Note Indenture Trustee and its agents and their successors
and assigns shall be relieved of all obligations under the Note Indenture and
the Debtors shall no longer be obligated to pay any further fees or expenses
incurred by the Note Indenture Trustee or its agents.
Section 14.10 De Minimis Distributions.
No cash distribution of less than ten dollars shall be made to any
holder of an Allowed Claim. Such undistributed amount will be distributed to the
applicable Reorganized Debtor.
Section 14.11 Construction.
As used in the Plan, singular terms shall include the plural, plural
terms shall include the singular, masculine pronouns shall include all pronouns,
and the word "or" shall not be construed as exclusive.
Respectfully submitted,
GLENOIT UNIVERSAL, LTD.
GLENOIT CORPORATION
GLENOIT ASSETS CORPORATION
AMERICAN PACIFIC ENTERPRISES, INC.
GRAND AVENUE CORPORATION
EX-CELL HOME FASHIONS, INC.
EX-CELL OF BENTONVILLE, INC.
EX-CELL LINDE OF CAROLINA, INC.
By: /s/ Thomas J. O'Gorman
-----------------------
Thomas J. O'Gorman
Chief Executive Officer and President
Date: July 6, 2000
21
<PAGE>
Appendix B Pro Forma Financial Statements and Liquidation Analysis
UNAUDITED PROJECTED CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS
-------------------------------------------------------------------
<TABLE>
<CAPTION>
HISTORICAL
-----------------------------------------------------------------------------------
Pre-confirmation
9 months Adjusted 9
ending months
ending
1998 1999 9/30/2000 Debt Exit 9/30/2000
Discharge Financing
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Sales $ 172,042 $ 294,725 $ 274,217 - - $ 274,217
Cost of goods sold 123,697 212,155 199,692 - - 199,692
-------- -------- -------- ------- ------ --------
Gross profit 48,345 82,570 74,525 - - 74,525
Operating expenses 32,876 76,066 51,974 - - 51,974
-------- -------- -------- ------- ------ --------
Operating income (loss) 15,469 6,504 22,551 - - 22,551
Amortization - Deferred Fin Costs 691 1,655 1,297 - - 1,297
Interest Expense 13,942 25,090 19,241 - - 19,241
Other income (expense), net (148) 921 620 - - 620
-------- -------- -------- ------- ------ --------
Income (loss) before reorganization 689 (19,320) 2,633 - - 2,633
costs, income taxes and extraordinary
item
Reorganization costs - - - - $ 4,000 4,000
-------- -------- -------- ------- ------ --------
Income (loss) before income taxes and 689 (19,320) 2,633 - (4,000) (1,367)
extraordinary item
Income tax expense (benefit) 308 (6,031) 1,046 - - 1,046
-------- -------- -------- ------- ------ --------
Income (loss) before extraordinary 381 (13,289) 1,587 - (4,000) (2,413)
item
Extraordinary income (loss), net of 117 - - $ 69,331 - 69,331
income tax benefit -------- -------- -------- ------- ------ --------
Net Income (loss) $ 264 $ (13,289) $ 1,587 $ 69,331 $(4,000) $ 66,918
======== ========== ========= ========= ====== ========
<CAPTION>
POST - CONFIRMATION
--------------------------------------------------------------
3 months
ending 12/31
2000 2001 2002 2003
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Sales $ 76,097 $ 366,965 $ 380,167 $ 392,376
Cost of goods sold 56,069 266,529 275,570 282,884
------- -------- -------- --------
Gross profit 20,028 100,436 104,596 109,492
Operating expenses 16,523 69,081 70,953 72,429
------- -------- -------- --------
Operating income (loss) 3,505 31,355 33,643 37,063
Amortization - Deferred Fin Costs 192 768 768 768
Interest Expense 4,881 19,334 18,572 17,543
Other income (expense), net - - - -
------- -------- -------- --------
Income (loss) before reorganization (1,568) 11,253 14,303 18,752
costs, income taxes and extraordinary
item
Reorganization costs - - - -
------- -------- -------- --------
Income (loss) before income taxes and (1,568) 11,253 14,303 18,752
extraordinary item
Income tax expense (benefit) (623) 4,468 5,680 7,447
------- -------- -------- --------
Income (loss) before extraordinary (945) 6,784 8,623 11,305
item
Extraordinary income (loss), net of - - - -
income tax benefit ------- -------- -------- --------
Net Income (loss) $ (945) $ 6,784 $ 8,623 $ 11,305
========= ========= ========= =========
</TABLE>
-2-
<PAGE>
UNAUDITED PROJECTED CONDENSED CONSOLIDATED BALANCE SHEETS
---------------------------------------------------------
<TABLE>
<CAPTION>
HISTORICAL
--------------------------------------------------------------------------------------------
Pre-Confirmation
9 months Adjusted
ended 9/30
1998 1999 9/30/2000 Debt Exit 2000
Discharge Financing
--------------------------------------------------------------------------------------------
Assets
------
<S> <C> <C> <C> <C> <C> <C>
Cash $ 340 $ 2,015 $ - - - $ -
Trade Receivables 29,666 27,640 39,450 - - 39,450
Other Receivables 365 2,396 5,773 - - 5,773
Inventory 19,734 50,975 62,548 - - 62,548
Other Current Assets 3,797 4,419 1,293 - - 1,293
Deferred Tax Asset - - 3,407 $(10,829) - (7,422)
---------- ---------- ---------- --------- -------- ----------
Total Current Assets 53,902 87,445 112,471 (10,829) - 101,642
Property and equipment, net 49,108 67,702 64,356 - - 64,356
Deferred Financing Costs 5,196 9,293 8,086 (6,090) $ 2,500 4,496
Goodwill 35,715 50,934 49,197 - - 49,197
Other Assets 778 1,571 1,482 - - 1,482
---------- ---------- ---------- --------- -------- ----------
Total Assets $ 144,699 $ 216,945 $ 235,592 $(16,919) $ 2,500 $ 221,173
========== ========== ========== ========= ======== ==========
Liabilities and Stockholders' Equity
------------------------------------
Accounts Payable 2,889 10,062 11,076 - - 11,076
Other Accrued Liabilities 19,119 10,683 17,183 - - 17,183
Accrued Interest 2,701 3,224 9,006 $ (7,400) - 1,606
Accrued Taxes 1,752 2,463 2,009 - - 2,009
Revolving Credit 15,000 37,000 46,293 - $ (8,500) 37,793
Term Loan A 50,707 36,664 34,683 - - 34,683
Term Loan B - 69,018 68,671 - - 68,671
Senior Subordinated Debt 95,000 95,000 95,000 (95,000) - -
Other Long-Term Liabilities 3,886 11,966 9,470 - - 9,470
New Subordinated Debt 0 - 15,000 15,000
Total liabilities 191,054 276,080 293,391 (102,400) 6,500 197,491
Preferred Stock 0 0 0 14,535 0 14,535
Common Stock 0 0 - -
Paid-in Capital 1,462 1,462 1,462 1,615 - 3,077
Retained Earnings (deficit) (46,967) (60,255) (58,748) 69,331 (4,000) 6,583
Translation (Gain) Loss (851) (341) (513) - - (513)
---------- ---------- ---------- --------- -------- ----------
Total Stockholders' Equity (46,355) (59,134) (57,799) 70,946 (4,000) 9,147
TOTAL LIABILITIES & $ 144,699 $ 216,945 $ 235,592 $(16,919) $ 2,500 $ 221,173
STOCKHOLDERS' EQUITY ========== ========== ========== ========= ======== ==========
<CAPTION>
POST - CONFIRMATION
---------------------------------------------------------
Year Ended
12/31
2000 2001 2002 2003
---------------------------------------------------------
Assets
------
<S> <C> <C> <C> <C>
Cash $ - $ - $ - $ 1,792
Trade Receivables 25,998 28,466 29,871 30,271
Other Receivables 2,326 2,558 2,512 2,481
Inventory 49,483 55,821 59,129 62,122
Other Current Assets 1,293 1,293 1,293 1,293
Deferred Tax Asset (7,422) (7,422) (7,422) (7,422)
---------- ---------- ---------- ----------
Total Current Assets 71,678 80,716 85,383 90,537
Property and equipment, net 63,452 61,112 59,173 58,233
Deferred Financing Costs 4,304 3,536 2,768 2,000
Goodwill 48,618 46,302 43,986 41,670
Other Assets 1,482 1,482 1,482 1,482
---------- ---------- ---------- ----------
Total Assets $ 189,534 $ 193,148 $ 192,792 $ 193,922
========== ========== ========== ==========
Liabilities and Stockholders' Equity
------------------------------------
Accounts Payable 9,687 10,290 10,100 10,494
Other Accrued Liabilities 16,283 17,483 18,425 18,683
Accrued Interest 1,911 1,911 1,911 1,911
Accrued Taxes 1,087 1,087 1,087 1,087
Revolving Credit 10,729 10,203 5,921 0
Term Loan A 34,188 31,220 26,934 21,658
Term Loan B 68,498 67,806 67,114 66,422
Senior Subordinated Debt - - - -
Other Long-Term Liabilities 9,038 7,310 5,840 5,840
New Subordinated Debt 15,377 16,318 17,317 18,377
Total liabilities 166,798 163,628 154,649 144,466
Preferred Stock 14,535 16,570 17,896 19,328
Common Stock 0 0 0 0
Paid-in Capital 3,077 3,077 3,077 3,077
Retained Earnings (deficit) 5,637 10,386 17,683 27,558
Translation (Gain) Loss (513) (513) (513) (513)
---------- ---------- ---------- ----------
Total Stockholders' Equity 8,201 12,950 20,247 30,122
TOTAL LIABILITIES & $ 189,534 $ 193,148 $ 192,792 $ 193,922
STOCKHOLDERS' EQUITY ========== ========== ========== ==========
</TABLE>
-3-
<PAGE>
UNAUDITED PROJECTED STATEMENTS OF CONSOLIDATED CASH FLOWS
---------------------------------------------------------
<TABLE>
<CAPTION>
HISTORICAL POST - CONFIRMATION
----------------------------------------------------------------------------------
Pre-Confirmation
Year Ended
12/31
1998 1999 2000 2001 2002 2003
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Income $ 264 $ (13,289) $ 65,973 $ 6,784 $ 8,623 $ 11,305
Depreciation amortization 6,416 12,279 12,907 13,024 13,024 13,024
Restructuring charge 13,100 (1,728) (1,728) (1,728) (942)
Loss(gain) on early retirement of debt 184 - (69,331)
Loss (gain) on sale of property and equipment 19 (199)
Stock compensation 100
Effect of foreign currency exchange rate (618) 510
Changes in working capital and other 11,424 (16,520) 15,783 (6,294) (2,659) (706)
--------- --------- --------- --------- --------- ---------
Operating Cash Flow 17,789 (4,119) 23,604 11,786 17,260 22,681
Cash flow from Investing Activities
Capital Expenditures, net (17,846) (5,779) (4,852) (7,600) (8,000) (9,000)
Purchases of Acquired Businesses (55,672) (59,649)
--------- --------- --------- --------- --------- ---------
Cash flow from Investing activities (73,518) (65,428) (4,852) (7,600) (8,000) (9,000)
Cash flow from Financing Activities
Issuance of debt and net revolver activity 63,708 76,974 (26,271) (526) (4,282) (5,921)
Issuance of new sub notes 15,000
Term amortization (2,996) (3,660) (4,978) (5,968)
Equity infusion 16,150 - - -
Payment for reorganization costs - (4,000) - - -
Payments on capital lease obligations (760) -
Payments for Financing Costs (987) (5,752) (2,500)
Advances on notes receivable - related party (79)
Dividends paid (1,936)
Purchase of senior subordinated notes (4,950) (16,150)
--------- --------- --------- --------- --------- ---------
Cash flow from financing activities 54,996 71,222 (20,767) (4,186) (9,260) (11,889)
Total Cash flow (733) 1,675 (2,015) 0 0 1,792
Beginning Cash 1,072 340 2,015 0 0 0
--------- --------- --------- --------- --------- ---------
Ending Cash $ 340 $ 2,015 $ 0 $ 0 $ 0 $ 1,792
========= ========= ========= ========= ========= =========
</TABLE>
-4-
<PAGE>
NOTES
-----
(1) Debt Discharge. The Restructuring assumes that the Noteholders holding
$95 million in principal claims and $7.4 in interest claims on the
Notes will receive $.17 for every $1 dollar of principal amount
outstanding, and nothing for the interest. Not reflected in the above
presentation is the projected gain to be realized on the extinguishment
of the Shareholder Notes that are liabilities at Glenoit Universal,
Ltd. This gain is anticipated to be approximately $33.3 million. No
other claims are anticipated to be impaired. In connection with this
extinguishment and subsequent issuance of new subordinated notes (under
the Citicorp Mezzanine Debt Arrangement), approximately $6.1 million of
unamortized deferred financing costs associated with the Notes and the
Credit Agreement will be written off. Also, the Company believes it
will receive a favorable tax treatment on the anticipated gain whereby,
the Company will lose the future benefit of certain tax attributes of
approximately $10.8 million but will not be required to pay any current
tax.
(2) Effective Date and Terms of the Restructuring. The projections assume
that the Restructuring will be consummated in accordance with its terms
and that all transactions contemplated by the Restructuring will be
consummated as of September 30, 2000. Any significant delay in the
expected date of consummation of the Restructuring could have a
significant unfavorable impact on financial performance, including a
decrease in net income for the year ended December 31, 2000 and could
result in additional professional and other fees.
(3) General Economic Conditions. The Projections were prepared assuming
economic conditions, including prevailing inflation rates, growth
rates, labor costs, interest rates and other factors, in the markets
served by the Reorganized Debtors do not differ materially over the
periods presented from current economic conditions.
(4) Revenue. The projections for future revenues were based on historical
sales growth achieved by the operating segments and projected growth by
customer type and related markets. Sales for the Decorative Home
Furnishings group are projected to grow between 8 - 12% annually
through 2003. As a result of the continued market pressures on domestic
apparel manufacturers and the recent sales decline in the Fabric group,
sales for the Fabric Group have been projected to decline 10% per year.
(5) Gross Margin. Gross margins are expected to increase slightly over
their current levels in the Decorative Home Furnishings Group but
decline in the Fabric Group due to decreased volumes.
(6) Selling, General and Administrative Expenses. These costs are expected
to increase from 2001 through 2003 at rates somewhat lower than sales
as a result of certain fixed costs which will not increase with
additional sales.
(7) Interest Expense. Interest expense is expected to decline as a result
of the projected extinguishment of $95 million of Notes, partially
offset by borrowing $15 million under the Citicorp Mezzanine Debt
Arrangement. In addition, interest expense is expected to decrease as a
result of projected debt repayments under the term loans. The Citicorp
Mezzanine Debt Arrangement is assumed to have a maturity date which
shall be no earlier than one year after the latest maturity date of the
loans to be advanced pursuant to the New Working Capital/Term Debt
Facility, with a 12% per annum cash interest coupon paid semi-annually
and a 6% per annum PIK interest coupon issued semi-annually. It is
assumed that the Citicorp Mezzanine Debt Arrangement does not have debt
amortization during the projection period. In addition, the Citicorp
Mezzanine Debt Arrangement provides for warrants to be issued for 10%
of the authorized shares of New Common Stock. The strike price of these
warrants is assumed to be out of the money during the projection
period. It is assumed for purposes of these projections that the
Replacement Facility will have similar terms to the Citicorp Mezzanine
Debt Arrangement, if the Replacement Facility is needed.
(8) Interest Income. It is expected there will be not material interest
income.
-5-
<PAGE>
(9) Income Taxes. The effective tax rate is expected to range from 36 - 39%
for fiscal years 2000 through 2004, for federal, state and local taxes.
(10) Balance Sheet Considerations. Projections of changes in certain balance
sheet accounts, such as accounts receivable, inventory and accounts
payable are primarily based upon historical ratios and current vendor
and customer terms.
(11) Long-Term Debt. The projections assume that as of the Effective Date,
the Company will have a new senior credit facility with advance rates,
terms and other items similar to its current senior credit facility as
well as the $15 million outstanding under the Citicorp Mezzanine Debt
Arrangement or the Replacement Facility. The current projections
reflect a longer amortization period on the term loan components of the
new senior credit facility.
(12) Capital Expenditures. Such expenditures are projected to be primarily
for additional manufacturing and warehousing capacity in the Decorative
Home Furnishings Group, computer software and equipment as well as
other improvements. It is projected that capital expenditures will
increase in fiscal year 2001 as a result of deferred capital needs from
fiscal 2000. Projected capital expenditures will not exceed any
anticipated covenant levels that exist under the New Working
Capital/Term Debt Facility.
(13) New Working Capital Facility. Although subject to negotiation, most
terms and conditions of the existing credit facility are assumed to be
continued for projection purposes. However, the current projections
reflect lower term amortization payments in the new agreement. In the
event that changes to the credit facility occur, assumptions relative
to interest rates, borrowing base availability and debt amortization
could have a significant impact on the working capital financing of the
Company.
(14) Participating Investor Equity Investment. Participating Investors will
provide the funds necessary to pay Class 5 Claims ($16.15 million) for
which they will receive all of the issued and outstanding New Common
Stock of Reorganized Holdings. Also, the Participating Investors will
receive the 145,350 shares of New Preferred Stock. The New Preferred
Stock shall be entitled to a PIK dividend of $14 per share for the
first year after the Effective Date, and a PIK dividend of $8 per share
each year thereafter. If the Participating Investors do not provide the
funds necessary to pay Class 5 Claims, then the holders of Class 5
Claims will receive all of the issued and outstanding New Common Stock
of Reorganized Holdings under the Prepackaged Plan, but no Preferred
Stock will be issued.
-6-
<PAGE>
Hypothetical Liquidation Analysis
as of May 27, 2000 (dollars in millions)
The accompanying notes are integral to understanding the basis of this analysis
<TABLE>
<CAPTION>
LIQUIDATED ASSETS Note 27-May-00 Liquidation % Recovery
Est Balance Proceeds
<S> <C> <C> <C> <C>
Cash (A) 5.1 5.1 100%
Accounts Receivable (B) 30.2 25.7 85%
Due from Factor, net of advances (B) 3.8 3.6 95%
Inventory (C) 58.9 38.3 65%
Prepaid Expenses and Other Current Assets (D) 6.3 - 0%
Property and Equipment (E) 63.1 25.2 40%
Goodwill, Net (F) 50.0 - 0%
Deferred Loan Costs, Net (G) 8.5 - 0%
Other Assets (H) 1.7 0.8 47%
-----------------------------------------------------------
Gross Assets Available for Distribution $ 227.6 98.7 43%
===========================================================
ALLOCATION OF PROCEEDS
Estimated Claim Estimated Recovery % Recovery
Administrative and Priority Claims:
Corporate Wind-down Costs (I) 14.8 14.8 100%
Trustee Costs (3% of gross proceeds) (J) 3.0 3.0 100%
Professional Fees (J) 0.9 0.9 100%
State & Local Taxes (J) 0.5 0.5 100%
-----------------------------------------------------------
Total Administrative and Priority Claims: $ 19.2 $ 19.2 100%
Proceeds available for payment of secured $ 79.5
claims:
Secured Claims:
Senior Secured Loan (K) $ 150.0 $ 79.5 53%
Total Secured Claims: $ 150.0 $ 79.5 53%
Proceeds available for unsecured claims: $ 0.0
Unsecured Claims: (L)
Trade Accounts Payable $ 14.1 $0.0 0%
Employee related claims 3.5 0.0 0%
General Unsecured Creditors 23.9 0.0 0%
Senior Subordinated Notes 95.0 0.0 0%
Shareholder Notes (M) 33.3 0.0 0%
-----------------------------------------------------------
Total Unsecured Claims: $ 169.8 $0.0 0%
-----------------------------------------------------------
Proceeds available for equity holders: $0.00 0%
</TABLE>
-7-
<PAGE>
GLENOIT UNIVERSAL, LTD.
NOTES TO LIQUIDATION ANALYSIS
A. Cash and short-term investments
-----------------------------------
Cash consists of all cash in banks or operating accounts. Short-term investments
with original maturities of 90 days or less are considered cash equivalents.
Short-term investments are stated at cost, which approximates fair value.
B. Accounts receivable and Due from Factor
------------------------------------------
Accounts receivable primarily consists of customer trade receivables, and are
recorded by Glenoit net of any reserves. The collection of accounts receivable
is based on such factors as the aging and historical collection patterns of the
receivables, the advance rate under the current credit facility, and the
anticipated effect of a Chapter 7 on the collectibility of such amounts.
Due from Factor represents money owed to Glenoit from its two factoring agents,
net of approximately $19.8 million of advances. The receivables are factored on
a non-recourse basis and, therefore, present no credit risk to Glenoit for
collection. Accounts may be returned to Glenoit, however, based on customer
disputes over merchandise quality, shipping or other reasons that may occur due
to the effect of the Chapter 7 filing. Therefore, should Factors return
receivables to Glenoit for collection, the Company could experience significant
disruption in cash flow resulting from a disruption in the collection process.
C. Inventory
--------------
Inventories are comprised of work-in-process (WIP) and raw materials, materials
and supplies, and finished goods. The overall inventory recovery is a weighted
average of management's estimated recovery for each inventory category; factors
considered include the unique or commodity-like nature of the goods, the
existence of firm orders from customers, known liquidations of similar goods,
and Glenoit's assumed ability to finish production of work-in-process. $4.2
million of reserves are netted against finished goods before applying recovery
estimates.
D. Prepaid Expenses and other current assets
--------------------------------------------
Prepaid expenses and other current assets consist primarily of miscellaneous
items such as rent, insurance, taxes, and deposits as well as deferred tax
assets. These items are assumed to have no value in liquidation.
E. Property and Equipment
-------------------------
Property and equipment includes owned land, buildings and improvements, and
machinery and equipment located at Glenoit's manufacturing and distribution
facilities located in North Carolina, Florida, Tennessee and Ohio as well as
sales and administrative offices in New York, California, and North Carolina.
The value of land and buildings was based upon management's assessment of the
value of each property considering a recent appraisal undertaken as part of the
Company's acquisition of Ex-Cell Home Fashions and the effects of the Chapter 7
environment. Glenoit also recently shutdown a Fabric Division manufacturing
facility and sold off excess machinery and equipment. This activity provided
insight to the market value for machinery and equipment within the Fabric
Division. Machinery and equipment includes machines used to manufacture
Glenoit's various products, as well as furniture and fixtures. The value of
machinery and equipment was based upon management's review of these assets,
recent appraisal undertaken as part of the Company's acquisition of Ex-Cell Home
Fashions, Inc. and the effects of the Chapter 7 environment. The costs to be
incurred in maintaining such facilities during the liquidation period have been
included in corporate wind-down costs.
F. Goodwill, net
----------------
Goodwill represents the excess purchase price over the fair value of assets
acquired primarily in connection with the acquisitions of American Pacific
Enterprises, Inc. and Ex-Cell Home Fashions, Inc. Any value associated with
trademarks and the Glenoit name are deemed to have been impaired by the effect
of a Chapter 7 liquidation. Therefore, there is no assumed value in liquidation.
-8-
<PAGE>
G. Deferred loan costs, net
----------------------------
These amounts relate to capitalized costs associated with the financing of the
Company's current senior credit facility and the $95 million Senior Subordinated
Notes. Therefore, there is no assumed value in liquidation.
H. Other Assets
---------------
The primary components of Other Assets are investments in the deferred
compensation plans related to certain senior management participants. All other
amounts are assumed to have no value.
I. Corporate Wind-Down Costs
-----------------------------
Wind-down costs consist of corporate overhead, legal fees and severance costs
and expenses to be incurred during the Chapter 7 liquidation period. Management
assumes that the liquidation would occur over a six-month period and that such
expenses, costs and overhead would decrease over time during this period.
Management assumes full manpower is required for a two-month period to
effectuate the run-off of work-in-process, distribution of product for orders on
hand and ultimate shuttering of manufacturing facilities. Upon shutdown of the
operations, manpower is significantly reduced. This assumes that holders of
secured claims will provide the financing needed to engage in this wind-down,
for absent such monetary support, the Companies would have no way to function,
and a Chapter 7 trustee would likely have to abandon the estates' assets, which
would lead to an even lower recovery for various parties.
J. Trustee, Professional Fees, Taxes
------------------------------------
Trustee fees are estimated at 3.0% of gross proceeds. Professional fees
represent the costs of a Chapter 7 case related to attorneys, accountants,
appraisers and other professionals retained by the trustee. Fees are based on
management's review of the nature of these costs and have been estimated at
$150,000 per month.
State and Local Taxes of approximately $500,000 are management's estimated
liability through May 2000 and is accorded priority status.
K. Senior Credit Facility
--------------------------
As of May 27, 2000, approximately $150.0 million was outstanding under the
Company's senior credit facility with its lending group. Of this amount,
approximately $46 million was outstanding under the revolver and the remaining
$104 million outstanding under two term loans. In addition, approximately $3.1
million in letters of credit were issued and outstanding, but had not been drawn
upon. Substantially all of the Company's domestic and Canadian assets and
operations are pledged as collateral on a pari passu basis for the revolver and
term loans under the senior credit facility.
L. Unsecured Claims
-------------------
Unsecured claims include trade payables, senior subordinated notes, other
subordinated notes, and other current liabilities. Not included in this amount
are potential claims from landlords for the cancellation of leases and other
claimants that cannot be anticipated at this time. Such additional claimants
would only serve to further dilute any potential recovery, if any.
M. Shareholders Notes
----------------------
Shareholder Notes with a principal amount of $33.3 million are promissory notes
issued by Holdings to various of the Old Shareholders, such notes bearing
interest at stated rates from 5% per annum to 12.5% per annum and maturing in
2004 and 2005. These notes receive no consideration in Chapter 7 liquidation.
-9-
