SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
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AMENDMENT NO. 1 TO FORM T-3
FOR APPLICATIONS FOR QUALIFICATION OF INDENTURES UNDER THE
TRUST INDENTURE ACT OF 1939
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(Name of applicant)
(Address of Principal Executive Offices)
JWP INC.
Six International Drive
Rye Brook, New York 10573
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SECURITIES TO BE ISSUED UNDER THE INDENTURE TO BE QUALIFIED
-----------------------------------------------------------
TITLE OF CLASS AMOUNT
7% Senior Secured Notes, Maximum of
Series B, Due 1997 $11,357,000
Approximate date of proposed public offering: On or as soon
as practicable after the Effective Date (as defined in the Plan)
of the Plan.
Name and address of agent for service:
Sheldon I. Cammaker, Esq.
General Counsel
JWP INC.
Six International Drive
Rye Brook, New York 10573-1058
The applicant hereby amends this application for qualification
on such date or dates as may be necessary to delay its
effectiveness until (i) the 20th day after the filing of a
further amendment which specifically states that it shall
supersede this amendment, or (ii) such date as the Commission,
acting pursuant to Section 307(c) of the Act, may determine upon
the written request of the applicant.
<PAGE>
GENERAL
1. General Information. Furnish the following information as
to the applicant:
a. Form of organization: A corporation.
b. State or other sovereign power under the laws of which
organized: Delaware
2. Securities Act exemption applicable. State briefly the
facts relied upon by the applicant as a basis for the claim that
registration of the indenture securities under the Securities
Act of 1933 is not required.
On December 21, 1993 (the "Petition Date"), an
involuntary petition for a reorganization under Chapter 11 of
the
United States Bankruptcy Code, 11 U.S.C. Section 101
et seq. (the "Bankruptcy Code") was filed against JWP INC.
("JWP") in the United States Bankruptcy Court for the Southern
District of New York (the "Court"). On February 14, 1994 (the
"Consent Date"), JWP filed a consent to the involuntary petition
and an order for relief was entered. Under Sections 1107 and
1108 of the Bankruptcy Code, JWP continues to operate its
businesses as a debtor-in-possession.
On February 14, 1994, JWP together with its affiliate,
SellCo Corporation ("SellCo"), a Delaware corporation, filed
JWP's and SellCo's Joint Plan of Reorganization under Chapter 11
of the Bankruptcy Code (the "Initial Plan"). The Initial Plan
was amended on July 1, 1994, on July 21, 1994, and on August 9,
1994 (the Initial Plan as so amended and revised being referred
to herein as the "Plan"). At a hearing before the Court on
August 22, 1994, the Court pursuant to Section 1125 of the
Bankruptcy Code approved the Disclosure Statement for the Plan
submitted to the Court (the "Disclosure Statement") as
containing
adequate information. On August 26, 1994, JWP and SellCo
completed soliciting acceptances of the Plan from the claims
against or interests in JWP entitled to vote on the Plan. A
copy
of the Disclosure Statement is attached as Exhibit T3E1 to this
Form T-3; the Plan is attached as Exhibit 1 to the Disclosure
Statement.
Section 1145 of the Bankruptcy Code exempts the offer
or sale of securities under a plan of reorganization from
registration under the Securities Act of 1933 and state
law. Under Section 1145, the issuance of securities is exempt
from registration if three principal requirements are satisfied:
(1) the securities are issued by a debtor, its successor, or
an affiliate participating in a joint plan with the debtor,
under a plan of reorganization; (2) the recipients of the
securities hold a claim against the debtor or such affiliate, an
interest in the debtor or such affiliate, or a claim for an
administrative expense against the debtor or such affiliate; and
(3) the securities are issued entirely in exchange for the
recipients' claim against or interest in the debtor or such
affiliate, or "principally" in such exchange and "partly" for
cash or property. JWP believes that the issuance of the
securities (the "Notes") under the indenture to be qualified to
holders of various creditor classes under the Plan will
satisfy all three conditions because; (a) the issuances are
expressly contemplated under the Plan; (b) the recipients are
holders of "Claims" against the debtors; and (c) the recipients
would obtain the Notes in exchange for their prepetition claims.
AFFILIATIONS
3. Affiliates. Furnish a list or diagram of all affiliates of
the applicant and indicate the respective percentages of voting
securities or other bases of control.
As of September 28, 1994
The diagram attached as Annex 1 shows the applicant's
direct and indirect subsidiaries.
As of Effective Date
The diagram attached as Annex 2 shows the applicant's
direct and indirect subsidiaries proposed to be operating
following the effectiveness of the Plan.
MANAGEMENT AND CONTROL
4. Directors and executive officers. List the names and
complete mailing addresses of all directors and executive
officers of the applicant and all persons chosen to become
directors or executive officers. Indicate all offices with the
applicant held or to be held by each person named.
<PAGE>
As of September 28, 1994
<TABLE>
<CAPTION>
Name Office Address
Directors
<S> <C> <C>
Frank T. MacInnis Director and c/o JWP
Chairman of 6 International Drive
the Board Rye Brook, NY 10573
Andrew T. Dwyer Director 532 Cantitoe Road
Bedford, NY 10506
Innis O'Rourke Director The Knoll, RFD #1
Upper Brookville
Oyster Bay, NY 11771
Craig C. Perry Director 3467 Pinestream Road, N.W.
Atlanta, GA 30327
Edmund S. Twining, Jr. Director Post Office Box 121
Orlean, VA 22128
Officers
Frank T. MacInnis President and c/o JWP
Chief Executive 6 International Drive
Officer Rye Brook, NY 10573
Sheldon I. Cammaker Executive Vice c/o JWP
President and 6 International Drive
General Counsel Rye Brook, NY 10573
Leicle E. Chesser Chief Financial Officer- c/o JWP
Executive Vice President 6 International Drive
Rye Brook, NY 10573
Jeffrey M. Levy Senior Vice President- c/o JWP
Chief Operating Officer 6 International Drive
Rye Brook, NY 10573
Joseph A. Gallo Senior Vice President c/o JWP
and Treasurer 6 International Drive
Rye Brook, NY 10573
Stephen H. Meyers Senior Vice c/o JWP
President-Finance 6 International Drive
Rye Brook, NY 10573
Joseph W. Barnett Corporate Secretary c/o JWP
and Vice President 6 International Drive
of Real Estate Rye Brook, NY 10573
Sidney R. Bernstein Vice President- c/o JWP
Taxation 6 International Drive
Rye Brook, NY 10573
Mark A. Pompa Vice President and c/o JWP
Controller 6 International Drive
Rye Brook, NY 10573
As of Effective Date
Name Office Address
Directors
Frank T. MacInnis Director and Chairman c/o JWP
of the Board 6 International Drive
Rye Brook, NY 10573
Bart A. Brown, Jr. Director c/o JWP
6 International Drive
Rye Brook, NY 10573
David A.B. Brown Director c/o JWP
6 International Drive
Rye Brook, NY 10573
Richard F. Hamm, Jr. Director c/o JWP
6 International Drive
Rye Brook, NY 10573
Malcom T. Hopkins Director c/o JWP
6 International Drive
Rye Brook, NY 10573
Steven N. Wertheimer Director c/o JWP
6 International Drive
Rye Brook, NY 10573
Todd Cunningham Director c/o JWP
6 International Drive
Rye Brook, NY 10573
Officers
Frank T. MacInnis President and Chief c/o JWP
Executive Officer 6 International Drive
Rye Brook, NY 10573
Sheldon I. Cammaker Executive Vice President c/o JWP
and General Counsel 6 International Drive
Rye Brook, NY 10573
Leicle E. Chesser Chief Financial Officer- c/o JWP
Executive Vice President 6 International Drive
Rye Brook, NY 10573
Jeffrey M. Levy Senior Vice President- c/o JWP
Chief Operating Officer 6 International Drive
Rye Brook, NY 10573
Joseph A. Gallo Senior Vice President c/o JWP
and Treasurer 6 International Drive
Rye Brook, NY 10573
Stephen H. Meyers Senior Vice c/o JWP
President-Finance 6 International Drive
Rye Brook, NY 10573
Joseph W. Barnett Corporate Secretary c/o JWP
and Vice President 6 International Drive
of Real Estate Rye Brook, NY 10573
Sidney R. Bernstein Vice President- c/o JWP
Taxation 6 International Drive
Rye Brook, NY 10573
Mark A. Pompa Vice President and c/o JWP
Controller 6 International Drive
Rye Brook, NY 10573
</TABLE>
5. Principal owners of voting securities. Furnish the
following information as to each person owning 10% or more of
the voting securities of the applicant.
Percentage of
Name and Complete Title of Class Amount Voting Securities
Mailing Address Owned Owned Owned
As of September 28, 1994
There was no person owning 10% or more of the voting securities
of the applicant.
As of Effective Date
To the best knowledge of the applicant based on current record
ownership of holders of claims and interests entitled to receive
common stock in reorganized JWP, there will be no person owning
10% or more of the voting securities of the applicant.
UNDERWRITERS
6. Underwriters. Give the name and complete mailing address
of (a) each person who, within three years prior to the date of
filing the application, acted as an underwriter of any
securities of the obligor which were outstanding on the date of
filing the application, and (b) each proposed principal
underwriter of the securities proposed to be offered. As to
each
person specified in (a) give the title of each class of
securities underwritten.
a. No person, within 3 years of the date hereof, acted as
an underwriter of any of the securities of JWP that are
outstanding on the date hereof.
b. The securities proposed to be offered will be
exchanged with certain holders of claims against JWP, as set
forth in the Plan, without the assistance of any underwriter.
CAPITAL SECURITIES
7. Capitalization. (a) Furnish the following information as
to each authorized class of securities of the applicant.
As of September 28, 1994
<TABLE>
<CAPTION>
TITLE OF AMOUNT AMOUNT
CLASS<FN1> AUTHORIZED
OUTSTANDING<FN2>
<S> <C> <C>
Common Stock, $0.10 par value 75,000,000 Shares 40,715,541
Shares
Preferred Stock, $1 par value 25,000,000 Shares 418,100
Shares
(designated as Series A)
7-3/4% Convertible 33,800,000 7,040,000
Subordinated Debentures
9.25% Senior Notes $ 40,000,000 $ 28,572,000
10.95% Senior Notes 30,000,000 30,000,000
10.25% Senior Notes 50,000,000 50,000,000
9.95% Senior Notes 60,000,000 60,000,000
10.35% Senior Notes 50,000,000 50,000,000
10.27% Senior Notes 20,000,000 20,000,000
Senior Serial Notes 25,000,000 25,000,000
9.56% Senior Notes 5,000,000 5,000,000
9.10% Senior Notes 60,000,000 60,000,000
12% Subordinated Notes 16,000,000 9,600,000
</TABLE>
[FN]
<FN1>
The applicant has 1,152,649 Warrants of Participation
outstanding, which were distributed as a dividend to the holders
of record of JWP Common Stock on June 30, 1969, on the basis of
one Warrant of Participation for each share of JWP Common Stock
then outstanding. The Warrants of Participation, which expire
on December 31, 1994, entitle their holders to receive shares of
JWP Common Stock in the event JWP's subsidiary, Jamaica Water
Supply Company ("JWS"), disposes of all or any significant
portion of its water distribution system or JWP disposes of any
of the shares of JWS which it owns. The number of shares of JWP
Common Stock to be issued, if any, will be determined according
to a formula based upon the consideration received by JWP for
the
JWS assets or stock less reasonable expenses incurred and taxes
to be paid in connection therewith, and will be distributed to
holders of Warrants of Participation on a pro rata basis. In
addition, the Company has stock options outstanding under its
stock options plans. Under the 1986 Stock Option Plan, there
are
stock options outstanding for 258,347 shares with exercise
prices ranging from $6.67 to $21.05. Under the 1991 Stock
Option Plan, there are stock options outstanding for 457,007
shares with exercise prices ranging from $3.50 to $14.00. Under
the 1992 Stock Option Plan, there are stock options outstanding
for 1,104,032 shares with exercise prices ranging from $3.50 to
$10.00.
[FN]
<F2>
For the various Notes and Debentures listed above, the amounts
set forth represent principal amount outstanding only and do not
include accrued interest, overdue amounts, fees, penalties or
other amounts. For a more detailed discussion of these
securities see the Disclosure Statement.
<PAGE>
As of Effective Date
For a description of the securities to be issued pursuant to the
Plan, see the Disclosure Statement "IV.
SUMMARY OF THE PLAN" and subpart A. thereof "A. PROPERTY TO BE
DISTRIBUTED UNDER THE PLAN"<F3>.
(b) Give a brief outline of the voting rights of each class of
voting securities referred to in paragraph (a) above.
As of September 28, 1994
With respect to the voting rights of the common stock, each
holder of a share of such common stock is entitled to one vote
on
all matters on which such shareholders are entitled to vote.
The Series A Preferred Stock which is the only currently
outstanding Preferred Stock has no voting rights whatsoever
except (i) voting rights to which it may be entitled under the
laws of the State of Delaware and (ii) whenever dividends
payable
on such Series A Preferred Stock have not been paid in an
aggregate amount equal to or exceeding the amount of dividends
payable thereon for six quarterly periods, the Series A
Preferred
Stock holders have the right to vote, as a class when considered
with all other series of Preferred Stock with substantially
[FN]
<F3>
Under the terms of the Plan, the applicant will issue Series X,
Series Y and Series Z warrants to certain claimants as described
therein. The Series X Warrants have an exercise price of $12.55
per share and must be exercised within five years of the
Effective Date. The Series Y Warrants have an exercise price of
$17.55 per share and must be exercised within five years of the
Effective Date. The Series Z Warrants have an exercise price of
$50.00 and must be exercised within two years of the Effective
Date.
<PAGE>
similar voting rights, to elect one additional director, such
voting right to continue until all accumulated dividends shall
have been paid or declared and set apart for payment.
As of Effective Date
For a description of the voting rights of the securities to be
issued pursuant to the Plan, see the Disclosure Statement "IV.
SUMMARY OF THE PLAN" and subpart A. thereof "A. PROPERTY
TO BE DISTRIBUTED UNDER THE PLAN".
INDENTURE SECURITIES<F4>
8. Analysis of indenture provisions. Insert at this point the
analysis of indenture provisions required under section
305(a)(2)
of the Act.
(a) Definition of Default: Withholding of Notice.
The following events are defined in the indenture as
"Events of Default":
(i) any Obligor defaults in the payment of interest on any
Security (including, without limitation, the issuance of
Interest
Deferral Securities) when the same becomes due and payable and
the Default continues for a period of five days;
(ii) any Obligor defaults in the payment of the principal
of any Security when the same becomes due and payable at
maturity, upon redemption or repurchase or otherwise;
(iii) any Obligor fails to observe or perform any covenant,
condition or agreement on the part of the Company to be observed
or performed pursuant to the Intercreditor Agreement or pursuant
to Sections 4.11, 4.15, 4.16, 4.17, 4.18, 4.25, 4.26, 4.28 or
4.29 of the indenture or pursuant to Article 3 or Article 5 of
the indenture;
(iv) any Obligor fails to comply with any of its other
agreements or covenants in, or provisions of, the Securities,
any
Collateral Document, or this Indenture and the Default continues
for the period and after the notice specified in Section
6.01(c);
(v) any representation or warranty in Article 10 or in any
Collateral Document shall have been incorrect in any material
respect when made;
(vi) (A) a default in the payment of principal, premium or
interest when due occurs (whether by scheduled maturity,
required prepayment, acceleration, demand or
[FN]
<F4>
Capitalized terms used in this Section 8. "Analysis of Indenture
Provisions." and not otherwise defined herein shall have the
meaning ascribed to them in the indenture.
<PAGE>
otherwise) under any agreement, Guaranty, note, mortgage,
indenture or instrument (other than the Securities) under
which there may be issued or by which there may be secured
or evidenced any Indebtedness of the Company or any of its
Subsidiaries (other than the Rohr Indebtedness or Indebtedness
of an Insignificant Subsidiary) in an amount or amounts in
excess of $5,000,000 individually or $7,000,000 in the
aggregate,
(B) a default occurs under any such agreement, note, mortgage,
indenture or instrument, the effect of which (1) results in the
acceleration of such Indebtedness, or (2) permits the holder of
such Indebtedness to accelerate, declare to be due and payable,
or demand total or partial redemption, prepayment or repurchase
of, all or any portion of such Indebtedness prior to its stated
maturity, or (C) all or any portion of such Indebtedness is
required to be prepaid, redeemed, purchased or defeased, or an
offer to prepay, redeem, purchase or defease such Indebtedness
is
required to be made, in each case prior to the stated maturity
thereof;
(vii) a final judgment or final judgments for the payment
of money are entered by a court or courts of competent
jurisdiction against the Company or any of its Subsidiaries
(other than an Insignificant Subsidiary or in respect of the
Rohr
Indebtedness) and such judgment or judgments remain undischarged
for a period (during which execution shall not be effectively
stayed) of 60 days, provided that any such judgment or judgments
exceeds $1,000,000 individually or $1,500,000 in the aggregate;
(viii) the Company or any of its Subsidiaries (other than
an Insignificant Subsidiary) pursuant to or within the meaning
of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief
against it in an involuntary case,
(C) consents to the appointment of a Custodian of it
or for all or substantially all of its property, or
(D) makes a general assignment for the benefit of its
creditors, or
(E) is unable to pay its debts as the same become due;
or
(ix) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against the Company or any
Subsidiary of the Company (other than an Insignificant
Subsidiary) in an involuntary case,
(B) appoints a Custodian of the Company or any
Subsidiary of the Company (other than an Insignificant
Subsidiary) or for all or substantially all of its property, or
(C) orders the liquidation of the Company or any
Subsidiary of the Company (other than an Insignificant
Subsidiary),
and the order or decree remains unstayed and in effect
for 60 days; or
(x) the Liens on any of the Collateral granted or purported
to be granted pursuant to any Collateral Document shall be or
become unenforceable or invalid, or the priority thereof shall
become diminished; or
(xi) with respect to any Plan, (A) a prohibited transaction
within the meaning of Section 4975 of the Code or Section 406 of
ERISA occurs which in the reasonable determination of the
Trustee
could result in direct or indirect liability to the Company or
any of its Subsidiaries;
(B) with respect to any Title IV Plan, the filing of a
notice to voluntarily terminate any such plan in a distress
termination; (C) with respect to any Multiemployer Plan, the
Company, any of its Subsidiaries or any ERISA Affiliate shall
incur any Withdrawal Liability; (D) with respect to any
Qualified
Plan, the Company, any of its Subsidiaries or any ERISA
Affiliate
shall incur any accumulated funding deficiency or request a
funding waiver from the IRS, and (E) with respect to any Title
IV
Plan or Multiemployer Plan which has an ERISA Event not
described in clause (B), (C) or (D) hereof, which in the
reasonable determination of the Trustee, there is a reasonable
likelihood for termination of any such plan by the PBGC and
for resulting liability of the Company, any of its Subsidiaries
or any ERISA Affiliate, provided, however, that the events
listed
in clauses (A) through (E) hereof shall constitute Events of
Default only if the liability, deficiency or waiver request of
the Company, any of its Subsidiaries or any ERISA Affiliate,
whether or not assessed, exceeds, individually or in the
aggregate, $1,000,000; or
(xii) the Guaranty pursuant to Article 11 hereof shall
cease for any reason to be in full force and effect or either
Guarantor, or any Person acting by or on behalf of either
Guarantor, shall deny or disaffirm its obligations under such
Guaranty.
If an Event of Default (other than an Event of Default
specified in clause (viii) or (ix) of Section 6.01(a)) occurs
and
is continuing, then and in every such case the Trustee or the
Holders of not less than 25% in aggregate principal amount of
the
outstanding Securities may, and the Trustee upon the request of
the Holders of not less than 25% in aggregate principal amount
of
the outstanding Securities shall, declare the principal amount
of
all the Securities, plus accrued interest, if any, to be due and
payable immediately, by a notice in writing to the Company (and
to the Obligors and the Trustee if given by the Holders), and
upon any such declaration such principal amount, plus
accrued interest, if any, shall become immediately due and
payable in cash. (Section 6.02)
If an Event of Default or Default occurs and is continuing
and is known to the Trustee, the Trustee shall mail to
Noteholders a notice of the Default or Event of Default within
90
days of such occurrence. Except in the case of a payment
default
with respect to the Notes, the Trustee may withhold such notice
for so long as a committee of Trust Officers in good faith
determines that withholding the notice is in the interests of
such holders. (Section 7.05)
(b) Authentication and Delivery: Application of Proceeds.
Securities may be authenticated and delivered from time to
time pursuant to the indenture and upon confirmation of the Plan
to the Class 2 Old Note Holders, to holders of Class 3B Old
Credit Agreement Debt (as each such Class is defined in the
Plan), and to Belmont Capital Partners II, L.P. Authentication
and delivery of Securities as described above shall be made upon
written orders of the Company delivered to the Trustee.
Securities will not be valid unless they are so authenticated by
the Trustee. (Section 2.02)
The Securities will be issued in exchange for claims as
provided in the Plan, and accordingly, the issuance of the
Securities will not result in proceeds to the applicant.
(c) Release and Substitution of Property Subject to the
Lien of the Indenture.
The Obligors and the Trustee are not permitted, absent the
consent of each Holder of the Notes affected, to release any
Collateral consisting of the Capital Stock of MES Corporation or
of SellCo. (Section 9.02(a)(viii))
In addition, release of the guaranty of the Notes by MES
Corporation and SellCo is likewise prohibited without the
consent
of each Holder of the Notes affected. (Section 9.02(a)(ix))
Upon the receipt by the Company or any Software House
Subsidiary of the proceeds of an Asset Sale or in respect of the
capital stock or assets of any Software House Subsidiary (other
than (i) Net Cash Proceeds used for the redemption of (A) the
Notes pursuant to Section 3.08, or (B) Series A Notes pursuant
to
the Series A Indenture, and (ii) proceeds pledged to the Trustee
pursuant to the Pledge Agreements), the Company shall execute
such documents and take such further acts as are necessary so
that the Trustee shall have a lien on such proceeds which lien
shall be senior to the lien held by the Trustee acting on behalf
of holders of (i) Series A Notes issued by the Company and
(ii) the SellCo Subordinated Notes. (Section 10.01(b))
Upon the receipt by the Company or any of its Subsidiaries
(other than a Software House Subsidiary) of the proceeds of an
Asset Sale (other than of capital stock of any Software House
subsidiary), the Company shall execute such documents and take
such further acts as are necessary so that the Trustee will have
a lien on such proceeds which lien (i) shall be subject to the
lien held by the trustee acting on behalf of holders of the
Series A Notes issued by the Company, and (ii) shall be
senior to the lien held by the SellCo Subordinated Indenture
Trustee acting on behalf of holders of the SellCo Subordinated
Notes. (Section 10.01(c))
The Company and each Obligor are required to cause Section
314(d) of the Act relating to releases of collateral to be
complied with which shall include delivery of certificates
and/or
opinions of Officers of the Company, or of independent persons,
if required. (Section 10.02(d))
(d) Satisfaction and Discharge. The indenture shall cease
to be of further effect other than with respect to:
(i) each Obligor's compensation and indemnity obligations
(Section 7.07), (ii) obligations of the Trustee and/or the
Paying
Agent to pay to the Company (A) excess money or securities
(Section 8.03) and monies unclaimed after the requisite
time period (Section 8.03), and (iii) obligations of the
Obligors
to pay unpaid Holders of Notes under Section 8.03 after the
turnover to the Company by the Trustee and/or the Paying
Agent of unclaimed monies;
when all Notes authenticated and issued (other than lost,
stolen, or destroyed Notes which have been replaced and/or paid)
have been delivered to the Trustee for cancellation and each
Obligor has paid all sums payable with respect thereto. (Section
8.01(a))
In addition, the obligations of the Obligors shall be
terminated if each of the following is met:
(i) the Company has irrevocably deposited in trust money
or government securities maturing as to principal and interest
in
an amount sufficient to discharge principal, interest, and all
other amounts payable under the indenture;
(ii) the Obligors have delivered to the trustee an
Officers' Certificate and Opinion of Counsel with respect to the
satisfaction of all conditions precedent relating to the
discharge and satisfaction of the indenture;
(iii) no Default or Event of Default shall have occurred
and be continuing on the date of deposit as a result of such
deposit;
(iv) the Obligors shall have delivered to the Trustee (A) a
ruling directed to the Trustee from the IRS stating that income,
gain, or loss will not be recognizable as a result of the
deposit
of funds as above described, or (B) an opinion of counsel (1)
to the same effect as such IRS ruling, or (2) stating that the
deposit of funds will not, after the passage of 90 days, be
subject to the preference provisions of Section 547 of the
Bankruptcy Code, or (3) stating that the Trustee will hold a
valid and perfected security interest in such funds and will be
entitled to receive adequate protection if such funds are used;
(v) each Obligor has paid all sums then payable by such
Obligor under the indenture and the Notes; and
(vi) the deposit of monies by the Obligors and the exercise
of the defeasance option shall not cause the Trustee to have a
conflict of interest under Section 6.08 of the indenture or
under
the Trust Indenture Act with respect to other securities of
the Company. (Section 8.01(b))
Notwithstanding the deposit of funds in accord with Section
8.01, the obligations of the Obligors shall, nevertheless,
survive for a 90 day interim period following such deposit. In
addition, following the end of such 90 day period,
obligations of the Obligors under Sections 2.02, 2.03, 2.04,
2.05, 2.06, 2.07, 2.10, 4.01, 4.02, 4.05, 4.17, 7.07, 7.08,
8.03,
8.04, and Article 11 shall survive until no Notes are
outstanding, and thereafter only the obligations of the Obligors
and the Trustee contained in Sections 7.07, 8.03, and 8.04 shall
survive. (Section 8.01(c))
(e) Evidence of Compliance.
(a) The Company shall deliver to the Trustee, within
105 days after the end of each fiscal year of the Company and
within 60 days after the end of each Quarter commencing with the
first Quarter commencing after the Issue Date, a certificate
from the principal executive officer, the principal financial
officer or the principal accounting officer stating that to the
best of such officer's knowledge no Default or Event of Default
has occurred, and setting forth in reasonable detail each of
the calculations performed by the Company in respect of the
covenants set forth in Sections 4.11, 4.15, 4.16, 4.18 and 4.28,
or if a Default or Event of Default shall have occurred to the
knowledge of such certifying person, describing all such
Defaults
and Events of Default and what action the Company is taking or
proposes to take with respect thereto. (Section 4.04(a))
(b) The Company shall deliver to the Trustee,
immediately upon any Officer having knowledge of (i) any Event
of
Default or (ii) the fact that any Indebtedness of the Company or
any Subsidiary of the Company in an amount in excess of $500,00
has been or could be declared due and payable before its
maturity
because of the occurrence of any default (or any event, which
with the giving of notice, or the lapse of time, or both, shall
constitute such default) under such Indebtedness, or (iii) the
occurrence of any event requiring the performance by the Company
or any of its Subsidiaries under any Performance Guaranty, an
Officers' Certificate specifying such Default or Event of
Default
or other event and what action the Company is taking or proposes
to take with respect thereto. (Section 4.04(c))
9. Other obligors. Give the name and complete mailing address
of any person, other than the applicant, who is an obligor upon
the indenture securities.
Other obligors are the "Guarantors" (as defined in the
indenture) which consist of SellCo and MES Corporation and their
respective successors; their address is c/o JWP INC., Six
International Drive, Rye Brook, New York 10573.
<PAGE>
CONTENTS
Contents of application for qualification. This
application for qualification comprises:
a. Pages numbered 1 to 22, consecutively.
b. The statement of eligibility and qualification of each
trustee under the indenture to be qualified.
c. The following exhibits in addition to those filed as a
part of the statement of eligibility and qualification of each
trustee.
Exhibit T3A1. Certificate of Incorporation of JWP
INC. filed with Delaware Secretary of
State on March 31, 1987
(Incorporated by reference to
applicant's Exhibit 3(a-1) to
Annual Report on Form 10-K for
fiscal year ended
December 31, 1988)
Exhibit T3A2. Agreement and Plan of Merger dated
April 1, 1987
between JWP INC. (a New York
corporation) into JWP
INC. (a Delaware corporation)
(Incorporated by reference
to applicant's Exhibit (b) to
Current Report on Form 8-K
dated August 4, 1987)
Exhibit T3A3. Certificate of Amendment of
Certificate of Incorporation
of JWP INC. filed by JWP INC. with
Delaware Secretary
of State on May 17, 1989
(Incorporated by reference to
applicant's Exhibit (a-3) to
Annual Report on Form 10-K
for fiscal year ended
December 31, 1989)
Exhibit T3A4. Certificate of Designation with
respect to $4.25
Convertible Exchangeable Preferred
Stock, Series A
($1.00 par value) filed by JWP
INC. with Delaware
Secretary of State on August 5,
1991 (Incorporated by
reference to applicant's Exhibit
4.1 to Quarterly Report
on Form 10-Q for the quarter ended
June 30, 1991)
Exhibit T3B By Laws of JWP INC. (Incorporated
by reference to
applicant's Exhibit 3(b) to Annual
Report on Form 10-K
for fiscal year ended
December 31, 1988)
Exhibit T3C Form of indenture including
exhibits thereto
Exhibit T3E1. Disclosure Statement and Third
Amended Joint Plan of
Reorganization Proposed by the
Debtor and its Affiliate,
SellCo Corporation as approved by
the United States
Bankruptcy Court, Southern
District of New York, on
August 22, 1994
Exhibit T3E2. Notice of (A) Solicitation of
Votes to Accept or Reject
the Debtor's Third Amended Plan of
Reorganization and
(B) Hearing to Consider
Confirmation of the Debtor's
Third Amended Plan of
Reorganization
Exhibit T3E3. Notification of Non-Voting Status
Exhibit T3E4. Ballot (Old Note Creditors)
Exhibit T3E5. Ballot (Old Credit Agreement
Creditors)
Exhibit T3E6. Ballot (Other Borrowed Money
Ballot)
Exhibit T3E7. Ballot (General Unsecured
Creditor)
Exhibit T3E8. Ballot (Subordinated Debt Claims)
Exhibit T3E9. Ballot (Contingent and Statutory
Subordinated Claims)
Exhibit T3E10. Ballot (Old Preferred Stock)
Exhibit T3E11. Ballot (Old Common Stock and
Related Interests)
Exhibit T3E12. Ballot (Shareholder Litigation)
Exhibit T3E13. Ballot (Equity Interest-Warrants
of Participation)
Exhibit T3F See Cross Reference Sheet showing
the location in the
indenture of the provisions
inserted therein pursuant to
Section 310 through 318(a),
inclusive, of the Trust
Indenture Act of 1939 (See Exhibit
T3C hereof)
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust indenture
Act of 1939, the applicant JWP INC., a corporation organized and
existing under the laws of the State of Delaware, has duly
caused
the application to be signed on its behalf by the undersigned,
thereunto duly authorized, and its seal to be hereunto affixed
and attested, all in the Village of Rye Brook, and State of New
York, on the 30th day of September, 1994.
JWP INC.
By:/s/ Frank T. MacInnis
Title: Chairman of the Board,
President and Chief
Executive Officer
Attest: By:/s/ Leicle E. Chesser
Title: Executive Vice President
and Chief Financial
Officer
/s/ Joseph W. Barnett
Title: Secretary
<PAGE>
ANNEX 1
JWP INC. SUBSIDIARIES
(All subsidiaries are 100% owned unless otherwise indicated.
The level of indentation indicates the level of ownership.)
JWP INC.
Jamaica Water Securities Corp.
Jamaica Water Supply Company (97%)
Sea Cliff Water Company
JWP Risk Holdings Inc.
Defender Indemnity Ltd.
JWP Information Services, Inc.
Businessland Canada Ltd.
Businessland (Hong Kong) Limited
AZCO Inc.
A to Z Equipment Corp.
JWP Mechanical/Electrical Services, Inc.
JWP Mechanical/Electrical Services (East),
Inc.
JWP Forest Electric Corp.
American Cable Products, Inc.
JWP Penguin Air Conditioning Corp.
Kerby Saunders Inc.
Kerby Saunders-Warkol, Inc.
Wachtel, Duklauer & Fein Incorporated
Wachtel, Duklauer & Fein
Incorporated (NJ) (90%)
SLR Constructors, Inc.
JWP Welsbach Electric Corp.
Heritage Air Systems Inc.
JWP Welsbach Electrical Corp. of L.I.
JWP New England Inc.
JWP of Hartford, Inc.
JWP/J.C. Higgins Corp.
JWP Guzovsky Electrical Corp.
Guzovsky/JWP Electrical Inc.
Afgo Engineering Corporation
JWP Maintenance & Services, Inc.
JWP Mechanical Services of New York,
Inc.
Afgo Engineering Corp. of Washington
JWP Mechanical/Electrical Services (Midwest), Inc.
JWP Midwest, Inc.
Gibson Electric Co., Inc.
Unique Construction Inc. (49%)
Sutter Hill Industries, Inc.
JWP Technical Services Corp.
North American Heating & Air
Conditioning Company
JWP/Hyre Electrical Corp.
JWP Zack Inc.
G/M Tech, Inc.
JWP Technical Services of Ohio, Inc.
JWP Mechanical/Electrical Services (West),
Inc.
Contra Costa Inc.
JWP West
JWP Trautman & Shreve, Inc.
Hansen Mechanical Contractors, Inc.
Superior Engineering Corporation
Houle Corporation
University Mechanical Contractors Inc.
JWP Mechanical Services, Inc.
University Energy Services of
California, Inc.
University Technical Services
Inc.
University Cogeneration, Inc.
T.L. Cholette, Inc.
Gone Inc.
University Mechanical &
Engineering, Inc.
University Nuclear Systems,
Inc.
JWP Technical Services of Guam, Inc.
(50%)
JWP Pacific International, Inc.
Jamaica Technical Trading Co.
JWP Technical Services of Guam,
Inc. (50%)
JWP Technical Services (CNMI), Inc.
JWP Technical Services (Malaysia)
SDN Bhd.
JWP Technical Services (Hong Kong)
Limited
JWP Technical Services (Singapore)
PTE, Ltd.
JWP Thailand Ltd.
JWP Systems/Kirkwood Electric Co., Inc.
JWP Mechanical/Electrical Services (South), Inc.
B & B Contracting and Supply Company
JWP Brandt Engineering
Brandt Engineering Company of
Arkansas, Inc.
Brandt Service Company
Metalair Industries, Inc.
JWP Gowan Inc.
Dyn Specialty Contracting Inc.
Dynalectric Company of Nevada
Dynalectric Company
Marlon of Texas, Inc.
E.M.A. International, Inc.
JWP Communications Inc.
JWP/IS Network Integration Services, Inc.
Communications Services, Inc.
NSI Communications Services, Inc.
Computer Maintenance Corporation
JWP Equipment Services Inc.
JWP Energy Products Inc.
General Energy Development, Inc.
JWP Environmental Composting
Technologies, Inc.
JWP Voc 1, Inc.
JWP Voc 2, Inc.
JWP Environmental Services Company
JWP Controls Holdings Inc.
Photo-Scan Management Corp.
JWP/HCCII Corp.
Case/Acme Systems, Inc.
Intec Business Phones, Inc.
Walker Engineering Corp.
Worldwide Communications Inc.
JWP/MEC Corp.
JWP Controls, Inc.
ISYS Security Systems, Inc.
JWP E.C. Corp.
Fort Corp.
JWP Unrestricted Sub 3 Inc.
JWP/SHI Corp.
Hydrosec (33%)
JWP Credit Corp.
JWP Merger Sub
JWP Environmental Services III Inc.
JWP Unrestricted Sub 12 Inc.
JWP International Inc.
Foreign Corporations (See Attached Annex A)
JWP Asset Management Inc.
JWP Telecom, Inc.
JWP Telecommunications Services, Inc.
JWP Telephone Service, Inc.
Standard Telecommunications, Inc.
Standard Telecommunications Equipment Inc.
JWP Unrestricted Sub 9 Inc.
SellCo Corporation
<PAGE>
ANNEX A
FOREIGN SUBSIDIARIES
(All subsidiaries are 100% owned unless otherwise indicated.
The level of indentation indicates the level of ownership.
JWP International Inc. is a wholly-owned subsidiary of JWP INC.)
JWP International Inc.
Comstock Limited
Comstock Canada (Limited Partnership) (50%)
Drake & Scull (Cayman Islands) Limited
Drake & Scull Assarain (LLC) (49%)
Lunar Drake & Scull (UAE) (49%)
JWP (Cayman Islands) Ltd.
JWP-NESMA Ltd. (50%)
JWP NRO Holdings Inc.
JWP (U.K.) Limited
Businessland Holdings Ltd.
BL Distribution Ltd.
JWP Leasing Limited
Drake & Scull Holdings Limited
DEL Commerce (Contract Services) Limited
Drake & Scull Group Services Limited
Drake & Scull Engineering Limited
Drake & Scull Airport Services Limited
Drake & Scull (Scotland) Limited
HKW Consultancy Limited
Drake & Scull Overseas Limited
Drake & Scull International Limited
Forest Datacom (UK) Ltd.
Forest Drake Scull Electric Limited
Forest Electric (U.K.) Limited
Heritage Air Systems Limited
H. & F. Kornfeld (U.K.) Limited
923452 Ontario Limited
Comstock Canada (Limited Partnership) (50%)
Drake & Scull France SARL
JWP (France) SARL
JWP Information Systems SARL
Sivea Geston S.A.
JWP Espana S.A.
Sivea Benelux
MicroAvenue
Antwerp Educational Center
MicroCom
<PAGE>
ANNEX 2
SUBSIDIARIES OF JWP INC.
Dyn Specialty Contracting Inc.
D&B Contracting and Supply Company
Contra Costa Electric, Inc.
Dynalectric Company
Dynalectric Company of Nevada
JWP Systems/Kirkwood Electric Co., Inc.
SellCo Corporation (for subsidiaries of Sellco, see Annex A
attached hereto)
MES Holdings Corporation (for subsidiaries of MES see Annex B
attached hereto)
JWP Energy Products, Inc.
JWP/MEC Corp.
University Energy Services of California, Inc.
University Technical Services, Inc.
JWP Telecom, Inc.
JWP Telecommunication Services Inc.
JWP Telephone Services Inc.
Standard Telecommunications, Inc.
Standard Telecommunications Equipment Inc.
JWP Pacific International, Inc.
Jamaica Technical Trading Company
JWP Technical Services (C.N.M.I.) Inc.
JWP Technical Services Hong Kong Limited
JWP Technical Services (Singapore) PTE Ltd.
JWP Thailand Ltd.
<PAGE>
SUBSIDIARIES (Direct and Indirect) OF SELLCO
(All subsidiaries are 100% owned unless otherwise indicated.
The level of indentation indicates the level of ownership.
SellCo is a wholly-owned subsidiary of JWP INC.)
Afgo Engineering Corporation
Afgo Engineering Corp. of Washington
American Cable Products, Inc.
Antwerp Education Center N.V.
AZCO Inc.
A to Z Equipment Corp.
Brandt Engineering Company of Arkansas, Inc.
Brandt Service Company
Communications Management Inc.
Drake & Scull France SARL
E.M.A. International, Inc.
Gone Inc.
Guzovsky/JWP Electrical Inc.
Jamaica Water Securities Corp.
Jamaica Water Supply Company (97%)
Sea Cliff Water Company
JWP Asset Management Inc.
JWP Brandt Engineering Co., Inc.
JWP Communications Inc.
Computer Maintenance Corporation
JWP/IS Network Integration Services, Inc.
JWP Controls Holding, Inc.
Case/Acme Systems, Inc.
Fort Corp.
Intec Business Phones Inc.
JWP Controls Inc.
ISYS Security Systems, Inc.
JWP Unrestricted Sub 3 Inc.
JWP/SHI Corp.
Photo-Scan Management Systems, Inc.
JWP Credit Corp.
JWP E.C. Corp.
JWP Environmental Services Company
JWP Equipment Services Inc.
General Energy Development, Inc.
JWP Voc 1, Inc.
JWP Voc 2, Inc.
JWP Environmental Composting Technologies, Inc.
JWP Espana SA
JWP France SARL
JWP Guzovsky Electrical Corp.
JWP/HCCII Corp.
JWP of Hartford, Inc.
JWP Information Services, Inc.
Businessland Canada Ltd.
Businessland (Hong Kong) Limited
JWP Information Services SARL
JWP Mechanical Services of New York, Inc.
JWP Merger Sub Inc.
JWP Environmental Services III Inc.
JWP New England Inc.
JWP Technical Services Corp.
Kerby Saunders, Inc.
Kerby Saunders-Warkol, Inc.
Marlon of Texas, Inc.
Metalair Industries, Inc.
MicroAvenue
MicroCom
North American Heating & Air Conditioning Company
Sivea Benelux
SLR Constructors Inc.
Superior Engineering Corporation
Sutter Hill Industries, Inc.
Teletime Limited
University Cogeneration, Inc.
University Mechanical Contractors, Inc.
University Nuclear Systems, Inc.
Wachtel, Duklauer & Fein, Incorporated
Wachtel, Duklauer & Fein Incorporated (NJ) (90%)
Walker Engineering, Inc.
Worldwide Communications, Inc.
JWP Unrestricted Sub 9 Inc.
JWP Unrestricted Sub 12 Inc.
<PAGE>
SUBSIDIARIES (Direct and Indirect) OF MES HOLDINGS CORPORATION
(All subsidiaries are 100% owned unless otherwise indicated.
The level of indentation indicates the level of ownership.
MES Corporation is a wholly-owned subsidiary of JWP INC.)
JWP Mechanical/Electrical Services, Inc.
JWP Mechanical/Electrical Services (East), Inc.
Heritage Air Systems Inc.
JWP Forest Electric Corp.
JWP/J.C. Higgins Corp.
JWP Maintenance and Services, Inc.
JWP Penguin Air Conditioning Corp.
JWP Welsbach Electric Corp.
JWP Welsbach Electric Corp. of L.I.
JWP Mechanical/Electrical Services (Midwest), Inc.
JWP/Hyre Electric Co. of Indiana, Inc.
JWP Midwest, Inc.
Gibson Electric Co., Inc.
JWP Technical Services of Ohio, Inc.
JWP Zack Inc.
JWP Mechanical/Electrical Services (West), Inc.
JWP West
T.L. Cholette, Inc.
Hansen Mechanical Contractors, Inc.
JWP Mechanical Services Inc.
JWP Trautman & Shreve, Inc.
JWP Mechanical/Electrical Services (South), Inc.
JWP Gowan Inc.
Defender Indemnity, Ltd.
JWP Risk Holdings Inc.
JWP International Inc.
Comstock Limited
Comstock Canada (Limited Partnership) (50%)
Drake & Scull (Cayman Islands) Limited
Drake & Scull Assarain (LLC) (49%)
Lunar Drake & Scull (UAE) (49%)
JWP (Cayman Islands) Ltd.
JWP-NESMA Ltd. (50%)
JWP Technical Services of Guam, Inc.
JWP NRO Holdings Inc.
JWP (U.K.) Limited
Businessland Holdings Ltd.
BL Distribution Ltd.
JWP Leasing Limited
Drake & Scull Holdings Limited
DEL Commerce (Contract Services) Limited
Drake & Scull Group Services Limited
Drake & Scull Engineering Limited
Drake & Scull Airport Services Limited
Drake & Scull (Scotland) Limited
HKW Consultancy Limited
Drake & Scull Overseas Limited
Drake & Scull International Limited
Forest Datacom (UK) Ltd.
Forest Drake Scull Electric Limited
Forest Electric (U.K.) Limited
Heritage Air Systems Limited
H. & F. Kornfeld (U.K.) Limited
923452 Ontario Limited
Comstock Canada (Limited Partnership) (50%)
Inte-Fac Corp.
<PAGE>
FORM T-1
===================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
__________________
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(B)(2)
_________________________
UNITED STATES TRUST COMPANY OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5459866
(Jurisdiction of incorporation (I.R.S. employer
if not a U.S. national bank) identification No.)
114 West 47th Street 10036-1532
New York, NY (Zip Code)
(Address of principal
executive offices)
__________________
JWP INC.
(Exact name of obligor as specified in its charter)
Delaware 11-2125338
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
Six International Drive
Rye Brook, New York 10573
(Address of principal executive offices) (Zip Code)
__________________
<PAGE>
MES CORPORATION
(Exact name of obligor as specified in its charter)
Delaware Applied for
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
C/O JWP Inc.
Six International Drive
Rye Brook, New York 10573
(Address of principal executive offices) (Zip Code)
__________________
SELLCO CORPORATION
(Exact name of obligor as specified in its charter)
Delaware Applied for
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
C/O JWP Inc.
Six International Drive
Rye Brook, New York 10573
(Address of principal executive offices) (Zip Code)
__________________
7% Senior Secured Notes, Series B, Due 1997
(Title of the indenture securities)
________________________________________________________________
<PAGE>
GENERAL
1. GENERAL INFORMATION
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising
authority to which it is subject.
Federal Reserve Bank of New York (2nd District), New York,
New York
(Board of Governors of the Federal Reserve System)
Federal Deposit Insurance Corporation, Washington, D.C.
New York State Banking Department, Albany, New York
(b) Whether it is authorized to exercise corporate trust
powers.
The trustee is authorized to exercise corporate trust
powers.
2. Affiliations with the Obligor
If the obligor is an affiliate of the trustee, describe
each such affiliation.
None
3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15.
JWP Inc. currently is not in default under any of its
outstanding securities for which United States Trust Company of
New York is Trustee. Accordingly, responses to Items 3, 4, 5,
6,
7, 8, 9, 10, 11, 12, 13, 14 and 15 of Form T-1 are not required
under General Instruction B.
16. LIST OF EXHIBITS.
T-1.1 - "Chapter 204, Laws of 1853, An Act to
Incorporate the United States Trust Company of New York, as
Amended", is incorporated by reference to Exhibit T-1.1 to Form
T-1 filed on September 20, 1991 with the Securities and Exchange
Commission (the "Commission") pursuant to the Trust Indenture
Act of 1939 (Registration No. 2221291).
T-1.2 - The trustee was organized by a special act
of the New York Legislature in 1853 prior to the time that the
New
York Banking Law was revised to require a Certificate of
authority to commence business. Accordingly, under New York
Banking Law, the Charter (Exhibit T-1.1) constitutes an
equivalent of a certificate of authority to commence business.
T-1.3 - The authorization of the trustee to exercise
corporate trust powers is contained in the Charter (Exhibit
T-1.1).
16. LIST OF EXHIBITS
(Continued)
T-1.4 - The By-laws of the United States Trust
Company of New York, as amended to date, are incorporated by
reference to Exhibit T-1.4 to Form T-1 filed on September 20,
1991 with the Commission pursuant to the Trust Indenture Act of
1939 (Registration No. 2221291).
T-1.6 - The consent of the trustee required by
Section 321(b) of the Trust Indenture Act of 1939.
T-1.7 - A copy of the latest report of condition of
the trustee published pursuant to law or the requirements of its
supervising or examining authority.
NOTE
As of September 30, 1994, the trustee had 2,999,020 shares of
Common Stock outstanding, all of which are owned by its parent
company, U.S. Trust Corporation. The term "trustee" in Item 2,
refers to each of United States Trust Company of New York and
its parent company, U.S. Trust Corporation.
In answering Item 2 in this statement of eligibility as to
matters peculiarly within the knowledge of the obligor or its
directors, the trustee has relied upon information furnished to
it by the obligor and will rely on information to be furnished
by
the obligor and the trustee disclaims responsibility for the
accuracy or completeness of such information.
__________________
Pursuant to the requirements of the Trust Indenture Act of 1939,
the trustee, United States Trust Company of New York, a
corporation organized and existing under the laws of the State
of
New York, has duly caused this statement of eligibility and
qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of New York, and
State of New York, on the 30th day of September 1994.
UNITED STATES TRUST COMPANY OF
NEW YORK, Trustee
By:
S/Louis P. Young
Vice President
<PAGE>
Exhibit T-1.6
The consent of the trustee required by Section 321(b) of the
Act.
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
March 19, 1992
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549
Gentlemen:
Pursuant to the provisions of Section 321(b) of the Trust
Indenture Act of 1939, and subject to the limitations set forth
therein, United States Trust Company of New York ("U.S. Trust")
hereby consents that reports of examinations of U.S. Trust by
Federal, State, Territorial or District authorities may be
furnished by such authorities to the Securities and Exchange
Commission upon request therefor.
Very truly yours,
UNITED STATES TRUST COMPANY
OF NEW YORK
By: S/Gerard F. Ganey
Senior Vice President
<PAGE>
EXHIBIT T-1.7
Consolidated Report of Condition of
UNITED STATES TRUST COMPANY OF NEW YORK
and Foreign and Domestic Subsidiaries, a member of the Federal
Reserve System, at the close of business June 30, 1994,
published
in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve
Act.
<TABLE>
<CAPTION>
Dollar Amounts ASSETS
in Thousands
<S> <C>
Cash and balances due from depository institutions:
a. Noninterest bearing balances and currency and coin: $ 290,519
b. Interest bearing balances: 50,000
Securities: 1,452,265
Federal funds sold and securities purchased under agreements to
resell in domestic offices of the bank and of its Edge and
Agreement subsidiaries, and in IBF's: 0
a: Federal funds sold: 5,000
b: Securities purchased under agreements to resell: 0
Loans and lease financing receivables:
a. Loans and leases, net of unearned income: 1,456,949
b. LESS: Allowance for loan and lease losses: 12,399
c. Loans and leases, net of unearned income,
allowance and reserve: 1,444,550
Premises and fixed assets (including capitalized leases): 97,105
Other real estate owned: 10,865
Investments in unconsolidated subsidiaries and associated companies: 957
Intangible assets: 1,465
Other assets: 113,660
-----------
TOTAL ASSETS: $ 3,466,386
===========
LIABILITIES
Deposits:
a. In domestic offices: $ 2,161,830
(1) Non interest bearing: 1,098,376
(2) Interest bearing: 1,063,454
b. In foreign offices, Edge and Agreement
subsidiaries, and IBF's: 7,636
(1) Interest bearing: 7,636
Federal funds purchased and securities sold under agreements
to repurchase in domestic offices of the bank and of its
Edge and Agreement subsidiaries, and in IBF's:
a. Federal funds purchased: 933,170
b. Securities sold under agreements to repurchase: 3,672
Demand notes issued to the U.S. Treasury: 0
Other Borrowed Money 73,049
Mortgage indebtedness and obligations under capitalized leases: 1,639
Subordinated notes and debentures: 12,453
Other liabilities: 81,856
------------
TOTAL LIABILITIES: $ 3,275,305
============
EQUITY CAPITAL
Common Stock: $ 14,995
Surplus: 41,500
Undivided profits and capital reserves: 138,377
Net unrealized holding gains (losses) on available-for-salesecurities (3,791)
------------
TOTAL EQUITY CAPITAL: $ 191,081
===========
TOTAL LIABILITY AND EQUITY CAPITAL: $ 3,466,386
===========
</TABLE>
<PAGE>
I, Daniel M. Clavin, Senior Vice President of the above-named
bank do hereby declare that this report of condition has been
prepared
in conformance with the instructions issued by the Board of
Governors of the Federal Reserve System and is true to the best
of my knowledge and belief.
DANIEL M. CLAVIN, SVP
June 30, 1994
We, the undersigned trustees, attest the correctness of this
Report of Condition and declare that it has been examined by us
and to
the best of our knowledge and belief has been prepared in
conformance with the instructions issued by the Board of
Governors of the
Federal Reserve System and is true and correct.
H. MARSHALL SCHWARZ ) Trustees
JEFFREY S. MAURER )
FREDERICK S. WONHAM )
EMCOR GROUP, INC.
(Formerly Known as JWP INC.),
as Issuer,
MES HOLDINGS CORPORATION
and
SELLCO CORPORATION,
as Guarantors
and
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee
INDENTURE
Dated as of December [__], 1994
$11,357,000
7% Senior Secured Notes, Series B, Due 1997
<PAGE>
CROSS-REFERENCE TABLE*
Trust Indenture
Act Section Indenture Section
310(a)(1) . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(4) . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(5) . . . . . . . . . . . . . . . . . . . . . . . 7.10
(b) . . . . . . . . . . . . . . . . . . . . . . . . 7.08;
7.10; 12.02
(c) . . . . . . . . . . . . . . . . . . . . . . . . N.A.
311(a) . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(c) . . . . . . . . . . . . . . . . . . . . . . . . N.A.
312(a) . . . . . . . . . . . . . . . . . . . . . . . . 2.05
(b) . . . . . . . . . . . . . . . . . . . . . . . . 12.03
(c) . . . . . . . . . . . . . . . . . . . . . . . . 12.03
313(a) . . . . . . . . . . . . . . . . . . . . . . . . 7.06
(b)(1) . . . . . . . . . . . . . . . . . . . . . . . 7.06
(b)(2) . . . . . . . . . . . . . . . . . . . . . . . 7.06
(c) . . . . . . . . . . . . . . . . . . . . . . . . 7.06;
12.02
(d) . . . . . . . . . . . . . . . . . . . . . . . . 7.06
314(a) . . . . . . . . . . . . . . . . . . . . . . . . 4.03;
4.04; . . . . . . . . . . . . . . . . . . . . . . . . 12.02
(b) . . . . . . . . . . . . . . . . . . . . . . . . 10.02
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . 12.04
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . 12.04
(c)(3) . . . . . . . . . . . . . . . . . . . . . . . N.A.
(d) . . . . . . . . . . . . . . . . . . . . . . . . 10.02
(e) . . . . . . . . . . . . . . . . . . . . . . . . 12.05
(f) . . . . . . . . . . . . . . . . . . . . . . . . N.A.
315(a) . . . . . . . . . . . . . . . . . . . . . . . . 7.01
(b) . . . . . . . . . . . . . . . . . . . . . . . . 7.05;
12.02
(c) . . . . . . . . . . . . . . . . . . . . . . . . 7.01
(d) . . . . . . . . . . . . . . . . . . . . . . . . 7.01
(e) . . . . . . . . . . . . . . . . . . . . . . . . 6.11
316(a)(last sentence) . . . . . . . . . . . . . . . . . 2.09
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . 6.05
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . 6.04
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . . . . . 6.07
(c) . . . . . . . . . . . . . . . . . . . . . . . . 6.05
317(a)(1) . . . . . . . . . . . . . . . . . . . . . . . 6.08
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . 6.09
(b) . . . . . . . . . . . . . . . . . . . . . . . . 2.04
318(a) . . . . . . . . . . . . . . . . . . . . . . . . 12.01
N.A. means not applicable.
* This Cross-Reference Table shall not, for any purpose, be
deemed to be a part of the Indenture.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions . . . . . . . . . . . . . . . . . 1
Section 1.02. Incorporation by Reference of Trust
Indenture Act 20
Section 1.03. Rules of Construction . . . . . . . . . . . . 20
ARTICLE 2
THE SECURITIES
Section 2.01. Form and Dating . . . . . . . . . . . . . . . 21
Section 2.02. Execution and Authentication . . . . . . . . . 21
Section 2.03. Registrar and Paying Agent . . . . . . . . . . 22
Section 2.04. Paying Agent to Hold Money in Trust . . . . . 22
Section 2.05. Holder Lists . . . . . . . . . . . . . . . . . 23
Section 2.06. Transfer and Exchange . . . . . . . . . . . . 23
Section 2.07. Replacement Securities . . . . . . . . . . . . 24
Section 2.08. Outstanding Securities . . . . . . . . . . . . 24
Section 2.09. Treasury Securities . . . . . . . . . . . . . 24
Section 2.10. Temporary Securities. . . . . . . . . . . . . 25
Section 2.11. Cancellation . . . . . . . . . . . . . . . . . 25
Section 2.12. Defaulted Interest . . . . . . . . . . . . . . 25
ARTICLE 3
REDEMPTION
Section 3.01. Notices to Trustee. . . . . . . . . . . . . . 26
Section 3.02. Selection of Securities to Be Redeemed . . . . 26
Section 3.03. Notice of Redemption . . . . . . . . . . . . . 26
Section 3.04. Effect of Notice of Redemption . . . . . . . . 27
Section 3.05. Deposit of Redemption Price . . . . . . . . . 27
Section 3.06. Securities Redeemed in Part . . . . . . . . . 28
Section 3.07. Optional Redemption. . . . . . . . . . . . . . 28
Section 3.08. Mandatory Redemption. . . . . . . . . . . . . 28
ARTICLE 4
COVENANTS
Section 4.01. Payment of Securities . . . . . . . . . . . . 30
Section 4.02. Maintenance of Office or Agency . . . . . . . 30
Section 4.03. SEC Reports; Reports to Securityholders . . . 31
Section 4.04. Compliance Certificate . . . . . . . . . . . . 31
Section 4.05. Stay, Extension and Usury Laws . . . . . . . . 32
Section 4.06. Limitation on Restricted Payments . . . . . . 32
Section 4.07. Limitations on Transactions with Affiliates. . 33
Section 4.08. Limitation on Liens . . . . . . . . . . . . . 33
Section 4.09. Limitation on Additional Indebtedness
and Capital Stock . . . . . . . . . . . . . . 35
Section 4.10. Limitation on New Subsidiaries. . . . . . . . 39
Section 4.11. Limitation on Sales of Assets . . . . . . . . 39
Section 4.12. Limitation on Certain Transfers of Assets . . 40
Section 4.13. No Material Changes in the Nature
of the Business 40
Section 4.14. Limitation on Investments and Advances . . . . 40
Section 4.15. Maintenance of Coverage Ratios . . . . . . . . 41
Section 4.16. Capital Expenditures. . . . . . . . . . . . . 42
Section 4.17. Corporate Existence . . . . . . . . . . . . . 43
Section 4.18. Change of Control . . . . . . . . . . . . . . 43
Section 4.19. Maintenance of Properties . . . . . . . . . . 45
Section 4.20. Payment of Taxes and Other Claims . . . . . . 45
Section 4.21. Maintenance of Insurance . . . . . . . . . . . 45
Section 4.22. Compliance with Law . . . . . . . . . . . . . 46
Section 4.23. Books and Records . . . . . . . . . . . . . . 46
Section 4.24. Employee Benefit Plans; ERISA . . . . . . . . 46
Section 4.25. Modification of Material Contractual
Obligations. 46
Section 4.26. Security Interests . . . . . . . . . . . . . . 47
Section 4.27. Lease Obligations . . . . . . . . . . . . . . 47
Section 4.28. Maintenance of Consolidated Tangible
Net Worth 47
Section 4.29. Performance Guaranties . . . . . . . . . . . . 48
ARTICLE 5
MERGERS AND ACQUISITIONS
Section 5.01. Mergers, Acquisitions, Etc. . . . . . . . . . 48
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default . . . . . . . . . . . . . . 49
Section 6.02. Acceleration . . . . . . . . . . . . . . . . . 52
Section 6.03. Other Remedies . . . . . . . . . . . . . . . . 52
Section 6.04. Waiver of Past Defaults . . . . . . . . . . . 53
Section 6.05. Control by Majority . . . . . . . . . . . . . 53
Section 6.06. Limitation on Suits . . . . . . . . . . . . . 53
Section 6.07. Rights of Holders to Receive Payment . . . . . 54
Section 6.08. Collection Suit by Trustee . . . . . . . . . . 54
Section 6.09. Trustee May File Proofs of Claim . . . . . . . 54
Section 6.10. Priorities . . . . . . . . . . . . . . . . . . 55
Section 6.11. Undertaking for Costs . . . . . . . . . . . . 55
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee . . . . . . . . . . . . . . 55
Section 7.02. Rights of Trustee . . . . . . . . . . . . . . 56
Section 7.03. Individual Rights of Trustee . . . . . . . . . 57
Section 7.04. Trustee's Disclaimer . . . . . . . . . . . . . 57
Section 7.05. Notice of Defaults . . . . . . . . . . . . . . 57
Section 7.06. Reports by Trustee to Holders . . . . . . . . 58
Section 7.07. Compensation and Indemnity . . . . . . . . . . 58
Section 7.08. Replacement of Trustee . . . . . . . . . . . . 59
Section 7.09. Successor Trustee by Merger, Etc. . . . . . . 60
Section 7.10. Eligibility; Disqualification . . . . . . . . 60
Section 7.11. Preferential Collection of Claims
Against Company 61
ARTICLE 8
DISCHARGE OF INDENTURE
Section 8.01. Termination of Company's Obligations . . . . . 61
Section 8.02. Application of Trust Money . . . . . . . . . . 63
Section 8.03. Repayment to the Company . . . . . . . . . . . 63
Section 8.04. Reinstatement . . . . . . . . . . . . . . . . 63
ARTICLE 9
AMENDMENTS
Section 9.01. Without Consent of Holders . . . . . . . . . . 64
Section 9.02. With Consent of Holders . . . . . . . . . . . 64
Section 9.03. Compliance with Trust Indenture Act . . . . . 65
Section 9.04. Revocation and Effect of Consents . . . . . . 66
Section 9.05. Notation on or Exchange of Securities . . . . 66
Section 9.06. Trustee to Sign Amendments, Etc. . . . . . . . 66
ARTICLE 10
COLLATERAL
Section 10.01. Pledge of Collateral . . . . . . . . . . . . 66
Section 10.02. Recording, Etc. . . . . . . . . . . . . . . . 68
Section 10.03. Suits to Protect the Collateral . . . . . . . 69
Section 10.04. Authorization of Receipt of Funds
by the Trustee Under the Collateral
Documents and the Intercreditor Agreement . . 69
ARTICLE 11
GUARANTY OF SECURITIES
Section 11.01. Guaranty. . . . . . . . . . . . . . . . . . . 70
Section 11.02. Obligations of the Guarantors Unconditional. 71
Section 11.03. Execution and Delivery of Guaranties . . . . . 71
Section 11.04. Limitations of Guaranties. . . . . . . . . . 72
ARTICLE 12
MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls . . . . . . . . 72
Section 12.02. Notices . . . . . . . . . . . . . . . . . . . 72
Section 12.03. Communication by Holders with Other Holders . 73
Section 12.04. Certificate and Opinion as to Conditions
Precedent . . . . . . . . . . . . . . . . . . 73
Section 12.05. Statements Required in Certificate or Opinion 74
Section 12.06. Rules by Trustee and Agents . . . . . . . . . 74
Section 12.07. Legal Holidays . . . . . . . . . . . . . . . 74
Section 12.08. Duplicate Originals . . . . . . . . . . . . . 74
Section 12.09. Governing Law . . . . . . . . . . . . . . . . 75
Section 12.10. No Adverse Interpretation of Other Agreements 75
Section 12.11. Successors . . . . . . . . . . . . . . . . . 75
Section 12.12. Severability . . . . . . . . . . . . . . . . 75
Section 12.13. Counterpart Originals . . . . . . . . . . . . 75
Section 12.14. Variable Provisions . . . . . . . . . . . . . 75
Section 12.15. Table of Contents, Headings, Etc. . . . . . . 75
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . 76
Exhibit A Form of Securities
Exhibit B-1 Form of Software House Senior Pledge Agreement
Exhibit B-2 Form of Software House Subordinated Pledge Agreement
Exhibit B-3 Form of Software House SellCo Pledge Agreement
Exhibit C Form of Intercreditor Agreement
<PAGE>
INDENTURE, dated as of December [__], 1994, among EMCOR
Group, Inc. (formerly known as JWP INC.), a Delaware corporation
(the "Company"), MES Holdings Corporation, a Delaware corporation
("MES"), SellCo Corporation, a Delaware corporation ("SellCo"
and, together with MES, the "Guarantors"), and United States
Trust Company of New York, a New York corporation, as trustee
(the "Trustee").
Each party agrees as follows for the benefit of the other
parties and for the equal and ratable benefit of the Holders of
the Company's 7% Senior Secured Notes, Series B, Due 1997 (the
"Securities"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions.
"Accountants' Certificate" means a certificate from
Deloitte and Touche or from other independent certified public
accountants of national standing.
"Affiliate" of any specified Person means any other Person,
directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified Person.
For the purposes of this definition, "control" when used with
respect to any Person means the power to direct the management
and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Asset Sale" has the meaning set forth in Section 4.11.
"Available Cash" means, at any date of determination, the
excess, if any, of (a) the sum of (i) the average daily balance
of collected funds on deposit for the immediately preceding
calendar month in the Cash Accounts (other than (A) customary
cash deposits made in the ordinary course of business consistent
with past practice in connection with payroll, employee benefit
and other similar or customary deposit arrangements, petty cash
accounts, disbursement accounts, or accounts holding retentions,
(B) cash deposited in a Cash Account maintained by a Water
Company, any Subsidiary of MES or a Dynalectric Company, the
disbursement or withdrawal of which is prohibited or restricted,
by contract, course of dealing or otherwise, on the Issue Date,
(C) funds deposited in a Cash Account in respect of the proceeds
received in connection with an Asset Sale or (D) an amount equal
to the proceeds of (1) Indebtedness incurred by the Company or
any of its Subsidiaries and (2) the issuance of the Company's
Capital Stock), plus (ii) the lesser of (A) the average daily
unused portion of the credit available under the Revolving Credit
Agreement for such immediately preceding calendar month, or (B)
$40,000,000, minus (b) the reserve maintained in accordance with
the Bankruptcy Plan by the Company or any disbursing agent
therefor, in respect of disputed claims against the Company, and
minus (c) the tax reserve maintained by SellCo in respect of
taxes owing in connection with Asset Sales by the Company and any
of its Subsidiaries.
"Bankruptcy Law" has the meaning set forth in Section
6.01(b).
"Bankruptcy Plan" means the Third Amended Joint Plan of
Reorganization of the Company and SellCo under Chapter 11 of the
Bankruptcy Code (Chapter 11 Case No. 94 B 46404 (JHG)), as
amended, supplemented or otherwise modified from time to time.
"Board of Directors" of a Person means the board of direc-
tors of such Person or any committee of such board of directors
duly authorized to act hereunder.
"Business Day" means any day other than a Legal Holiday.
"Capital Expenditures" means, for any Person for any
period, the aggregate (without duplication) of (a) all
expenditures by such Person, except interest capitalized during
construction, during such period for property, plant or
equipment, including, without limitation, renewals, improvements,
replacements and capitalized repairs, that would be reflected as
additions to property, plant or equipment on a consolidated
balance sheet of such Person prepared in conformity with GAAP,
and (b) the principal amount of all Indebtedness incurred or
assumed in connection with any such additions to property, plant
and equipment. For the purpose of this definition, the purchase
price of equipment which is acquired simultaneously with the
trade-in of existing equipment owned by such Person or with
insurance proceeds shall be included in Capital Expenditures only
to the extent of the gross amount of such purchase price less the
credit granted by the seller of such equipment being traded in at
such time or the amount of such proceeds, as the case may be.
"Capital Lease" means, as to any Person, any lease of
property, real or personal, in respect of which the present value
of the minimum rental commitment would be capitalized on a
balance sheet of such Person in accordance with GAAP.
"Capital Lease Obligation" means, as to any Person, the
amount of the liability in respect of a Capital Lease which would
at such time be required to be capitalized on a balance sheet of
such Person in accordance with GAAP.
"Capital Stock" means any and all shares, interests,
participations, rights or other equivalents (however designated)
of any Person.
"Cash Accounts" means, collectively, all bank, money market
and other deposit accounts maintained by the Company and its
Subsidiaries other than the Imprest Accounts.
"Change of Control" means an event whereby any Person or
group (as such term is defined in Rule 13d-5 of the Exchange Act)
of related Persons, other than the Specified Holders, shall
acquire beneficial ownership, directly or indirectly, of more
than 50% of the outstanding voting stock of the Company.
"Change of Control Offer" has the meaning set forth in
Section 4.18(a).
"Change of Control Payment Date" has the meaning set forth
in Section 4.18(a).
"Code" means the Internal Revenue Code of 1986 (or any
successor legislation thereto), as amended from time to time.
"Collateral" means the "Pledged Collateral," as defined in
each of the Pledge Agreements, and any and all other collateral
securing the obligations of the Company, the Guarantors, or any
other obligor under the Securities or under this Indenture
pursuant to any other Collateral Document.
"Collateral Documents" means the Pledge Agreements and any
other document executed and delivered by the Company, a
Guarantor, or any other obligor under the Securities or under
this Indenture granting a Lien on any of its property to secure
payment of the obligations of the Company, the Guarantors, or any
other obligor under the Securities or under this Indenture, which
document shall be in form and substance satisfactory to the
Trustee.
"Company" means EMCOR Group, Inc. (formerly known as JWP
INC.), a Delaware corporation, and its successors.
"Comstock" means, so long as it is a Subsidiary of the
Company, Comstock Canada, Ltd., a Canadian limited partnership,
and its successors.
"Consolidated Cash Interest Expense" means, for any period,
total accrued interest expense, (including the interest component
of Capital Lease obligations) of the Operating Companies on a
consolidated basis during such period, including, without
limitation, all commissions, discounts and other fees and charges
(to the extent such commissions, fees and charges are included in
"interest" under GAAP) owed with respect to letters of credit,
and net costs under interest rate contracts, but excluding,
however, (a) amortization of debt discount, (b) interest paid in
property other than cash, (c) any other interest expense not
payable in cash, (d) interest on $16,000,000 principal amount of
the Subordinated Notes and (e) commitment fees payable under the
Revolving Credit Agreement and the Dynalectric Revolving Credit
Agreement, all as determined in conformity with GAAP.
"Consolidated EBIT" for any period means Consolidated Net
Income (Loss) for such period increased (to the extent already
deducted therefrom) by the sum, on a consolidated basis, of (a)
all income tax expense for such period to the extent included in
Consolidated Net Income (Loss), and (b) all interest expense for
such period to the extent included in Consolidated Net Income
(Loss).
"Consolidated Fixed Charge Coverage Ratio" at any date
means the ratio of (a) Consolidated EBIT plus depreciation and
amortization of the Operating Companies less any Capital
Expenditures of the Operating Companies for the applicable
quarters immediately preceding such determination date (the
"Reference Period") to (b) the sum of (i) Consolidated Cash
Interest Expense incurred by the Operating Companies calculated
on a pro forma basis for the Reference Period; (ii) (A) for the
Reference Period from January 1, 1995 through December 31, 1995,
stated interest on the Securities, the Series A Notes and the
Subordinated Notes, excluding interest on $16,000,000 principal
amount of the Subordinated Notes, accreted during the period from
October 1, 1995 through December 31, 1995, (B) for the Reference
Period from April 1, 1995 through March 31, 1996, stated interest
on the Securities, the Series A Notes and the Subordinated Notes,
excluding interest on $16,000,000 principal amount of the
Subordinated Notes, accreted from October 1, 1995 through March
31, 1996, (C) for the Reference Period from July 1, 1995 through
June 30, 1996, stated interest on the Securities, the Series A
Notes and the Subordinated Notes, excluding interest on
$16,000,000 principal amount of the Subordinated Notes, accreted
from October 1, 1995 through June 30, 1996, (D) for the Reference
Period from October 1, 1995 through September 30, 1996, and for
each Reference Period thereafter, stated interest on the
Securities, the Series A Notes and the Subordinated Notes,
excluding interest on $16,000,000 principal amount of the
Subordinated Notes, accreted during such Reference Period; and
(iii) cash dividends (including on any preferred stock) paid by
the Operating Companies during the Reference Period to a Person
other than an Operating Company. For purposes of this
definition, the factors set forth in (a) and (b) above (other
than cash dividends) shall be calculated after giving effect on a
pro forma basis (as if the same occurred at the beginning of the
Reference Period) to (i) the acquisition by any Operating Company
of any Person which, as a result of such acquisition, becomes a
wholly-owned Subsidiary or the acquisition of assets constituting
a business by any Operating Company during such Reference Period
and (ii) any Asset Sales by an Operating Company (excluding gains
or losses recognized from such Asset Sales) occurring during the
Reference Period. In calculating cash interest expense for
purposes of determining the denominator of this ratio, interest
on Indebtedness of any Operating Company determined on a
fluctuating basis, to the extent such interest is covered by an
agreement relating to an interest swap obligation, shall be
deemed to accrue at the rate per annum resulting after giving
effect to the operation of such agreement.
"Consolidated Net Income (Loss)" means, for any period, the
aggregate of the net income (loss) of the Operating Companies for
such period, determined on a consolidated basis in accordance
with GAAP, provided that there shall be excluded from such net
income (to the extent otherwise included therein) (a) any gain or
loss realized upon the sale or other disposition (including with-
out limitation dispositions pursuant to sale-leaseback
transactions and costs related to closings of operations, if
incurred) of any real property or equipment of the Operating
Companies which is not sold or otherwise disposed of in the
ordinary course of business or of any Capital Stock of any Person
owned by any Operating Company; (b) the net income (loss) of any
such Person accounted for by the equity method of accounting
(other than a venture permitted under Section 4.14(k)), except to
the extent of the amount of dividends or distributions paid to an
Operating Company; and (c) the net income (loss) of any other
Person acquired by any Operating Company in a pooling of
interests transaction for any period prior to the date of such
acquisition.
"Consolidated Tangible Net Worth" means, as at any date of
determination, the consolidated tangible net worth of the
Operating Companies, determined on a consolidated basis in
accordance with GAAP.
"Contractor" means any Domestic MES Subsidiary as of the
time of any determination of Seaboard Hard Dollar Backlog.
"Contractor Hard Dollar Backlog" means, for any Contractor
that is the subject of a Contractor Sale, the aggregate contract
price of all Seaboard bonded contracts of such Contractor
(including contracts awarded but on account of which work has not
yet commenced) less the amounts earned on account of such
contracts, calculated on a percent of completion basis as of the
month ended prior to the date of such Contractor Sale and in
accordance with GAAP.
"Contractor Sale" means any sale or other disposition,
pursuant to one transaction or a series of transactions, of all
or substantially all of the Capital Stock or assets of a
Contractor.
"Contractual Obligation" of any Person means any
obligation, agreement, undertaking or similar provision of any
security issued by such Person or of any agreement, undertaking,
contract, lease, indenture, mortgage, deed of trust or other
instrument (excluding a Security or this Indenture) to which such
Person is a party or by which it or any of its property is bound
or to which any of its properties is subject, and includes,
without limitation, such Person's Material Contractual
Obligations.
"Corporate Trust Office" shall be at the address of the
Trustee specified in Section 12.02 or such other address as the
Trustee may give notice of to the Company.
"Current Assets" means, at any date, the total consolidated
current assets of the Operating Companies at such date,
determined in conformity with GAAP.
"Current Liabilities" means, at any date, the total
consolidated current liabilities of the Operating Companies at
such date, determined in conformity with GAAP.
"Custodian" has the meaning set forth in Section 6.01(b).
"Default" means any event that is, or after notice or
passage of time or both would be, an Event of Default.
"Defender" means (a) so long as it is a Subsidiary of the
Company, Defender Indemnity Ltd., a Vermont corporation, and its
successors, and (b) any other Domestic MES Subsidiary conducting
insurance related services for the Company and its Subsidiaries
similar to those conducted by Defender Indemnity Ltd.
"Disqualified Stock" means any Capital Stock which, by its
terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the
happening of any event, matures or is mandatorily redeemable,
pursuant to a sinking fund obligation or otherwise, or redeemable
at the option of the holder thereof, in whole or in part, on or
prior to the maturity date of the Securities.
"Domestic MES Subsidiaries" means each of the Subsidiaries
of MES other than the Foreign MES Subsidiaries.
"Dynalectric Company" means, for so long as it is a
Subsidiary of the Company, each of the following: Dynalectric
Company, Dynalectric Company of Nevada, Inc., Dyn Specialty
Contracting, Inc., Contra Costa Electric, Inc., JWP
Systems/Kirkwood Electric Company, Inc., B&B Contracting and
Supply Company, and their respective successors.
"Dynalectric Revolving Credit Agreement" means the Credit
Agreement, dated as of the Issue Date, by and among the Company,
the Dynalectric Companies and the other parties thereto and their
respective successors and assigns, and any refinancings,
replacements or renewals thereof permitted by Section 4.09.
"ERISA" means the Employee Retirement Income Security Act
of 1974, as amended from time to time, and the regulations
promulgated and rulings issued thereunder.
"ERISA Affiliate" means any trade or business (whether or
not incorporated) that is a member of a controlled group of which
the Company or any of its Subsidiaries is a member or that is
under common control with the Company or any of its Subsidiaries
within the meaning of Section 414 of the Code and the regulations
promulgated and rulings issued thereunder.
"ERISA Event" means (a) a Reportable Event, with respect to
a Title IV Plan or a Multiemployer Plan (other than a Reportable
Event not subject to the provision for 30-day notice to the
PBGC), or an event described in Section 4068 of ERISA; (b) the
withdrawal of the Company or any of its Subsidiaries or any ERISA
Affiliate from a Title IV Plan subject to Section 4063 of ERISA
during a plan year in which it was a "substantial employer," as
such term is defined in Section 4001(a)(2) of ERISA, or the
incurrence of liability by the Company or any of its Subsidiaries
or any ERISA Affiliate under Section 4064 of ERISA upon the
termination of a Title IV Plan subject to Section 4063 of ERISA;
(c) the complete or partial withdrawal of the Company, any of its
Subsidiaries or any ERISA Affiliate from any Multiemployer Plan;
(d) the filing of a notice of intent to terminate a Title IV Plan
pursuant to Section 4041(a)(2) of ERISA or the treatment of a
plan amendment as a termination under Section 4041 of ERISA; (e)
the institution of proceedings to terminate a Title IV Plan or
Multiemployer Plan by the PBGC under Title IV of ERISA; (f) the
failure to make required contributions to a Qualified Plan; or
(g) any other event or condition which might constitute grounds
under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Title IV Plan or
Multiemployer Plan, other than PBGC premiums due but not
delinquent under Section 4007 of ERISA.
"Event of Default" has the meaning set forth in Section
6.01(a).
"Excess Cash" means, at any date of determination, (a) if
the Seaboard Hard Dollar Backlog is less than $280,000,000, the
excess, if any, of Available Cash over $40,000,000, and (b) if
the Seaboard Hard Dollar Backlog equals or exceeds $280,000,000,
(i) the sum of the balances, from the financial statements
reflecting all necessary adjustments and accruals required by
Generally Accepted Accounting Principles, of (A) cash and cash
equivalents of the Domestic MES Subsidiaries and the Company
other than cash restricted by agreement or contract (but
including such cash restricted by agreement or contract under
contracts for which there is an equal and offsetting account
payable included in (ii) (A) of this definition), (B) accounts
receivable of the Domestic MES Subsidiaries outstanding less than
90 days, excluding any amounts specifically reserved for and
reduced for a pro-rata portion of general accounts receivable
reserves, including any reserves maintained by the Company, (C)
costs in excess of billings for the Domestic MES Subsidiaries,
net of reserves, including any reserves maintained by the
Company, and (D) (x) $20,000,000 at any time that the Seaboard
Hard Dollar Backlog is greater than or equal to $280,000,000 but
less than $300,000,000, (y) $10,000,000 at any time that the
Seaboard Hard Dollar Backlog is greater than or equal to
$300,000,000 but less than $320,000,000, and (z) zero if the
Seaboard Hard Dollar Backlog is equal to or greater than
$320,000,000; less (ii) the sum of (A) all current liabilities of
the Domestic MES Subsidiaries and the Company (but not including
any liability on account of any Funded Indebtedness), and (B) any
balance outstanding under any working capital revolver or lines
of credit of or guaranteed by the Domestic MES Subsidiaries or
the Company, to the extent that such balance is not already
classified as a current liability under clause (ii)(A) above. A
positive result of this calculation constitutes Excess Cash. For
purposes of determining Excess Cash, any date of determination
shall be at a financial reporting quarter end.
"Exchange Act" means the Securities Exchange Act of 1934,
as amended.
"Foreign MES Subsidiaries" means Comstock, each U.K.
Subsidiary, each Middle-East Subsidiary, each Malaysian
Subsidiary, U2, and any other Subsidiary of any MES Company
permitted hereunder, incorporated and organized in a jurisdiction
other than the United States of America, and each of their
respective Subsidiaries.
"Funded Indebtedness" of any Person, means the sum, without
duplication, of (a) total consolidated long-term Indebtedness of
such Person as shown on such Person's consolidated balance sheet
(including current maturities of long-term Indebtedness and
excluding Indebtedness outstanding under the Revolving Credit
Agreement), (b) total Capital Lease Obligations of such Person
reported as long-term Indebtedness on such Person's consolidated
balance sheet, and (c) Guaranties by such Person of the Funded
Indebtedness of others.
"GAAP" means Generally Accepted Accounting Principles as in
effect on the Issue Date.
"Generally Accepted Accounting Principles" means generally
accepted accounting principles in the United States of America as
in effect from time to time set forth in the opinions and
pronouncements of the Accounting Principles Board and the
American Institute of Certified Public Accountants and the
statements and pronouncements of the Financial Accounting
Standards Board, or in such other statements by such other entity
as may be in general use by significant segments of the
accounting profession, which are applicable to the circumstances
as of the date of determination.
"Guarantors" means, collectively, MES and SellCo and their
respective successors, and "Guarantor" means either of the
Guarantors individually.
"Guaranty" or "guaranty" means, as applied to any
obligation, (a) a guaranty (other than (i) by endorsement of
negotiable instruments for collection in the ordinary course of
business, and (ii) a Performance Guaranty), direct or indirect,
in any manner (including, without limitation, letters of credit
and reimbursement agreements in respect thereof), of any part or
all of such obligation including, without limitation, the
Guaranty pursuant to Article 11; and (b) an agreement, direct or
indirect, contingent or otherwise, the practical effect of which
is to assure in any way the payment or performance (or payment of
damages in the event of non-performance) of any part or all of
such obligation, including, without limiting the foregoing, the
payment of amounts drawn down by letters of credit, but excluding
any Performance Guaranty. The amount of a guaranty shall be
deemed to be the maximum amount of the obligation guarantied for
which the guarantor could be held liable under such guaranty.
"Holder" means a Person in whose name a Security is
registered.
"Imprest Accounts" means bank and other deposit accounts
maintained by the Company or any of its Subsidiaries which are
subject to Liens of the type described in clause (f) of the
definition of the term "Permitted Liens".
"Indebtedness" means, when used with reference to any
Person, any indebtedness, contingent or otherwise, in respect of
borrowed money (whether or not the recourse of the lender is to
the whole of the assets of such Person or only to a portion
thereof) or evidenced by bonds (other than bonds constituting
Performance Guaranties), notes, debentures or similar instruments
or obligations to provide cash collateral for or to cover or to
reimburse for drawings under letters of credit or representing
the balance deferred and unpaid of the purchase price of any
property (except any such balance that constitutes a trade
payable), and shall also include, without limitation (but without
duplication), (a) any Capital Lease Obligations of such Person,
(b) (to the extent not otherwise included in this definition)
Guaranties of items which would be included within this
definition (regardless of whether such items would appear upon
such balance sheet), and (c) all Indebtedness referred to above
secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any
Lien upon or in property (including, without limitation, accounts
and general intangibles) owned by such Person even though such
Person has not assumed or become liable for the payment of such
Indebtedness, provided that for purposes of computing
Indebtedness outstanding at any time, such items shall be
excluded to the extent that they would otherwise be eliminated as
inter-company items in consolidation.
"Indenture" means this Indenture as amended, supplemented
or otherwise modified from time to time.
"Insignificant Subsidiary" means, at any date of
determination, any Subsidiary of SellCo that (a) has not for the
90-day period ending on such date carried on any active trade or
business or owned the Capital Stock of any Subsidiary that,
during such period, carried on any active trade or business, and
(b) has total liabilities (including contingent liabilities
estimated by the Board of Directors of such Subsidiary in good
faith) that exceed its total assets.
"Insurance Related Letter of Credit Obligations" means, at
any time, the sum of (a) the maximum aggregate amount then
available to be drawn under all Insurance Related Letters of
Credit outstanding at such time (assuming the occurrence of, and
compliance with, all conditions for drawing) plus (b) the
aggregate amount of unpaid reimbursement obligations resulting
from drawings under Insurance Related Letters of Credit.
"Insurance Related Letters of Credit" means standby letters
of credit issued for the account of Defender or the Company in
the ordinary course of business to secure its payment obligations
under workers' compensation and liability insurance policies
underwritten by Defender or such other underwriter in respect of
the Company and its Subsidiaries and their respective employees
and businesses.
"Intercreditor Agreement" means the Intercreditor
Agreement, dated as of the Issue Date and substantially in the
form of Exhibit D hereto, among the Trustee, the Series A
Indenture Trustee, the SellCo Subordinated Indenture Trustee, the
Company, MES and SellCo, as the same may be amended, supplemented
or otherwise modified from time to time.
"Interest Deferral Securities" has the meaning set forth in
Section 2.02(d).
"Investment" means, when used with reference to any Person,
any direct or indirect advances, loans or other extensions of
credit or capital contributions by such Person to (by means of
transfers of property to others or payments for property or
services for the account or use of others, or otherwise), or
purchases or acquisitions by such Person of Capital Stock, bonds,
notes, debentures or other securities or instruments issued by,
any other Person.
"IRS" means the Internal Revenue Service, or any successor
thereto.
"Issue Date" means December [__], 1994.
"JWS" means, so long as it is a Subsidiary of the Company,
Jamaica Water Supply Company, a New York corporation, and its
successors.
"JWSC" means, (a) so long as it is a Subsidiary of the
Company, Jamaica Water Securities Corp., a New York corporation,
and its successors, and (b), so long as it is a Subsidiary of the
Company, the immediate parent corporation, if any, of Jamaica
Water Securities Corp., and its successors.
"Legal Holiday" has the meaning set forth in Section 12.07.
"Lien" means any mortgage, deed of trust, pledge,
hypothecation, assignment, deposit arrangement, security inter-
est, lien, charge, encumbrance or other preferential arrangement
of any kind intended to assure payment of any Indebtedness or
other obligation or to assure any performance by any Person
(including any conditional sale or other title retention
agreement, any lease in the nature thereof, and any agreement to
give any security interest).
"Malaysian Subsidiaries" means, so long as such corporation
is a Subsidiary of the Company, (a) the corporation to be
organized by the Company or any Subsidiary of the Company in
Malaysia in connection with the operation and maintenance of
power plants in Malaysia, and (b) if organized by a Subsidiary of
the Company, the immediate parent corporation of such corporation
so long as the principal asset of such parent corporation is such
corporation, each of such corporation's Subsidiaries, and their
respective successors.
"Management Stock Option Plan" means the Company's
Management Stock Option Plan, dated as of the Issue Date.
"Material Adverse Change" means a material adverse change
in any of (a) the condition (financial or otherwise), business,
performance, prospects, operations or properties of the Company
or of the Operating Companies taken as one enterprise; (b) the
legality, validity or enforceability of this Indenture, the
Securities, any Collateral Document, the Intercreditor Agreement
or any other document executed in connection with any of the
foregoing; (c) the perfection or priority of the Liens granted
pursuant to any Collateral Document; (d) the ability of the
Company to repay its obligations under the Securities or this
Indenture or to perform its obligations under the Securities,
this Indenture, any Collateral Document or the Intercreditor
Agreement; or (e) the rights and remedies of the Trustee or the
Holders of Securities under the Securities, this Indenture, any
Collateral Document or the Intercreditor Agreement.
"Material Adverse Effect" means an effect that results in
or causes, or has a reasonable likelihood of resulting in or
causing, a Material Adverse Change.
"Material Contractual Obligation" means, in respect of any
Person, (a) the articles of incorporation, bylaws, partnership
agreement, or other organizational and governing documents of
such Person; (b) in the case of the Company, the Series A Notes,
the Series A Indenture, the Series A Senior Pledge Agreement, the
Series A Subordinated Pledge Agreement, each of the other
"Collateral Documents" (as defined in the Series A Indenture) to
which it is a party, the Subordinated Notes, the Subordinated
Note Indenture, the Management Stock Option Plan, and the
Revolving Credit Agreement and the Dynalectric Revolving Credit
Agreement; (c) in the case of SellCo, the SellCo Subordinated
Notes, the SellCo Subordinated Indenture, the Securities, this
Indenture, the Series A SellCo Pledge Agreement, the Software
House SellCo Pledge Agreement and each of the other "Collateral
Documents" (as defined in the SellCo Subordinated Indenture) to
which it is a party; (d) in the case of MES, the Revolving Credit
Agreement, the Securities, this Indenture, the Subordinated Notes
and the Subordinated Note Indenture; and (e) in the case of the
Dynalectric Companies, the Dynalectric Revolving Credit
Agreement.
"MES" means MES Holdings Corporation, a Delaware
corporation, and its successors.
"MES Companies" means MES and each of its Subsidiaries.
"Middle-East Subsidiaries" means, so long as such Persons
are Subsidiaries of the Company, Lunar Drake & Scull (UAE), a
United Arab Emirates corporation, Drake & Scull Assarain, an
Omani corporation, Drake & Scull (Cayman Islands) Ltd., a Cayman
Islands corporation, JWP-Nesma Ltd., a Saudi Arabia corporation,
JWP (Cayman Islands), Ltd., a Cayman Islands corporation and
their respective successors.
"Multiemployer Plan" means a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA to which the Company or
any of its Subsidiaries or any ERISA Affiliate is making or
accruing an obligation to make contributions, or has within any
of the preceding five years made or accrued an obligation to make
contributions on behalf of participants who are or were employed
by any of them.
"Net Cash Proceeds" means, when used with reference to any
Asset Sale or series of related Asset Sales effected on or after
December 1, 1993 (other than an Asset Sale consisting of the
assets of any MES Company or of any Dynalectric Company or the
Capital Stock of Dyn Specialty Contracting, Inc.), (a) the
aggregate amount of the cash portion of the purchase price, and
(b) all other cash consideration (including, without limitation,
any cash payments received by way of deferred payment of
principal pursuant to a note and any interest thereon,
receivable, contingent payment arrangement, dividend,
distribution or otherwise, but only as and when received)
received after the Issue Date directly or indirectly by the
Company or any of its Subsidiaries in respect of an Asset Sale,
which cash consideration equals or exceeds $250,000, after
deducting, without duplication (i) sales, transfer and similar
taxes and reasonable out-of-pocket expenses and fees (including
reasonable legal, accounting and brokerage fees and expenses)
incurred by the Company or such Subsidiary (which taxes, expenses
and fees are classified as such in accordance with Generally
Accepted Accounting Principles) in connection with such sale;
(ii) employee severance costs incurred in connection with the
sale of any business constituting an Asset Sale; (iii) fixed,
determined liabilities in accordance with Generally Accepted
Accounting Principles retained by the Company or such Subsidiary
in connection with such Asset Sale including amounts payable in
respect of any insurance matters or employee benefit matters;
(iv) reserves established in respect of contingent liabilities in
accordance with Generally Accepted Accounting Principles retained
by the Company or such Subsidiary in connection with such Asset
Sale; (v) customary costs incurred in connection with the closing
of a business constituting or arising in connection with such
Asset Sale; and (vi) reserves maintained in accordance with the
Bankruptcy Plan by the Company or any disbursing agent therefor,
in respect of disputed unsecured claims against the Company;
provided, however, that with respect to the sale of the Capital
Stock or assets of one or more of the Water Companies, an
aggregate amount not in excess of $15,000,000, which is either
applied to the repayment of Indebtedness outstanding under and
pursuant to the Revolving Credit Agreement or deposited in a cash
collateral account pursuant to the provisions thereof, shall not
be considered "Net Cash Proceeds" hereunder.
"Net Debt Offering Proceeds" means the principal amount of
Indebtedness of the Company (other than Indebtedness incurred
under or evidenced by the Securities, the Software House Notes,
the SellCo Subordinated Notes, the Subordinated Notes, the
Revolving Credit Agreement, the Dynalectric Revolving Credit
Agreement, and the SellCo Intercompany Note), net of the amount
of (a) reasonable brokers' and advisors' fees and commissions
payable in connection with such Indebtedness; (b) all federal,
state and local taxes payable as a direct consequence of such
Indebtedness; (c) the reasonable fees and expenses directly
attributable to the incurrence of such Indebtedness, to the
extent not included in clause (a); and (d) reserves maintained in
accordance with the Bankruptcy Plan by the Company or any
disbursing agent therefor, in respect of disputed unsecured
claims against the Company.
"Net Equity Offering Proceeds" means the gross cash
proceeds received by the Company from the issuance, subsequent to
the Issue Date, of the Company's Capital Stock (upon the exercise
of options, warrants or otherwise), other than the issuance of
the Company's common stock pursuant to the Management Stock
Option Plan, less (a) all reasonable out-of-pocket expenses
(including reasonable legal, accounting and advisor's fees and
expenses), discounts and commissions incurred, and all federal,
state and local taxes assessed, in connection therewith; and (b)
reserves maintained in accordance with the Bankruptcy Plan by the
Company or any disbursing agent therefor, in respect of disputed
unsecured claims against the Company.
"Nevada Subsidiaries" means Dynalectric Company of Nevada
and Hansen Mechanical Contractors, Inc., each a Nevada
corporation, and their respective Subsidiaries and successors.
"Obligors" means, collectively, the Company and the
Guarantors, and "Obligor" means any of the Obligors singly.
"OECD" means the Organization for Economic Cooperation and
Development.
"Offer Price" has the meaning set forth in Section 4.18(a).
"Officer" means the Chairman of the Board, the President,
the Chief Financial Officer, the Treasurer, any Vice President,
the Assistant Treasurer, the Secretary, the Assistant Secretary
or the Controller of an obligor, as the context requires.
"Officers' Certificate" means a certificate signed by two
Officers of the Company, delivered to the Trustee, and which
shall include the statements set forth in Section 12.05.
"Operating Companies" means the Company, individually, each
of the MES Companies and each of the Dynalectric Companies.
"Opinion of Counsel" means a written opinion from
independent legal counsel who is acceptable to the Trustee. The
counsel may not be an employee of, or counsel to, the Company or
the Trustee.
"Paying Agent" has the meaning set forth in Section
2.03(a).
"Payment Securities" means the Securities issued under this
Indenture on the Issue Date.
"PBGC" means the Pension Benefit Guaranty Corporation or
any successor thereto.
"Pension Plan" means an employee pension benefit plan, as
defined in Section 3(2) of ERISA (other than a Multiemployer
Plan), which is not an individual account plan as defined in
Section 3(34) of ERISA, and which the Company, any of its
Subsidiaries or, if a Title IV Plan, any ERISA Affiliate
maintains, contributes to or has an obligation to contribute to
on behalf of participants who are or were employed by any of
them.
"Performance Guaranties" means, in respect of the Company
or any of its Subsidiaries, contingent obligations arising from
the issuance of performance guaranties, assurances, indemnities,
bonds, letters of credit or similar agreements in the ordinary
course of business in respect of the contracts (other than for
borrowed money) of the Company, any of the Subsidiaries of the
Company, or Unique Construction for the benefit of surety
companies or for the benefit of others to induce such others to
forgo the issuance of a surety bond in their favor.
"Permitted Investments" means (a) securities issued or
directly and fully guarantied or insured by the United States of
America or any agency or instrumentality thereof (provided that
the full faith and credit of the United States of America is
pledged in support thereof) with a maturity not more than one
year from the date of acquisition; (b) time deposits and
certificates of deposit of any domestic commercial bank of
recognized standing having capital and surplus of at least
$500,000,000 or a commercial bank organized under the laws of any
other country that is a member of the OECD and having total
assets of at least $500,000,000, in either case, the outstanding
short-term securities of which are rated at least A-1 by Standard
& Poor's Corporation or at least P-1 by Moody's Investors
Service, Inc., or carry an equivalent rating by a nationally
recognized rating agency if both of the two named rating agencies
cease publishing ratings of investments, which time deposits or
certificates of deposit mature not more than one year from the
date of acquisition; (c) commercial paper and demand notes rated
at least A-1 or the equivalent thereof by Standard & Poor's
Corporation or at least P-1 or the equivalent thereof by Moody's
Investors Service, Inc. and maturing within one year after the
date of acquisition; and (d) debt securities issued by any State
of the United States of America or any political subdivision
thereof rated at least A- or the equivalent thereof by Standard &
Poor's Corporation or A3 or the equivalent thereof by Moody's
Investors Service, Inc. and maturing within one year after the
date of acquisition.
"Permitted Liens" means, with respect to any Person,
(a) pledges or deposits by such Person under workmen's
compensation laws, unemployment insurance laws or similar
legislation, or good faith deposits in connection with bids,
tenders, contracts (other than for borrowed money) or leases to
which such Person is a party, or deposits to secure public or
statutory obligations of such Person or deposits of cash or
United States Government bonds to secure surety or appeal bonds
to which such Person is a party, or deposits as security for
contested taxes or import duties or for the payment of rent; (b)
Liens arising by operation of law in favor of materialmen,
mechanics, warehousemen, carriers, lessors, bankers or other
similar Persons incurred in the ordinary course of business which
secure its obligations (other than for borrowed money) to such
Person; provided, however, that (i) the Person incurring such
Lien is not in default with respect to such payment obligation to
such other Person, or (ii) the Person incurring such Lien is in
good faith and by appropriate proceedings diligently contesting
such obligation and adequate provision is made for the payment
thereof in accordance with Generally Accepted Accounting
Principles; (c) Liens for taxes, assessments or other
governmental charges not yet subject to penalties for non-payment
or which are being contested in good faith and by appropriate
proceedings, if adequate reserves, as may be required by
Generally Accepted Accounting Principles, shall have been made
therefor; (d) Liens in favor of issuers of surety bonds issued
pursuant to the request of and for the account of such Person or
any Person guarantying such surety bonds in the ordinary course
of its business; (e) survey exceptions, encumbrances, easements
or reservations of, or rights of others for, rights of way,
sewers, electric lines, telegraph and telephone lines and other
similar purposes, or zoning or other restrictions as to the use
of real properties or Liens incidental to the conduct of the
business of such Person or to the ownership of its properties;
and (f) Liens consisting of restrictions regarding the
disbursement or withdrawal of funds deposited by a Subsidiary of
the Company in bank accounts maintained by such Subsidiary in the
ordinary course of business consistent with past practice, which
accounts are (A) maintained in connection with specific
construction projects or contracts from which payments and
disbursements with respect to such projects or contracts are to
be made or (B) required by customers of such Subsidiary to be
excluded from the Company's or such Subsidiary's cash management
system.
"Person" means any individual, corporation, limited
liability company, partnership, joint venture, trust,
unincorporated organization or government or any agency or
political subdivision thereof.
"Plan" means an employee benefit plan, as defined in
Section 3(3) of ERISA, which the Company or any of its
Subsidiaries maintains, contributes to or has an obligation to
contribute to on behalf of participants who are or were employed
by any of them.
"Pledge Agreements" means the Software House Senior Pledge
Agreement, the Software House Subordinated Pledge Agreement and
the Software House SellCo Pledge Agreement.
The "principal" of a debt security means the principal of
the security plus the premium, if any, on the security.
"Qualified Plan" means an employee pension benefit plan, as
defined in Section 3(2) of ERISA, which is intended to be tax-
qualified under Section 401(a) of the Code, and which the
Company, any of its Subsidiaries or any ERISA Affiliate
maintains, contributes to or has an obligation to contribute to
on behalf of participants who are or were employed by any of
them.
"Quarter" means a fiscal quarterly period of the Company or
any of its Subsidiaries.
"Registrar" has the meaning set forth in Section 2.03(a).
"Reportable Event" means any of the events described in
Section 4043(b)(1), (2), (3), (5), (6), (8) or (9) of ERISA.
"Restricted Debt Prepayment" means any purchase,
redemption, defeasance (including, but not limited to, in-sub-
stance or legal defeasance), prepayment, other acquisition or re-
tirement for value, or payment (other than (a) a required
scheduled or mandatory payment or redemption or required payment
on demand; (b) payments under the Revolving Credit Agreement, the
Dynalectric Revolving Credit Agreement or other revolving credit
facilities of the Operating Companies permitted herein; (c)
payments made by a Subsidiary of the Company to the Company or
another Subsidiary of the Company in respect of intercompany
Indebtedness permitted hereunder; or (d) payments permitted under
Section 4.09(xxxi)), directly or indirectly, by the Company or
any of its Subsidiaries, of Indebtedness of the Company or any of
its Subsidiaries, other than in respect of the Securities.
"Restricted Investment" means any direct or indirect
Investment by the Company or any Subsidiary of the Company in any
Affiliate of the Company, other than investments permitted
pursuant to Section 4.14.
"Restricted Payment" means any (a) Stock Payment by the
Company or a Subsidiary of the Company, (b) Restricted
Investment, or (c) Restricted Debt Prepayment. Notwithstanding
the foregoing, Restricted Payments shall not include tax payments
by a Subsidiary of the Company to the Company or to another
Subsidiary of the Company that is the parent entity of such
Subsidiary, or payments of dividends or other distributions by a
Subsidiary of the Company so long as such dividends or
distributions are made pro rata to all shareholders of the same
class in respect of which such dividend or distribution is made.
"Revolving Credit Agreement" means the Credit Agreement,
dated as of the Issue Date, by and among the Company, MES, and
the other parties thereto and their respective successors and
assigns, and any refinancings, replacements or renewals thereof
permitted by Section 4.09.
"Rohr Indebtedness" means Indebtedness of University
Cogeneration, Inc. owed to Connecticut General Insurance Company
and outstanding on the Issue Date.
"Seaboard" means Seaboard Surety Company.
"Seaboard Hard Dollar Backlog" means the aggregate contract
price of all Seaboard bonded contracts of Contractors (including
contracts awarded but on account of which work has not yet
commenced), less the amounts earned on account of such contracts,
calculated on a percent of completion basis in accordance with
Generally Accepted Accounting Principles less the Contractor Hard
Dollar Backlog.
"Sea Cliff" means, so long as it is a Subsidiary of the
Company, Sea Cliff Water Company, a New York corporation, and its
successors.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as
amended.
"Security" means any Payment Security or any Interest
Deferral Security.
"SellCo" means SellCo Corporation, a Delaware corporation,
and its successors.
"SellCo Companies" means SellCo, each of the Subsidiaries
of SellCo and each of the Software House Subsidiaries.
"SellCo Intercompany Note" means the promissory note of the
Company in favor of SellCo, dated the Issue Date, in an aggregate
principal amount of $5,464,133.78, which promissory note shall be
payable after the payment in full of the Securities and prior to
the date on which the SellCo Subordinated Notes are redeemed and
canceled or deemed to have been redeemed and canceled pursuant to
Section 3.09 of the SellCo Subordinated Indenture, but in no
event earlier than the fifth anniversary of the "Issue Date" (as
defined in the SellCo Subordinated Indenture).
"SellCo Subordinated Indenture" means the Indenture, dated
the Issue Date, between SellCo, as issuer and Shawmut Bank
Connecticut National Association, as trustee, pursuant to which
SellCo issued the SellCo Subordinated Notes.
"SellCo Subordinated Indenture Trustee" means the
"Trustee," as defined in the SellCo Subordinated Indenture.
"SellCo Subordinated Notes" means SellCo's 12% Subordinated
Contingent Payment Notes, Due 2004, issued by SellCo pursuant to
the Sellco Subordinated Indenture in an aggregate principal
amount not exceeding the sum of $46,000,000 plus the Additional
Interest Amount (as defined in the Bankruptcy Plan) in respect
thereof, together with any pay-in-kind interest accrued thereon
pursuant to the terms thereof.
"SellCo Subordinated Pledge Agreement" means the Pledge
Agreement, dated the Issue Date, pursuant to which the "Pledged
Collateral," as defined therein, shall be pledged by SellCo to
secure the payment of SellCo's obligations under the SellCo
Subordinated Notes and the SellCo Subordinated Indenture, as the
same may be amended, supplemented or otherwise modified from time
to time.
"Series A SellCo Pledge Agreement" means the Pledge
Agreement, dated the Issue Date and substantially in the form of
Exhibit B-3 hereto, pursuant to which the "Pledged Collateral,"
as defined therein, shall be pledged by SellCo to secure the
payment of SellCo's obligations under the Securities and this
Indenture, as the same may be amended, supplemented or otherwise
modified from time to time.
"Series A Indenture" means the Indenture, dated the Issue
Date, between the Company, as issuer, and IBJ Schroder Bank &
Trust Company, as trustee, pursuant to which the Company issued
the Series A Notes.
"Series A Indenture Trustee" means the "Trustee," as
defined in the Series A Indenture.
"Series A Notes" means the Company's 7% Senior Secured
Notes, Series A, Due 1997, issued by the Company pursuant to the
Series A Indenture in an aggregate principal amount not exceeding
the sum of $[51,000,000] plus the Additional Interest Amount (as
defined in the Bankruptcy Plan) in respect thereof, together with
any pay-in-kind interest accrued thereon pursuant to the terms
thereof.
"Series A Senior Pledge Agreement" means the Pledge
Agreement, dated the Issue Date, pursuant to which the "Pledged
Collateral," as defined therein, shall be pledged by the Company
to secure the payment of the Company's obligations under the
Series A Notes and the Series A Indenture, as the same may be
amended, supplemented or otherwise modified from time to time.
"Series A Subordinated Pledge Agreement" means the Pledge
Agreement, dated the Issue Date, pursuant to which the "Pledged
Collateral," as defined therein, shall be pledged by the Company
to secure the payment of the Company's obligations under the
Series A Notes and the Series A Indenture, as the same may be
amended, supplemented or otherwise modified from time to time.
"Software House SellCo Pledge Agreement" means the Pledge
Agreement, dated the Issue Date, pursuant to which the "Pledged
Collateral," as defined therein, shall be pledged by SellCo to
secure the payment of SellCo's obligations under the Software
House Notes and the Software House Indenture, as the same may be
amended, supplemented or otherwise modified from time to time.
"Software House Senior Pledge Agreement" means the Pledge
Agreement, dated the Issue Date and substantially in the form of
Exhibit B-1 hereto, pursuant to which the "Pledged Collateral,"
as defined therein, shall be pledged by the Company to secure the
payment of the Company's obligations under the Securities and the
Indenture, as the same may be amended, supplemented or otherwise
modified from time to time.
"Software House Subordinated Pledge Agreement" means the
Pledge Agreement, dated the Issue Date and substantially in the
form of Exhibit B-2 hereto, pursuant to which the "Pledged
Collateral," as defined therein, shall be pledged by the Company
to secure the payment of the Company's obligations under the
Securities and the Indenture, as the same may be amended,
supplemented or otherwise modified from time to time.
"Software House Subsidiaries" means, so long as such
Persons are Subsidiaries of the Company, JWP/MEC Corp., a
Pennsylvania corporation, University Energy Services of
California Inc. (and, if organized by the Company, a direct
subsidiary of the Company, so long as (a) the principal asset of
such subsidiary is the Capital Stock of University Energy
Services of California Inc. and (b) the Capital Stock of such
subsidiary is pledged to the Trustee under the Series A
Subordinated Pledge Agreement), a California corporation, JWP
Pacific International Inc., a Delaware corporation, JWP Telecom,
Inc., a Delaware corporation, and JWP Energy Products, Inc., an
Idaho corporation, each of the Subsidiaries of such corporations,
and their respective successors.
"Specified Holder" means a Holder to which one or more
Securities is issued on the Issue Date.
"Stock Payment" means:
(a) with respect to a Person, any dividend, either in cash
or in property (except dividends payable in common stock of such
Person), on, or the making by such Person of any other
distribution in respect of, its Capital Stock, now or hereafter
outstanding, or the redemption, repurchase, retirement or other
acquisition for value by such Person, directly or indirectly, of
its Capital Stock or any warrants, rights or options to purchase
or acquire shares of any class of its Capital Stock, now or
hereafter outstanding; and
(b) with respect to any Subsidiary, any such dividend
(except dividends payable in common stock of such Subsidiary) or
distribution in respect of, or any such redemption, repurchase,
retirement or other acquisition of, its Capital Stock or the
Capital Stock of any Person of which it is a Subsidiary or any
warrants, rights, or options to purchase or acquire shares of any
class of its Capital Stock or the Capital Stock of any Person of
which it is a Subsidiary, now or hereafter outstanding.
"Subordinated Notes" means the Company's 11% Series C
Notes, Due 2001, issued by the Company pursuant to the
Subordinated Note Indenture in an aggregate principal amount not
exceeding the sum of $60,000,000 plus the Additional Interest
Amount (as defined in Bankruptcy Plan) in respect thereof,
together with any pay-in-kind interest accrued thereon pursuant
to the terms thereof.
"Subordinated Note Indenture" means the Indenture, dated
the Issue Date, between the Company, as issuer and Shawmut Bank
Connecticut National Association, as trustee, pursuant to which
the Company issued the Subordinated Notes.
"Subsidiary" of a Person means (a) any corporation of which
the outstanding Capital Stock having at least a majority of the
votes entitled to be cast in the election of directors, under
ordinary circumstances, shall at the time be owned or controlled,
directly or indirectly, by such Person, by such Person and one or
more of its Subsidiaries or by one or more of its Subsidiaries;
(b) any other Person the power to direct the policies, management
or affairs of which is contractually held by such Person, or by
such Person and one or more of its Subsidiaries or by one or more
of its Subsidiaries; or (c) any other Person of which at least a
majority of voting interest, under ordinary circumstances, is at
the time, directly or indirectly, owned or controlled by such
Person, or by such Person and one or more of its Subsidiaries or
by one or more of its Subsidiaries. Notwithstanding the
foregoing, for purposes of this Indenture, (i) none of JWP
Information Services, Inc., Antwerp Education Center N.V.,
Microcom N.V., Sivea Benelux, Micro Avenue or JWP Information
Systems S.A.R.L. shall be deemed Subsidiaries of the Company or
any of its Subsidiaries, and (ii) any Middle-East Subsidiary and
any Malaysian Subsidiary and its respective Subsidiaries shall be
deemed Subsidiaries of the Company and certain of its
Subsidiaries so long as the Company, individually or together
with any of such Subsidiaries of the Company, owns or controls
Capital Stock entitling it to cast at least one-third of the
votes entitled to be cast at the election of directors of such
Middle East Subsidiary or such Malaysian Subsidiary,
respectively.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb) as in effect on the date on which this
Indenture is qualified under the TIA, except as provided in
Sections 9.01 and 9.03 hereof.
"Title IV Plan" means a Pension Plan, other than a
Multiemployer Plan, which is covered by Title IV of ERISA.
"Trustee" means United States Trust Company of New York, a
New York corporation, until a successor replaces it in accordance
with the applicable provisions of this Indenture and thereafter
means the successor serving hereunder.
"Trust Officer" means the Chairman or Vice Chairman of the
Board of Directors, the President or any other officer or
assistant officer of the Trustee assigned by the Trustee to
administer its corporate trust office.
"U.K. Subsidiaries" means, so long as such Persons are
Subsidiaries of the Company, JWP U.K. Ltd., a United Kingdom
corporation, and each of its Subsidiaries (other than any Middle
East Subsidiary or any Malaysian Subsidiary) and their respective
successors.
"Unique Construction" means Unique Construction Company, an
Illinois corporation, and its successors.
"Unrestricted Cash Coverage Ratio" at any date means the
ratio of (a) Consolidated EBIT (other than Consolidated EBIT
attributable to the Foreign MES Subsidiaries) plus depreciation
and amortization of the Operating Companies (other than
depreciation and amortization attributable to the Foreign MES
Subsidiaries) plus any cash received by any of the Operating
Companies (other than the Foreign MES Subsidiaries from any Water
Company or any Foreign MES Subsidiary) during the applicable
quarters immediately preceding such determination date less any
Capital Expenditures of the Operating Companies (other than
Capital Expenditures of the Foreign MES Subsidiaries not funded
by the Company) for the applicable quarters immediately preceding
such determination date (the "Reference Period"), to (b) the sum
of (i) Consolidated Cash Interest Expense incurred by the
Operating Companies (other than the Foreign MES Companies)
calculated on a pro forma basis for the Reference Period, and
(ii) cash dividends (including on any preferred stock) paid by
the Operating Companies (other than the Foreign MES Companies)
during the Reference Period to a Person other than an Operating
Company (other than the Foreign MES Companies). For purposes of
this definition, the factors set forth in (a) and (b) above
(other than cash dividends) shall be calculated after giving
effect on a pro forma basis (as if the same occurred at the
beginning of the Reference Period) to (i) the acquisition by any
Operating Company of any Person which, as a result of such acqui-
sition, becomes a wholly-owned Subsidiary or the acquisition of
assets constituting a business by any Operating Company during
such Reference Period and (ii) any Asset Sales by an Operating
Company (excluding gains or losses recognized from such Asset
Sales) occurring during the Reference Period. In calculating
cash interest expense for purposes of determining the denominator
of this ratio, interest on Indebtedness of any Operating Company
determined on a fluctuating basis, to the extent such interest is
covered by an agreement relating to an interest swap obligation,
shall be deemed to accrue at the rate per annum resulting after
giving effect to the operation of such agreement.
"U.S. Government Obligations" has the meaning set forth in
Section 8.01(f).
"U2" means, so long as it is a Subsidiary of the Company,
University Mechanical Contractors, Inc., a Washington
corporation, and its successors.
"Water Company" means, so long as it is a Subsidiary of the
Company, each of JWS, JWSC, and Sea Cliff, and their respective
successors.
"Withdrawal Liability" means, at any time, the aggregate
amount of the liabilities, if any, pursuant to Section 4201 of
ERISA, and any increase in contributions pursuant to Section 4243
of ERISA with respect to all Multiemployer Plans.
Section 1.02. Incorporation by Reference of Trust Indenture
Act.
Whenever this Indenture refers to a provision of the TIA,
the provision is incorporated by reference in and made a part of
this Indenture.
The following TIA terms used in this Indenture have the
following meanings:
"indenture securities" means the Securities;
"indenture security holder" means a Holder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the
Trustee; and
"obligor" on the Securities means the Company or any other
obligor on the Securities (including each Guarantor).
All other terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined
by SEC rule under the TIA have the meanings so assigned to them.
Section 1.03. Rules of Construction.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(c) "or" is not exclusive;
(d) words in the singular include the plural, and in the
plural include the singular; and
(e) provisions apply to successive events and
transactions.
ARTICLE 2
THE SECURITIES
Section 2.01. Form and Dating.
The Securities, and the Trustee's certificate of
authentication in respect thereof, shall be substantially in the
form of Exhibit A, the terms of which are incorporated in and
made a part of this Indenture. The Securities may have
notations, legends or endorsements required by law, stock
exchange rule, agreements to which the Company is subject or
usage. Each Security shall be dated the date of its
authentication. The Securities shall be issuable only in
registered form and only in denominations of $100 and integral
multiples thereof.
Section 2.02. Execution and Authentication.
(a) An Officer of the Company shall sign the Securities
for the Company by manual or facsimile signature. Such signature
shall be attested to by the Secretary of the Company. The Com-
pany's seal shall be reproduced on the Securities. Each
Guarantor shall execute its Guaranty in the manner set forth in
Section 11.03. If an Officer whose signature is on a Security no
longer holds that office at the time the Security is authen-
ticated, the Security shall nevertheless be valid.
(b) A Security shall not be valid until authenticated by
the manual signature of a Trust Officer on behalf of the Trustee.
The signature of such Trust Officer shall be conclusive evidence,
and the only evidence, that the Security has been authenticated
under this Indenture.
(c) The Trustee shall authenticate Payment Securities for
original issue up to the aggregate principal amount stated in
paragraph 4 of the Securities, upon a written order of the
Company signed by two Officers, which order shall set forth the
amount and the date of the Securities to be authenticated. The
aggregate principal amount of Payment Securities outstanding at
any time may not exceed $11,357,000 except as provided in Section
2.07.
(d) As provided in Paragraph 2 of the Securities, the
Company is required on each interest payment date, in lieu of the
payment interest in cash on the outstanding Securities, to pay
interest on the outstanding Securities through the issuance of
additional Securities (the "Interest Deferral Securities") in an
aggregate principal amount equal to the interest that would be
payable with respect to the outstanding Securities if such
interest were paid in cash. On each interest payment date, the
Trustee or authenticating agent shall authenticate Interest
Deferral Securities for issuance to each Holder of Securities on
the preceding record date, as shown by the records of the
Registrar, in the amount required to pay such interest (which
shall be determined based on the aggregate amount of Securities
held by each Holder as shown by the records of the Trustee).
Each issuance of Interest Deferral Securities shall be made pro
rata, except that the Company shall pay cash to any Holder to the
extent necessary to avoid issuing Interest Deferral Securities in
denominations which are not integral multiples of $100.
(e) The Trustee may appoint an authenticating agent
acceptable to the Company to authenticate Securities. Unless
limited by the term of such appointment, an authenticating agent
may authenticate Securities whenever the Trustee may do so. Each
reference in this Indenture to authentication by the Trustee
includes authentication by such agent. An authenticating agent
has the same rights as an Agent to deal with any obligor or an
Affiliate of any obligor.
Section 2.03. Registrar and Paying Agent.
(a) The Company shall maintain or cause to be maintained
an office or agency where Securities may be presented for
registration of transfer or for exchange ("Registrar") and an
office or agency where Securities may be presented or surrendered
for payment ("Paying Agent"). The Registrar shall keep a
register of the Securities and of their transfer and exchange.
The Company may appoint one or more co-registrars and one or more
additional paying agents. The term "Paying Agent" includes any
additional paying agent. The Company may change any Paying
Agent, Registrar or co-registrar without notice to any Holder.
The Company shall notify the Trustee of the name and address of
any Agent not a party to this Indenture. If the Company fails to
appoint or maintain another entity as Registrar or Paying Agent,
the Trustee shall act as such. The Company or any of its
Subsidiaries may act as Paying Agent, Registrar or co-registrar,
except as otherwise provided in this Indenture.
(b) The Company shall enter into an appropriate agency
agreement with any Agent not a party to this Indenture, which
shall incorporate the provisions of the TIA. The agreement shall
implement the provisions of this Indenture that relate to such
Agent. The Company shall give prompt written notice to the
Trustee of the name and address of any such Agent. If the
Company fails to maintain a Registrar or Paying Agent, or fails
to give the foregoing notice, the Trustee shall act as such, and
shall be entitled to appropriate compensation in accordance with
Section 7.07.
(c) The Company initially appoints the Trustee as
Registrar, Paying Agent and agent for service of notices and
demands in connection with the Securities.
Section 2.04. Paying Agent to Hold Money in Trust.
Not later than each date on which principal and interest on
the Securities is due and payable (other than by issuance of
Interest Deferral Securities), the Company (or any other obligor
on the Securities) shall deposit with the Paying Agent, in
immediately available funds, money sufficient to pay such
principal and interest. The Company (and any other obligor on
the Securities) shall require each Paying Agent other than the
Trustee to agree in writing that the Paying Agent shall hold in
trust for the benefit of Holders or the Trustee all money held by
the Paying Agent for the payment of principal of or interest on
the Securities (whether such money has been paid to it by the
Company or any other obligor on the Securities), and shall notify
the Trustee of any default by the Company (or any other obligor
on the Securities) in making any such payment. While any such
default continues, the Trustee may require a Paying Agent to pay
all money held by it to the Trustee. The Company at any time may
require a Paying Agent to pay all money held by it to the
Trustee. Upon payment over to the Trustee, the Paying Agent (if
other than the Company) shall have no further liability for the
money delivered to the Trustee. If the Company acts as Paying
Agent, it shall segregate and hold in a separate trust fund for
the benefit of the Holders all money held by it as Paying Agent.
Section 2.05. Holder Lists.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of
the names and addresses of the Holders and shall otherwise comply
with TIA Section 312(a). If the Trustee is not the Registrar,
the Company shall cause to be furnished to the Trustee at least
15 Business Days before each interest payment date and at such
other times as the Trustee may request in writing, within 30 days
of such request, a list in such form and as of such date as the
Trustee may reasonably require, of the names and addresses of the
Holders and the Company shall otherwise comply with TIA
Section 312(a).
Section 2.06. Transfer and Exchange.
(a) When Securities are presented to the Registrar or a
co-registrar with a request to register, transfer or exchange
them for an equal principal amount of Securities of other
authorized denominations, the Registrar shall register the trans-
fer or make the exchange if its requirements for such trans-
actions are met; provided, however, that any Security presented
or surrendered for registration of transfer or exchange shall be
duly endorsed or accompanied by a written instruction of transfer
in form satisfactory to the Registrar and the Trustee, duly
executed by the Holder thereof or his attorney duly authorized in
writing. To permit registrations of transfers and exchanges, the
Company shall issue and the Trustee shall authenticate Securities
which the Holder making the transfer or exchange is entitled to
receive at the Registrar's written request, subject to such rules
as the Trustee may reasonably require.
(b) The Company shall not be required (i) to issue,
register the transfer of or exchange Securities during a period
beginning at the opening of business on a Business Day 15 days
before the day of any selection of Securities for redemption
under Section 3.02 and ending at the close of business on the day
of selection; (ii) to register the transfer of or exchange any
Security so selected for redemption in whole or in part, except
the unredeemed portion of any Security being redeemed in part; or
(iii) to register the transfer or exchange of a Security between
the record date and the next succeeding interest payment date.
(c) No service charge shall be made to the Holder for any
registration of transfer or exchange (except as otherwise
expressly permitted herein), but the Company may require payment
of a sum sufficient to cover any transfer tax or similar
governmental charge payable in connection therewith (other than
such transfer tax or similar governmental charge payable upon ex-
changes (without a transfer to another Person) pursuant to
Section 2.10, 3.06 or 9.05, in which event the Company shall be
responsible for the payment of any such taxes).
(d) Prior to due presentment for registration of transfer
of any Security, the Trustee, any Agent and the Company may deem
and treat the Person in whose name any Security is registered as
the absolute owner of such Security for the purpose of receiving
payment of principal of and interest on such Security and for all
other purposes whatsoever, whether or not such Security is
overdue, and none of the Trustee, any Agent or the Company shall
be affected by notice to the contrary.
Section 2.07. Replacement Securities.
(a) If any mutilated Security is surrendered to the
Trustee, or the Company and the Trustee receive evidence to their
satisfaction of the destruction, loss or theft of any Security,
then, in the absence of notice to the Company or the Trustee that
such Security has been acquired by a bona fide purchaser, the
Company shall issue and the Trustee, upon the written order of
the Company signed by two Officers, shall authenticate a
replacement Security of like tenor and principal amount, bearing
a number not contemporaneously outstanding, in exchange for any
such mutilated Security or in lieu of any such destroyed, lost or
stolen Security, if the Trustee's requirements for replacement of
Securities are met. If required by the Trustee or the Company,
an indemnity bond must be supplied by the Holder that is
sufficient in the judgment of the Trustee and the Company to
protect the Company, the Trustee, any Agent or any authenticating
agent from any loss that any of them may suffer if a Security is
replaced. The Company and the Trustee may charge for their
expenses in replacing a Security.
(b) Every replacement Security is an additional obligation
of the Company and each Guarantor, and shall be entitled to the
benefits of this Indenture equally and proportionately with any
and all other Securities issued hereunder.
(c) The provisions of this Section 2.07 are exclusive and
shall preclude (to the extent lawful) all other rights and
remedies with respect to the replacement or payment of mutilated,
destroyed, lost or stolen Securities.
Section 2.08. Outstanding Securities.
(a) The Securities outstanding at any time are all the
Securities authenticated by the Trustee except for those canceled
by it, those delivered to it for cancellation, those redeemed or
purchased by the Company pursuant to Article 3, and those
described in this Section as not outstanding. If a Security is
replaced pursuant to Section 2.07, it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.
(b) If the principal amount of any Security is considered
paid under Section 4.01, it ceases to be outstanding and interest
on it ceases to accrue.
(c) A Security ceases to be outstanding if the Company or
one of its Subsidiaries holds the Security.
Section 2.09. Treasury Securities.
(a) In determining whether the Holders of the required
principal amount of Securities have given or concurred in any
request, demand, authorization, notice, direction, waiver or
consent, Securities owned by an Affiliate of the Company (other
than a Specified Holder) shall be disregarded and considered as
though not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on
any such request, demand, authorization, notice, direction,
waiver or consent, only Securities that a Trust Officer knows are
so owned shall be so disregarded.
(b) In determining whether the Holders of the required
principal amount of Securities have (i) directed the time, method
or place of conducting any proceeding for any remedy available to
the Trustee hereunder, or exercising any trust or power conferred
upon the Trustee; (ii) consented to the waiver of any past Event
of Default and its consequences; or (iii) consented to the
postponement of any interest payment, Securities owned by a
Specified Holder shall be disregarded and considered as though
not outstanding only if such Specified Holder is an Affiliate of
the Company, except that for the purposes of determining whether
the Trustee shall be protected in relying on any such direction
or consent, only Securities that a Trust Officer knows are so
owned shall be so disregarded.
Section 2.10. Temporary Securities.
Until definitive Securities are ready for delivery, the
Company may prepare and, upon written request from the Company
signed by two Officers of the Company, the Trustee shall
authenticate temporary Securities. Temporary Securities shall be
in any authorized denomination, substantially in the form of
definitive Securities and with other variations that the Company
considers appropriate for temporary Securities. Without
unreasonable delay, the Company shall prepare and the Trustee,
upon receipt of the written order of the Company signed by two
Officers, shall authenticate definitive Securities in exchange
for temporary Securities. Until such exchange, temporary
Securities shall be entitled to the same rights, benefits and
privileges as definitive Securities.
Section 2.11. Cancellation.
The Company at any time may deliver Securities previously
authenticated hereunder to the Trustee for cancellation. The
Registrar and Paying Agent shall forward to the Trustee any
Securities surrendered to them for registration of transfer, ex-
change or payment. The Trustee shall cancel all Securities
surrendered for registration of transfer, exchange, payment, re-
placement or cancellation and shall destroy canceled Securities
(subject to the record-retention requirement of the Exchange
Act), and certification of their destruction shall be delivered
to the Company unless the Company shall direct that canceled
Securities be returned to it. The Company may not reissue or
issue new Securities to replace Securities that it has redeemed
or paid or that have been delivered to the Trustee for cancel-
lation.
Section 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the
Securities, it shall pay the defaulted interest in any lawful
manner plus, to the extent lawful, interest payable on the
defaulted interest, to the Persons who are Holders on a
subsequent special record date, which date shall be at least five
Business Days prior to the payment date, in each case at the rate
provided in the Securities and in Section 4.01 (which interest
shall be paid, except on the maturity date of the Securities, in
the form of Interest Deferral Securities). The Company shall,
with the consent of the Trustee, fix or cause to be fixed each
such special record date and payment date. At least 15 days
before a special record date, the Company (or the Trustee in the
name of and at the expense of the Company) shall mail to the
Holders and to the Trustee (unless the Trustee mailed such notice
on behalf of the Company) a notice that states the special record
date, the related payment date and the amount of such interest to
be paid.
Section 2.13. CUSIP Numbers.
The Company, in issuing the Securities, may use "CUSIP"
numbers (if then generally in use), and the Trustee shall use
CUSIP numbers in notices of redemption or exchange as a
convenience to the Holders; provided, however, that any such
notice shall state that no representation is made as to the
correctness of such numbers either as printed on the Securities
or as contained in any notice of redemption or exchange, and that
reliance may be only on the other identification numbers printed
on the Securities, and any redemption shall not be affected by
any defect in or omission of such numbers.
ARTICLE 3
REDEMPTION
Section 3.01. Notices to Trustee.
If the Company elects to redeem Securities pursuant to the
optional redemption provisions of Section 3.07, it shall furnish
to the Trustee, at least 45 days but not more than 60 days
(unless a shorter period shall be agreed to in writing by the
Trustee) before a redemption date, an Officers' Certificate
setting forth the Section of this Indenture and/or paragraph of
the Securities pursuant to which the redemption shall occur, the
redemption date, the principal amount of Securities to be
redeemed and the redemption price; provided, however, that if the
Company redeems Securities on the Issue Date, such notice of such
redemption shall be given on the Issue Date.
Section 3.02. Selection of Securities to Be Redeemed.
(a) If less than all of the Securities are to be redeemed
(other than pursuant to a repurchase thereof pursuant to Section
4.18 below), the Trustee shall select the Securities to be
redeemed by lot or by a method that complies with applicable
legal and stock exchange requirements, if any, taking into
account the provisions of clause (b) of this Section 3.02. The
particular Securities to be redeemed shall be selected unless
otherwise provided herein, not less than 30 nor more than 60 days
prior to the redemption date by the Trustee from the outstanding
Securities not previously called for redemption; provided,
however, that if the Company redeems Securities on the Issue
Date, the Trustee shall select such Securities to be redeemed on
the Issue Date.
(b) The Trustee shall promptly notify the Company in
writing of the Securities selected for redemption and, in the
case of any Security selected for partial redemption, the
principal amount thereof to be redeemed. Securities and portions
of them selected shall be in amounts of $1,000 or whole multiples
of $1,000; except that if all of the Securities of a Holder are
to be redeemed, the entire outstanding amount of Securities held
by such Holder, even if not a multiple of $1,000, shall be
redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Securities called for
redemption also apply to portions of Securities called for
redemption.
Section 3.03. Notice of Redemption.
(a) At least 30 days but not more than 60 days before a
redemption date, the Company shall mail or cause to be mailed a
notice of redemption, by first-class mail, postage prepaid, to
each Holder whose Securities are to be redeemed at the Holder's
last address, as it shall appear on the register of the
Securities; provided, however, that if the Company shall redeem
Securities on the Issue Date, no such notice shall be required.
A copy of such notice shall be mailed to the Trustee in the same
manner and on the same day that the notice is mailed to the
Holders.
(b) The notice shall identify the Securities to be
redeemed and shall state:
(i) the redemption date;
(ii) the redemption price;
(iii) if any Security is being redeemed in part, the
portion of the principal amount of such Security to be
redeemed and that, after the redemption date, upon sur-
render of such Security, a new Security or Securities in
principal amount equal to the unredeemed portion will be
issued;
(iv) the name and address of the Paying Agent;
(v) that Securities called for redemption must be
surrendered to the Paying Agent to collect the redemption
price;
(vi) that, unless the Company defaults in making such
redemption payment, interest on Securities called for
redemption ceases toaccrue on and after theredemption date;
(vii) the paragraph of the Securities and/or Section
of this Indenture pursuant to which the Securities called
for redemption are being redeemed, and, if such redemption
is being made pursuant to Section 3.08(b), (c), (d), (e) or
(f), setting forth in reasonable detail the facts and
circumstances surrounding the event giving rise to such
required redemption and the calculations made by the
Company in determining the amount of Securities to be
redeemed; and
(viii) that no representation is made as to the
correctness or accuracy of the CUSIP number, if any, listed
in such notice or printed on the Securities.
At the Company's request, the Trustee shall give the notice
of redemption in the Company's name and at its expense; provided,
however, that the Company shall deliver to the Trustee, at least
45 days prior to the redemption date, an Officers' Certificate
requesting that the Trustee give such notice and setting forth
the text of the information to be stated in such notice as
provided in this Section 3.03(b), and the Trustee shall have no
responsibility whatsoever with regard to such notice being
accurate or correct.
Section 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed, Securities called for
redemption become due and payable on the redemption date at the
redemption price set forth in the Security or this Indenture, as
the case may be.
Section 3.05. Deposit of Redemption Price.
(a) No later than the redemption date, the Company shall
deposit in immediately available funds with the Trustee or with
the Paying Agent (or, if the Company or a Subsidiary of the
Company is the Paying Agent, shall segregate and hold in trust)
money sufficient to pay the redemption price of and accrued
interest on all Securities to be redeemed on that date. The
Trustee or the Paying Agent shall return to the Company any money
deposited with the Trustee or the Paying Agent by the Company in
excess of the amounts necessary to pay the redemption price of,
and accrued interest on, all Securities to be redeemed.
(b) If the Company complies with clause (a) of this
Section 3.05, interest on the Securities to be redeemed will
cease to accrue on the applicable redemption date, whether or not
such Securities are presented for payment. If any Security
called for redemption shall not be so paid upon surrender for
redemption because of the failure of the Company to comply with
the preceding paragraph, interest will be paid on the unpaid
principal from the redemption date until such principal is paid
and to the extent lawful on any interest not paid on such unpaid
principal, in each case at the rate provided in the Securities
and in Section 4.01.
Section 3.06. Securities Redeemed in Part.
Upon surrender of a Security that is redeemed in part, the
Company shall issue and the Trustee shall authenticate for the
Holder at the expense of the Company a new Security equal in
principal amount to the unredeemed portion of the Security
surrendered.
Section 3.07. Optional Redemption.
After the payment in full of all Indebtedness outstanding
under the Series A Notes, the Company may redeem all or any
portion of the Securities, upon the terms and at the redemption
price set forth in paragraph 5 of the Securities in an aggregate
amount at any date of determination not to exceed Excess Cash.
Any redemption pursuant to this Section 3.07 shall be made
pursuant to the provisions of Sections 3.01 through 3.06.
Section 3.08. Mandatory Redemption.
(a) Concurrently with its receipt of any Net Cash Proceeds
in respect of an Asset Sale or series of related Asset Sales
effected by the Company in respect of assets constituting
"Pledged Shares" under the Software House Senior Pledge
Agreement, the Company shall redeem Securities, at a redemption
price of 100% of the principal amount thereof, together with
accrued interest to the date of such redemption on the principal
amount of Securities redeemed, in an amount equal to such Net
Cash Proceeds (it being understood that the Company shall, on the
Issue Date, redeem Securities in accordance with this clause (a)
in an amount equal to all such Net Cash Proceeds held by the
Company on the Issue Date.
(b) After the payment in full of all Indebtedness
outstanding under the Series A Notes, concurrently with its
receipt of any Net Cash Proceeds in respect of an Asset Sale or
series of related Asset Sales effected by the Company (other than
an Asset Sale (i) of the type referred to in clause (a) above,
and (ii) governed by Section 5.01(a), (b), (c), (d) or (e)), the
Company shall redeem Securities, at a redemption price of 100% of
the principal amount thereof, together with accrued interest to
the date of such redemption on the principal amount of Securities
redeemed, in an amount equal to such Net Cash Proceeds.
(c) After the payment in full of all Indebtedness
outstanding under the Series A Notes, concurrently with its
receipt of any Net Equity Offering Proceeds (other than in
connection with an offering or series of offerings constituting a
Change of Control) in an amount in excess of $25,000,000, the
Company shall redeem Securities, at a redemption price of 100% of
the principal amount thereof, together with accrued interest to
the date of such redemption on the principal amount of Securities
redeemed, in an amount equal to such excess.
(d) After the payment in full of all Indebtedness
outstanding under the Series A Notes, concurrently with its
receipt of any Net Debt Offering Proceeds in respect of
Indebtedness permitted under Section 4.09(vi), the Company shall
redeem Securities, at a redemption price of 100% of the principal
amount thereof, together with accrued interest to the date of
such redemption on the principal amount of Securities redeemed,
in an amount equal to such Net Debt Offering Proceeds.
(e) From and after (i) the payment in full of all
Indebtedness outstanding under the Series A Notes, and (ii) the
later to occur of (A) the payment in full of the Loans (as
defined in the Revolving Credit Agreement as in effect on the
Issue Date and the Dynalectric Revolving Credit Agreement as in
effect on the Issue Date), together with all accrued interest
thereon, and the termination of the Aggregate Loan Commitment (as
defined in the Revolving Credit Agreement and the Dynalectric
Revolving Credit Agreement), and (B) December 31, 1995, within 45
days after the last day of June and December of each calendar
year, commencing on June 30, 1995, the Company shall redeem
Securities, at a redemption price of 100% of the principal amount
thereof, together with accrued interest to the date of such
redemption on the principal amount of Securities redeemed, in an
amount equal to 100% of Excess Cash as at the last day of June or
December of such calendar year, as the case may be.
(f) Concurrently with the receipt by any Software House
Subsidiary of Net Cash Proceeds in respect of any Asset Sale or
series of related Asset Sales by such Software House Subsidiary,
the Company shall redeem Securities, at a redemption price of
100% of the principal amount thereof, together with accrued
interest to the date of such redemption on the principal amount
of Securities redeemed, in an amount equal to the product of such
Net Cash Proceeds multiplied by a fraction, the numerator of
which is the aggregate number of shares of the common stock of
such Subsidiary owned directly or indirectly by the Company, and
the denominator of which is the aggregate number of shares of
common stock of such Subsidiary issued and outstanding (it being
understood that the Company shall, on the Issue Date, redeem
Securities in accordance with this clause (f) in an amount equal
to all such Net Cash Proceeds held by each Software House
Subsidiary on the Issue Date).
(g) After the payment in full of all Indebtedness
outstanding under the Series A Notes, concurrently with the
receipt by any Subsidiary of the Company (other than a Software
House Subsidiary) of Net Cash Proceeds in respect of any Asset
Sale or series of related Asset Sales by such Subsidiary (or
within 60 days after such receipt if such Net Cash Proceeds do
not exceed $500,000), the Company shall redeem Securities, at a
redemption price of 100% of the principal amount thereof,
together with accrued interest to the date of such redemption on
the principal amount of Securities redeemed, in an amount equal
to the product of such Net Cash Proceeds multiplied by a
fraction, the numerator of which is the aggregate number of
shares of the common stock of such Subsidiary owned directly or
indirectly by the Company, and the denominator of which is the
aggregate number of shares of common stock of such Subsidiary
issued and outstanding.
(h) Notwithstanding anything to the contrary contained in
this Section 3.08:
(i) the Company shall only be required to redeem
Securities in respect of an Asset Sale by JWS or Sea Cliff
(A) to the extent dividends or other distributions by JWS
or Sea Cliff of Net Cash Proceeds in respect of such Asset
Sale would not violate the terms of any Contractual
Obligation binding upon JWS or Sea Cliff, as the case may
be, or any rule or regulation of any governmental authority
binding upon JWS or Sea Cliff, as the case may be, and (B)
in an amount equal to such Net Cash Proceeds received by
JWS or Sea Cliff in respect of such Asset Sale, multiplied
by a fraction, the numerator of which is the aggregate
number of shares of the common stock of JWS, Sea Cliff or
JWSC, as the case may be, owned by JWSC or the Company, as
the case may be, and the denominator of which is the
aggregate number of shares of common stock of JWSC, JWS or
Sea Cliff, as the case may be, issued and outstanding; and
(ii) in respect of any Asset Sale by any Foreign MES
Subsidiary, the Company shall only be required to redeem
Securities (A) to the extent dividends or other
distributions by such Foreign MES Subsidiary to the Company
or other Subsidiary of the Company of Net Cash Proceeds in
respect of such Asset Sale would not violate the terms of
any Contractual Obligation binding upon such Foreign MES
Subsidiary or any rule or regulation of any governmental
authority binding upon any of such Foreign MES Subsidiary,
and (B) in an amount equal to the Net Cash Proceeds
received by such Foreign MES Subsidiary in respect of such
Asset Sale, multiplied by a fraction, the numerator of
which is the aggregate number of shares of the common stock
of such Foreign MES Subsidiary owned by the Company or any
Subsidiary of the Company, and the denominator of which is
the aggregate number of shares of common stock of such
Foreign MES Subsidiary issued and outstanding.
(i) Other than as specifically provided in this Section
3.08, any redemption pursuant to this Section 3.08 shall be made
pursuant to the provisions of Sections 3.01 through 3.06.
ARTICLE 4
COVENANTS
Section 4.01. Payment of Securities.
(a) The Company shall pay the principal of and interest on
the Securities on the dates and in the manner provided in the
Securities and this Indenture. Principal and interest shall be
considered paid on the date due if the Paying Agent holds on such
date money deposited by the Company in immediately available
funds (or in the case of interest due other than in cash,
Interest Deferral Securities), designated for and sufficient to
pay all principal and interest then due.
(b) The Company shall pay interest (including post-
petition interest in any proceeding under any Bankruptcy Law) on
overdue principal at the rate equal to 2% per annum in excess of
the then applicable interest rate on the Securities to the extent
lawful; it shall pay interest (including post-petition interest
in any proceeding under any Bankruptcy Law) on overdue install-
ments of interest (without regard to any applicable grace period)
at the same rate to the extent lawful.
Section 4.02. Maintenance of Office or Agency.
(a) The Company shall maintain in the Borough of Man-
hattan, The City of New York, an office or agency (which may be
an office of the Trustee, Registrar or co-registrar) where
Securities may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Company in
respect of the Securities and this Indenture may be served. The
Company shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any
such required office or agency or shall fail to furnish the
Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust
Office of the Trustee.
(b) The Company may also from time to time designate one
or more other offices or agencies where the Securities may be
presented or surrendered for any or all such purposes and may
from time to time rescind such designations; provided, however,
that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or
agency in the Borough of Manhattan, The City of New York for such
purposes. The Company shall give prompt written notice to the
Trustee of any such designation or rescission and of any change
in the location of any such other office or agency.
(c) The Company hereby designates the Corporate Trust
Office of the Trustee in the Borough of Manhattan, the City of
New York, as one such office or agency of the Company in
accordance with Section 2.03.
Section 4.03. SEC Reports; Reports to Securityholders.
(a) The Company shall file with the Trustee and mail to
the Holders, within 15 days after it files them with the SEC,
copies of the annual and quarterly reports and of the
information, documents and other reports (or copies of such
portions of any of the foregoing as the SEC may by rules and
regulations prescribe) that the Company is required to file with
the SEC pursuant to Section 13 or 15(d) of the Exchange Act. The
Company also shall comply with the provisions of TIA
Section 314(a).
(b) From and after the date at which audited financial
statements of the Company are prepared for the Company's 1993
fiscal year, so long as any of the Securities are outstanding,
the Company shall prepare, (i) for the first three Quarters of
each fiscal year (commencing with the first Quarter commencing
after the Issue Date), quarterly reports (containing information
including, but not limited to, unaudited combined or consolidated
financial statements) and (ii) for each fiscal year commencing
with the 1994 fiscal year, an annual report (containing audited
financial statements and an opinion thereon by the Company's
independent certified public accountants) in substantially the
form which it would be required to file under Section 13 of the
Exchange Act if it had a class of securities listed on a national
securities exchange. The Company shall cause a copy of such
reports to be mailed to the Trustee and to each of the Holders of
the Securities within 50 days after the close of each of the
first three Quarters of each fiscal year (commencing with the
first Quarter commencing after the Issue Date) and within 95 days
after the close of each fiscal year commencing with the 1994
fiscal year, at such Holder's address appearing on the register
of the Securities.
Section 4.04. Compliance Certificate.
(a) The Company shall deliver to the Trustee, within 105
days after the end of each fiscal year of the Company commencing
with the 1994 fiscal year and within 60 days after the end of
each Quarter commencing with the first Quarter commencing after
the Issue Date, a certificate of the principal executive officer,
the principal financial officer or the principal accounting
officer of the Company stating, as to the officer signing such
certificate, that a review of the activities of the Company and
its Subsidiaries during the preceding fiscal period has been made
under the supervision of such signing officers with a view to
determining whether each of the Company and such Subsidiaries has
kept, observed, performed and fulfilled its obligations under
this Indenture and that to the best of his knowledge no Default
or Event of Default has occurred, and setting forth in reasonable
detail each of the calculations performed by the Company in
respect of the covenants set forth in Sections 4.09(vi) and
4.09(viii) (if Indebtedness has been incurred in such fiscal year
under such Sections) and Sections 4.11, 4.15, 4.16, 4.18 (if a
Change of Control has occurred during such fiscal year), 4.27 and
4.28; or, if the signer has knowledge of any such Default or
Event of Default, specifying each such Default or Event of
Default and the nature thereof and what action the Company is
taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current
recommendations of the American Institute of Certified Public
Accountants, the annual reports delivered to the Trustee and the
Holders pursuant to Section 4.03(b) above shall be accompanied by
a written statement of the Company's independent public
accountants (who shall be Deloitte and Touche or another firm of
established national reputation) that in the course of the
regular audit of the business of the Company and its
Subsidiaries, which audit was conducted by such accountants in
accordance with generally accepted auditing standards, such
accountants have obtained no knowledge that a Default or Event of
Default has occurred and is continuing, or, if in the opinion of
such accountants, a Default or Event of Default has occurred and
is continuing, a statement as to the nature thereof, it being
understood that such accountants shall not be liable directly or
indirectly to any Person for any failure to obtain knowledge of
any Default or Event of Default.
(c) The Company shall deliver to the Trustee, immediately
upon an Officer having knowledge of (i) any Event of Default,
(ii) the fact that any Indebtedness of the Company or any
Subsidiary of the Company in an amount in excess of $500,000 has
been or could be declared due and payable before its maturity
because of the occurrence of any default (or any event which,
with notice or the lapse of time, or both, shall constitute such
default) under such Indebtedness, or (iii) the occurrence of any
event requiring the performance by the Company or any of its
Subsidiaries under any Performance Guaranty, an Officers' Cer-
tificate specifying such Event of Default or Default or other
event and what action the Company is taking or proposes to take
with respect thereto.
Section 4.05. Stay, Extension and Usury Laws.
Each Obligor covenants (to the extent that it may lawfully
do so) that it shall not at any time insist upon, plead, or in
any manner whatsoever claim, and shall resist any and all efforts
to be compelled to take the benefit or advantage of, any stay or
extension law or any usury law or other law which would prohibit
or forgive any Obligor from paying all or any portion of the
principal of and/or interest on the Securities as contemplated
herein, wherever enacted, now or at any time hereafter in force,
or which may affect the covenants or the performance of this
Indenture; and (to the extent that it may lawfully do so) each
Obligor hereby expressly waives all benefit or advantage of any
such law, and covenants that it will not hinder, delay or impede
the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as
though no such law had been enacted.
Section 4.06. Limitation on Restricted Payments.
The Company shall not, and shall not permit MES, any
Domestic MES Subsidiary, any Dynalectric Company or any SellCo
Company to, directly or indirectly, make any Restricted Payment;
provided, however, that the foregoing shall not prohibit:
(a) the purchase, redemption, retirement or other
acquisition by any Water Company of any of its shares of
preferred stock or Indebtedness pursuant to any sinking fund or
other mandatory retirement requirement in respect thereof or the
optional repurchase or repayment thereof if the proceeds used
therefor are not available for the payment of dividends by such
Water Company;
(b) acquisitions permitted under Sections 5.01(g) and
5.01(h); or
(c) renewals, extensions or replacements of Indebtedness
permitted by Section 4.09(xxxi).
Section 4.07. Limitations on Transactions with Affiliates.
The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, enter into or renew any
transaction (including without limitation the purchase, sale,
lease, or exchange of any property or the rendering of any
service) with any Affiliate of the Company or of any Subsidiary
(other than a transaction between the Company, MES, any Domestic
MES Subsidiary or any Dynalectric Company and MES, any Domestic
MES Subsidiary, any Dynalectric Company or the Company); pro-
vided, however, that this Section 4.07 shall not be violated by
(a) the payment of reasonable and customary directors fees to
directors who are not employees of the Company or such
Subsidiary; (b) the incurrence of Indebtedness and the making of
Investments permitted in Sections 4.09 and 4.14; (c) payments by
the Company in respect of the Securities, the Software House
Notes or the Subordinated Notes, in each case in accordance with
the terms thereof; (d) payments by SellCo in respect of the
SellCo Subordinated Notes in accordance with the terms thereof;
(e) payments by MES and SellCo pursuant to their respective
Guaranties set forth in Article 11; (f) the making of Restricted
Payments permitted in Section 4.06; (g) Performance Guaranties
permitted under Section 4.29; or (h) any other transaction
directly or indirectly with or for the benefit of any Affiliate
of the Company or any of its Subsidiaries on a basis no less
favorable to the Company or such Subsidiary as would be obtained
in a comparable arm's length transaction with a Person not an
Affiliate (as determined by a majority of the disinterested
members of the board of directors of the Company or such
Subsidiary).
Section 4.08. Limitation on Liens.
The Company shall not, and shall not permit any of its
Subsidiaries to, create, assume or suffer to exist any Lien upon
any of its assets, now owned or hereafter acquired, except:
(a) Liens arising under the Collateral Documents;
(b) Liens on the assets of the Company (other than (i) the
Capital Stock of MES, the Software House Subsidiaries, the Water
Companies, SellCo and the Subsidiaries of SellCo, and (ii) the
Series A Substitute Collateral and the Series B Substitute
Collateral, as such terms are defined in the Bankruptcy Plan) and
any of the MES Companies (i) arising under or pursuant to the
Revolving Credit Agreement and the Dynalectric Revolving Credit
Agreement, securing Indebtedness incurred thereunder in an
aggregate principal amount outstanding not in excess of
$70,000,000, and (ii) securing the obligations of any of the MES
Companies under Performance Guaranties;
(c) Liens arising under (i) the Series A Senior Pledge
Agreement, the Series A Subordinated Pledge Agreement, the Series
A SellCo Pledge Agreement, and the SellCo Subordinated Pledge
Agreement, each as in effect on the Issue Date, and (ii) each of
the other "Collateral Documents" (as defined in the Series A
Indenture and in the SellCo Subordinated Indenture);
(d) Liens pursuant to Capital Lease Obligations permitted
under Section 4.09(viii);
(e) purchase money mortgages or pledges or other purchase
money Liens upon any property acquired by the Company or any of
its Subsidiaries (other than the Water Companies) after the Issue
Date acquired or held by such company in the ordinary course of
business and securing solely the purchase price of such property
or Indebtedness incurred solely for the purpose of financing the
acquisition of such property (but only to the extent the
Indebtedness secured by such Liens shall otherwise be permitted
under Section 4.09) in an aggregate principal amount which does
not exceed (i) $10,000,000 in the aggregate, in the case of the
Operating Companies, and (ii) $1,500,000 in the aggregate, in the
case of the SellCo Companies (other than the Water Companies).
(f) Permitted Liens;
(g) Liens existing on the Issue Date;
(h) Liens (including purchase money mortgages or pledges
or other purchase money Liens) on the assets of the Water
Companies, securing Indebtedness permitted by Section 4.09(xvi);
(i) Liens on the assets of the Operating Companies
securing obligations (other than for borrowed money) in the
ordinary course of business in an aggregate amount not in excess
of $10,000,000 at any time outstanding;
(j) Liens on the assets of Foreign MES Subsidiaries,
securing Indebtedness permitted under Section 4.09 incurred by
any Foreign MES Subsidiary;
(k) Liens on the insurance policies of the Company, MES,
any Domestic MES Subsidiary or any Dynalectric Company arising in
connection with the deferred payment or financing thereof in the
ordinary course of business;
(l) Liens consisting of cash collateral deposits made by
the Company, MES, any MES Subsidiary, any Dynalectric Company or
Defender in the ordinary course of business in connection with
the Company's, MES', any MES Subsidiary's or any Dynalectric
Company's insurance program consistent with past practices;
(m) Liens incurred by Defender in respect of its pledge of
promissory notes made by the Company in favor of Defender,
securing Defender's obligations under Insurance Related Letter of
Credit Obligations;
(n) Liens existing on any property of a corporation at the
time such corporation becomes a Subsidiary of the Company, which
Liens were not created, incurred or assumed in contemplation
thereof, provided that no such Lien shall extend to or cover any
other property of the Company or any Subsidiary;
(o) Liens on the assets of the Company (other than any
such assets constituting Collateral) and the common stock or
assets of the Dynalectric Companies securing (i) indebtedness
incurred under and pursuant to the Dynalectric Revolving Credit
Agreement and (ii) obligations of the Dynalectric Companies under
Performance Guaranties;
(p) Liens on up to $15,000,000 of the proceeds received in
respect of the sale by the Company or a Water Company of the
common stock or assets of a Water Company, securing outstanding
Indebtedness under the Revolving Credit Agreement and the
Dynalectric Revolving Credit Agreement;
(q) Liens on the tangible personal property of the Company
to be located at the Company's executive offices at 101 Merritt
Seven Corporate Park, Norwalk, Connecticut, to secure
Indebtedness to the State of Connecticut or any agency or
instrumentality thereof in an aggregate amount at any time
outstanding not in excess of $200,000; and
(r) any extension, renewal or replacement (or successive
extensions, renewals or replacements) of Liens permitted by this
Section 4.08 without any increase in the amount of Indebtedness
secured thereby or in the assets subject to such Lien.
Section 4.09. Limitation on Additional Indebtedness and Capital
Stock.
The Company shall not, and shall not permit any of its
Subsidiaries to (a) directly or indirectly, create incur, issue,
assume, guaranty or otherwise become directly or indirectly
liable with respect to any Indebtedness; or (b) issue any Capital
Stock, except:
(i) the Securities;
(ii) Indebtedness of the Company and MES under the
Revolving Credit Agreement in an aggregate principal amount
not in excess of $70,000,000 at any time outstanding, and
Guaranties of such Indebtedness by any of the Subsidiaries
of MES;
(iii) Indebtedness of the Company in respect of the
Series A Notes and the Subordinated Notes;
(iv) Indebtedness of SellCo in respect of the SellCo
Subordinated Notes;
(v) the Guaranties of (A) SellCo in respect of its
Guaranty pursuant to Article 11 and its guaranty of the
Indebtedness of the Company under the Software House Notes
and the Software House Indenture, and (B) MES in respect of
its Guaranty pursuant to Article 11, its guaranty of the
Indebtedness of the Company under the Software House Notes
and the Software House Indenture, and its guaranty of the
Indebtedness of the Company under the Subordinated Notes
and the Subordinated Note Indenture;
(vi) Funded Indebtedness of the Company, the Net Debt
Offering Proceeds of which are used by the Company in
accordance with Section 3.08(d); provided, however, that
(A) if the aggregate amount of outstanding Securities on
the date the Company issues such Funded Indebtedness is
$15,000,000 or less, the Net Debt Offering Proceeds of such
Funded Indebtedness shall be in an amount sufficient to
redeem all of the outstanding Securities, together with all
accrued but unpaid interest thereon; and (B) if the
aggregate amount of outstanding Securities on the date the
Company issues such Funded Indebtedness exceeds
$15,000,000, such Net Debt Offering Proceeds shall be in an
amount at least equal to 50% of such outstanding
Securities; and provided further, that if, after the
application of the Net Debt Offering Proceeds of such
Funded Indebtedness in accordance with Section 3.08, the
Securities will not be redeemed in full, together with all
accrued but unpaid interest thereon, the Company may issue
such Funded Indebtedness only if (1) the Funded
Indebtedness so issued does not mature earlier than the
maturity of the Securities; and (2) the Funded Indebtedness
so issued has (x) no scheduled principal, sinking fund,
redemption, prepayment or other payments (other than
interest payments) due in respect thereof on or prior to
the maturity date of the Securities, and (y) covenants
relating to limitations on Restricted Payments, payment
restrictions of Subsidiaries, Liens and additional
Indebtedness of the Company and its Subsidiaries, in each
case no more restrictive than the similar covenants set
forth in the Securities in this Indenture;
(vii) Indebtedness of the Company or any of its
Subsidiaries (other than the Water Companies) secured by
Liens permitted by Section 4.08(e);
(viii) Indebtedness of the Company or any of its
Subsidiaries (other than the Water Companies) under Capital
Lease Obligations; provided, however, that the aggregate
amount of Capital Lease Obligations incurred after the
Issue Date in any fiscal year of the Company under this
clause (viii) by (A) the Operating Companies shall not
exceed an amount equal to 50% of the Capital Expenditures
made by such Operating Companies during such fiscal year
and permitted by Section 4.16, and by (B) the SellCo
Companies (other than the Water Companies) shall not exceed
$3,000,000 at any time outstanding;
(ix) Indebtedness of Defender and the Company
consisting of Insurance Letter of Credit Obligations not in
excess of $75,000,000 at any one time outstanding;
(x) Indebtedness (A) arising from loans or advances to
the Company, MES or any Domestic MES Subsidiary made in the
ordinary course of business and consistent with the
Company's or MES's cash management system; (B) arising from
loans or advances to the Company or any Dynalectric Company
made in the ordinary course of business consistent with
Dynalectric's cash management system; and (C) arising from
loans or advances to the SellCo Companies made in the
ordinary course of business consistent with SellCo's cash
management system;
(xi) Indebtedness incurred after the Issue Date
arising from loans or advances by the Company or any MES
Company to (i) the SellCo Companies in an aggregate
principal amount at any time outstanding not in excess of
$7,000,000, and (ii) the Dynalectric Companies in an
aggregate amount at any time outstanding not in excess of
$8,000,000;
(xii) Indebtedness of Comstock in an aggregate
principal amount not in excess of $20,000,000 (Canadian) at
any time outstanding (other than (A) Capital Lease
Obligations, (B) Indebtedness owed to the Company or any
Subsidiary of the Company, which Indebtedness is
outstanding on the Issue Date, (C) Indebtedness owed to any
Foreign MES Subsidiary, and (D) Indebtedness permitted
under Section 4.09(xxiv)), and Guaranties by the Company,
JWP International, Inc. or one or more Foreign MES
Subsidiaries of such Indebtedness;
(xiii) Indebtedness of the U.K. Subsidiaries in an
aggregate principal amount not in excess of 20,000,000 at
any time outstanding (other than (A) Capital Lease
Obligations, (B) Indebtedness owed to the Company or any
Subsidiary of the Company, which Indebtedness is
outstanding on the Issue Date, (C) Indebtedness owed to any
Foreign MES Subsidiary, and (D) Indebtedness permitted
under Section 4.09(xxiv)) and Guaranties by JWP
International, Inc. or one or more Foreign MES Subsidiaries
of such Indebtedness;
(xiv) Indebtedness of the Middle East Subsidiaries and
the Malaysian Subsidiaries in an aggregate principal amount
not in excess of 7,000,000 at any time outstanding (other
than (A) Capital Lease Obligations, (B) Indebtedness owed
to the Company or any Subsidiary of the Company which
Indebtedness is outstanding on the Issue Date, (C)
Indebtedness owed to any Foreign MES Subsidiary, and (D)
Indebtedness permitted under Section 4.09(xxiv)) and
Guaranties by JWP International Inc. or one or more Foreign
MES Subsidiaries of such Indebtedness;
(xv) Indebtedness of U2 in an aggregate principal
amount not in excess of $4,000,000 at any time outstanding
(other than (A) Capital Lease Obligations, (B) Indebtedness
owed to the Company which Indebtedness is outstanding on
the Issue Date, (C) Indebtedness owed to any Foreign MES
Subsidiary, and (D) Indebtedness permitted under Section
4.09(xxiv));
(xvi) Indebtedness of the Water Companies and
preferred stock of the Water Companies, the aggregate
principal amount outstanding and liquidation preference of
which shall not exceed $130,000,000 at any time of
determination;
(xvii) Capital Stock issued by the Company (other than
Disqualified Stock), so long as the Net Equity Offering
Proceeds thereof are applied in accordance with Section
3.08(c);
(xviii) Indebtedness of the Company to Defender in an
aggregate principal amount not in excess of $75,000,000 at
any time outstanding, incurred in connection with Insurance
Related Letters of Credit;
(xix) Indebtedness consisting of deferred payment
obligations of the Company or any of its Subsidiaries for
insurance premiums, or incurred by the Company or any of
its Subsidiaries in respect of funds borrowed for the
payment of such premiums, in either case in the ordinary
course of business and consistent with past practices;
(xx) Indebtedness of any of the Operating Companies
consisting of reimbursement obligations with respect to
documentary letters of credit issued for its own account in
the ordinary course of business;
(xxi) Indebtedness of any of the SellCo Companies
consisting of reimbursement obligations with respect to
documentary letters of credit issued for its own account in
the ordinary course of business;
(xxii) contingent reimbursement obligations of
Defender or the Company in respect of Insurance Related
Letters of Credit in an aggregate amount not in excess of
$75,000,000 at any time outstanding;
(xxiii) Indebtedness outstanding on the Issue Date;
(xxiv) Indebtedness of Foreign MES Subsidiaries
consisting of loans or advances made after the Issue Date
by the Company or any Domestic MES Subsidiary in an
aggregate principal amount not in excess of $5,000,000 at
any time outstanding;
(xxv) Indebtedness of one or more of the Company and
the Dynalectric Companies pursuant to the Dynalectric
Revolving Credit Agreement in an aggregate principal amount
not in excess of $10,000,000 at any time outstanding, and
Guaranties of such Indebtedness by the other Dynalectric
Companies, MES, and the Domestic MES Subsidiaries;
(xxvi) Indebtedness of the Company to SellCo in an
aggregate principal amount not in excess of $5,464,133.78
at any time outstanding, evidenced by the SellCo
Intercompany Note;
(xxvii) Indebtedness of any corporation at the time
such corporation becomes a Subsidiary which Indebtedness
was not created, assumed or guaranteed in contemplation
thereof;
(xxviii) Indebtedness of (A) a Foreign MES Subsidiary
to any other Foreign MES Subsidiary, (B) a Dynalectric
Company to any other Dynalectric Company, (C) the Company
or any MES Company to any other MES Company (other than a
Foreign MES Subsidiary), and (D) any SellCo Company to any
other SellCo Company;
(xxix) additional Indebtedness in an aggregate amount
at any time outstanding not in excess of $5,000,000;
(xxx) Indebtedness of the Company in an aggregate
amount at any time outstanding not in excess of $200,000 to
the State of Connecticut or any agency or instrumentality
thereof, incurred in connection with the relocation of the
Company's executive offices to the State of Connecticut;
and
(xxxi) any renewals, extensions or replacements of
Indebtedness permitted under this Section 4.09 in an
aggregate amount not in excess of the Indebtedness being
renewed, extended or replaced.
Notwithstanding the above, at no time will the Company or
any of its Subsidiaries be permitted to incur or assume
Indebtedness or issue Capital Stock if a Default or Event of
Default would exist upon the incurrence or assumption of such In-
debtedness, the issuance of such Capital Stock, or immediately
thereafter.
Section 4.10. Limitation on New Subsidiaries.
The Company shall not have any direct Subsidiaries other
than MES, SellCo, Dyn Specialty Contracting, Inc., and each of
the Software House Subsidiaries.
Section 4.11. Limitation on Sales of Assets.
Subject to Section 4.12, the Company shall not, and shall
not permit any of its Subsidiaries to, sell, lease, convey or
otherwise dispose of any assets (which shall include the Capital
Stock of any Subsidiary) (an "Asset Sale"), other than the sale
or disposition of inventory or equipment sold in each case in the
ordinary course of business or equipment or motor vehicles that
have become obsolete or are replaced in the ordinary course of
business (provided that the sale, lease, conveyance or other
disposition of all or substantially all of the assets of the
Company or any of its Subsidiaries shall be governed by the
provisions of Section 5.01), unless (i) such Asset Sale is for at
least fair market value (as determined, in respect of any Asset
Sale generating Net Cash Proceeds in excess of $250,000, by the
majority of the disinterested members of the board of directors
of the Company or such Subsidiary, as the case may be, in good
faith), (ii) in connection with an Asset Sale in respect of the
assets or Capital Stock of any Water Company, at least 50% of the
consideration therefor consists solely of cash and such cash is
received within 60 days of the closing of such Asset Sale,
excluding from such consideration the assumption of liabilities
by the purchaser in connection with such Asset Sale, (iii) the
Company complies with Section 3.08, (iv) such assets do not
consist of the Capital Stock of MES or SellCo, and (v) any notes,
bonds, securities, instruments, properties or other non-cash
assets constituting proceeds of any such Asset Sale are pledged
to the Trustee as Collateral under the Pledge Agreements or
another Collateral Document.
Section 4.12. Limitation on Certain Transfers of Assets.
The Company shall not, and shall not permit any Subsidiary
to, transfer, sell, assign or contribute any assets to any
Subsidiary of the Company other than (a) Investments of the type
permitted under Section 4.14, (b) sales, leases, conveyances or
other dispositions of assets permitted under Sections 4.06, 4.08
and 4.11, (c) transfers, sales, assignments or contributions of
assets to any Domestic MES Subsidiary, any Dynalectric Company or
any SellCo Subsidiary in connection with, and at the time of, the
sale of such Domestic MES Subsidiary, Dynalectric Company or
SellCo Subsidiary, provided that the sale of such assets would
otherwise have been permitted under the other provisions
described in this Indenture, including, without limitation,
Section 4.11 and Article 5, and (d) the sale, transfer,
assignment or contribution of the Capital Stock or assets of (i)
any Domestic MES Subsidiary to any other Domestic MES Subsidiary,
(ii) any Dynalectric Company to another Dynalectric Company or to
any MES Company, (iii) any Subsidiary of SellCo to any other
Subsidiary of SellCo, (iv) any Foreign MES Subsidiary to any
other Foreign MES Subsidiary, or (v) any Software House
Subsidiary to any other Software House Subsidiary.
Section 4.13. No Material Changes in the Nature of the
Business.
The Company shall not, and shall not permit any of its
Subsidiaries to, engage in any business not related to its
businesses engaged in on the Issue Date.
Section 4.14. Limitation on Investments and Advances.
The Company shall not, and shall not permit any of its
Subsidiaries to, make any Investments in or advances to any other
Person, except for:
(a) Permitted Investments;
(b) Investments in the Company, MES or any Domestic MES
Subsidiary;
(c) Investments consisting of extensions of trade credit
and notes receivable, in either case, made or obtained in the
ordinary course of business consistent with past practice;
(d) existing Investments (but only to extent of the
capital invested in such investments at the Issue Date unless
otherwise provided in this Section 4.14);
(e) Investments consisting of loans or advances to the
Company, MES, any Domestic MES Subsidiary or any Dynalectric
Company made in the ordinary course of business and consistent
with past practices in connection with the Company's, MES's or
the Dynalectric Companies' cash management system;
(f) Investments made after the Issue Date consisting of
loans, advances or capital contributions (i) by the Company, MES,
or any MES Subsidiary to any SellCo Company; provided, however,
that such Investments in the aggregate shall not exceed at any
time outstanding $7,000,000, (ii) by the Company, MES, or any MES
Subsidiary to any Dynalectric Company; provided, however, that
such Investments in the aggregate shall not exceed at any time
outstanding $8,000,000, (iii) by a Dynalectric Company to any
other Dynalectric Company, and (iv) by a SellCo Company to any
other SellCo Company;
(g) loans or advances to employees of the Company, MES,
any Domestic MES Company, any Dynalectric Company or any SellCo
Company, which loans and advances in the aggregate shall not
exceed $500,000 at any time outstanding;
(h) Investments made by the Company or any MES Company
after the Issue Date in (i) Comstock in an aggregate amount not
in excess of $5,000,000 (Canadian) at any time outstanding, and
(ii) Foreign MES Subsidiaries in an aggregate amount not in
excess of $5,000,000 at any time outstanding;
(i) Investments made by any Foreign MES Subsidiary in any
Foreign MES Subsidiary;
(j) Investments of the Company or any of its Subsidiaries
consisting of notes, bonds, debentures or other securities or
instruments (other than general partnership and similar
interests) acquired by the Company or such Subsidiary in
connection with an Asset Sale permitted hereunder;
(k) Investments of the Company or any of its Subsidiaries
made in the ordinary course of business in connection with its
capacity as a co-venturer in a joint venture, corporation or
other similar pooling of efforts in respect of a specific project
or series of related specific projects for a limited or fixed
duration to conduct a business of the type in which the Company
or such Subsidiary is presently engaged, consistent with past
practices;
(l) Investments of SellCo evidenced by the SellCo
Intercompany Note;
(m) Investments of Defender consisting of Indebtedness
incurred by the Company permitted in Section 4.09(xviii); and
(n) Additional Investments made in the ordinary course of
business consistent with past practice in an aggregate amount not
in excess of $2,500,000 at any time outstanding.
Section 4.15. Maintenance of Coverage Ratios.
(a) The Operating Companies shall maintain an Unrestricted
Cash Coverage Ratio for each of the periods listed below of not
less than the following ratio, calculated as of the last date of
the periods indicated below:
Unrestricted
Cash
Coverage
Measurement Period Ratio
January 1, 1995 - September 30, 1995 1.00:1
January 1, 1995 - December 31, 1995 1.00:1
Each Rolling Four Fiscal Quarter
Period ending thereafter 1.00:1
(b) The Operating Companies shall maintain a
Consolidated Fixed Charge Coverage Ratio for each of the periods
listed below of not less than the following ratio, calculated as
of the last date of the periods indicated below:
Consolidated
Fixed Charge
Coverage
Measurement Period Ratio
January 1, 1995 - September 30, 1995 1.00:1
January 1, 1995 - December 31, 1995 1.00:1
Each Rolling Four Fiscal Quarter
Period ending thereafter 1.50:1
Section 4.16. Capital Expenditures.
(a) The Company shall not permit the aggregate Capital
Expenditures of the Operating Companies made during each of the
fiscal years set forth below to be in excess of the maximum
amount set forth below for such fiscal year:
Maximum Amount of
Fiscal Year Beginning in Capital Expenditures
1994 10,000,000
1995 10,500,000
1996 11,000,000
1997 and thereafter 11,500,000
(b) The Company shall not permit the aggregate Capital
Expenditures of the SellCo Companies (other than the Water
Companies) made during each of the fiscal years set forth below
to be in excess of the maximum amount set forth below for such
fiscal year:
Maximum Amount of
Fiscal Year Beginning in Capital Expenditures
1994 4,000,000
1995 4,000,000
1996 4,000,000
1997 and thereafter 4,000,000
Section 4.17. Corporate Existence.
Except as permitted under Article 5, the Company shall do or
cause to be done all things necessary to preserve and keep in
full force and effect its corporate existence and the corporate,
partnership or other existence of each Subsidiary of the Company
in accordance with the respective organizational documents as
they may be from time to time amended of the Company and each
such Subsidiary and the rights (charter and statutory),
governmental licenses and governmental franchises of the Company
and its Subsidiaries; provided, however, that neither the Company
nor any of its Subsidiaries shall be required to preserve any
statutory right, governmental license or governmental franchise
of any Subsidiary of the Company, unless the failure to do so
would have a Material Adverse Effect; and provided further that
nothing in this Section 4.17 shall prohibit the dissolution of
any such Subsidiary of the Company (other than MES, SellCo or any
Software House Subsidiary) if such dissolution would not have a
Material Adverse Effect.
Section 4.18. Change of Control.
(a) If there shall at any time or times occur a Change of
Control, then the Company shall notify the Holders in writing of
such occurrence and shall make an offer to repurchase (the
"Change of Control Offer"), not later than the 90th day after the
earlier of (i) an Officer of the Company obtaining knowledge of
such occurrence, and (ii) written notice to the Company by the
Trustee or any Holder of any Security of such occurrence (the
"Change of Control Payment Date"), all Securities then
outstanding at a price equal to 100% of the outstanding principal
amount thereof plus accrued and unpaid interest to the repurchase
date (the "Offer Price").
(b) The Company shall comply with all applicable law
(including, without limitation, Rule 14e-1 under the Exchange
Act, if applicable) in the event that the Company shall be
required to make an offer to redeem pursuant to this Section
4.18.
(c) Subject to Section 4.18(b), the Company shall provide
the Trustee with written notice of the Change of Control Offer at
least 60 days before any such Change of Control Payment Date and
at least 10 days before the notice of any Change of Control Offer
is mailed to Holders. Notice of a Change of Control Offer shall
be mailed by the Company not less than 45 days or more than 60
days before the Change of Control Payment Date to the Holders at
their last registered addresses with a copy to the Trustee and
the Paying Agent. The Change of Control Offer shall remain open
from the time of mailing until one Business Day before the Change
of Control Payment Date. The notice shall contain all
instructions and materials necessary to enable such Holders to
tender Securities pursuant to the Change of Control Offer. The
notice, which shall govern the terms of the Change of Control
Offer, shall state, in addition to anything required to be stated
therein under applicable law:
(i) that the Change of Control Offer is being made
pursuant to this Section 4.18 and that all Securities
validly tendered will be accepted for payment;
(ii) the Offer Price and the Change of Control Payment
Date;
(iii) that any Security not tendered for payment will
continue to accrue interest;
(iv) that, unless the Company defaults in making such
repurchase payment, any Security accepted for payment
pursuant to the Change of Control Offer shall cease to
accrue interest on and after the Change of Control Payment
Date;
(v) that Holders electing to have a Security
repurchased pursuant to a Change of Control Offer will be
required to surrender the Security, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the
Security completed, to the Company at the address specified
in the notice at least one Business Day before the Change of
Control Payment Date;
(vi) that Holders will be entitled to withdraw their
election if the Company receives, not later than one
Business Day prior to the Change of Control Payment Date, a
telegram, telex, facsimile transmission or letter setting
forth the name of the Holder, the principal amount of
Securities the Holder delivered for repurchase and a
statement that such Holder is withdrawing his election to
have such Security repurchased;
(vii) that Holders whose Securities are repurchased
only in part will be issued new Securities representing the
unrepurchased portion of the Securities surrendered;
(viii) the instructions that Holders must follow in
order to tender their Securities; and
(ix) the circumstances and relevant facts regarding
such Change of Control (including, but not limited to,
information (to the extent reasonably available to the
Company) with respect to pro forma historical and projected
financial information after giving effect to such Change of
Control, information regarding the Persons acquiring
control, and such Person's business plans going forward).
(d) On the Change of Control Payment Date, the Company
shall, to the extent lawful (i) accept for payment Securities or
portions thereof tendered pursuant to the Change of Control
Offer, (ii) deposit with the Paying Agent money sufficient to pay
the Offer Price of all Securities or portions thereof so
tendered, and (iii) deliver to the Trustee Securities so
accepted, together with an Officer's Certificate stating the
Securities or portions thereof tendered to the Company. The
Paying Agent shall promptly mail or deliver to the Holders of
Securities so accepted payment in an amount equal to the Offer
Price, and the Trustee shall promptly authenticate and mail or
deliver to Holders whose Securities are repurchased only in part
a new Security equal in principal amount to the unrepurchased
portion of the Security surrendered. For purposes of this
Section 4.18, the Trustee shall act as Paying Agent.
Section 4.19. Maintenance of Properties.
The Company shall cause all material properties owned by the
Company or any of its Subsidiaries or used or useful in the
conduct of its business or the business of any of its
Subsidiaries to be maintained and kept in good condition, repair
and working order (ordinary wear and tear excepted) and supplied
with all necessary equipment and shall cause to be made all
necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the reasonable judgment of the
Company may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted
at all times; provided, however, that nothing in this Section
shall prevent the Company or any of its Subsidiaries from
discontinuing the operation or maintenance of any of such
properties if such discontinuance is, in the reasonable judgment
of the Company, desirable in the conduct of its business or the
business of any of its Subsidiaries and not disadvantageous in
any material respect to the Holders.
Section 4.20. Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (a) all
taxes, assessments and governmental charges levied or imposed
upon the Company or any of its Subsidiaries or upon the income,
profits or property of the Company or any Subsidiary, and (b) all
lawful claims for labor, materials and supplies that, if unpaid,
might by law become a Lien upon the property of the Company or
any of its Subsidiaries; provided, however, that neither the
Company nor any of its Subsidiaries shall be required to pay or
discharge or cause to be paid or discharged any such tax,
assessment, charge or claim (i) whose amount, applicability or
validity is being contested in good faith by appropriate
proceedings, and with respect to which appropriate reserves have
been established in accordance with Generally Accepted Accounting
Principles or (ii) if the failure to so pay or discharge would
not have a Material Adverse Effect.
Section 4.21. Maintenance of Insurance.
The Company shall, and shall cause its Subsidiaries to, keep
at all times all of their properties that are of an insurable
nature insured against loss or damage with insurers believed by
the Company to be responsible to the extent that property of
similar character is usually so insured by corporations similarly
situated and owning like properties in accordance with good
business practice. The Company shall, and shall cause its
Subsidiaries to, use the proceeds from any such insurance policy
to repair, replace or otherwise restore the property to which
such proceeds relate; provided that the Company or such
Subsidiary may elect not to make such repair, replacement or
restoration if the Company or such Subsidiary determines in good
faith that such repair, replacement or restoration is not in the
best interests of the Company or such Subsidiary.
Section 4.22. Compliance with Law.
The Company shall, and shall cause each of its Subsidiaries
to, comply, in all material respects, with all applicable
federal, state and local laws and regulations, including, without
limitation, ERISA, those regarding the collection, payment and
deposit of employees' income, unemployment and Social Security
taxes and those relating to environmental matters, except where
the failure to comply would not have a Material Adverse Effect.
Section 4.23. Books and Records.
The Company shall, and shall cause each of its Subsidiaries
to, keep proper records and books of account with respect to its
business activities, in which proper entries, reflecting all of
their financial transactions, are made in accordance with
Generally Accepted Accounting Principles.
Section 4.24. Employee Benefit Plans; ERISA.
The Company shall not, directly or indirectly, and shall not
permit its Subsidiaries or any ERISA Affiliate to, directly or
indirectly, by reason of an amendment or amendments (other than
any amendment required by applicable law or by any federal or
state agency or commission) to, or the adoption of, one or more
Title IV Plans, permit the present value of all accrued benefit
liabilities, under all Title IV Plans, (using the actuarial
assumptions utilized for purposes of funding such Title IV Plans)
to increase by more than $2,000,000; provided that this
limitation shall not be applicable to the extent that the fair
market value of assets allocable to such benefits, all determined
as of the most recent valuation date for each such Title IV Plan,
is in excess of the benefit liabilities, or to increase to the
extent security must be provided to any Title IV Plan under
Section 401(a)(29) of the Code. Neither the Company nor any of
its Subsidiaries shall establish or become obligated to any new
Plan that is a "welfare benefit plan," as defined in Section 3(1)
of ERISA, for the purpose of providing retiree medical and/or
retiree life insurance benefits, or modify any existing welfare
benefit plan for the benefit of retirees, which would result in
the present value of future liabilities under any such plans to
increase by more than $1,000,000 (except as may be required by
applicable laws or by any state or federal agency or commission).
Except as hereinabove permitted with respect to any Title IV
Plan, neither the Company nor any of its Subsidiaries shall
establish or become obligated to any new Pension Plan, or modify
any existing Pension Plan, which would result in the present
value of future liabilities under any such plans increasing by
more than $1,000,000.
Section 4.25. Modification of Material Contractual Obligations.
The Company shall not, and shall not permit any of its
Subsidiaries to, alter, amend, modify, rescind, terminate or
waive any of their respective rights under, or fail to comply in
all material respects with, any of its Material Contractual
Obligations; provided, however, that (a) the Company and each of
its Subsidiaries may amend its certificate of incorporation and
bylaws (or other similar governing documents) if such amendment
would not have a Material Adverse Effect, (b) the Company and the
MES Companies may amend the Revolving Credit Agreement if such
amendment would not have a Material Adverse Effect, and (c) the
Company and the Dynalectric Companies may amend the Dynalectric
Revolving Credit Agreement if such amendment would not have a
Material Adverse Effect.
Section 4.26. Security Interests.
The Company shall comply in all material respects with its
obligations and agreements under the Collateral Documents and the
Intercreditor Agreement.
Section 4.27. Lease Obligations.
(a) The Company shall not create or suffer to exist, or
permit any of its Subsidiaries to create or suffer to exist, any
obligations as lessee for the rental or hire of real or personal
property of any kind under leases or agreements to lease having
an original term of more than one year (other than Capital
Leases) that would cause the liabilities of (i) the Operating
Companies, on a consolidated basis, in respect of all such
obligations (net of rentals received in connection with any
sublease arrangements) to exceed the sum of (A) $24,000,000, plus
(B) an amount equal to 110% of the obligations as lessee of any
Subsidiary acquired by the Company and permitted by Section
5.01(f) or (g) on the date such Subsidiary was acquired in the
Company's 1994 fiscal year, the sum of (A) $25,000,000, plus (B)
an amount equal to 110% of the obligations as lessee of any
Subsidiary acquired by the Company and permitted by Section
5.01(f) or (g) on the date such Subsidiary was acquired in the
Company's 1995 fiscal year, the sum of (A) $26,000,000, plus (B)
an amount equal to 110% of the obligations as lessee of any
Subsidiary acquired by the Company and permitted by Section
5.01(f) or (g) on the date such Subsidiary was acquired in the
Company's 1996 fiscal year, and the sum of (A) $27,000,000, plus
(B) an amount equal to 110% of the obligations as lessee of any
Subsidiary acquired by the Company and permitted by Section
5.01(f) or (g) on the date such Subsidiary was acquired in the
Company's 1997 fiscal year, or (ii) the SellCo Companies (other
than the Water Companies), on a consolidated basis, in respect of
all such obligations to exceed $11,000,000 payable in any fiscal
year.
(b) The Company shall not, and shall not permit any of its
Subsidiaries to, become or remain liable as lessee or guarantor
or other surety with respect to any lease, whether an operating
lease or a Capital Lease, of any property (whether real or
personal or mixed), whether now owned or hereafter acquired,
which (i) the Company or any of its Subsidiaries has sold or
transferred or is to sell or transfer to any other Person (other
than customary contingent liabilities as a sublessor or assignor
of a lease), or (ii) the Company or any of its Subsidiaries
intends to use for substantially the same purposes as any other
property that has been or is to be sold or transferred by that
entity to any other Person in connection with such lease unless,
in either case, the Company complies with Section 4.11.
Section 4.28. Maintenance of Consolidated Tangible Net Worth.
The Operating Companies shall at all times maintain a
Consolidated Tangible Net Worth of not less than an amount equal
to (a) from the Issue Date through December 31, 1994,
$44,000,000, and (b) during each Quarter commencing on or after
January 1, 1995, the sum of (i) $44,000,000 plus (ii) an amount
equal to the sum of fifty percent of the cumulative Consolidated
Net Income of the Operating Companies from January 1, 1995
through the date of determination.
Section 4.29. Performance Guaranties.
The Company shall not, and shall not permit any of its
Subsidiaries to, enter into, assume, or otherwise become liable
under, any Performance Guaranty except in the ordinary course of
business consistent with sound commercial practices; provided,
however, that the aggregate amount of Performance Guaranties in
respect of the contracts of Unique Construction shall not exceed
$8,000,000 at any time outstanding.
ARTICLE 5
MERGERS AND ACQUISITIONS
Section 5.01. Mergers, Acquisitions, Etc.
The Company shall not and shall not permit any of its
Subsidiaries to (i) merge with any Person, (ii) consolidate with
any Person, (iii) acquire all or substantially all of the Capital
Stock or stock equivalents of any Person, (iv) acquire, whether
in one transaction or in a series of transactions, all or
substantially all of the assets of any Person or assets
constituting the business of a division, branch or other unit
operation of any Person, or (v) sell, lease, transfer or
otherwise dispose of, whether in one transaction or in a series
of transactions, all or substantially all of its assets, except:
(a) the merger of a Domestic MES Subsidiary with and into,
or sale or transfer of all or substantially all of the assets or
Capital Stock of a Domestic MES Subsidiary to, MES or another
Domestic MES Subsidiary;
(b) the merger of a Foreign MES Subsidiary with and into,
or sale or transfer of all or substantially all of the assets or
Capital Stock of a Foreign MES Subsidiary to, MES or another
Foreign MES Subsidiary;
(c) the merger of a Dynalectric Company with and into, or
sale or transfer of all or substantially all of the assets or
Capital Stock of a Dynalectric Company to, another Dynalectric
Company or an MES Subsidiary, or, with respect to the sale or
transfer of the Capital Stock of Dynalectric Company, to MES;
(d) the merger of a Subsidiary of SellCo with and into, or
sale or transfer of all or substantially all of the assets or
Capital Stock of a Subsidiary of Sellco to, SellCo or another
Subsidiary of Sellco;
(e) the merger with and into, or sale or transfer of all or
substantially all of the assets or Capital Stock of a Software
House Subsidiary to, another Software House Subsidiary;
(f) one or more Asset Sales in respect of all or
substantially all of the assets of (i) any Subsidiary of MES
(other than a sale by such Subsidiary that would constitute a
sale of all or substantially all of the assets of MES), (ii) any
Dynalectric Company, (iii) any SellCo Company, and (iv) any
Software House Subsidiary, in each case, subject to compliance
with Section 4.11;
(g) the acquisition for cash of all or substantially all of
the assets of any corporation by any MES Subsidiary, provided
that (i) such assets are purchased for no more than the fair
market value thereof, and (ii) the aggregate fair market value of
all such assets acquired during any calendar year shall not
exceed $500,000; provided, however, that, to the extent the
actual acquisition of assets pursuant to this clause (f) in any
calendar year shall be less than the maximum amount set forth in
this clause (f) for such calendar year (without giving effect to
the carry over permitted by this provision), the difference
between such stated maximum amount and such actual acquisitions
shall, in addition, be available for acquisitions in the next
succeeding calendar year; and
(h) the acquisition of all or substantially all of the
assets of any domestic corporation by any Domestic MES
Subsidiary, provided that (i) such assets are purchased for no
more than the fair market value thereof, and (ii) the
consideration for such assets consists solely of the common stock
of such Domestic MES Subsidiary.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
(a) An "Event of Default" occurs if:
(i) any Obligor defaults in the payment of interest on
any Security (including, without limitation, the issuance of
Interest Deferral Securities) when the same becomes due and
payable and the Default continues for a period of five days;
(ii) any Obligor defaults in the payment of the
principal of any Security when the same becomes due
and payable at maturity, upon redemption, repurchase or
otherwise;
(iii) any Obligor fails to observe or perform any
covenant, condition or agreement on the part of the Company
to be observed or performed pursuant to the Intercreditor
Agreement or pursuant to Section 4.11, 4.15, 4.16, 4.17,
4.18, 4.25, 4.26, 4.28 or 4.29 or pursuant to Article 3 or
Article 5;
(iv) any Obligor fails to comply with any of its other
agreements or covenants in, or provisions of, the
Securities, any Collateral Document, or this Indenture and
the Default continues for the period and after the notice
specified in Section 6.01(c);
(v) any representation or warranty in Article 10 or in
any Collateral Document shall have been incorrect in any
material respect when made;
(vi) (A) a default in the payment of principal,
premium or interest when due occurs (whether by scheduled
maturity, required prepayment, acceleration, demand or
otherwise) under any agreement, Guaranty, note, mortgage,
indenture or instrument (other than the Securities) under
which there may be issued or by which there may be secured
or evidenced any Indebtedness of the Company or any of its
Subsidiaries (other than (i) the Rohr Indebtedness, (ii)
Indebtedness of an Insignificant Subsidiary or (iii) so long
as such Indebtedness is not guaranteed, directly or
indirectly, by the Company, any of the domestic MES
subsidiaries, MES or any of the SellCo Companies
Indebtedness of Comstock or any of the UK Subsidiaries
outstanding on the Issue Date) in an amount or amounts in
excess of $5,000,000 individually or $7,000,000 in the
aggregate, (B) a default occurs under any such agreement,
note, mortgage, indenture or instrument, the effect of which
(1) results in the acceleration of such Indebtedness, or
(2) permits the holder of such Indebtedness to accelerate,
declare to be due and payable, or demand total or partial
redemption, prepayment or repurchase of, all or any portion
of such Indebtedness prior to its stated maturity, or
(C) all or any portion of such Indebtedness is required to
be prepaid, redeemed, purchased or defeased, or an offer to
prepay, redeem, purchase or defease such Indebtedness is
required to be made, in each case prior to the stated
maturity thereof;
(vii) a final judgment or final judgments for the
payment of money are entered by a court or courts of
competent jurisdiction against the Company or any of its
Subsidiaries (other than an Insignificant Subsidiary or in
respect of the Rohr Indebtedness) and such judgment or
judgments remain undischarged for a period (during which
execution shall not be effectively stayed) of 60 days,
provided that any such judgment or judgments exceeds
$1,000,000 individually or $1,500,000 in the aggregate;
(viii) the Company or any of its Subsidiaries (other
than an Insignificant Subsidiary) pursuant to or within the
meaning of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for
relief against it in an involuntary case,
(C) consents to the appointment of a Cus-
todian of it or for all or substantially all of
its property,
(D) makes a general assignment for the bene-
fit of its creditors, or
(E) is unable to pay its debts as the same
become due; or
(ix) a court of competent jurisdiction enters an order
or decree under any Bankruptcy Law that:
(A) is for relief against the Company or any
Subsidiary of the Company (other than an
Insignificant Subsidiary) in an involuntary case,
(B) appoints a Custodian of the Company or
any Subsidiary of the Company (other than an
Insignificant Subsidiary) or for all or substan-
tially all of its property,
(C) orders the liquidation of the Company or
any Subsidiary of the Company (other than an
Insignificant Subsidiary),
and the order or decree remains unstayed and in effect
for 60 days; or
(x) the Liens on any of the Collateral granted or
purported to be granted pursuant to any Collateral Document
shall be or become unenforceable or invalid, or the priority
thereof shall become diminished; or
(xi) with respect to any Plan, (A) a prohibited
transaction within the meaning of Section 4975 of the Code
or Section 406 of ERISA occurs that in the reasonable
determination of the Trustee could result in direct or
indirect liability to the Company or any of its
Subsidiaries; (B) with respect to any Title IV Plan, the
filing of a notice to voluntarily terminate any such plan in
a distress termination; (C) with respect to any
Multiemployer Plan, the Company, any of its Subsidiaries, or
any ERISA Affiliate shall incur any Withdrawal Liability;
(D) with respect to any Qualified Plan, the Company, any of
its Subsidiaries or any ERISA Affiliate shall incur an
accumulated funding deficiency or request a funding waiver
from the IRS, and (E) with respect to any Title IV Plan or
Multiemployer Plan that has an ERISA Event not described in
clause (B), (C) or (D) above that, in the reasonable
determination of the Trustee, there is a reasonable
likelihood for termination of any such plan by the PBGC and
for resulting liability of the Company, any of its
Subsidiaries or any ERISA Affiliate; provided, however, that
the events listed in clauses (A) through (E) above shall
constitute Events of Default only if the liability,
deficiency or waiver request of the Company, any of its
Subsidiaries or any ERISA Affiliate, whether or not
assessed, exceeds, individually or in the aggregate,
$1,000,000; or
(xii) the Guaranty pursuant to Article 11 shall cease
for any reason to be in full force and effect or either
Guarantor, or any Person acting by or on behalf of either
Guarantor, shall deny or disaffirm its obligations under
such Guaranty.
(b) The term "Bankruptcy Law" means Title 11, U.S. Code, or
any similar federal or state law for the relief of debtors. The
term "Custodian" means any receiver, trustee, assignee,
liquidator or similar official under any Bankruptcy Law.
(c) A Default under Section 6.01(a)(iv) or (v) is not an
Event of Default until 30 days after the Trustee notifies the
Obligors, or until 30 days after the Holders of at least 25% in
aggregate principal amount of the then outstanding Securities
notify the Obligors (and the Trustee, if such notice is given by
the Holders), in writing, of the Default. The notice must
specify the Default, demand that it be remedied and state that
the notice is a "Notice of Default."
Section 6.02. Acceleration.
If an Event of Default (other than an Event of Default
specified in clause (viii) or (ix) of Section 6.01(a)) occurs and
is continuing, the Trustee may, by written notice to the Company,
or the Holders of at least 25% in aggregate principal amount of
the then outstanding Securities may, by written notice to the
Obligors and the Trustee, and the Trustee shall, upon the request
of such Holders, declare the unpaid principal of, and any accrued
but unpaid interest on, all the Securities to be due and payable.
Upon such declaration, the unpaid principal of, and accrued and
unpaid interest shall be due and payable immediately in cash. In
the event of a declaration of acceleration because an Event of
Default specified in Section 6.01(a)(vi) has occurred and is
continuing, such declaration of acceleration shall be
automatically annulled if such payment default is cured or waived
or the holders of the Indebtedness that is the subject of such
Event of Default have rescinded their declaration of acceleration
in respect of such Indebtedness within 30 days thereof and the
Trustee has received written notice of such cure, waiver or
rescission and no other Event of Default under Section
6.01(a)(vi) has occurred that has not been cured or waived within
30 days of the declaration of acceleration of such Indebtedness
in respect thereof. If an Event of Default specified in clause
(viii) or (ix) of Section 6.01(a) occurs, the unpaid principal
of, and any accrued but unpaid interest on, all the Securities
shall ipso facto become and be immediately due and payable in
cash without any declaration or other act on the part of the
Trustee or any Holder. The Holders of a majority in aggregate
principal amount of the then outstanding Securities by written
notice to the Trustee may rescind an acceleration and its
consequences if the rescission would not conflict with any
judgment or decree of a court of competent jurisdiction and if
all existing Events of Default (except nonpayment of principal or
interest on the Securities that has become due solely because of
the acceleration) have been cured or waived. No such rescission
shall affect any subsequent Default or Event of Default or impair
any right consequent thereto.
Section 6.03. Other Remedies.
(a) Notwithstanding any other provision of this Indenture,
if an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal
of or interest on the Securities or to enforce the performance of
any provision of the Securities or this Indenture, including,
without limitation, the Guaranty, pursuant to Article 11.
(b) The Trustee may maintain a proceeding even if it does
not possess any of the Securities or does not produce any of them
in the proceeding. A delay or omission by the Trustee or any
Holder in exercising any right or remedy accruing upon an Event
of Default shall not impair the right or remedy or constitute a
waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
Section 6.04. Waiver of Past Defaults.
Subject to Section 9.02, the Holders of at least a majority
in aggregate principal amount of the then outstanding Securities
by notice to the Trustee may waive an existing Default or Event
of Default and its consequences except a continuing Default or
Event of Default in the payment of the principal of or interest
on any Security. Upon any such waiver, such Default or Event of
Default shall cease to exist, and together with any Event of
Default arising therefrom, shall be deemed to have been cured for
every purpose of this Indenture, but no such waiver shall extend
to any subsequent or other Default or impair any right consequent
thereon.
Section 6.05. Control by Majority.
(a) The Holders of at least a majority in aggregate
principal amount of the then outstanding Securities may direct
the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power
conferred on it. The Trustee may refuse, however, to follow any
direction that conflicts with law or this Indenture, that may be
unduly prejudicial to the rights of other Holders, or would
subject the Trustee to personal liability. The Trustee shall be
entitled to indemnification reasonably satisfactory to it against
losses or expenses caused by the taking or not taking of such
action.
(b) The Company may set a record date for purposes of
determining the identity of Holders entitled to vote or consent
to any action by vote or consent authorized or permitted under
this Indenture, which record date shall be the later of 10 days
prior to the first solicitation of such consent or the date of
the most recent list of Holders furnished to the Trustee pursuant
to Section 2.05 of this Indenture prior to such solicitation. If
a record date is fixed, those persons who were Holders of
Securities at such record date (or their duly designated
proxies), and only those persons, shall be entitled to take such
action by vote or consent or to revoke any vote or consent
previously given, whether or not such persons continue to be
Holders after such record date. No such vote or consent shall be
valid or effective for more than 120 days after such record date.
Section 6.06. Limitation on Suits.
(a) A Holder may pursue a remedy with respect to this
Indenture or the Securities only if:
(i) the Holder gives to the Trustee written notice of
a continuing Event of Default;
(ii) the Holders of at least 25% in aggregate
principal amount of the then outstanding Securities make a
written request to the Trustee to pursue the remedy;
(iii) such Holder or Holders offer and, if requested,
provide to the Trustee indemnity satisfactory to the Trustee
against any loss, liability or expense;
(iv) the Trustee does not comply with the request
within 60 days after receipt of the request and the offer
and, if requested, the provision of indemnity; and
(v) during such 60-day period, the Holders of a
majority in aggregate principal amount of the then
outstanding Securities do not give the Trustee a direction
inconsistent with the request.
(b) A Holder may not use this Indenture to prejudice the
rights of another Holder or to obtain a preference or priority
over another Holder.
Section 6.07. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the
right of any Holder to receive payment of principal of and
interest on the Security, on or after the respective due dates
expressed in the Security, or to bring suit for the enforcement
of any such payment on or after such respective dates, shall not
be impaired or affected without the consent of such Holder.
Section 6.08. Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(a)(i) or
(ii) occurs and is continuing, the Trustee is authorized to
recover judgment in its own name and as trustee of an express
trust against any or all of the Obligors or any other obligor on
the Securities for the whole amount of principal and interest
remaining unpaid on the Securities and interest on overdue
principal and, to the extent lawful, interest and such further
amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and
counsel.
Section 6.09. Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and
other papers or documents as may be necessary or advisable in
order to have the claims of the Trustee (including any claim for
the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel) and the Holders allowed
in any judicial proceedings relative to any Obligor (or any other
obligor upon the Securities), its creditors or its property and
shall be entitled and empowered to collect, receive and distri-
bute any money or other property payable or deliverable on any
such claims, and any custodian in any such judicial proceeding is
hereby authorized by each Holder to make such payments to the
Trustee, and in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the
Trustee any amount due to it for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section
7.07. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section
7.07 out of the estate in any such proceeding shall be denied for
any reason, payment of the same shall be secured by a Lien on,
and shall be paid out of, any and all distributions, dividends,
money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or
under any plan of reorganization or arrangement or otherwise.
Nothing herein contained shall be deemed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder,
or to authorize the Trustee to vote in respect of the claim of
any Holder in any such proceeding except to vote for the election
of a trustee in bankruptcy or similar Person.
Section 6.10. Priorities.
(a) If the Trustee collects any money pursuant to this
Article, any Collateral Document or the Intercreditor Agreement,
it shall pay out the money in the following order:
First: to the Trustee, its agents and attorneys for
amounts due under Section 7.07, including payment of all
compensation, expense and liabilities incurred, and all
advances made, by the Trustee, and the costs and expenses of
collection;
Second: to the Holders for amounts due and unpaid on
the Securities for principal and interest, ratably, without
preference or priority of any kind, according to the amounts
due and payable on the Securities for principal and
interest, respectively; and
Third: to the Obligors or as otherwise provided in the
Intercreditor Agreement.
(b) The Trustee may fix a record date and payment date for
any payment to Holders and give whatever notice to the Holders
the Trustee deems appropriate.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action
taken or omitted by it as a Trustee, a court in its discretion
may require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having
due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section does not apply to a
suit by the Trustee, a suit by a Holder pursuant to Section 6.06,
or a suit by Holders of more than 10% in aggregate principal
amount of the then outstanding Securities.
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing,
the Trustee shall exercise such of the rights and powers vested
in it by this Indenture, and use the same degree of care and
skill in their exercise, as a prudent man would exercise or use
under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default
known to the Trustee:
(i) The duties of the Trustee shall be determined
solely by the express provisions of this Indenture and the
Trustee need perform only those duties that are specifically
set forth in this Indenture and no others, and no implied
covenants or obligations shall be read into this Indenture
against the Trustee.
(ii) In the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed
therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this
Indenture. The Trustee shall, however, examine the
certificates and opinions to determine whether or not they
conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for
its own negligent action, its own negligent failure to act, or
its own willful misconduct, except that:
(i) This clause (c) does not limit the effect of
clause (a) or (b) of this Section.
(ii) The Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer, unless it is
proved that the Trustee was negligent in ascertaining the
pertinent facts.
(iii) The Trustee shall not be liable with respect to
any action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to
Section 6.05.
(d) Whether or not therein expressly so provided, every
provision of this Indenture that in any way relates to the
Trustee is subject to clause (a), (b), (c) and (e) of this
Section 7.01.
(e) Notwithstanding anything to the contrary outstanding,
no provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee
may refuse to perform any duty or exercise any right or power
unless it receives indemnity satisfactory to it against any loss,
liability or expense that may be incurred thereby, including, but
not limited to, liability relating to any environmental laws,
rules or regulations.
(f) The Trustee shall not be liable for interest on any
money received by it except as the Trustee may agree in writing
with the Company. Money held in trust by the Trustee need not be
segregated from other funds except to the extent required by law.
Section 7.02. Rights of Trustee.
(a) The Trustee may conclusively rely and shall be
protected from acting or refraining from acting based upon any
document believed by it to be genuine and to have been signed or
presented by the proper person. The Trustee need not investigate
any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate (which shall conform to the
provisions of Section 12.05) or an Opinion of Counsel, or both.
The Trustee shall not be liable for any action it takes or omits
to take in good faith in reliance on such Officers' Certificate
or Opinion of Counsel. The Trustee may consult with counsel and
the written advice of such counsel or any Opinion of Counsel
shall be full and complete authorization and protection from
liability in respect of any action taken, suffered or omitted by
it hereunder in good faith and in reliance thereon.
(c) The Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any agent
appointed with due care.
(d) The Trustee shall not be liable for any action it takes
or omits to take in good faith that it believes to be authorized
or within its rights or powers conferred upon it by this
Indenture.
(e) Unless otherwise specifically provided in the
Indenture, any demand, request, direction or notice from the
Company shall be sufficient if signed by an Officer of the
Company.
(f) The Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Indenture at the
request or direction of any of the Holders pursuant to this
Indenture, unless such Holders shall have offered the Trustee
reasonable security and indemnity against the costs, expenses and
liabilities which might be incurred by it in compliance with such
request or direction.
Section 7.03. Individual Rights of Trustee.
The Trustee, in its individual or any other capacity, may
become the owner or pledgee of Securities and may otherwise deal
with the Company, the other Obligors or an Affiliate of the
Obligors with the same rights it would have if it were not
Trustee. Any Agent may do the same with like rights. The
Trustee is subject, however, to Sections 7.10 and 7.11.
Section 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for, and makes no
representation as to the validity or adequacy of this Indenture
or the Securities; it shall not be accountable for the Company's
use of any proceeds from the Securities or any money paid to the
Company or upon the Company's direction under any provision
hereof; it shall not be responsible for the use or application of
any money received by any Paying Agent other than the Trustee;
and it shall not be responsible for any statement or recital
herein or any statement in the Securities or any other document
in connection with the sale of the Securities or pursuant to this
Indenture other than its certificate of authentication.
Section 7.05. Notice of Defaults.
If a Default or Event of Default occurs and is continuing
and if it is known to the Trustee, the Trustee shall mail to the
Holders, as their names and addresses appear on the register of
the Securities, a notice of the Default or Event of Default
within 90 days after the occurrence thereof. Except in the case
of a Default or Event of Default in payment on any Security, the
Trustee may withhold the notice if and so long as a committee of
its Trust Officers in good faith determines that withholding the
notice is in the interests of the Holders.
Section 7.06. Reports by Trustee to Holders.
(a) Within 60 days after each May 15, beginning with the
May 15 following the date of this Indenture, the Trustee shall
mail to the Holders, in the manner and to the extent required by
TIA Section 313(c), a brief report dated as of such reporting
date that complies with TIA Section 313(a). The Trustee shall
also comply with TIA Section 313(b). The Trustee shall also
transmit by mail all reports as required by TIA Section 313(c).
(b) Commencing at the time this Indenture is qualified
under the TIA, a copy of each report at the time of its mailing
to Holders shall be filed with the SEC and each stock exchange on
which the Securities are listed. The Company shall promptly
notify the Trustee when the Securities are listed on any stock
exchange.
Section 7.07. Compensation and Indemnity.
(a) The Obligors, jointly and severally, agree that they
shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services
hereunder. The Trustee's compensation shall not be limited by
any law on compensation of a trustee of an express trust. The
Obligors, jointly and severally, agree that they shall reimburse
the Trustee promptly upon request for all reasonable dis-
bursements, advances and expenses incurred or made by it in
addition to the compensation for its services. Such expenses
shall include the reasonable compensation, disbursements and
expenses of the Trustee's agents and counsel.
(b) The Obligors, jointly and severally, shall indemnify
the Trustee for, and hold it harmless against, any and all loss,
liability or expense incurred by it arising out of or in
connection with the acceptance or administration of its duties
under this Indenture, except as set forth in Section 7.07(c).
The Trustee shall notify each Obligor promptly of any claim for
which it may seek indemnity. Failure by the Trustee to so notify
each Obligor shall not relieve any Obligor of its obligations
hereunder. The Obligors shall defend the claim and the Trustee
shall cooperate in the defense. The Trustee may have separate
counsel and the Obligors shall pay the reasonable fees and
expenses of such counsel. The Obligors need not pay for any
settlement made without its consent, which consent shall not be
unreasonably withheld. The obligation of the Obligors under this
Section 7.07 shall survive the satisfaction and discharge of this
Indenture.
(c) The Obligors need not reimburse any expense or
indemnify against any loss or liability incurred by the Trustee
through its own negligence or willful misconduct.
(d) To secure the Obligors' payment obligations in
this Section, the Trustee shall have a claim and Lien prior to
the Securities on all money or property held or collected by the
Trustee, except that held in trust to pay principal of and
interest on particular Securities. Such Lien shall survive the
satisfaction and discharge of the Indenture.
(e) When the Trustee incurs expenses or renders services
after an Event of Default specified in Section 6.01(a) (viii) or
(ix) occurs, the expenses and the compensation for the services
are intended to constitute expenses of administration under any
Bankruptcy Law.
Section 7.08. Replacement of Trustee.
(a) A resignation or removal of the Trustee and appointment
of a successor Trustee shall become effective only upon the
successor Trustee's acceptance of appointment as provided in this
Section.
(b) The Trustee may resign at any time and be discharged
from the trust hereby created by so notifying the Company in
writing. The Holders of a majority in aggregate principal amount
of the then outstanding Securities may remove the Trustee by so
notifying the Trustee and the Company in writing. The Company
may remove the Trustee if:
(i) the Trustee fails to comply with Section 7.10;
(ii) the Trustee is adjudged a bankrupt or an
insolvent or an order for relief is entered with respect to
the Trustee under any Bankruptcy Law;
(iii) a Custodian or public officer takes charge of the
Trustee or its property; or
(iv) the Trustee becomes incapable of acting.
(c) If the Trustee resigns or is removed or if a vacancy
exists in the office of Trustee for any reason, the Company shall
promptly appoint a successor Trustee. Within one year after the
successor Trustee takes office, the Holders of a majority in
aggregate principal amount of the then outstanding Securities may
appoint a successor Trustee to replace the successor Trustee
appointed by the Company.
(d) If a successor Trustee does not take office within 60
days after the retiring Trustee resigns or is removed, the
retiring Trustee, the Company or the Holders of at least 10% in
aggregate principal amount of the then outstanding Securities may
petition any court of competent jurisdiction for the appointment
of a successor Trustee.
(e) If the Trustee after written request by any Holder who
has been a Holder for at least six months fails to comply with
Section 7.10, such Holder may petition any court of competent
jurisdiction for the removal of the Trustee and the appointment
of a successor Trustee.
(f) A successor Trustee shall deliver a written acceptance
of its appointment to the retiring Trustee and to the Company.
Thereupon, the resignation or removal of the retiring Trustee
shall become effective, and the successor Trustee shall have all
the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its suc-
cession to the Holders. The retiring Trustee shall promptly
transfer all property held by it as Trustee to the successor
Trustee, provided all sums owing to the Trustee hereunder have
been paid and subject to the Lien provided for in Section 7.07.
Notwithstanding replacement of the Trustee pursuant to this
Section 7.08, the Obligors' obligations under Section 7.07 shall
continue for the benefit of the retiring Trustee.
Section 7.09. Successor Trustee by Merger, Etc.
If the Trustee consolidates, merges or converts into, or
transfers all or substantially all of its corporate trust
business to, another corporation, the successor corporation
without any further act shall be the successor Trustee, provided
such successor is eligible and qualified under Section 7.10.
Section 7.10. Eligibility; Disqualification.
(a) There shall at all times be one or more Trustee(s)
hereunder at least one of whom shall be at all times either:
(i) a corporation organized and doing business under
the laws of the United States of America or of any state or
the District of Columbia, authorized under such laws to
exercise corporate trust powers and subject to supervision
or examination by federal or state authority and having a
combined capital and surplus of at least $50,000,000; or
(ii) a corporation or other Person organized and doing
business under the laws of a foreign government that is
permitted to act as Trustee pursuant to a rule, regulation
or order of the SEC, authorized under such laws to exercise
corporate trust powers, and subject to supervision or
examination by authority of such foreign government or a
political subdivision thereof substantially equivalent to
supervision or examination applicable to United States
institutional trustees, and having a combined capital and
surplus of at least $50,000,000.
(b) If such corporation publishes reports of condition at
least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then, for the
purposes of this Section 7.10, the combined capital and surplus
of such corporation shall be deemed to be its combined capital
and surplus as set forth in its most recent report of condition
so published. If at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section 7.10,
it shall resign immediately in the manner and with the effect
hereinafter specified in this Article 7. Neither the Company nor
any person directly or indirectly controlling, controlled by, or
under common control with, the Company shall serve as Trustee
hereunder.
(c) The Trustee shall be subject to the provisions of
Section 310(b) of the TIA during the period of time provided for
therein. Nothing herein shall prevent the Trustee from filing
with the SEC the application referred to in the second to last
paragraph of Section 310(b) of the TIA.
(d) Notwithstanding the provisions of clause (a) of this
Section 7.10, no obligor upon the Securities or any Affiliate of
such obligor shall serve as Trustee hereunder.
Section 7.11. Preferential Collection of Claims Against Company.
The Trustee is subject to TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee
who has resigned or been removed shall be subject to TIA
Section 311(a) to the extent indicated therein.
ARTICLE 8
DISCHARGE OF INDENTURE
Section 8.01. Termination of Company's Obligations.
(a) This Indenture shall cease to be of further effect
(except that the Obligors' obligations under Section 7.07 and the
Obligors', Trustee's and Paying Agent's obligations under Section
8.03 shall survive) when all outstanding Securities theretofore
authenticated and issued have been delivered (other than
destroyed, lost or stolen Securities that have been replaced or
paid) to the Trustee for cancellation and each Obligor has paid
all sums payable hereunder.
(b) In addition, the Obligors may terminate their obliga-
tions under the Securities and this Indenture if:
(i) the Company has irrevocably deposited in trust for
the benefit of the Holders with the Trustee or (at the
option of the Trustee) with a trustee reasonably
satisfactory to the Trustee and the Company, under the terms
of an irrevocable trust agreement in form and substance
satisfactory to the Trustee at any time prior to the stated
maturity of the Securities or the date of redemption of all
of the outstanding Securities, money or U.S. Government
Obligations maturing as to principal and interest in such
amounts and at such times as are sufficient (in the
reasonable opinion of a nationally recognized firm of
independent accountants expressed in a written certificate
thereof delivered to the Trustee, without consideration of
the reinvestment of such interest) to pay principal of and
interest on the outstanding Securities (other than
Securities replaced pursuant to Section 2.07) to maturity or
redemption, as the case may be, and to pay all other sums
payable by it hereunder, provided that (i) the trustee of
the irrevocable trust shall have been irrevocably instructed
to pay such money or the proceeds of such U.S. Government
Obligations to the Trustee and (ii) the Trustee shall have
been irrevocably instructed to apply such money or the
proceeds of such U.S. Government Obligations to the payment
of said principal and interest with respect to the
Securities;
(ii) the Obligors deliver to the Trustee an Officers'
Certificate stating that all conditions precedent provided
for herein relating to the satisfaction and discharge of
this Indenture have been complied with, and an Opinion of
Counsel to the same effect;
(iii) no Default or Event of Default shall have
occurred and be continuing on the date of such deposit or as
a result thereof;
(iv) the Obligors shall have delivered to the Trustee
(A) either (1) a ruling directed to the Trustee received
from the Internal Revenue Service to the effect that the
Holders of the Securities will not recognize income, gain or
loss for federal income tax purposes as a result of the
Obligors' exercise of its option under this clause (b) and
will be subject to federal income tax on the same amount and
in the same manner and at the same time as would have been
the case if such option had not been exercised or (2) an
Opinion of Counsel, reasonably satisfactory to the Trustee,
to the same effect as the ruling described in clause (1),
accompanied by a ruling to that effect published by the
Internal Revenue Service, and (B) an Opinion of Counsel,
reasonably satisfactory to the Trustee, to the effect that
(1) after the passage of 90 days following the deposit, the
trust funds will not be subject to the preference provisions
of Section 547 of Title 11 of the United States Code (except
that no opinion need be given with respect to the
application of subsection (6)(4)(b) thereof), or (2) (x) the
Trustee will hold, for the benefit of the Holders of
Securities, a valid and perfected security interest in such
trust funds, and (y) the Holders of Securities will be
entitled to receive adequate protection of their interests
in such trust funds if such trust funds are used;
(v) each Obligor has paid or caused to be paid all
sums then payable by such Obligor hereunder and under the
Securities; and
(vi) the exercise by the Obligors of their option
under this clause (b) shall not cause the Trustee to have a
conflicting interest as defined in Section 7.10 or for
purposes of the TIA with respect to any securities of the
Company.
(c) Notwithstanding the foregoing paragraph (b), prior to
the end of the 90-day period following the deposit referred to
above, none of the Company's obligations or, to the extent
applicable, any Guarantor's obligations, under this Indenture
shall be discharged and, subsequent to the end of such 90-day
period, the Obligors' respective obligations under Sections 2.02,
2.03, 2.04, 2.05, 2.06, 2.07, 2.10, 4.01, 4.02, 4.05, 4.17, 7.07,
7.08, 8.03 and 8.04 and under Article 11 shall survive until the
Securities are no longer outstanding. Thereafter, only the
Obligors' and the Trustee's obligations in Sections 7.07, 8.03
and 8.04 shall survive.
(d) After such irrevocable deposit made pursuant to Section
8.01(b) and satisfaction of the other conditions set forth
herein, the Trustee upon request shall acknowledge in writing the
discharge of the Obligors' obligations under this Indenture
except for those surviving obligations specified above.
(e) In order to have money available on a payment date to
pay principal of or interest on the Securities, the U.S.
Government Obligations shall be payable as to principal or
interest at least one Business Day before such payment date in
such amounts as will provide the necessary money.
(f) "U.S. Government Obligations" means securities that are
(i) direct obligations of the United States of America for the
payment of which its full faith and credit is pledged or (ii)
obligations of a Person controlled or supervised by, and acting
as an agency or instrumentality of, the United States of America,
the timely payment of which is unconditionally guarantied as a
full faith and credit obligation by the United States of America,
that, in either case under clause (i) or (ii), are not callable
or redeemable at the option of the issuer thereof.
Section 8.02. Application of Trust Money.
The Trustee or a trustee satisfactory to the Trustee and the
Company shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to Section 8.01(b). It shall apply
the deposited money and the money from U.S. Government
Obligations through the Paying Agent and in accordance with this
Indenturetothe paymentofprincipal ofand interestonthe Securities.
Section 8.03. Repayment to the Company.
(a) The Trustee and the Paying Agent shall promptly pay to
the Company, upon written request, any excess money or securities
held by them at any time after the termination of the Company's
obligations in accordance with Section 8.01.
(b) The Trustee and the Paying Agent shall pay to the
Company, upon written request, any money held by them for the
payment of principal or interest that remains unclaimed for two
years and six months after the date upon which such payment shall
have become due; provided, however, that the Company shall have
caused notice of such payment to be mailed to each Holder
entitled thereto not less than 30 days prior to such repayment.
After payment to the Company, the Holders entitled to the money
must look to the Company for payment as general creditors unless
an applicable abandoned property law designates another person,
and all liability of the Trustee and such Paying Agent with
respect to such money shall cease.
Section 8.04. Reinstatement.
If the Trustee or Paying Agent is unable to apply any money
or U.S. Government Obligations in accordance with Section 8.02 by
reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining,
restraining or otherwise prohibiting such application, the
Obligors' obligations under this Indenture and the Securities
shall be revived and reinstated as though no deposit had occurred
pursuant to Section 8.01(b) until such time as the Trustee or
Paying Agent is permitted to apply all such money or U.S.
Government Obligations in accordance with Section 8.02; provided,
however, that if any Obligor has made any payment of interest on
or principal of any Securities because of the reinstatement of
its obligations, such Obligor shall be subrogated to the rights
of the Holders of such Securities to receive such payment from
the money or U.S. Government Obligations held by the Trustee or
Paying Agent.
ARTICLE 9
AMENDMENTS
Section 9.01. Without Consent of Holders.
(a) The Obligors and the Trustee may amend or supplement
this Indenture or the Securities without the consent of any
Holder:
(i) to cure any ambiguity, defect or inconsistency;
(ii) to comply with any requirements of the SEC in
connection with the qualification of this Indenture under
the TIA as then in effect;
(iii) to provide for uncertificated Securities in
addition to certificated Securities; or
(iv) to make any change that does not adversely affect
the rights of any Holder hereunder or under any Collateral
Document, the Intercreditor Agreement or any Security.
(b) Upon the written request of the Obligors, accompanied
by a resolution of the Boards of Directors of the Obligors
authorizing the execution of any such supplemental Indenture,
and, upon receipt by the Trustee of the documents described in
Section 9.06, the Trustee shall join with the Obligors in the
execution of any supplemental Indenture authorized or permitted
by the terms of this Indenture and to make any further
appropriate agreements and stipulations that may be therein
contained, but the Trustee shall not be obligated to enter into
any such supplemental Indenture that affects its own rights,
duties or immunities under this Indenture or otherwise, in which
case the Trustee may, in its discretion, but shall not be
obligated to, enter into such supplemental Indenture.
Section 9.02. With Consent of Holders.
(a) The Obligors and the Trustee may amend any of the
provisions of this Indenture, any Collateral Document, the
Intercreditor Agreement or the Securities or waive compliance in
a particular instance by any Obligor of any provision of this
Indenture, any Collateral Document, the Intercreditor Agreement
or the Securities, with the written consent of the Holders of at
least a majority in aggregate principal amount of the then
outstanding Securities; provided that, without the consent of
each Holder affected, an amendment or waiver under this Section
may not:
(i) reduce the principal amount of Securities the
Holders of which must consent to an amendment or waiver;
(ii) reduce the rate of or change the time for payment
of interest, including defaulted interest, on any Security;
(iii) reduce the principal or premium (if any) of or
change the fixed maturity of any Security or alter the
redemption provisions with respect thereto;
(iv) make any Security payable in money other than
that stated in the Security;
(v) make any change in Section 6.04 or 6.07 or in this
clause (v) of this Section 9.02(a);
(vi) waive a Default in the payment of principal of or
interest on, or redemption payment with respect to, any
Security;
(vii) make any change in Section 2 of the
Intercreditor Agreement;
(viii) release any Collateral consisting of the
Capital Stock of MES or SellCo; or
(ix) release any Guarantor or modify the provisions of
this Indenture relating to the Guaranty set forth in Article
11 in a manner adverse to the Holders.
(b) Upon the written request of the obligors, accompanied
by a resolution of the Boards of Directors of the obligors
authorizing the execution of any such supplemental Indenture, and
upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders as aforesaid, and upon
receipt by the Trustee of the documents described in Section
9.06, the Trustee shall join with the obligors in the execution
of such supplemental Indenture unless such supplemental Indenture
affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise, in which case the Trustee may, in its
discretion, but shall not be obligated to, enter into such
supplemental Indenture.
(c) It shall not be necessary for the consent of the
Holders under this Section to approve the particular form of any
proposed amendment or waiver, but it shall be sufficient if such
consent approves the substance thereof.
(d) After an amendment or waiver under this Section becomes
effective, the Company shall mail to the Holders of each Security
affected thereby a notice briefly describing the amendment or
waiver. Any failure of the Company to mail such notice, or any
defect therein, shall not, however, in any way impair or affect
the validity of any such supplemental Indenture or waiver.
(e) The Company shall give the Holders of the Securities
notice of the effectiveness of any amendment under this Section
9.02.
Section 9.03. Compliance with Trust Indenture Act.
Every amendment to this Indenture or the Securities at a
time when this Indenture shall be qualified under the TIA shall
be set forth in a supplemental Indenture that complies with the
TIA as then in effect.
Section 9.04. Revocation and Effect of Consents.
Until an amendment or waiver becomes effective, a consent to
it by a Holder is a continuing consent by the Holder and every
subsequent Holder of a Security or portion of a Security that
evidences the same Indebtedness as the consenting Holder's
Security, even if notation of the consent is not made on any
Security. Any such Holder or subsequent Holder may, however,
revoke the consent as to his Security or portion of a Security if
the Trustee receives written notice of revocation before the date
the amendment or waiver becomes effective. An amendment or
waiver becomes effective in accordance with its terms and
thereafter binds every Holder. The Company may fix a record date
for determining which Holders must consent to such amendment or
waiver.
Section 9.05. Notation on or Exchange of Securities.
The Trustee may place an appropriate notation about an
amendment or waiver on any Security thereafter authenticated.
The Company, in exchange for all Securities, may issue and the
Trustee shall authenticate new Securities that reflect the
amendment or waiver. Failure to make the appropriate notation or
issue a new Security shall not affect the validity and effect of
such amendment or waiver.
Section 9.06. Trustee to Sign Amendments, Etc.
The Trustee shall sign any amendment or supplemental
Indenture authorized pursuant to this Article 9 if the amendment
does not adversely affect the rights, duties, liabilities or
immunities of the Trustee. If it does, the Trustee may, but need
not, sign it. In signing or refusing to sign such amendment or
supplemental Indenture, the Trustee shall be entitled to receive,
if requested, an indemnity reasonably satisfactory to it and to
receive, and, subject to Section 7.01, shall be fully protected
in relying upon, an Officers' Certificate and an Opinion of
Counsel as conclusive evidence that such amendment or sup-
plemental Indenture is authorized or permitted by this Indenture,
that it is not inconsistent herewith, and that it will be valid
and binding upon the Company in accordance with its terms. The
Company may not sign an amendment or supplemental Indenture until
the Board of Directors approves it.
ARTICLE 10
COLLATERAL
Section 10.01. Pledge of Collateral.
(a) Each of the Company and SellCo has made an assignment
of its right, title and interest in and to all of the "Pledged
Collateral" (as defined in the Pledge Agreements) to the Trustee
under the Pledge Agreements to which it is a party for the
benefit of the Holders of Securities and the Trustee. The due
and punctual payment of the principal of, premium, if any, and
interest on the Securities when and as the same shall be due and
payable, whether on an interest payment date, at maturity, by
acceleration, call for redemption or otherwise, and interest on
the overdue principal and interest, if any, of the Securities ac-
cording to the terms hereunder or thereunder (and at the rate set
forth therein), and payment of all other obligations of the
Obligors to the Trustee and the Holders pursuant to the terms of
this Indenture are (and are intended to be) secured by such
Pledged Collateral as provided in the Pledge Agreements, subject
to the terms of the Intercreditor Agreement. At the time the
Pledge Agreements were executed, each of the Company and SellCo
had full right, power and lawful authority to grant, convey,
hypothecate, assign, mortgage and pledge the property
constituting such Pledged Collateral, in the manner and form
done, or intended to be done, in the Pledge Agreements, free and
clear of all liens, pledges, charges and encumbrances whatsoever,
except (i) the liens created by the Pledge Agreements, the Series
A Senior Pledge Agreement, the Series A Subordinated Pledge
Agreement, the Series A SellCo Pledge Agreement, and the SellCo
Subordinated Pledge Agreement, and, except to the extent
otherwise provided therein, and (ii) liens permitted under
Section 4.08(p), and (a) shall forever warrant and defend title
to the same against the claims of all persons whatsoever, (b)
shall execute, acknowledge and deliver to the Trustee such
further assignments, transfers, assurances or other instruments
as the Trustee may reasonably require or request, and (c) shall
do or cause to be done all such acts and things as may be
necessary or proper, or as may be reasonably required by the
Trustee, to assure and confirm to the Trustee the security
interests in such Pledged Collateral contemplated hereby, by the
Pledge Agreements or any part thereof, as from time to time
constituted, so as to render the same available for the security
and benefit of this Indenture and of the Securities secured
hereby, according to the intent and purposes herein expressed.
The Pledge Agreements create a direct and valid lien on the
property constituting Collateral, as set forth therein. To the
extent applicable, the Pledge Agreements will be governed by the
Uniform Commercial Code in effect from time to time in the State
of New York. Each Holder, by accepting a Security, irrevocably
agrees to be bound by the provisions of the Pledge Agreements and
the Intercreditor Agreement.
(b) Upon the receipt by the Company or any of the Software
House Subsidiaries of any proceeds from an Asset Sale in respect
of the Capital Stock or assets of any Software House Subsidiary
(other than (i) Net Cash Proceeds used for the redemption of (A)
Securities pursuant to Section 3.08, or (B) Series A Notes
pursuant to the Series A Indenture, and (ii) proceeds pledged to
the Trustee pursuant to the terms of the Pledge Agreements), the
Company shall (i) execute and deliver to the Trustee such
Collateral Documents and take such further actions as shall be
requested by the Trustee to grant to the Trustee a Lien on such
proceeds, (ii) deliver such proceeds to the Trustee, file or
record such financing statements, mortgages, agreements or other
documents, notify such third parties, and do all further actions
as are necessary to perfect the Lien granted to the Trustee, and
(iii) execute and deliver such further instruments, documents and
agreements, deliver such opinions of counsel, and do such further
acts as the Trustee shall request to carry out the provisions of
this Section 10.01(b). The Lien on any Collateral granted to the
Trustee under any Collateral Document pursuant to this Section
10.01(b) shall be senior to any Lien in such Collateral granted
to the Series A Indenture Trustee and the SellCo Subordinated
Indenture Trustee pursuant to any "Collateral Document" (as
defined in the Series A Indenture and the SellCo Subordinated
Indenture).
(c) Upon receipt by the Company or any SellCo Company of
any proceeds from an Asset Sale in respect of the assets of the
Company (other than the Capital Stock of any Software House
Subsidiary) or such SellCo Company, the Company shall (i) execute
and deliver to the Trustee such Collateral Documents and take
such further actions as shall be requested by the Trustee to
grant to the Trustee a Lien on such proceeds, (ii) deliver such
proceeds to the Series A Indenture Trustee, as bailee, file or
record such financing statements, mortgages, agreements or other
documents, notify such third parties, and do all further actions
as are necessary to perfect the Lien granted to the Trustee, and
(iii) execute and deliver such further instruments, documents and
agreements, deliver such opinions of counsel, and do such further
acts as the Trustee shall request to carry out the provisions of
this Section 10.01(c). The Lien on any Collateral granted to the
Trustee under any Collateral Document pursuant to this Section
10.01(c) shall be (A) senior to any Lien in such Collateral
granted to the SellCo Subordinated Indenture Trustee pursuant to
any "Collateral Document" (as defined in the SellCo Subordinated
Indenture), and (B) subject to any Lien in such Collateral
granted to the Series A Indenture Trustee pursuant to any
"Collateral Document" (as defined in the Series A Indenture).
Section 10.02. Recording, Etc.
(a) The Company has duly delivered to (i) the Trustee,
pursuant to the Software House Senior Pledge Agreement, the
Pledged Collateral referred to therein, and (ii) the Series A
Indenture Trustee, as bailee, pursuant to the Software House
Subordinated Pledge Agreement, the Pledged Collateral referred to
therein, in each case together with appropriate stock powers
therefor and assignments thereof, duly executed in blank. SellCo
has duly delivered to the Trustee, pursuant to the Software House
SellCo Pledge Agreement, the Pledged Collateral referred to
therein, together with appropriate stock powers therefor and
assignments thereof, duly executed in blank. In addition, each
of the Company and SellCo, as the case may be, has caused, at its
own expense, the Pledge Agreements to which it is a party, this
Indenture, all amendments or supplements thereto and hereto, and
all appropriate financing statements to be registered, recorded
and filed or re-recorded, refiled and renewed in such manner and
in such place or places, if any, as may be required by law in
order fully to preserve and protect the Liens of the Pledge
Agreements on all parts of the Collateral and to effectuate and
preserve the security of the Holders and all rights of the
Trustee.
(b) The Company and each other obligor on the Securities
shall furnish to the Trustee, promptly after the execution and
delivery of this Indenture, and promptly after the execution and
delivery of any amendment hereto or to the Collateral Documents
or any other instrument of further assurance, an Opinion of
Counsel stating that, in the opinion of such Counsel, subject to
customary exclusions and exceptions reasonably acceptable to the
Trustee, either (i) this Indenture, the Pledge Agreements, any
such amendment and all other instruments of further assurance
have been properly recorded, registered and filed and all such
other action has been taken to the extent necessary to make
effective the Lien intended to be created by the Collateral
Documents, and reciting the details of such action or referring
to prior Opinions of Counsel in which such details are given, and
stating that, as to the Collateral Documents, such recording,
registering and filing are the only recordings, registering and
filings necessary to give notice thereof and that no re-
recordings, re-registering or refilings are necessary to maintain
such notice, and further stating that all financing statements
and continuation statements have been executed and filed that are
necessary fully to preserve and protect the rights of the
Security holders and the Trustee hereunder and under the
Collateral Documents, or (ii) no such action is necessary to make
such Lien and assignment effective.
(c) The Company and each other obligor on the Securities
shall furnish to the Trustee, within 30 days after March 31 in
each year beginning with March 31, 1995, an Opinion of Counsel,
dated as of such date, (i) stating that, in the opinion of such
counsel, subject to customary exclusions and exceptions
reasonably acceptable to the Trustee, either (A) all such action
has been taken with respect to the recording, registering, fil-
ing, re-recording, re-registering and refiling of the Indenture,
all supplemental indentures, financing statements, continuation
statements and all other instruments of further assurance as are
necessary to maintain the Lien of the Collateral Documents and
reciting the details of such action or referring to prior
Opinions of Counsel in which such details are given, and stating
that all financing statements and continuation statements have
been executed and filed that are necessary fully to preserve and
protect the rights of the Security holders and the Trustee
hereunder and under the Collateral Documents, or (B) no such
action is necessary to maintain such Lien and assignment and
(ii) stating what, if any, action of the foregoing character is
necessary during the one-year period commencing March 31 in the
then-current calendar year so to maintain such Lien and
assignment during such period.
(d) To the extent applicable, the Company and each obligor
on the Securities shall cause TIA Section 314(d) relating to the
release of property from the Lien of the Collateral Documents to
be complied with. Any certificate or opinion required by TIA
Section 314(d) may be made by an Officer of the Company, except
in cases which TIA Section 314(d) requires that such certificate
or opinion be made by an independent person.
Section 10.03. Suits to Protect the Collateral.
The Trustee shall have power to institute and maintain such
suits and proceedings as it may deem expedient to prevent any
impairment of the Collateral by any acts that may be unlawful or
in violation of any Collateral Document, the Intercreditor
Agreement, or this Indenture, and such suits and proceedings as
the Trustee may deem expedient to preserve or protect its
interests and the interests of the Securityholders in the
Collateral (including power to institute and maintain suits or
proceedings to restrain the enforcement of or compliance with any
legislative or other governmental enactment, rule or order that
may be unconstitutional or otherwise invalid if the enforcement
of, or compliance with, such enactment, rule or order would
impair the Security hereunder or be prejudicial to the interests
of the Holders or the Trustee).
Section 10.04. Authorization of Receipt of Funds by the Trustee
Under the Collateral Documents and the Intercreditor Agreement.
The Trustee is authorized to receive any funds for the
benefit of Holders distributed under the Collateral Documents and
the Intercreditor Agreement and to make further distributions of
such funds to the Holders according to the provisions of this
Indenture.
ARTICLE 11
GUARANTY OF SECURITIES
Section 11.01. Guaranty.
(a) Subject to the provisions of this Article 11, each
Guarantor hereby unconditionally guaranties to each Holder and to
the Trustee, on behalf of the Holders, (i) the due and punctual
payment of the principal of and interest on each Security, when
and as the same shall become due and payable, whether at
maturity, upon redemption, by acceleration or otherwise, the due
and punctual payment of interest on the overdue principal of and
interest, if any, on the Securities, to the extent lawful, and
the due and punctual performance of all other obligations of the
Company to the Holders or the Trustee all in accordance with the
terms of such Security and this Indenture, and (ii) in the case
of any extension of time of payment or renewal of any Securities
or any of such other obligations, that the same will be promptly
paid in full when due or performed in accordance with the terms
of the extension or renewal, at stated maturity, upon redemption,
by acceleration or otherwise. Each Guarantor hereby agrees that
its obligations hereunder shall be absolute and unconditional,
irrespective of, and shall be unaffected by, any invalidity,
irregularity or unenforceability of any such Security or this
Indenture, any failure to enforce the provisions of any such
Security or this Indenture, any waiver, modification or
indulgence granted to the Company with respect thereto, by any
Holder of such Security or the Trustee, or any other
circumstances that may otherwise constitute a legal or equitable
discharge of a surety or such Guarantor. Each Guarantor hereby
waives diligence, presentment, filing of claims with a court in
the event of merger or bankruptcy of the Company, any right to
require a proceeding first against the Company, the benefit of
discussion, protest or notice with respect to any such Security
or the Indebtedness evidenced thereby and all demands whatsoever
(except as specified below), and covenants that this Guaranty
will not be discharged as to any such Security except by payment
in full of the principal thereof and interest thereon and as
provided in Section 8.01. Each Guarantor further agrees that, as
between such Guarantor, on the one hand, and the Holders and the
Trustee, on the other hand, (i) the maturity of the obligations
guarantied hereby may be accelerated as provided in Article 6 for
the purposes of this Guaranty, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in
respect of the obligations guarantied hereby, and (ii) in the
event of any declaration of acceleration of such obligations as
provided in Article 6, such obligations (whether or not due and
payable) shall forthwith become due and payable by such Guarantor
for the purpose of this Guaranty. In addition, without limiting
the foregoing provisions, upon the effectiveness of an
acceleration under Article 6, the Trustee shall promptly make a
demand for payment on the Securities under the Guaranty provided
for in this Article 11 and not discharged.
(b) Notwithstanding anything to the contrary contained in
this Article 11, none of the Holders or the Trustee shall be
entitled to make any demand whatsoever under the Guaranty until
all of the Indebtedness outstanding under the Series A Notes has
been paid in full, whether at maturity, upon redemption, after
acceleration, or otherwise.
(c) Each Guarantor hereby waives any rights of subrogation
or any similar rights against the Company in respect of any
amounts paid to any Holder by such Guarantor pursuant to the
provisions of this Guaranty.
(d) The Guaranty set forth in this Section 11.01 shall not
be valid or become obligatory for any purpose with respect to a
Security until the certificate of authentication on such Security
shall have been signed by or on behalf of the Trustee.
Section 11.02. Obligations of the Guarantors Unconditional.
(a) Nothing contained in this Article 11 or elsewhere in
this Indenture or in any Security is intended to or shall impair,
as between each Guarantor and the Holders, the obligations of
such Guarantor, which obligations are independent of the
obligations of the Company under the Securities and the Indenture
and are absolute and unconditional, to pay to the holders the
principal of and interest on the Securities as and when the same
shall become due and payable in accordance with the provisions of
this Guaranty, or is intended to or shall affect the relative
rights of the Holders and creditors of such Guarantor, nor shall
anything herein or therein prevent the Trustee or any Holder from
exercising all remedies otherwise permitted by applicable law
upon the occurrence of an Event of Default.
(b) This Article 11 shall continue to be effective or shall
be reinstated, as the case may be, if at any time any payment of
any of the Securities is rescinded or must otherwise be returned
by the Holders or the Trustee upon the insolvency, bankruptcy or
reorganization of any obligor or otherwise, all as though such
payment had not been made.
(c) Each Guarantor hereby covenants and agrees that it
shall comply with all its obligations, requirements and
restrictions contained in Articles 4, 5 and 6 of this Indenture
so as not to create a Default or Event of Default under this
Indenture.
Section 11.03. Execution and Delivery of Guaranties.
(a) To evidence its Guaranty set forth in this Article 11,
each Guarantor hereby agrees that a notation of such Guaranty
shall be placed on each Security authenticated and delivered by
the Trustee and that this Guaranty shall be executed on behalf of
such Guarantor by the manual or facsimile signature of an Officer
of such Guarantor.
(b) Each Guarantor hereby agrees that its Guaranty set
forth in this Article 11 shall remain in full force and effect
notwithstanding any failure to endorse on each Security a
notation of such Guaranty.
(c) If an Officer of a Guarantor whose signature is on a
Security no longer holds that office at the time the Trustee
authenticates the Security on which a Guaranty is endorsed, such
Guaranty shall be valid nevertheless.
(d) The delivery of any Security by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery
of the Guaranty set forth in this Indenture on behalf of each
Guarantor.
Section 11.04. Limitations of Guaranties.
Each Guarantor and, by its acceptance hereof, each Holder,
hereby confirms that it is the intention of all such parties that
in no event shall either Guarantor's obligations under its
Guaranty constitute or result in a violation of any applicable
fraudulent conveyance or similar law of any relevant
jurisdiction. Therefore, in the event that the Guaranty would,
but for this sentence, constitute or result in such a violation,
then the liability of a Guarantor under such Guaranty shall be
reduced to the extent necessary to eliminate such violation under
the applicable fraudulent conveyance or similar law. Subject to
the preceding limitation on liability, the Guaranty constitutes a
guaranty of payment in full when due and not merely a guaranty of
collectibility.
ARTICLE 12
MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or
conflicts with the duties imposed by any of Sections 310 to 317,
inclusive, of the TIA through operation of Section 318(c)
thereof, such imposed duties shall control.
Section 12.02. Notices.
(a) Any notice or communication by any obligor or the
Trustee to any other party hereto is duly given if in writing and
delivered in person or mailed by first-class mail (registered or
certified, return receipt requested), postage prepaid, telex,
telecopier or overnight air courier guarantying next day
delivery, to such party's address:
If to the Company:
EMCOR Group, Inc.
101 Merritt Seven Corporate Park
Norwalk, Connecticut 061851-1060
Attention: President
Telecopier No.: (203) [________]
If to MES:
MES Holdings Corporation
c/o EMCOR Group, Inc.
101 Merritt Seven Corporate Park
Norwalk, Connecticut 061851-1060
Attention: President
Telecopier No.: (203) [________]
If to SellCo:
SellCo Corporation
c/o EMCOR Group, Inc.
101 Merritt Seven Corporate Park
Norwalk, Connecticut 061851-1060
Attention: President
Telecopier No.: (203) [________]
If to the Trustee:
United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Attention: Corporate Trust - Department B
Telecopier No.: (212) 852-1626
(b) The obligors or the Trustee, by notice to the other
parties hereto, may designate additional or different addresses
for subsequent notices or communications.
(c) If the Company mails a notice or communication to
Holders, it shall mail a copy to the Trustee and each Agent at
the same time.
Section 12.03. Communication by Holders with Other Holders.
Holders may communicate pursuant to TIA Section 312(b) with
other Holders with respect to their rights under this Indenture
or the Securities. The Company, the Trustee, the Registrar and
anyone else shall have the protection of TIA Section 312(c). Any
notice or communication given to a Holder shall be mailed to the
Holder at the Holder's address as it appears on the registration
books of the Registrar and shall be sufficiently given if so
mailed within the time prescribed. Failure to mail a notice or
communication to a Holder or any defect in it shall not affect
its sufficiency with respect to other Holders. If a notice or
communication is mailed in the manner provided above, it is duly
given, whether or not received by the addressee.
Section 12.04. Certificate and Opinion as to Conditions
Precedent.
Upon any request or application by the Company to the
Trustee to take any action under this Indenture, the Company
shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance
satisfactory to the Trustee (which shall include the statements
set forth in Section 12.05) stating that, in the opinion of the
signers, all conditions precedent and covenants (including any
covenants compliance with which constitutes a condition
precedent), if any, provided for in this Indenture relating to
the proposed action have been complied with; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements
set forth in Section 12.05) stating that, in the opinion of such
counsel, all such conditions precedent and covenants (including
any covenants compliance with which constitutes a condition
precedent) have been complied with.
Section 12.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with
a condition or covenant provided for in this Indenture (other
than certificates pursuant to Section 4.04(a)) shall include:
(a) a statement that the person making such certificate or
opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or
opinions contained in such certificate or opinion are based;
(c) a statement that, in the opinion of such person, he has
made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(d) a statement as to whether or not, in the opinion of
such person, such condition or covenant has been complied with.
Section 12.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a
meeting of Holders. The Registrar or Paying Agent may make
reasonable rules and set reasonable requirements for its
functions.
Section 12.07. Legal Holidays.
A "Legal Holiday" is a Saturday, Sunday or day on which
banking institutions or trust companies in the City of New York
or at a place of payment are authorized or obligated by law,
regulation or executive order to remain closed. If a payment
date is a Legal Holiday at a place of payment, payment may be
made at that place on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period.
Section 12.08. Duplicate Originals.
The parties may sign any number of copies of this Indenture.
One signed copy is enough to prove this Indenture.
Section 12.09. Governing Law.
The internal laws of the State of New York shall govern and
be used to construe this Indenture and the Securities, without
regard to the conflicts of law rules thereof.
Section 12.10. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another
indenture, loan or debt agreement of the Company or any of its
Subsidiaries. Any such indenture, loan or debt agreement may not
be used to interpret this Indenture.
Section 12.11. Successors.
All agreements of the Company in this Indenture and the
Securities shall bind its successor. All agreements of the
Trustee in this Indenture shall bind its successor.
Section 12.12. Severability.
In case any provision in this Indenture or in the Securities
shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby.
Section 12.13. Counterpart Originals.
The parties may sign any number of copies of this Indenture.
Each signed copy shall be an original, but all of them together
represent the same agreement.
Section 12.14. Variable Provisions.
The Company initially appoints the Trustee as Paying Agent
and Registrar.
Section 12.15. Table of Contents, Headings, Etc.
The Table of Contents, Cross-Reference Table and Headings of
the Articles and Sections of this Indenture have been inserted
for convenience of reference only, are not to be considered a
part hereof and shall in no way modify or restrict any of the
terms or provisions hereof.
<PAGE>
SIGNATURES
EMCOR GROUP, INC.
By:______________________________
Title:
MES HOLDINGS CORPORATION
By:______________________________
Title:
SELLCO CORPORATION
By:______________________________
Title:
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee
By:______________________________
Title:
<PAGE>
EXHIBIT A
(Face of Securities)
No.
EMCOR GROUP, INC.
7% Senior Secured Notes, Series B, Due 1997
EMCOR GROUP, INC. (formerly known as JWP INC.), a
corporation organized and existing under the laws of the
State of Delaware, promises to pay to __________________ or
registered assigns the principal sum of _________ Dollars on
[___________ __], 1997, as set forth herein.
Interest Payment Dates: March __ and September __
Record Dates: March __ and September __
Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof, which further
provisions shall for all purposes have the same effect as if set
forth at this place.
EMCOR GROUP, INC.
By:
Title:
Attest:
[SEAL]
By:
Title: Secretary
Dated:
Certificate of Authentication: This is one
of the Securities referred to in the
within-mentioned Indenture.
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee
By:
Authorized Signatory
<PAGE>
(Back of Securities)
EMCOR GROUP, INC.
7% Senior Secured Notes, Series B, Due 1997
1. Interest. EMCOR GROUP, INC. (formerly known as JWP
INC.), a Delaware corporation (the "Company"), promises to pay
interest on the principal amount of this Security from the date
of issuance until maturity at the interest rate of 7.0% per
annum, payable as set forth in paragraph 2.
The Company shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law, as defined
in the Indenture) on overdue principal at the rate equal to 2%
per annum in excess of the then applicable interest rate on the
Securities to the extent lawful; it shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy
Law) on overdue installments of interest (without regard to any
applicable grace period) at the same rate to the extent lawful.
Interest shall be computed on the basis of a 360-day year of
twelve 30-day months.
2. Method of Payment. The Company shall pay interest
semiannually in arrears on each June 30 and December 31 to the
holders of record of this Security ("Holders") at the close of
business on the June 15 and December 15 next preceding the
interest payment date, commencing June 30, 1995. Interest shall
initially accrue from the date of issuance of this Security, and
the first interest payment date will be June 30, 1995. The
Company shall pay interest on the Securities (except defaulted
interest) to the persons who are registered Holders of Securities
at the close of business on the record date for the next interest
payment date even though Securities are canceled after the record
date and on or before the interest payment date. Holders must
surrender Securities to a Paying Agent to collect principal
payments. The Company shall pay principal and, except as set
forth below, interest in money of the United States of America
that at the time of payment is legal tender for payment of public
and private debts. The Company may, however, pay principal and,
except as set forth below, interest by check payable in such
money.
The Company shall, in lieu of the payment of interest in
cash on this Security (other than on the final maturity date of
this Security), pay interest on this Security on each interest
payment date by the issuance of additional Securities (the
"Interest Deferral Securities") in an aggregate principal amount
up to the amount of interest that would be payable with respect
to this Security if such interest was paid in cash. For purposes
of determining the principal amount of Interest Deferral
Securities to be received as interest pursuant to this paragraph,
each Interest Deferral Security will have a value equal to its
face value. On each such interest payment date, the Trustee or
authenticating agent shall authenticate Interest Deferral
Securities for original issuance to each Holder of Securities on
the preceding record date, as shown by the records of the
Registrar, dated the date of such interest payment date, in the
principal amount calculated in the previous sentence. Each
issuance of Interest Deferral Securities shall be made pro rata
with respect to the outstanding Securities, except that the
Company shall pay cash to any Holder to the extent necessary to
avoid issuing Interest Deferral Securities in denominations that
are not integral multiples of $100. Any Interest Deferral
Security shall be governed by the Indenture and shall be subject
to the same terms as this Security (except, as the case may be,
with respect to the title, issuance date and aggregate principal
amount). The term Securities shall include the Interest Deferral
Securities that are issued under the Indenture.
3. Paying Agent and Registrar. United States Trust Company
of New York, a New York corporation, as Trustee (the "Trustee"),
shall act as Paying Agent and Registrar. The Company may change
any Paying Agent, Registrar or Co-Registrar without prior notice.
The Company or any of its subsidiaries may act in any such
capacity.
4. Indenture. The Company issued the Securities under an
Indenture dated as of December [__], 1994 (the "Indenture")
between the Company, MES Holdings Corporation, SellCo Corporation
and the Trustee. The terms of the Securities include those
stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb) as in effect on the date of the Indenture.
The Securities are subject to, and qualified by, all such terms,
certain of which are summarized herein, and Holders are referred
to the Indenture and such Act for a statement of such terms. The
Payment Securities are general obligations of the Company limited
to $11,357,000 in initial aggregate principal amount.
5. Optional Redemption. After the payment in full of all
Indebtedness outstanding under the Series A Notes, the Company
may redeem all or any of the Securities at any time and from time
to time at the redemption price of 100% of the principal amount
thereof plus accrued but unpaid interest to the redemption date
in an aggregate amount at any date of determination not in excess
of Excess Cash.
6. Mandatory Redemption in Certain Instances.
Concurrently with its receipt of any Net Cash Proceeds in
respect of an Asset Sale or series of related Asset Sales
effected by the Company in respect of the sale of assets
constituting "Pledged Shares" under the Software House Senior
Pledge Agreement, the Company will redeem Securities at a
redemption price of 100% of the principal amount thereof,
together with accrued interest to the date of such redemption on
the principal amount of Securities redeemed, in an amount equal
to such Net Cash Proceeds. The Company will redeem on the Issue
Date Securities in an amount equal to all such Net Cash Proceeds
held by the Company on the Issue Date.
Concurrently with the receipt by any Software House
Subsidiary of any Net Cash Proceeds in respect of an Asset Sale
or series of related Asset Sales, the Company will redeem
Securities at a redemption price of 100% of the principal amount
thereof, together with accrued interest to the date of such
redemption on the principal amount of Securities redeemed, in an
amount equal to such Net Cash Proceeds. The Company will redeem
on the Issue Date Securities in an amount equal to all such Net
Cash Proceeds held by each Software House Subsidiary on the Issue
Date.
After the payment in full of all Indebtedness outstanding
under the Series A Notes, concurrently with the receipt by the
Company or any SellCo Company of any Net Cash Proceeds in respect
of an Asset Sale or series of related Asset Sales by the Company
or such SellCo Company (other than an Asset Sale (i) of the type
referred to in the two preceding paragraphs, or (b) governed by
Article 5 of the Indenture), the Company will redeem Securities
at a redemption price of 100% of the principal amount thereof,
together with accrued interest to the date of such redemption on
the principal amount of Securities redeemed, in an amount equal
to such Net Cash Proceeds.
After the payment in full of all Indebtedness outstanding
under the Series A Notes, concurrently with its receipt of any
Net Equity Offering Proceeds (other than in connection with an
offering or series of offerings constituting a Change of Control)
in an amount in excess of $25,000,000, the Company will redeem
Securities at a redemption price of 100% of the principal amount
thereof, together with accrued interest to the date of such
redemption on the principal amount of Securities redeemed, in an
amount equal to such excess.
After the payment in full of all Indebtedness outstanding
under the Series A Notes, concurrently with its receipt of any
Net Debt Offering Proceeds in respect of Indebtedness permitted
under Section 4.09(vi) of the Indenture, the Company will redeem
Securities at a redemption price of 100% of the principal amount
thereof, together with accrued interest to the date of such
redemption on the principal amount of Securities redeemed, in an
amount equal to such Net Debt Offering Proceeds.
After the payment in full of all Indebtedness outstanding
under the Series A Notes, and from and after the later to occur
of (i) the repayment in full of the Loans (as defined in the
Revolving Credit Agreement as in effect on the Issue Date and the
Dynalectric Revolving Credit Agreement as in effect on the Issue
Date), together with all accrued interest thereon, and the
termination of the Aggregate Loan Commitment (as defined in the
Revolving Credit Agreement and the Dynalectric Revolving Credit
Agreement), and (ii) December 31, 1995, within 45 days after the
last day of June and December of each calendar year, commencing
on June 30, 1995, the Company will redeem Securities at a
redemption price of 100% of the principal amount thereof,
together with accrued interest to the date of such redemption on
the principal amount of Securities redeemed, in an aggregate
amount equal to 100% of Excess Cash as at the end of such period.
7. Repurchase Upon Change of Control. If at any time a
Change of Control occurs, the Company shall be required to offer
to repurchase all outstanding Securities at a price equal to 100%
of the outstanding principal amount thereof plus accrued interest
thereon to the date of repurchase of such Securities. Holders of
Securities that are the subject of such an offer to repurchase
shall receive an offer to repurchase from the Company prior to
any related repurchase date, and may elect to have such Securi-
ties repurchased by completing the form entitled "Option of
Holder to Elect Purchase" appearing on this Security and by
complying with the other requirements requested by the Company in
respect of such repurchase.
8. Notice of Redemption. Notice of redemption pursuant to
paragraph 5 of this Security shall be mailed at least 30 days but
no more than 60 days before the redemption date to each Holder to
be redeemed at his registered address; provided, however, that if
the Company redeems Securities on the Issue Date, no such notice
shall be required. Securities in denominations larger than
$1,000 may be redeemed in part but only in whole multiples of
$1,000. In the event of a redemption of less than all of the
Securities, the Securities shall be chosen for redemption by the
Trustee, generally pro rata or by lot. On and after the
redemption date, interest ceases to accrue on Securities or
portions of them called for redemption.
If this Security is redeemed subsequent to a record date
with respect to any interest payment date specified above and on
or prior to such interest payment date, then any accrued interest
shall be paid to the person in whose name this Security is
registered at the close of business on such record date.
9. Denominations, Transfer, Exchange. Subject to certain
exceptions set forth in the Indenture, the Securities are in
registered form without coupons in denominations of $100 and
integral multiples thereof. The transfer of Securities may be
registered and Securities may be exchanged as provided in the
Indenture. The Registrar may require a Holder, among other
things, to furnish appropriate endorsements and transfer docu-
ments and to pay any taxes and fees required by law or permitted
by the Indenture. The Registrar need not exchange or register
the transfer of any Security or portion of a Security selected
for redemption. Also, it need not exchange or register the
transfer of any Securities for a period of 15 days before a
selection of Securities to be redeemed.
10. Persons Deemed Owners. The registered Holder of a
Security shall be treated as its owner for all purposes.
11. Amendments and Waivers. Subject to certain exceptions,
the Indenture or the Securities may be amended with the consent
of the Holders of at least a majority in principal amount of the
then outstanding Securities, and any existing Default may be
waived with the consent of the Holders of at least a majority in
principal amount of the then outstanding Securities. Without the
consent of any Holder, the Indenture or the Securities may be
amended to cure any ambiguity, defect or inconsistency, to pro-
vide for assumption of the Company's obligations to Holders or to
make any change that does not adversely affect the rights of any
Holder.
12. Defaults and Remedies. An Event of Default is:
default for five days in payment of interest on the Securities;
default in payment of principal on the Securities; failure by any
Obligor to comply with certain of its agreements in the
Indenture, the Securities or the Intercreditor Agreement; failure
by any Obligor for 30 days after notice to it to comply with any
of its other agreements in the Indenture, the Securities or
certain other agreements; a material breach by the Company of
certain of its representations and warranties; certain defaults
under, and the acceleration prior to the maturity of, other
indebtedness of the Company and certain of its Subsidiaries;
certain final judgments that remain undischarged; certain events
of bankruptcy or insolvency; the ineffectiveness of the Guaranty
contained in Article 11 of the Indenture or the denial or
disaffirmation of its obligations thereunder by a Guarantor; and
the invalidity, unenforceability or diminished priority of the
Liens on the Collateral under any Collateral Document (each as
defined in the Indenture). If an Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in
principal amount of the then outstanding Securities may declare
the principal amount of the Securities to be due and payable
immediately. In the case of an Event of Default arising from
certain events of bankruptcy or insolvency, all outstanding
Securities become due and payable immediately without further
action or notice. Holders may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee may
require indemnity satisfactory to it before it enforces the
Indenture or Securities. Subject to certain limitations, Holders
of a majority in principal amount of the then outstanding
Securities may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Holders notice of any
continuing default (except a default in payment of principal or
interest) if it determines that withholding notice is in their
interests. The Company must furnish an annual compliance
certificate to the Trustee.
13. Collateral. The obligations of the Company and the
Guarantors under the Securities and the Indenture are secured by
the Collateral (as defined in the Indenture), as set forth in the
Indenture and the Collateral Documents referred to therein.
14. Unclaimed Money. If money for the payment of principal
or interest remains unclaimed for two years and six months, the
Trustee and the Paying Agent will pay the money back to the
Company at its request. After that, Security holders entitled to
the money must look to the Company for payment unless an
abandoned property law designates another person and all
liability of the Trustee and such Paying Agent with respect to
such money shall cease.
15. Discharge Prior to Redemption or Maturity. If the
Company deposits with the Trustee money or U.S. Government
Obligations sufficient to pay principal of, premium, if any, and
accrued interest on the Notes to redemption or maturity, the
Company will be discharged from the Indenture and the Securities,
except for certain sections thereof.
16. Trustee Dealings with Obligors. The Trustee, in its
individual or any other capacity, may make loans to, accept
deposits from, and perform services for any obligor on the
Securities or its Affiliates, and may otherwise deal with each
such obligor or its Affiliates, as if it were not Trustee.
17. No Recourse Against Others. A director, officer,
employee or stockholder, as such, of the Company shall not have
any liability for any obligations of the Company under the
Securities or the Indenture or for any claim based on, in respect
of or by reason of such obligations. Each Holder by accepting a
Security waives and releases all such liability. The waiver and
release are part of the consideration for the issue of the
Securities.
18. Authentication. This Security shall not be valid until
authenticated by the manual signature of the Trustee or an
authenticating agent.
19. Abbreviations. Customary abbreviations may be used in
the name of a Holder or an assignee, such as: TEN COM (= tenants
in common), TEN ENT (= tenants by the entireties), JT TEN (=
joint tenants with right of survivorship and not as tenants in
common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to
Minors Act.)
20. Indenture. Each Holder, by accepting a Security,
agrees to be bound by all of the terms and provisions of the
Indenture, as the same may be amended from time to time.
21. CUSIP Numbers. Pursuant to a recommendation
promulgated by the Committee on Uniform Security Identification
Procedures, the Company has caused CUSIP numbers to be printed on
the Securities and has directed the Trustee to use CUSIP numbers
in notices of redemption as a convenience to Holders. No repre-
sentation is made as to the accuracy of such numbers either as
printed on the Securities or as contained in any notice of re-
demption and reliance may be placed only on the other identifi-
cation numbers placed hereon.
The Company will furnish to any Holder, upon written request
and without charge, a copy of the Indenture. Request may be made
to: EMCOR Group, Inc., 101 Merritt Seven Corporate Park,
Norwalk, Connecticut 061851-1060, Attention: Secretary.
<PAGE>
FORM OF NOTATION ON SECURITY
RELATING TO GUARANTY
SellCo Corporation and MES Holdings Corporation
(collectively, the "Guarantors," which term includes any
successor Person under the Indenture) have each unconditionally
guarantied, to the extent set forth in the Indenture and subject
to the provisions in the Indenture, (a) the due and punctual
payment of the principal of and interest on the Securities,
whether at maturity, upon redemption, by acceleration or
otherwise, the due and punctual payment of interest on overdue
principal, and, to the extent permitted by law, interest, and the
due and punctual performance of all other obligations of the
Company to the Holders or the Trustee, all in accordance with the
terms set forth in Article 11 of the Indenture and (b) in case of
any extension of time of payment or renewal of any Securities or
any of such other obligations, that the same will be promptly
paid in full when due or performed in accordance with the terms
of the extension or renewal, whether at stated maturity, upon
redemption, by acceleration or otherwise.
The obligations of each Guarantor to the Holders of
Securities and to the Trustee pursuant to this Guaranty and the
Indenture are expressly set forth in Article 11 of the Indenture
and reference is hereby made to the Indenture for the precise
terms of this Guaranty.
This Guaranty shall not be valid or obligatory for any
purpose until the certificate of authentication on the Security
upon which this Guaranty is noted shall have been executed by the
Trustee under the Indenture by the manual signature of one of its
authorized officers.
MES HOLDINGS CORPORATION
By:
Title:
SELLCO CORPORATION
By:
Title:
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below: (I) or
(we) assign and transfer this Security to
(Insert assignee's Social Security or tax I.D. no.)
(Print or type assignee's name, address and zip code) and
irrevocably appoint _____________________________ agent to
transfer this Security on the books of the Company. The agent
may substitute another to act for him.
Date:_______________ Your signature:
(Sign exactly as your name appears on the
other side of this Security)
Signature Guaranty:_________________________
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the
Company pursuant to Section 4.18 of the Indenture, check the box:
If you want to elect to have only a portion of this Security
purchased by the Company pursuant to the aforesaid Section of the
Indenture, state the amount to be purchased by the Company:
$______________
Date: Your Signature:
(Sign exactly as your name appears
on the other side of this Security)
Signature Guaranty:
<PAGE>
SOFTWARE HOUSE SUBORDINATED PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated [____________ __], 1994, made by
EMCOR Group, Inc. (formerly known as JWP INC.), a Delaware
corporation (the "Company"), to United States Trust Company of
New York, as trustee under the Indenture referred to below (in
such capacity, the "Trustee" and, together with the Holders (as
defined in the Indenture), the "Secured Parties").
W I T N E S S E T H:
WHEREAS, the Company has entered into an Indenture, dated as
of December [__], 1994, with the Trustee in respect of the
Company's 7% Senior Secured Notes, Series B, Due 1997 (said
Indenture, as it may be amended, supplemented or otherwise
modified from time to time, being the "Indenture" and capitalized
terms not defined herein but defined therein or in the
Intercreditor Agreement referred to below being used herein as
therein defined); and
WHEREAS, the Trustee has entered into an Intercreditor
Agreement, dated the date hereof and substantially in the form of
Exhibit C to the Indenture (as the same may be amended,
supplemented or otherwise modified from time to time, the
"Intercreditor Agreement"), with the Company and with each of IBJ
Schroder Bank & Trust Company, as the trustee for the holders of
the Series A Obligations referred to therein (the "Series A
Indenture Trustee"), and Shawmut Bank Connecticut, National
Association, as the trustee for the holders of the SellCo Related
Obligations referred to therein, pursuant to which, among other
things, the Lien on the Pledged Collateral (as defined in Section
1(a) hereof) created hereby shall be subordinated to the Senior
Lien (as defined in the Intercreditor Agreement) on the Pledged
Collateral securing the Series A Obligations; and
WHEREAS, the Pledged Collateral constitutes Category One
Collateral under the Intercreditor Agreement; and
WHEREAS, pursuant to the Intercreditor Agreement, the Series
A Indenture Trustee, as the Senior Lienor (in such capacity, the
"Senior Pledgee"), has agreed to hold the Pledged Collateral as
bailee for the Trustee, as junior pledgee; and
WHEREAS, the Company is the legal and beneficial owner of
(a) the shares of capital stock described in Schedule I hereto
(the "Pledged Shares") and issued by the issuers named therein
(the "Issuers"), and (b) the Indebtedness (if any) described in
said Schedule and issued by the obligors named therein (the
"Pledged Debt"); and
WHEREAS, it is a requirement under the Indenture that the
Company shall have made the pledge contemplated by this
Agreement;
NOW, THEREFORE, in consideration of the premises, the
Company hereby agrees with the Trustee on behalf and for the
ratable benefit of the Secured Parties as follows:
Section 1. Pledge.
(a) The Company hereby pledges to the Trustee on behalf and
for the ratable benefit of the Secured Parties, and grants to the
Trustee on behalf and for the ratable benefit of the Secured
Parties a security interest in, the following (the "Pledged
Collateral"):
(i) all of the Pledged Shares;
(ii) all additional shares of stock or other securities of
any Issuer from time to time acquired by the Company in any
manner (any such shares being "Additional Shares");
(iii) the certificates representing the shares referred to
in clauses (i) and (ii) above;
(iv) all of the Pledged Debt;
(vi) all notes or other instruments evidencing the
indebtedness referred to in clause (iv) above; and
(vii) all dividends, interest, cash, instruments and other
property or proceeds, from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all
of the foregoing.
(b) The pledge made and the security interest granted
pursuant to this Agreement, and all rights and remedies of the
Trustee and the other Secured Parties hereunder and in and to the
Pledged Collateral shall be subject in all respects to the terms
and provisions of the Intercreditor Agreement. The Trustee, for
itself and on behalf of each of the other Secured Parties,
acknowledges and agrees that the Lien granted to the Secured
Parties hereunder is junior and subordinate to the Senior Lien in
the Pledged Collateral securing the Series A Obligations.
(c) The Trustee, by execution of the Intercreditor
Agreement, appoints the Senior Pledgee to hold the Pledged
Collateral, in accordance with the terms of, and subject to the
conditions of, the Intercreditor Agreement.
Section 2. Security for Obligations.
This Agreement secures and the Pledged Collateral is
security for the full and prompt payment when due (whether at
stated maturity, redemption, repurchase, by acceleration or
otherwise) of, and the performance of, all of the Company's
obligations under the Securities, the Indenture, this Agreement,
and each other instrument, document and agreement executed by the
Company in connection with any of the foregoing, whether now or
hereafter existing and whether for principal, premium, interest
(including without limitation, interest, whether or not allowed,
after the filing of a petition initiating any proceeding under
any Bankruptcy Law), penalties, commissions, charges, expenses,
fees, indemnifications, reimbursements, liabilities, amounts
payable, or otherwise (collectively, the "Obligations").
Section 3. Delivery of Pledged Collateral.
All certificates or instruments representing or evidencing
the Pledged Collateral shall be delivered to the Senior Pledgee,
so long as the Senior Lien has not been released, and thereafter,
to the Trustee, and held by the Senior Pledgee, so long as the
Senior Lien has not been released, and thereafter, by or on
behalf of the Trustee, pursuant hereto and shall be in suitable
form for transfer by delivery, or shall be accompanied by duly
executed instruments of transfer or assignment in blank, all in
form and substance satisfactory to the Trustee. After the Senior
Lien has been released, the Trustee shall have the right (a) at
any time in its discretion and without notice to the Company, to
transfer to or to register in its name or in the name of any of
its nominees any or all of the Pledged Collateral, and (b) at any
time to exchange certificates or instruments representing or
evidencing any of the Pledged Collateral for certificates or
instruments of smaller or larger denominations.
Section 4. Representations and Warranties.
The Company makes the following representations:
(a) The Pledged Shares (i) have been duly authorized and
validly issued; (ii) are fully paid and non-assessable; and (iii)
constitute 100% of the issued and outstanding shares of stock of
the respective Issuers thereof.
(b) The Company is the legal and beneficial owner of the
Pledged Collateral free and clear of any Lien, except for (i) the
Lien created by this Agreement, and (ii) the Senior Lien.
(c) The pledge of the Pledged Shares and the Pledged Debt
pursuant to this Agreement creates a valid and perfected security
interest in the Pledged Collateral, subject only to the Senior
Lien, in favor of the Trustee on behalf and for the ratable
benefit of the Secured Parties securing the payment of all of the
Obligations.
(d) No consent, authorization, approval, or other action
by, and no notice to or filing with, any governmental authority
is required either (i) for the pledge by the Company of the
Pledged Collateral pursuant to this Agreement or for the due
execution, delivery or performance of this Agreement by the
Company, or (ii) for the exercise by the Trustee of the voting or
other rights provided for in this Agreement or of the remedies in
respect of the Pledged Collateral pursuant to this Agreement,
except as may be required in connection with the disposition of
the Pledged Collateral by laws affecting the offering and sale of
securities generally.
(e) The Pledged Debt constitutes all of the Series A
Substitute Collateral," as defined in the Plan of Reorganization.
Section 5. Further Assurances, Etc.
(a) The Company agrees that at any time and from time to
time, at the cost and expense of the Company, the Company will
promptly execute and deliver all further instruments and
documents, and take all further action, that may be necessary or
desirable, or that the Trustee may request, in order to perfect
and protect the Lien granted or purported to be granted hereby
or, subject to the provisions of the Intercreditor Agreement, to
enable the Trustee to exercise and enforce its rights and
remedies hereunder with respect to any Pledged Collateral.
(b) The Company agrees to defend the title to the Pledged
Collateral and the Lien thereon of the Trustee against the claim
of any other Person and to maintain and preserve such Lien until
indefeasible payment in full of all of the Obligations.
Section 6. Voting Rights; Dividends; Etc.
(a) Subject to the provisions of the Intercreditor
Agreement, as long as no Default or Event of Default shall have
occurred and be continuing:
(i) The Company shall be entitled to exercise any and
all voting and other consensual rights pertaining to the
Pledged Collateral or any part thereof for any purpose not
inconsistent with the terms of this Agreement, the
Indenture, the Securities or any other instrument or
document relating thereto; provided, however, that the
Company shall not exercise or shall refrain from exercising
any such right if such action would (A) in the reasonable
judgment of the Company have a material adverse effect on
the value of the Pledged Collateral or any part thereof, or
(B) be inconsistent with or violate any provision of this
Agreement, the Securities or the Indenture.
(ii) Subject to the provisions of the Intercreditor
Agreement, the Company shall be entitled to receive and
retain any and all dividends and interest paid in respect of
the Pledged Collateral, other than any and all
(A) dividends and interest paid or payable other
than in cash in respect of, and instruments and other
property received, receivable or otherwise distributed
in respect of, or in exchange for, any Pledged
Collateral,
(B) dividends and other distributions paid or
payable in cash in respect of any Pledged Shares or
Additional Pledged Shares in connection with a partial
or total liquidation or dissolution or in connection
with a reduction of capital, capital surplus or paid-
in-surplus, and
(C) cash paid, payable or otherwise distributed
in redemption of, or in exchange for, any Pledged
Collateral,
all of which shall be forthwith delivered to the Trustee or
to the Senior Pledgee on the Trustee's behalf to hold as
Pledged Collateral and shall, if received by the Company, be
received in trust for the benefit of the Secured Parties, be
segregated from the other property or funds of the Company,
and be forthwith delivered to the Trustee or to the Senior
Pledgee on the Trustee's behalf as Pledged Collateral in the
same form as so received (with any necessary indorsement).
(iii) Subject to the provisions of the Intercreditor
Agreement, the Trustee shall execute and deliver (or cause
to be executed and delivered) to the Company all such
proxies and other instruments as the Company may reasonably
request for the purpose of enabling the Company to exercise
the voting and other rights which it is entitled to exercise
pursuant to paragraph (i) above and to receive the dividends
or interest payments which it is authorized to receive and
retain pursuant to paragraph (ii) above.
(b) Subject to the provisions of the Intercreditor
Agreement, upon the occurrence and during the continuance of a
Default or an Event of Default:
(i) Upon notice by the Trustee to the Company, all
rights of the Company to exercise the voting and other
consensual rights which it would otherwise be entitled to
exercise pursuant to Section 6(a)(i) above shall cease, and
all such rights shall thereupon become vested in the Trustee
who shall thereupon have the sole right to exercise such
voting and other consensual rights.
(ii) All rights of the Company to receive the
dividends, interest payments and other distributions which
it would otherwise be authorized to receive and retain
pursuant to Section 6(a)(ii) above shall cease, and all such
rights shall thereupon become vested in the Trustee who
shall thereupon have the sole right to receive and hold as
Pledged Collateral such dividends, interest payments and
other distributions.
(iii) All dividends, interest payments and other
distributions which are received by the Company contrary to
the provisions of paragraph (ii) of this Section 6(b) shall
be received in trust for the benefit of the Trustee, shall
be segregated from other funds of the Company and shall be
forthwith paid over to the Trustee as Pledged Collateral in
the same form as so received (with any necessary
indorsement).
(iv) The Company shall, if necessary to permit the
Trustee to exercise the voting and other rights which it may
be entitled to exercise pursuant to Section 6(b)(i) above
and to receive all dividends, interest payments and
distributions which it may be entitled to receive under
Section 6(b)(ii) above, execute and deliver to the Trustee,
from time to time and upon written notice of the Trustee,
appropriate proxies, dividend payment orders and other
instruments as the Trustee may reasonably request. The
foregoing shall not in any way limit the Trustee's power and
authority granted pursuant to Section 8 hereof.
Section 7. Transfers and Other Liens; Additional Shares.
(a) The Company agrees that it will not (i) sell or
otherwise dispose of, or grant any option or warrant with respect
to, any of the Pledged Collateral, or (ii) create or permit to
exist any Lien upon or with respect to any of the Pledged
Collateral except for (A) the Lien created pursuant to this
Agreement, and (B) the Senior Lien.
(b) The Company agrees that it will (i) cause each Issuer
not to issue any shares of stock or other securities in addition
to or in substitution for the Pledged Shares except to the
Company, (ii) pledge hereunder, immediately upon its acquisition
(directly or indirectly) thereof, to the Trustee (or, until the
Senior Lien has been released, to the Senior Pledgee) any and all
Additional Shares, and (iii) promptly (and in any event within
three Business Days) deliver to the Trustee a Pledge Amendment,
duly executed by the Company, in substantially the form of
Schedule II hereto (a "Pledge Amendment"), in respect of the
Additional Shares, together with all certificates, notes or other
instruments representing or evidencing the same. The Company
hereby (i) authorizes the Trustee to attach each Pledge Amendment
to this Pledge Agreement, (ii) agrees that all Additional Shares
listed on any Pledge Amendment delivered to the Trustee shall for
all purposes hereunder constitute Pledged Shares and Pledged
Debt, respectively, subject to the rights of the holders of the
Senior Lien, and (iii) is deemed to have made, upon such
delivery, the representations and warranties contained in Section
4 hereof with respect to such Pledged Collateral.
Section 8. Trustee Appointed Attorney-in-Fact and Proxy.
Subject to the provisions of the Intercreditor Agreement,
the Company hereby irrevocably constitutes and appoints the
Trustee and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact and proxy
with full irrevocable power and authority in the place and stead
of the Company and in the name of the Company or in its own name,
from time to time in the Trustee's discretion, for the purpose of
carrying out the terms of this Agreement, to take any and all
appropriate action and to execute and deliver any and all
documents and instruments which the Trustee may deem necessary or
advisable to accomplish the purposes of this Agreement,
including, without limitation, to receive, indorse and collect
all instruments made payable to the Company representing any
dividend, interest payment or other distribution or payment in
respect of the Pledged Collateral or any part thereof, to give
full discharge for the same, and to vote or grant any consent in
respect of the Pledged Shares authorized by Section 6(b) hereof.
The Company hereby ratifies, to the extent permitted by law, all
that any said attorney shall lawfully do or cause to be done by
virtue hereof. This power, being coupled with an interest, is
irrevocable until the Obligations are paid in full.
Section 9. Trustee May Perform.
Subject to the provisions of the Intercreditor Agreement, if
the Company fails to perform any agreement contained herein, the
Trustee may itself perform, or cause performance of, such
agreement, and the expenses of the Trustee incurred in connection
therewith shall be payable by the Company under Section 12 hereof
and constitute Obligations secured hereby.
Section 10. Reasonable Care.
The Trustee shall be deemed to have exercised reasonable
care in the custody and preservation of the Pledged Collateral in
its possession if the Pledged Collateral is accorded treatment
substantially equal to that which the Trustee accords its own
property, it being understood that neither the Trustee nor any
other Secured Party shall have responsibility for (i)
ascertaining or taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relative to any
Pledged Collateral, whether or not the Trustee or any other
Secured Party has or is deemed to have knowledge of any such
matter, or (ii) taking any necessary steps to preserve rights
against any Person with respect to any Pledged Collateral.
Section 11. Remedies upon Default.
Subject to the provisions of the Intercreditor Agreement, if
any Event of Default shall have occurred and be continuing:
(a) The Trustee may exercise in respect of the Pledged
Collateral, in addition to other rights and remedies provided for
herein or otherwise available to it, all the rights and remedies
of a secured party after default under the Uniform Commercial
Code in effect in the State of New York at that time (the "UCC"),
and the Trustee may also, without notice except as specified
below, sell the Pledged Collateral or any part thereof in one or
more parcels at public or private sale, at any exchange, broker's
board or at any office of the Trustee or elsewhere, for cash, on
credit or for future delivery, and upon such other terms as the
Trustee may deem commercially reasonable. The Company agrees
that, to the extent notice of sale shall be required by law, at
least ten days' notice to the Company of the time and place of
any public sale or the time after which any private sale is to be
made shall constitute reasonable notification. The Trustee shall
not be obligated to make any sale of Pledged Collateral
regardless of notice of sale having been given. The Trustee may
adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to
which it was so adjourned. The Company hereby waives any claims
against the Trustee arising by reason of the fact that the price
at which any Pledged Collateral may have been sold at such a
private sale was less than the price which might have been
obtained at a public sale, even if the Trustee accepts the first
offer received and does not offer such Pledged Collateral to more
than one offeree.
(b) If the Trustee shall determine to exercise its right to
sell all or any of the Pledged Collateral pursuant to this
Section 11, the Company agrees that, upon request of the Trustee,
the Company will, at its own cost and expense:
(i) execute and deliver, and use its best efforts to
cause each issuer of the Pledged Collateral and its
directors and officers to execute and deliver, all such
instruments and documents, and do or cause to be done all
such other acts and things, as may be necessary or, in the
reasonable opinion of the Trustee, advisable to register
such Pledged Collateral under the provisions of the Securi-
ties Act of 1933, as from time to time amended (the
"Securities Act"), and to cause the registration statement
relating thereto to become effective and to remain effective
for such period as prospectuses are required by law to be
furnished, and to make all amendments and supplements
thereto and to the related prospectus which, in the opinion
of the Trustee, are necessary or advisable, all in con-
formity with the requirements of the Securities Act and the
rules and regulations of the Securities and Exchange
Commission ("SEC") applicable thereto;
(ii) use its best efforts to qualify the Pledged
Collateral under the state securities or "Blue Sky" laws and
to obtain all necessary governmental approvals for the sale
of the Pledged Collateral, as requested by the Trustee;
(iii) make available to its security holders, as soon
as practicable, an earning statement which will satisfy the
provisions of section 11(a) of the Securities Act; and
(iv) do or cause to be done all such other acts and
things as may be necessary to make such sale of the Pledged
Collateral or any part thereof valid and binding and in
compliance with applicable law.
The Company further acknowledges the impossibility of
ascertaining the amount of damages which would be suffered by the
Secured Parties by reason of the failure by the Company to
perform any of the covenants contained in this Section 11 and,
consequently, agrees that, if the Company shall fail to perform
any of such covenants, it shall pay, as liquidated damages and
not as a penalty, an amount equal to the value of the Pledged
Collateral on the date the Trustee shall demand compliance with
this Section.
(c) The Company recognizes that, by reason of the
aforementioned requirements and certain prohibitions contained in
the Securities Act and applicable state securities laws, the
Trustee may, at its option, elect not to require the Company to
register all or any part of the Pledged Collateral and may
therefore be compelled, with respect to any sale of all or any
part of the Pledged Collateral, to limit purchasers to those who
will agree, among other things, to acquire such securities for
their own account, for investment, and not with a view to the
distribution or resale thereof. The Company acknowledges and
agrees that any such sale may result in prices and other terms
less favorable to the seller than if such sale were a public sale
without such restrictions and, notwithstanding such
circumstances, agrees that any such sale shall be deemed to have
been made in a commercially reasonable manner. The Trustee shall
be under no obligation to delay the sale of any of the Pledged
Collateral for the period of time necessary to permit the Company
to register such securities for public sale under the Securities
Act, or under applicable state securities laws, even if the
Company would agree to do so.
(d) If the Trustee determines to exercise its right to sell
any or all of the Pledged Collateral, upon written request, the
Company shall, from time to time, furnish to the Trustee all such
information as the Trustee may request in order to determine the
number of shares and other instruments included in the Pledged
Collateral which may be sold by the Trustee as exempt
transactions under the Act and rules of the SEC thereunder, as
the same are from time to time in effect.
(e) Any cash held by the Trustee as Pledged Collateral and
all cash proceeds received by the Trustee in respect of any sale
of, collection from, or other realization upon all or any part of
the Pledged Collateral shall be applied by the Trustee as
provided in Section 6.10 of the Indenture.
(f) Notwithstanding anything to the contrary set forth
herein, the Trustee shall not exercise any of the remedies set
forth in this Section 11 for a period of 90 days after the
occurrence of an Event of Default without the prior written
consent of the Majority Lenders (as defined in the Revolving
Credit Agreement referred to in the Indenture).
Section 12. Expenses.
The Company will upon demand pay to the Trustee the amount
of any and all reasonable expenses, including, without
limitation, the reasonable fees and expenses of the Trustee's
counsel and of any experts and agents, which the Trustee may
incur in connection with (a) the administration of this
Agreement, (b) the custody or preservation of, sale of,
collection from, or other realization upon, any of the Pledged
Collateral, (c) the exercise or enforcement of any of the rights
and remedies hereunder of the Trustee and the other Secured
Parties, or (d) the failure by the Company to perform or observe
any of the provisions hereof.
Section 13. Security Interest Absolute.
All rights of the Trustee and security interests hereunder,
and all obligations of the Company hereunder, shall be absolute
and unconditional irrespective of:
(a) any lack of validity or enforceability of any provision
of the Indenture, the Securities, the Intercreditor Agreement, or
any other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of,
or in any other term of, or any increase in the amount of, all or
any of the Obligations, or any other amendment or waiver of any
term of, or any consent to any departure from any requirement of,
the Indenture, the Securities, the Intercreditor Agreement, or
any other instrument or document relating thereto;
(c) any exchange, release or non-perfection of any Lien on
any other collateral, or any release or amendment or waiver of
any term of any guaranty of, or consent to departure from any
requirement of any guaranty of, all or any of the Obligations; or
(d) any other circumstance which might otherwise constitute
a defense available to, or a discharge of, a borrower or a
pledgor.
Section 14. Amendments, Etc.
No amendment or waiver of any provision of this Agreement
nor consent to any departure by the Company herefrom shall in any
event be effective unless the same shall be in writing and signed
by the Trustee, and then such waiver or consent shall be effec-
tive only in the specific instance and for the specific purpose
for which given.
Section 15. Addresses for Notices.
All notices and other communications provided for hereunder
shall be in writing (including telegraphic, telex, telecopy or
cable communication) and mailed, telegraphed, telexed,
telecopied, cabled or delivered by hand, if to the Company or the
Trustee, addressed to the Company or the Trustee, as the case may
be, at its address specified in the Indenture, or, as to either
party, at such other address as shall be designated by such party
in a written notice to each other party complying as to delivery
with the terms of this Section. All such notices and other
communications shall, when mailed, telegraphed, telexed,
telecopied, cabled or delivered, be effective four (4) Business
Days after deposit in the mails, delivered to the telegraph
company, confirmed by telex answerback, telecopied with
confirmation of receipt, delivered to the cable company or
delivered by hand to the addressee or its agent, respectively.
Section 16. Continuing Security Interest; Transfer of
Securities or Obligations.
This Pledge Agreement shall create a continuing security
interest in the Pledged Collateral and shall (a) remain in full
force and effect until indefeasible payment in full of the
Obligations, (b) be binding upon the Company, its successors and
assigns, and (c) inure, together with the rights and remedies of
the Trustee hereunder, to the benefit of and be enforceable by
the Secured Parties and their respective successors, transferees
and assigns. Without limiting the generality of the foregoing
clause (c), any Holder may assign or otherwise transfer any
Security held by it or Obligation owing to it to any other
Person, and such other Person shall thereupon become vested with
all the rights in respect thereof granted to such Holder herein
or otherwise with respect to such of the Securities or
Obligations so transferred or assigned. Subject to the
provisions of the Intercreditor Agreement, upon the payment in
full of the Obligations, the Company shall be entitled to the
return, upon its request and at its expense, of such of the
Pledged Collateral as shall not have been sold or otherwise
applied pursuant to the terms hereof.
Section 17. Governing Law; Severability; Terms.
This Agreement shall be governed by, and be construed and
interpreted in accordance with, the law of the State of New York.
Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision
shall be ineffective only to the extent of such prohibition or
invalidity and without invalidating the remaining provisions of
this Agreement. Unless otherwise defined herein or in the
Indenture, terms defined in Article 9 of the UCC are used herein
as therein defined.
Section 18. Waiver of Jury Trial.
The Company waives any right it may have to a trial by jury
in respect of any litigation based on, or arising out of, under
or in connection with, this Agreement or any course of conduct,
course of dealing, verbal or written statement or other action of
the Trustee or any other Secured Party.
Section 19. Conflicts.
In the event of any conflict between the terms of the
Intercreditor Agreement and this Agreement, the terms of the
Intercreditor Agreement shall govern.
Section 20. Section Titles.
The Section titles contained in this Agreement are and shall
be without substantive meaning or content of any kind whatsoever
and are not part of this Agreement.
IN WITNESS WHEREOF, the Company has caused this Agreement to
be duly executed and delivered by its duly authorized officer on
the date first above written.
EMCOR GROUP, INC.
By:____________________________
Title:
Accepted and Acknowledged:
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee
By:__________________________
Title:
<PAGE>
SCHEDULE I TO PLEDGE AGREEMENT
Attached to and forming a part of that certain Pledge Agreement,
dated December [__], 1994, by EMCOR Group, Inc. to United States
Trust Company of New York, as Trustee.
<TABLE>
<CAPTION>
Stock
Certificate Number
Stock Issuer Class of Stock No(s). Par Value of Shares
____________ ______________ ___________ _________ _________
<S> <C> <C> <C> <C>
1. MES Holdings Corporation Common [__] [__] [___]
2. SellCo Corporation Common [__] [__] [___]
</TABLE>
<TABLE>
<CAPTION>
Original
Description Debt Certificate Final Principal
Issuer of Debt No(s). Maturity Amount
______ ___________ ________________ ________ __________
<S> <C> <C> <C> <C>
[NONE]
<PAGE>
SCHEDULE II TO PLEDGE AGREEMENT
PLEDGE AMENDMENT
________________
This Pledge Amendment, dated ___________, 19__, is
delivered pursuant to Section 7 of the Pledge Agreement
referred to below. The undersigned hereby agrees that this
Pledge Amendment may be attached to the Pledge Agreement,
dated December [__], 1994, between the undersigned and
United States Trust Company of New York, as Trustee on
behalf of and for the ratable benefit of the Secured Parties
referred to therein and that the Additional Shares listed on
this Pledge Amendment shall be and become part of the
Pledged Collateral referred to in the Pledge Agreement and
shall secure all Obligations of the undersigned. The terms
defined in the Pledge Agreement or Indenture are being used
herein as therein defined.
EMCOR GROUP, INC.
By:____________________________
Title:
</TABLE>
<TABLE>
<CAPTION>
Stock
Certificate Number
Stock Issuer Class of Stock No(s). Par Value of Shares
____________ ______________ ___________ _________ _________
<S> <C> <C> <C> <C>
</TABLE>
<PAGE>
EXHIBIT B-1
SOFTWARE HOUSE SENIOR PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated [____________ __], 1994, made by
EMCOR Group, Inc. (formerly
known as JWP INC.), a Delaware corporation (the "Company"), to
United States Trust Company of New
York, as trustee under the Indenture referred to below (in such
capacity, the "Trustee" and, together with the
Holders (as defined in the Indenture), the "Secured Parties").
W I T N E S S E T H:
WHEREAS, the Company has entered into an Indenture, dated as
of December [__], 1994, with the
Trustee in respect of the Company's 7% Senior Secured Notes,
Series B, Due 1997 (said Indenture, as it may
be amended, supplemented or otherwise modified from time to time,
being the "Indenture" and capitalized
terms not defined herein but defined therein or in the
Intercreditor Agreement referred to below being used
herein as therein defined); and
WHEREAS, the Trustee has entered into an Intercreditor
Agreement dated the date hereof and
substantially in the form of Exhibit C to the Indenture (as it
may be amended, supplemented or otherwise
modified from time to time, the "Intercreditor Agreement") with
the Company, SellCo and the other Trustees
referred to therein; and
WHEREAS, the Pledged Collateral constitutes Category Two
Collateral under the Intercreditor
Agreement; and
WHEREAS, the Company is the legal and beneficial owner of
(a) the shares of capital stock
described in Schedule I hereto (the "Pledged Shares") and issued
by the issuers named therein (the "Issuers"),
and (b) the Indebtedness (if any) described in said Schedule and
issued by the obligors named therein (the
"Pledged Debt"); and
WHEREAS, it is a requirement under the Indenture that the
Company shall have made the pledge
contemplated by this Agreement;
NOW, THEREFORE, in consideration of the premises, the
Company hereby agrees with the Trustee
on behalf and for the ratable benefit of the Secured Parties as
follows:
Section 1. Pledge.
(a) The Company hereby pledges to the Trustee on behalf and
for the ratable benefit of the Secured
Parties, and grants to the Trustee on behalf and for the ratable
benefit of the Secured Parties a security inter-
est in, the following (the "Pledged Collateral"):
(i) all of the Pledged Shares;
(ii) all additional shares of stock or other securities of
any Issuer from time to time acquired by the
Company in any manner (any such shares being "Additional
Shares");
(iii) the certificates representing the shares referred to
in clauses (i) and (ii) above;
(iv) all of the Pledged Debt;
(v) all indebtedness for the deferred purchase price of
property from time to time owed to (A) the
Company by any Person in respect of the sale by the Company of
any of the Pledged Shares or Additional
Shares, and (B) all indebtedness for the deferred purchase price
of property from time to time owed to the
Company or any of the Issuers by any other Person in respect of
an Asset Sale (as defined in the Indenture)
by such Issuer (any such indebtedness being "Additional Debt");
(vi) all notes or other instruments evidencing the
indebtedness referred to in clauses (iv) and (v)
above; and
(vii) all dividends, interest, cash, instruments and other
property or proceeds, from time to time
received, receivable or otherwise distributed in respect of or in
exchange for any or all of the foregoing.
(b) The pledge made and the security interest granted
pursuant to this Agreement, and all rights and
remedies of the Trustee and the other Secured Parties hereunder
and in and to the Pledged Collateral shall be
subject in all respects to the terms and provisions of the
Intercreditor Agreement.
Section 2. Security for Obligations.
This Agreement secures and the Pledged Collateral is
security for the full and prompt
payment when due (whether at stated maturity, redemption,
repurchase, by acceleration or otherwise) of, and
the performance of, all of the Company's obligations under the
Securities, the Indenture, this Agreement, and
each other instrument, document and agreement executed by the
Company in connection with any of the
foregoing, whether now or hereafter existing and whether for
principal, premium, interest (including without
limitation, interest, whether or not allowed, after the filing of
a petition initiating any proceeding under any
Bankruptcy Law), penalties, commissions, charges, expenses, fees,
indemnifications, reimbursements, liabilities,
amounts payable, or otherwise (collectively, the "Obligations").
Section 3. Delivery of Pledged Collateral.
All certificates or instruments representing or evidencing
the Pledged Collateral shall be delivered to
and held by or on behalf of the Trustee pursuant hereto and shall
be in suitable form for transfer by delivery,
or shall be accompanied by duly executed instruments of transfer
or assignment in blank, all in form and
substance satisfactory to the Trustee. The Trustee shall have
the right, at any time in its discretion and
without notice to the Company, to transfer to or to register in
its name or in the name of any of its nominees
any or all of the Pledged Collateral. In addition, the Trustee
shall have the right at any time to exchange certi-
ficates or instruments representing or evidencing any of the
Pledged Collateral for certificates or instruments
of smaller or larger denominations.
Section 4. Representations and Warranties.
The Company makes the following representations:
(a) The Pledged Shares (i) have been duly authorized and
validly issued; (ii) are fully paid and non-
assessable; and (iii) constitute 100% of the issued and
outstanding shares of stock of the respective Issuers
thereof.
(b) The Company is the legal and beneficial owner of the
Pledged Collateral free and clear of any
Lien, except for (i) the Lien created by this Agreement, and (ii)
the Lien created by the Series A
Subordinated Pledge Agreement.
(c) The pledge of the Pledged Shares and the Pledged Debt
pursuant to this Agreement creates a
valid and perfected first priority security interest in the
Pledged Collateral, in favor of the Trustee on behalf
and for the ratable benefit of the Secured Parties securing the
payment of all of the Obligations.
(d) No consent, authorization, approval, or other action
by, and no notice to or filing with, any
governmental authority is required either (i) for the pledge by
the Company of the Pledged Collateral pursuant
to this Agreement or for the due execution, delivery or
performance of this Agreement by the Company, or (ii)
for the exercise by the Trustee of the voting or other rights
provided for in this Agreement or of the remedies
in respect of the Pledged Collateral pursuant to this Agreement,
except as may be required in connection with
the disposition of the Pledged Collateral by laws affecting the
offering and sale of securities generally.
(e) The Pledged Debt constitutes all of the "Series B
Substitute Collateral," as defined in the Plan of
Reorganization.
Section 5. Further Assurances, Etc.
(a) The Company agrees that at any time and from time to
time, at the cost and expense of the
Company, the Company will promptly execute and deliver all
further instruments and documents, and take all
further action, that may be necessary or desirable, or that the
Trustee may request, in order to perfect and
protect the Lien granted or purported to be granted hereby or to
enable the Trustee to exercise and enforce
its rights and remedies hereunder with respect to any Pledged
Collateral.
(b) The Company agrees to defend the title to the Pledged
Collateral and the Lien thereon of the
Trustee against the claim of any other Person and to maintain and
preserve such Lien until indefeasible
payment in full of all of the Obligations.
Section 6. Voting Rights; Dividends; Etc.
(a) As long as no Default or Event of Default shall have
occurred and be continuing:
(i) The Company shall be entitled to exercise any and
all voting and other consensual rights
pertaining to the Pledged Collateral or any part thereof for
any purpose not inconsistent with the
terms of this Agreement, the Indenture, the Securities or
any other instrument or document relating
thereto; provided, however, that the Company shall not
exercise or shall refrain from exercising any
such right if such action would (A) in the reasonable good
faith judgment of the Company have a
material adverse effect on the value of the Pledged
Collateral or any part thereof, or (B) be
inconsistent with or violate any provision of this
Agreement, the Securities or the Indenture.
(ii) The Company shall be entitled to receive and
retain any and all dividends and interest
paid in respect of the Pledged Collateral, other than any
and all
(A) dividends and interest paid or payable other
than in cash in respect of, and
instruments and other property received, receivable or
otherwise distributed in respect of, or
in exchange for, any Pledged Collateral,
(B) dividends and other distributions paid or
payable in cash in respect of any
Pledged Shares or Additional Pledged Shares in
connection with a partial or total liquidation
or dissolution or in connection with a reduction of
capital, capital surplus or paid-in-surplus,
and
(C) cash paid, payable or otherwise distributed
in redemption of, or in exchange for,
any Pledged Collateral,
all of which shall be forthwith delivered to the Trustee to
hold as Pledged Collateral and shall, if
received by the Company, be received in trust for the
benefit of the Secured Parties, be segregated
from the other property or funds of the Company, and be
forthwith delivered to the Trustee as
Pledged Collateral in the same form as so received (with any
necessary indorsement).
(iii) The Trustee shall execute and deliver (or cause
to be executed and delivered) to the
Company all such proxies and other instruments as the
Company may reasonably request for the pur-
pose of enabling the Company to exercise the voting and
other rights which it is entitled to exercise
pursuant to paragraph (i) above and to receive the dividends
or interest payments which it is
authorized to receive and retain pursuant to paragraph (ii)
above.
(b) Upon the occurrence and during the continuance of a
Default or an Event of Default:
(i) Upon notice by the Trustee to the Company, all
rights of the Company to exercise the
voting and other consensual rights which it would otherwise
be entitled to exercise pursuant to Section
6(a)(i) above shall cease, and all such rights shall
thereupon become vested in the Trustee who shall
thereupon have the sole right to exercise such voting and
other consensual rights.
(ii) All rights of the Company to receive the
dividends, interest payments and other
distributions which it would otherwise be authorized to
receive and retain pursuant to Section 6(a)(ii)
above shall cease, and all such rights shall thereupon
become vested in the Trustee who shall
thereupon have the sole right to receive and hold as Pledged
Collateral such dividends, interest
payments and other distributions.
(iii) All dividends, interest payments and other
distributions which are received by the
Company contrary to the provisions of paragraph (ii) of this
Section 6(b) shall be received in trust for
the benefit of the Trustee, shall be segregated from other
funds of the Company and shall be forthwith
paid over to the Trustee as Pledged Collateral in the same
form as so received (with any necessary
indorsement).
(iv) The Company shall, if necessary to permit the
Trustee to exercise the voting and other
rights which it may be entitled to exercise pursuant to
Section 6(b)(i) above and to receive all
dividends, interest payments and distributions which it may
be entitled to receive under Section
6(b)(ii) above, execute and deliver to the Trustee, from
time to time and upon written notice of the
Trustee, appropriate proxies, dividend payment orders and
other instruments as the Trustee may
reasonably request. The foregoing shall not in any way
limit the Trustee's power and authority
granted pursuant to Section 8 hereof.
Section 7. Transfers and Other Liens; Additional Shares and
Additional Debt.
(a) The Company agrees that it will not (i) sell or
otherwise dispose of, or grant any option or
warrant with respect to, any of the Pledged Collateral (except,
in respect of the Pledged Shares, in accordance
with the terms of the Indenture), or (ii) create or permit to
exist any Lien upon or with respect to any of the
Pledged Collateral except for (A) the Lien created pursuant to
this Agreement, and (B) the Lien created
pursuant to the Series A Subordinated Pledge Agreement.
(b) The Company agrees that it will (i) cause each Issuer
not to issue any shares of stock or other
securities in addition to or in substitution for the Pledged
Shares except to the Company, (ii) pledge here-
under, immediately upon its acquisition (directly or indirectly)
thereof, any and all Additional Shares and any
and all Additional Debt, and (iii) promptly (and in any event
within three Business Days) deliver to the
Trustee a Pledge Amendment, duly executed by the Company, in
substantially the form of Schedule II hereto
(a "Pledge Amendment"), in respect of the Additional Shares and
Additional Debt, together with all
certificates, notes or other instruments representing or
evidencing the same. The Company hereby (i)
authorizes the Trustee to attach each Pledge Amendment to this
Pledge Agreement, (ii) agrees that all Addi-
tional Shares and all Additional Debt listed on any Pledge
Amendment delivered to the Trustee shall for all
purposes hereunder constitute Pledged Shares and Pledged Debt,
respectively, and (iii) is deemed to have
made, upon such delivery, the representations and warranties
contained in Section 4 hereof with respect to
such Pledged Collateral.
Section 8. Trustee Appointed Attorney-in-Fact and Proxy.
The Company hereby irrevocably constitutes and appoints the
Trustee and any officer or agent
thereof, with full power of substitution, as its true and lawful
attorney-in-fact and proxy with full irrevocable
power and authority in the place and stead of the Company and in
the name of the Company or in its own
name, from time to time in the Trustee's discretion, for the
purpose of carrying out the terms of this Agree-
ment, to take any and all appropriate action and to execute and
deliver any and all documents and instruments
which the Trustee may deem necessary or advisable to accomplish
the purposes of this Agreement, including,
without limitation, to receive, indorse and collect all
instruments made payable to the Company representing
any dividend, interest payment or other distribution or payment
in respect of the Pledged Collateral or any
part thereof, to give full discharge for the same, and to vote or
grant any consent in respect of the Pledged
Shares authorized by Section 6(b) hereof. The Company hereby
ratifies, to the extent permitted by law, all
that any said attorney shall lawfully do or cause to be done by
virtue hereof. This power, being coupled with
an interest, is irrevocable until the Obligations are paid in
full.
Section 9. Trustee May Perform.
If the Company fails to perform any agreement contained
herein, the Trustee may itself perform, or
cause performance of, such agreement, and the expenses of the
Trustee incurred in connection therewith shall
be payable by the Company under Section 12 hereof and constitute
Obligations secured hereby.
Section 10. Reasonable Care.
The Trustee shall be deemed to have exercised reasonable
care in the custody and preservation of the
Pledged Collateral in its possession if the Pledged Collateral is
accorded treatment substantially equal to that
which the Trustee accords its own property, it being understood
that neither the Trustee nor any other
Secured Party shall have responsibility for (i) ascertaining or
taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relative to any
Pledged Collateral, whether or not the Trustee
or any other Secured Party has or is deemed to have knowledge of
any such matter, or (ii) taking any
necessary steps to preserve rights against any Person with
respect to any Pledged Collateral.
Section 11. Remedies upon Default.
If any Event of Default shall have occurred and be
continuing:
(a) The Trustee may exercise in respect of the Pledged
Collateral, in addition to other rights and
remedies provided for herein or otherwise available to it, all
the rights and remedies of a secured party after
default under the Uniform Commercial Code in effect in the State
of New York at that time (the "UCC"), and
the Trustee may also, without notice except as specified below,
sell the Pledged Collateral or any part thereof
in one or more parcels at public or private sale, at any
exchange, broker's board or at any office of the Trustee
or elsewhere, for cash, on credit or for future delivery, and
upon such other terms as the Trustee may deem
commercially reasonable. The Company agrees that, to the extent
notice of sale shall be required by law, at
least ten days' notice to the Company of the time and place of
any public sale or the time after which any
private sale is to be made shall constitute reasonable
notification. The Trustee shall not be obligated to make
any sale of Pledged Collateral regardless of notice of sale
having been given. The Trustee may adjourn any
public or private sale from time to time by announcement at the
time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to
which it was so adjourned. The Company
hereby waives any claims against the Trustee arising by reason of
the fact that the price at which any Pledged
Collateral may have been sold at such a private sale was less
than the price which might have been obtained at
a public sale, even if the Trustee accepts the first offer
received and does not offer such Pledged Collateral to
more than one offeree.
(b) If the Trustee shall determine to exercise its right to
sell all or any of the Pledged Collateral
pursuant to this Section 11, the Company agrees that, upon
request of the Trustee, the Company will, at its
own cost and expense:
(i) execute and deliver, and use its best efforts to
cause each issuer of the Pledged Collateral
and its directors and officers to execute and deliver, all
such instruments and documents, and do or
cause to be done all such other acts and things, as may be
necessary or, in the reasonable opinion of
the Trustee, advisable to register such Pledged Collateral
under the provisions of the Securities Act of
1933, as from time to time amended (the "Securities Act"),
and to cause the registration statement
relating thereto to become effective and to remain effective
for such period as prospectuses are
required by law to be furnished, and to make all amendments
and supplements thereto and to the
related prospectus which, in the opinion of the Trustee, are
necessary or advisable, all in conformity
with the requirements of the Securities Act and the rules
and regulations of the Securities and
Exchange Commission ("SEC") applicable thereto;
(ii) use its best efforts to qualify the Pledged
Collateral under the state securities or "Blue
Sky" laws and to obtain all necessary governmental approvals
for the sale of the Pledged Collateral, as
requested by the Trustee;
(iii) make available to its security holders, as soon
as practicable, an earning statement which
will satisfy the provisions of section 11(a) of the
Securities Act; and
(iv) do or cause to be done all such other acts and
things as may be necessary to make such
sale of the Pledged Collateral or any part thereof valid and
binding and in compliance with applicable
law.
The Company further acknowledges the impossibility of
ascertaining the amount of damages which would be
suffered by the Secured Parties by reason of the failure by the
Company to perform any of the covenants
contained in this Section 11 and, consequently, agrees that, if
the Company shall fail to perform any of such
covenants, it shall pay, as liquidated damages and not as a
penalty, an amount equal to the value of the
Pledged Collateral on the date the Trustee shall demand
compliance with this Section.
(c) The Company recognizes that, by reason of the
aforementioned requirements and certain
prohibitions contained in the Securities Act and applicable state
securities laws, the Trustee may, at its option,
elect not to require the Company to register all or any part of
the Pledged Collateral and may therefore be
compelled, with respect to any sale of all or any part of the
Pledged Collateral, to limit purchasers to those
who will agree, among other things, to acquire such securities
for their own account, for investment, and not
with a view to the distribution or resale thereof. The Company
acknowledges and agrees that any such sale
may result in prices and other terms less favorable to the seller
than if such sale were a public sale without
such restrictions and, notwithstanding such circumstances, agrees
that any such sale shall be deemed to have
been made in a commercially reasonable manner. The Trustee shall
be under no obligation to delay the sale
of any of the Pledged Collateral for the period of time necessary
to permit the Company to register such
securities for public sale under the Securities Act, or under
applicable state securities laws, even if the
Company would agree to do so.
(d) If the Trustee determines to exercise its right to sell
any or all of the Pledged Collateral, upon
written request, the Company shall, from time to time, furnish to
the Trustee all such information as the
Trustee may request in order to determine the number of shares
and other instruments included in the
Pledged Collateral which may be sold by the Trustee as exempt
transactions under the Act and rules of the
SEC thereunder, as the same are from time to time in effect.
(e) Any cash held by the Trustee as Pledged Collateral and
all cash proceeds received by the Trustee
in respect of any sale of, collection from, or other realization
upon all or any part of the Pledged Collateral
shall be applied by the Trustee as provided in Section 6.10 of
the Indenture.
Section 12. Expenses.
The Company will upon demand pay to the Trustee the amount
of any and all reasonable expenses,
including, without limitation, the reasonable fees and expenses
of the Trustee's counsel and of any experts and
agents, which the Trustee may incur in connection with (a) the
administration of this Agreement, (b) the
custody or preservation of, sale of, collection from, or other
realization upon, any of the Pledged Collateral, (c)
the exercise or enforcement of any of the rights and remedies
hereunder of the Trustee and the other Secured
Parties, or (d) the failure by the Company to perform or observe
any of the provisions hereof.
Section 13. Security Interest Absolute.
All rights of the Trustee and security interests hereunder,
and all obligations of the Company
hereunder, shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of any provision
of the Indenture, the Securities or any other
agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of,
or in any other term of, or any increase
in the amount of, all or any of the Obligations, or any other
amendment or waiver of any term of, or any
consent to any departure from any requirement of, the Indenture,
the Securities or any other instrument or
document relating thereto;
(c) any exchange, release or non-perfection of any Lien on
any other collateral, or any release or
amendment or waiver of any term of any guaranty of, or consent to
departure from any requirement of any
guaranty of, all or any of the Obligations; or
(d) any other circumstance which might otherwise constitute
a defense available to, or a discharge of,
a borrower or a pledgor.
Section 14. Amendments, Etc.
No amendment or waiver of any provision of this Agreement
nor consent to any departure by the
Company herefrom shall in any event be effective unless the same
shall be in writing and signed by the
Trustee, and then such waiver or consent shall be effective only
in the specific instance and for the specific
purpose for which given.
Section 15. Addresses for Notices.
All notices and other communications provided for hereunder
shall be in writing (including
telegraphic, telex, telecopy or cable communication) and mailed,
telegraphed, telexed, telecopied, cabled or
delivered by hand, if to the Company or the Trustee, addressed to
the Company or the Trustee, as the case
may be, at its address specified in the Indenture, or, as to
either party, at such other address as shall be
designated by such party in a written notice to each other party
complying as to delivery with the terms of this
Section. All such notices and other communications shall, when
mailed, telegraphed, telexed, telecopied,
cabled or delivered, be effective four (4) Business Days after
deposit in the mails, delivered to the telegraph
company, confirmed by telex answerback, telecopied with
confirmation of receipt, delivered to the cable
company or delivered by hand to the addressee or its agent,
respectively.
Section 16. Continuing Security Interest; Transfer of
Securities or Obligations.
This Pledge Agreement shall create a continuing security
interest in the Pledged Collateral and shall
(a) remain in full force and effect until indefeasible payment in
full of the Obligations, (b) be binding upon the
Company, its successors and assigns, and (c) inure, together with
the rights and remedies of the Trustee
hereunder, to the benefit of and be enforceable by the Secured
Parties and their respective successors,
transferees and assigns. Without limiting the generality of the
foregoing clause (c), any Holder may assign or
otherwise transfer any Security held by it or Obligation owing to
it to any other Person, and such other Person
shall thereupon become vested with all the rights in respect
thereof granted to such Holder herein or
otherwise with respect to such of the Securities or Obligations
so transferred or assigned. Upon the payment
in full of the Obligations, the Company shall be entitled to the
return, upon its request and at its expense, of
such of the Pledged Collateral as shall not have been sold or
otherwise applied pursuant to the terms hereof.
Section 17. Release of Liens.
Upon the Trustee's receipt of a written request by the
Company made contemporaneously with or at
any time after the receipt by the Trustee (or, if applicable, the
Senior Pledgee) of all Net Cash Proceeds and
Additional Debt from the Company in accordance with the terms of
the Indenture in connection with the sale
by the Company of any of the Pledged Shares or Additional Shares,
the Trustee shall release its Lien on such
Pledged Shares and Additional Shares. The Trustee shall, at the
Company's expense, execute and deliver such
documents and instruments as the Company may reasonably request
to evidence such release.
Section 18. Governing Law; Severability; Terms.
This Agreement shall be governed by, and be construed and
interpreted in accordance with, the law
of the State of New York. Wherever possible, each provision of
this Agreement shall be interpreted in such
manner as to be effective and valid under applicable law, but if
any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision
shall be ineffective only to the extent of such
prohibition or invalidity and without invalidating the remaining
provisions of this Agreement. Unless otherwise
defined herein or in the Indenture, terms defined in Article 9 of
the UCC are used herein as therein defined.
Section 19. Waiver of Jury Trial.
The Company waives any right it may have to a trial by jury
in respect of any litigation based on, or
arising out of, under or in connection with, this Agreement or
any course of conduct, course of dealing, verbal
or written statement or other action of the Trustee or any other
Secured Party.
Section 20. Conflicts.
In the event of any conflict between the terms of the
Intercreditor Agreement and this Agreement, the
terms of the Intercreditor Agreement shall govern.
Section 21. Section Titles.
The Section titles contained in this Agreement are and shall
be without substantive meaning or
content of any kind whatsoever and are not part of this
Agreement.
IN WITNESS WHEREOF, the Company has caused this Agreement to
be duly executed and
delivered by its duly authorized officer on the date first above
written.
EMCOR GROUP, INC.
By:
Title:
Accepted and Acknowledged:
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee
By:__________________________
Title:
<PAGE>
SCHEDULE I TO PLEDGE AGREEMENT
Attached to and forming a part of that certain Pledge Agreement,
dated December [__], 1994, by EMCOR
Group, Inc. to United States Trust Company of New York, as
Trustee.
Stock Certificate Number
Stock Issuer Class of Stock No(s). Par Value of Shares
1.JWP/MEC Corp. Common [__] [__] [___]
2.University Energy
Services of
California, Inc. Common [__] [__] [___]
3. JWP Pacific
International, Inc. Common [__] [__] [___]
4.JWP Telecom, Inc. Common [__] [__] [___]
5.JWP Energy
Products, Inc. Common [__] [__] [___]
Original
Description Debt Certificate Final Principal
Issuer of Debt Nos. Maturity Amount
<PAGE>
SCHEDULE II TO PLEDGE AGREEMENT
PLEDGE AMENDMENT
This Pledge Amendment, dated , 19__, is
delivered pursuant to Section 7 of the Pledge Agreement
referred to below. The undersigned hereby agrees that this
Pledge Amendment may be attached to the Pledge
Agreement, dated December [__], 1994, between the
undersigned and United States Trust Company of New York, as
Trustee on behalf of and for the ratable benefit of the
Secured Parties referred to therein and that the [Additional
Shares] [and] [Additional Debt] listed on this Pledge
Amendment shall be and become part of the Pledged Collateral
referred to in the Pledge Agreement and shall secure all
Obligations of the undersigned. The terms defined in the
Pledge Agreement or Indenture are being used herein as
therein defined.
EMCOR GROUP, INC.
By:____________________________
Title:
Stock Certificate Number
Stock Issuer Class of Stock No(s). Par Value of Shares
Original
Description Debt Certificate Final Principal
Issuer of Debt No(s). Maturity Amount
<PAGE>
EXHIBIT B-3
SOFTWARE HOUSE SELLCO PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated [____________ __], 1994, made by
SellCo Corporation, a Delaware
corporation (the "Pledgor"), to United States Trust Company of
New York, as trustee under the Indenture
referred to below (in such capacity, the "Trustee" and, together
with the Holders (as defined in the Indenture),
the "Secured Parties").
W I T N E S S E T H:
WHEREAS, EMCOR Group, Inc. (formerly known as JWP INC.), a
Delaware corporation (the
"Company") has entered into an Indenture, dated as of December
[__], 1994, with the Trustee in respect of the
Company's 7% Senior Secured Notes, Series B, Due 1997 (said
Indenture, as it may be amended,
supplemented or otherwise modified from time to time, being the
"Indenture" and capitalized terms not
defined herein but defined therein or in the Intercreditor
Agreement referred to below being used herein as
therein defined); and
WHEREAS, as set forth in the Indenture, the Pledgor has
guarantied all of the Company's obligations
under the Indenture and the Securities; and
WHEREAS, the Trustee has entered into an Intercreditor
Agreement, dated the date hereof and
substantially in the form of Exhibit C to the Indenture (as it
may be amended, supplemented or otherwise
modified from time to time, the "Intercreditor Agreement") with
the Pledgor, the Company, IBJ Schroder Bank
& Trust Company, as the trustee for the holders of the Series A
Obligations referred to therein (the "Series A
Indenture Trustee"), and Shawmut Bank Connecticut, National
Association, as the trustee for the holders of
the SellCo Related Obligations referred to therein, pursuant to
which, among other things, the Lien on the
Pledged Collateral (as defined in Section 1(a) hereof) created
hereby shall be subordinated to the Senior Lien
(as defined in the Intercreditor Agreement) on the Pledged
Collateral securing the Series A Obligations; and
WHEREAS, the Pledged Collateral constitutes Category One
Collateral under the Intercreditor
Agreement; and
WHEREAS, pursuant to the Intercreditor Agreement, the Series
A Indenture Trustee, as the Senior
Lienor (in such capacity, the "Senior Pledgee"), has agreed to
hold the Pledged Collateral as bailee for the
Trustee, as junior pledgee; and
WHEREAS, the Pledgor is the legal and beneficial owner of
(a) the shares of capital stock described
in Schedule I hereto (the "Pledged Shares") and issued by the
issuers named therein (the "Issuers"), and (b) the
Indebtedness described in said Schedule and issued by the
obligors named therein (the "Pledged Debt"); and
WHEREAS, it is a requirement under the Indenture that the
Pledgor shall have made the pledge
contemplated by this Agreement;
NOW, THEREFORE, in consideration of the premises, the
Pledgor hereby agrees with the Trustee
on behalf and for the ratable benefit of the Secured Parties as
follows:
Section 1. Pledge.
(a) The Pledgor hereby pledges and deposits with the Senior
Pledgee, on the Trustee's behalf and for
the ratable benefit of the Secured Parties, and grants to the
Trustee on behalf and for the ratable benefit of
the Secured Parties a security interest in, the following (the
"Pledged Collateral"):
(i) all of the Pledged Shares;
(ii) all additional shares of stock or other securities of
any Issuer from time to time acquired by the
Pledgor in any manner (any such shares being "Additional
Shares");
(iii) the certificates representing the shares referred to
in clauses (i) and (ii) above;
(iv) all of the Pledged Debt;
(v) all indebtedness for the deferred purchase price of
property from time to time owed to (A) the
Pledgor by any Person in respect of the sale by the Pledgor of
any of Pledged Shares or Additional Shares,
and (B) all indebtedness for the deferred purchase price of
property from time to time owed to the Pledgor or
any of the Issuers by any other Person in respect of any Asset
Sale (as defined in the Indenture) by such
Issuer (any such indebtedness being "Additional Debt");
(vi) all notes or other instruments evidencing the
indebtedness referred to in clauses (iv) and (v)
above; and
(vii) all dividends, interest, cash, instruments and other
property or proceeds, from time to time
received, receivable or otherwise distributed in respect of or in
exchange for any or all of the foregoing.
(b) The pledge made and the security interest granted
pursuant to this Agreement, and all rights and
remedies of the Trustee and the other Secured Parties hereunder
and in and to the Pledged Collateral shall be
subject in all respects to the terms and provisions of the
Intercreditor Agreement. The Trustee, for itself and
on behalf of each of the other Secured Parties, acknowledges and
agrees that the Lien granted to the Secured
Parties hereunder is junior and subordinate to the Senior Lien in
the Pledged Collateral securing the Series A
Obligations.
(c) The Trustee, by execution of the Intercreditor
Agreement, appoints the Senior Pledgee to hold
the Pledged Collateral, in accordance with the terms of, and
subject to the conditions of, the Intercreditor
Agreement.
Section 2. Security for Obligations.
This Agreement secures and the Pledged Collateral is
security for the full and prompt payment when
due (whether at stated maturity, redemption, repurchase, by
acceleration or otherwise) of, and the
performance of, all of the Pledgor's obligations under the
Securities, the Indenture, this Agreement, and each
other instrument, document and agreement executed by the Pledgor
in connection with any of the foregoing,
whether now or hereafter existing and whether for principal,
premium, interest (including without limitation,
interest, whether or not allowed, after the filing of a petition
initiating any proceeding under any Bankruptcy
Law), penalties, commissions, charges, expenses, fees,
indemnifications, reimbursements, liabilities, amounts
payable, otherwise (collectively, the "Obligations").
Section 3. Delivery of Pledged Collateral.
All certificates or instruments representing or evidencing
the Pledged Collateral shall be delivered to
the Senior Pledgee, so long as the Senior Lien has not been
released, and thereafter, to the Trustee, and held
by the Senior Pledgee, so long as the Senior Lien has not been
released, and thereafter, by or on behalf of the
Trustee, pursuant hereto and shall be in suitable form for
transfer by delivery, or shall be accompanied by duly
executed instruments of transfer or assignment in blank, all in
form and substance satisfactory to the Trustee.
After the Senior Lien has been released, the Trustee shall have
the right (a) at any time in its discretion and
without notice to the Pledgor, to transfer to or to register in
its name or in the name of any of its nominees
any or all of the Pledged Collateral, and (b) at any time to
exchange certificates or instruments representing or
evidencing any of the Pledged Collateral for certificates or
instruments of smaller or larger denominations.
Section 4. Representations and Warranties.
The Pledgor makes the following representations:
(a) The Pledged Shares (i) have been duly authorized and
validly issued; (ii) are fully paid and non-
assessable; and (iii) constitute 100% of the issued and
outstanding shares of stock of the respective Issuers
thereof.
(b) The Pledgor is the legal and beneficial owner of the
Pledged Collateral free and clear of any
Lien, except for (i) the Lien created by this Agreement, (ii) the
Senior Lien, and (iii) the Lien created by the
SellCo Subordinated Pledge Agreement.
(c) The pledge of the Pledged Shares and the Pledged Debt
pursuant to this Agreement creates a
valid and perfected security interest in the Pledged Collateral,
subject only to the Senior Lien, in favor of the
Trustee on behalf and for the ratable benefit of the Secured
Parties securing the payment of all of the
Obligations.
(d) No consent, authorization, approval, or other action
by, and no notice to or filing with, any
governmental authority is required either (i) for the pledge by
the Pledgor of the Pledged Collateral pursuant
to this Agreement or for the due execution, delivery or
performance of this Agreement by the Pledgor, or (ii)
for the exercise by the Trustee of the voting or other rights
provided for in this Agreement or of the remedies
in respect of the Pledged Collateral pursuant to this Agreement,
except as may be required in connection with
the disposition of the Pledged Collateral by laws affecting the
offering and sale of securities generally.
(e) The Pledged Debt constitutes all of the outstanding
indebtedness for the deferred purchase price
of property owed to the Pledgor and each of the Issuers in
respect of Asset Sales (as defined in the Indenture)
by the Pledgor and the Issuers.
Section 5. Further Assurances, Etc.
(a) The Pledgor agrees that at any time and from time to
time, at the cost and expense of the
Pledgor, the Pledgor will promptly execute and deliver all
further instruments and documents, and take all
further action, that may be necessary or desirable, or that the
Trustee may request, in order to perfect and
protect the Lien granted or purported to be granted hereby or,
subject to the provisions of the Intercreditor
Agreement, to enable the Trustee to exercise and enforce its
rights and remedies hereunder with respect to
any Pledged Collateral.
(b) The Pledgor agrees to defend the title to the Pledged
Collateral and the Lien thereon of the
Trustee against the claim of any other Person and to maintain and
preserve such Lien until indefeasible
payment in full of all of the Obligations.
Section 6. Voting Rights; Dividends; Etc.
(a) Subject to the provisions of the Intercreditor
Agreement, as long as no Default or Event of
Default shall have occurred and be continuing:
(i) The Pledgor shall be entitled to exercise any and
all voting and other consensual rights
pertaining to the Pledged Collateral or any part thereof for
any purpose not inconsistent with the
terms of this Agreement, the Indenture, the Securities or
any other instrument or document relating
thereto; provided, however, that the Pledgor shall not
exercise or shall refrain from exercising any
such right if such action would (A) in the reasonable good
faith judgment of the Pledgor have a
material adverse effect on the value of the Pledged
Collateral or any part thereof, or (B) be
inconsistent with or violate any provision of this
Agreement, the Securities or the Indenture.
(ii) Subject to the provisions of the Intercreditor
Agreement, the Pledgor shall be entitled to
receive and retain any and all dividends and interest paid
in respect of the Pledged Collateral, other
than any and all
(A) dividends and interest paid or payable other
than in cash in respect of, and
instruments and other property received, receivable or
otherwise distributed in respect of, or
in exchange for, any Pledged Collateral,
(B) dividends and other distributions paid or
payable in cash in respect of any
Pledged Shares or Additional Pledged Shares in
connection with a partial or total liquidation
or dissolution or in connection with a reduction of
capital, capital surplus or paid-in-surplus,
and
(C) cash paid, payable or otherwise distributed
in redemption of, or in exchange for,
any Pledged Collateral,
all of which shall be forthwith delivered to the Trustee or
to the Senior Pledgee on the Trustee's
behalf to hold as Pledged Collateral and shall, if received
by the Pledgor, be received in trust for the
benefit of the Secured Parties, be segregated from the other
property or funds of the Pledgor, and be
forthwith delivered to the Trustee as Pledged Collateral in
the same form as so received (with any
necessary indorsement).
(iii) Subject to the provisions of the Intercreditor
Agreement, the Trustee shall execute and
deliver (or cause to be executed and delivered) to the
Pledgor all such proxies and other instruments
as the Pledgor may reasonably request for the purpose of
enabling the Pledgor to exercise the voting
and other rights which it is entitled to exercise pursuant
to paragraph (i) above and to receive the
dividends or interest payments which it is authorized to
receive and retain pursuant to paragraph (ii)
above.
(b) Subject to the provisions of the Intercreditor
Agreement, upon the occurrence and during the
continuance of a Default or an Event of Default:
(i) Upon notice by the Trustee to the Pledgor, all
rights of the Pledgor to exercise the voting
and other consensual rights which it would otherwise be
entitled to exercise pursuant to Section
6(a)(i) above shall cease, and all such rights shall
thereupon become vested in the Trustee who shall
thereupon have the sole right to exercise such voting and
other consensual rights.
(ii) All rights of the Pledgor to receive the
dividends, interest payments and other
distributions which it would otherwise be authorized to
receive and retain pursuant to Section 6(a)(ii)
above shall cease, and all such rights shall thereupon
become vested in the Trustee who shall
thereupon have the sole right to receive and hold as Pledged
Collateral such dividends, interest
payments and other distributions.
(iii) All dividends, interest payments and other
distributions which are received by the
Pledgor contrary to the provisions of paragraph (ii) of this
Section 6(b) shall be received in trust for
the benefit of the Trustee, shall be segregated from other
funds of the Pledgor and shall be forthwith
paid over to the Trustee as Pledged Collateral in the same
form as so received (with any necessary
indorsement).
(iv) The Pledgor shall, if necessary to permit the
Trustee to exercise the voting and other
rights which it may be entitled to exercise pursuant to
Section 6(b)(i) above and to receive all
dividends, interest payments and distributions which it may
be entitled to receive under Section
6(b)(ii) above, execute and deliver to the Trustee, from
time to time and upon written notice of the
Trustee, appropriate proxies, dividend payment orders and
other instruments as the Trustee may
reasonably request. The foregoing shall not in any way
limit the Trustee's power and authority
granted pursuant to Section 8 hereof.
Section 7. Transfers and Other Liens; Additional Shares and
Additional Debt.
(a) The Pledgor agrees that it will not (i) sell or
otherwise dispose of, or grant any option or warrant
with respect to, any of the Pledged Collateral (except, in
respect of the Pledged Shares, in accordance with the
terms of the Indenture), or (ii) create or permit to exist any
Lien upon or with respect to any of the Pledged
Collateral except for (A) the Lien created pursuant to this
Agreement, (B) the Senior Lien, and (C) the Lien
created pursuant to the SellCo Subordinated Pledge Agreement.
(b) The Pledgor agrees that it will (i) cause each Issuer
not to issue any shares of stock or other
securities in addition to or in substitution for the Pledged
Shares except to the Pledgor, (ii) pledge hereunder,
immediately upon its acquisition (directly or indirectly)
thereof, to the Trustee (or, until the Senior Lien has
been released, to the Senior Pledgee) any and all Additional
Shares and any and all Additional Debt, and (iii)
promptly (and in any event within three Business Days) deliver to
the Trustee a Pledge Amendment, duly
executed by the Pledgor, in substantially the form of Schedule II
hereto (a "Pledge Amendment"), in respect of
the Additional Shares or Additional Debt, together with all
certificates, notes or other instruments
representing or evidencing the same. The Pledgor hereby (i)
authorizes the Trustee to attach each Pledge
Amendment to this Pledge Agreement, (ii) agrees that all
Additional Shares and all Additional Debt listed on
any Pledge Amendment delivered to the Trustee shall for all
purposes hereunder constitute Pledged Shares
and Pledged Debt, respectively, subject to the rights of the
holders of the Senior Lien, and (iii) is deemed to
have made, upon such delivery, the representations and warranties
contained in Section 4 hereof with respect
to such Pledged Collateral.
Section 8. Trustee Appointed Attorney-in-Fact and Proxy.
Subject to the provisions of the Intercreditor Agreement,
the Pledgor hereby irrevocably constitutes
and appoints the Trustee and any officer or agent thereof, with
full power of substitution, as its true and lawful
attorney-in-fact and proxy with full irrevocable power and
authority in the place and stead of the Pledgor and
in the name of the Pledgor or in its own name, from time to time
in the Trustee's discretion, for the purpose
of carrying out the terms of this Agreement, to take any and all
appropriate action and to execute and deliver
any and all documents and instruments which the Trustee may deem
necessary or advisable to accomplish the
purposes of this Agreement, including, without limitation, to
receive, indorse and collect all instruments made
payable to the Pledgor representing any dividend, interest
payment or other distribution or payment in respect
of the Pledged Collateral or any part thereof, to give full
discharge for the same, and to vote or grant any
consent in respect of the Pledged Shares authorized by Section
6(b) hereof. The Pledgor hereby ratifies, to
the extent permitted by law, all that any said attorney shall
lawfully do or cause to be done by virtue hereof.
This power, being coupled with an interest, is irrevocable until
the Obligations are paid in full.
Section 9. Trustee May Perform.
Subject to the provisions of the Intercreditor Agreement, if
the Pledgor fails to perform any agreement
contained herein, the Trustee may itself perform, or cause
performance of, such agreement, and the expenses
of the Trustee incurred in connection therewith shall be payable
by the Pledgor under Section 12 hereof and
constitute Obligations secured hereby.
Section 10. Reasonable Care.
The Trustee shall be deemed to have exercised reasonable
care in the custody and preservation of the
Pledged Collateral in its possession if the Pledged Collateral is
accorded treatment substantially equal to that
which the Trustee accords its own property, it being understood
that neither the Trustee nor any other
Secured Party shall have responsibility for (i) ascertaining or
taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relative to any
Pledged Collateral, whether or not the Trustee
or any other Secured Party has or is deemed to have knowledge of
any such matter, or (ii) taking any
necessary steps to preserve rights against any Person with
respect to any Pledged Collateral.
Section 11. Remedies upon Default.
Subject to the provisions of the Intercreditor Agreement, if
any Event of Default shall have occurred
and be continuing:
(a) The Trustee may exercise in respect of the Pledged
Collateral, in addition to other rights and
remedies provided for herein or otherwise available to it, all
the rights and remedies of a secured party after
default under the Uniform Commercial Code in effect in the State
of New York at that time (the "UCC"), and
the Trustee may also, without notice except as specified below,
sell the Pledged Collateral or any part thereof
in one or more parcels at public or private sale, at any
exchange, broker's board or at any office of the Trustee
or elsewhere, for cash, on credit or for future delivery, and
upon such other terms as the Trustee may deem
commercially reasonable. The Pledgor agrees that, to the extent
notice of sale shall be required by law, at
least ten days' notice to the Pledgor of the time and place of
any public sale or the time after which any
private sale is to be made shall constitute reasonable
notification. The Trustee shall not be obligated to make
any sale of Pledged Collateral regardless of notice of sale
having been given. The Trustee may adjourn any
public or private sale from time to time by announcement at the
time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to
which it was so adjourned. The Pledgor hereby
waives any claims against the Trustee arising by reason of the
fact that the price at which any Pledged Col-
lateral may have been sold at such a private sale was less than
the price which might have been obtained at a
public sale, even if the Trustee accepts the first offer received
and does not offer such Pledged Collateral to
more than one offeree.
(b) If the Trustee shall determine to exercise its right to
sell all or any of the Pledged Collateral
pursuant to this Section 11, the Pledgor agrees that, upon
request of the Trustee, the Pledgor will, at its own
cost and expense:
(i) execute and deliver, and use its best efforts to
cause each issuer of the Pledged Collateral
and its directors and officers to execute and deliver, all
such instruments and documents, and do or
cause to be done all such other acts and things, as may be
necessary or, in the reasonable opinion of
the Trustee, advisable to register such Pledged Collateral
under the provisions of the Securities Act of
1933, as from time to time amended (the "Securities Act"),
and to cause the registration statement
relating thereto to become effective and to remain effective
for such period as prospectuses are
required by law to be furnished, and to make all amendments
and supplements thereto and to the
related prospectus which, in the opinion of the Trustee, are
necessary or advisable, all in conformity
with the requirements of the Securities Act and the rules
and regulations of the Securities and
Exchange Commission ("SEC") applicable thereto;
(ii) use its best efforts to qualify the Pledged
Collateral under the state securities or "Blue
Sky" laws and to obtain all necessary governmental approvals
for the sale of the Pledged Collateral, as
requested by the Trustee;
(iii) make available to its security holders, as soon
as practicable, an earning statement which
will satisfy the provisions of section 11(a) of the
Securities Act; and
(iv) do or cause to be done all such other acts and
things as may be necessary to make such
sale of the Pledged Collateral or any part thereof valid and
binding and in compliance with applicable
law.
The Pledgor further acknowledges the impossibility of
ascertaining the amount of damages which would be
suffered by the Secured Parties by reason of the failure by the
Pledgor to perform any of the covenants
contained in this Section 11 and, consequently, agrees that, if
the Pledgor shall fail to perform any of such
covenants, it shall pay, as liquidated damages and not as a
penalty, an amount equal to the value of the
Pledged Collateral on the date the Trustee shall demand
compliance with this Section.
(c) The Pledgor recognizes that, by reason of the
aforementioned requirements and certain
prohibitions contained in the Securities Act and applicable state
securities laws, the Trustee may, at its option,
elect not to require the Pledgor to register all or any part of
the Pledged Collateral and may therefore be
compelled, with respect to any sale of all or any part of the
Pledged Collateral, to limit purchasers to those
who will agree, among other things, to acquire such securities
for their own account, for investment, and not
with a view to the distribution or resale thereof. The Pledgor
acknowledges and agrees that any such sale may
result in prices and other terms less favorable to the seller
than if such sale were a public sale without such
restrictions and, notwithstanding such circumstances, agrees that
any such sale shall be deemed to have been
made in a commercially reasonable manner. The Trustee shall be
under no obligation to delay the sale of any
of the Pledged Collateral for the period of time necessary to
permit the Pledgor to register such securities for
public sale under the Securities Act, or under applicable state
securities laws, even if the Pledgor would agree
to do so.
(d) If the Trustee determines to exercise its right to sell
any or all of the Pledged Collateral, upon
written request, the Pledgor shall, from time to time, furnish to
the Trustee all such information as the Trustee
may request in order to determine the number of shares and other
instruments included in the Pledged
Collateral which may be sold by the Trustee as exempt
transactions under the Act and rules of the SEC
thereunder, as the same are from time to time in effect.
(e) Any cash held by the Trustee as Pledged Collateral and
all cash proceeds received by the Trustee
in respect of any sale of, collection from, or other realization
upon all or any part of the Pledged Collateral
shall be applied by the Trustee as provided in Section 6.10 of
the Indenture.
(f) Notwithstanding anything to the contrary set forth
herein, the Trustee shall not exercise any of the
remedies set forth in this Section 11 for a period of 90 days
after the occurrence of an Event of Default
without the prior written consent of the Majority Lenders (as
defined in the Revolving Credit Agreement
referred to in the Series A Indenture.
Section 12. Expenses.
The Pledgor will upon demand pay to the Trustee the amount
of any and all reasonable expenses,
including, without limitation, the reasonable fees and expenses
of the Trustee's counsel and of any experts and
agents, which the Trustee may incur in connection with (a) the
administration of this Agreement, (b) the
custody or preservation of, sale of, collection from, or other
realization upon, any of the Pledged Collateral, (c)
the exercise or enforcement of any of the rights and remedies
hereunder of the Trustee and the other Secured
Parties, or (d) the failure by the Pledgor to perform or observe
any of the provisions hereof.
Section 13. Security Interest Absolute.
All rights of the Trustee and security interests hereunder,
and all obligations of the Pledgor
hereunder, shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of any provision
of the Indenture, the Securities, the
Intercreditor Agreement, or any other agreement or instrument
relating thereto;
(b) any change in the time, manner or place of payment of,
or in any other term of, or any increase
in the amount of, all or any of the Obligations, or any other
amendment or waiver of any term of, or any
consent to any departure from any requirement of, the Indenture,
the Securities, the Intercreditor Agreement,
or any other instrument or document relating thereto;
(c) any exchange, release or non-perfection of any Lien on
any other collateral, or any release or
amendment or waiver of any term of any guaranty of, or consent to
departure from any requirement of any
guaranty of, all or any of the Obligations; or
(d) any other circumstance which might otherwise constitute
a defense available to, or a discharge of,
a borrower or a pledgor.
Section 14. Amendments, Etc.
No amendment or waiver of any provision of this Agreement
nor consent to any departure by the
Pledgor herefrom shall in any event be effective unless the same
shall be in writing and signed by the Trustee,
and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for
which given.
Section 15. Addresses for Notices.
All notices and other communications provided for hereunder
shall be in writing (including
telegraphic, telex, telecopy or cable communication) and mailed,
telegraphed, telexed, telecopied, cabled or
delivered by hand, if to the Pledgor or the Trustee, addressed to
the Pledgor or the Trustee, as the case may
be, at its address specified in the Indenture, or, as to either
party, at such other address as shall be designated
by such party in a written notice to each other party complying
as to delivery with the terms of this Section.
All such notices and other communications shall, when mailed,
telegraphed, telexed, telecopied, cabled or
delivered, be effective four (4) Business Days after deposit in
the mails, delivered to the telegraph company,
confirmed by telex answerback, telecopied with confirmation of
receipt, delivered to the cable company or
delivered by hand to the addressee or its agent, respectively.
Section 16. Continuing Security Interest; Transfer of
Securities or Obligations.
This Pledge Agreement shall create a continuing security
interest in the Pledged Collateral and shall
(a) remain in full force and effect until indefeasible payment in
full of the Obligations, (b) be binding upon the
Pledgor, its successors and assigns, and (c) inure, together with
the rights and remedies of the Trustee
hereunder, to the benefit of and be enforceable by the Secured
Parties and their respective successors,
transferees and assigns. Without limiting the generality of the
foregoing clause (c), any Holder may assign or
otherwise transfer any Security held by it or Obligation owing to
it to any other Person, and such other Person
shall thereupon become vested with all the rights in respect
thereof granted to such Holder herein or
otherwise with respect to such of the Securities or Obligations
so transferred or assigned. Subject to the
provisions of the Intercreditor Agreement, upon the payment in
full of the Obligations, the Pledgor shall be
entitled to the return, upon its request and at its expense, of
such of the Pledged Collateral as shall not have
been sold or otherwise applied pursuant to the terms hereof.
Section 17. Governing Law; Severability; Terms.
This Agreement shall be governed by, and be construed and
interpreted in accordance with, the law
of the State of New York. Wherever possible, each provision of
this Agreement shall be interpreted in such
manner as to be effective and valid under applicable law, but if
any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision
shall be ineffective only to the extent of such
prohibition or invalidity and without invalidating the remaining
provisions of this Agreement. Unless otherwise
defined herein or in the Indenture, terms defined in Article 9 of
the UCC are used herein as therein defined.
Section 18. Release of Liens.
Upon the Trustee's receipt of a written request by the
Pledgor made contemporaneously with or at
any time after the receipt by the Trustee of all Net Cash
Proceeds and Additional Debt from the Pledgor in
accordance with the terms of the Indenture in connection with the
sale by the Pledgor of any of the Pledged
Shares or Additional Shares, the Trustee shall release its Lien
on such Pledged Shares and Additional Shares.
The Trustee shall, at the Pledgor's expense, execute and deliver
such documents and instruments as the
Pledgor may reasonably request to evidence such release.
Section 19. Waiver of Jury Trial.
The Pledgor waives any right it may have to a trial by jury
in respect of any litigation based on, or
arising out of, under or in connection with, this Agreement or
any course of conduct, course of dealing, verbal
or written statement or other action of the Trustee or any other
Secured Party.
Section 20. Conflicts.
In the event of any conflict between the terms of the
Intercreditor Agreement and this Agreement, the
terms of the Intercreditor Agreement shall govern.
Section 21. Section Titles.
The Section titles contained in this Agreement are and shall
be without substantive meaning or
content of any kind whatsoever and are not part of this
Agreement.
IN WITNESS WHEREOF, the Pledgor has caused this Agreement to
be duly executed and delivered
by its duly authorized officer on the date first above written.
SELLCO CORPORATION
By:
Title:
Accepted and Acknowledged:
UNITED STATES TRUST COMPANY OF NEW YORK,
as Trustee
By:__________________________
Title:
SCHEDULE I TO PLEDGE AGREEMENT
Attached to and forming a part of that certain Pledge Agreement,
dated December [__], 1994, by SellCo
Corporation to United States Trust Company of New York, as
Trustee.
Stock Certificate Number
Stock Issuer Class of Stock No(s). Par Value of Shares
1[___] Common [__] [__] [___]
2.[___] Common [__] [__] [___]
3.[____] Common [__] [__] [___]
4.[___] Common [__] [__] [___]
Original
Description Debt Certificate Final Principal
Issuer of Debt No(s). Maturity Amount
<PAGE>
SCHEDULE II TO PLEDGE AGREEMENT
PLEDGE AMENDMENT
This Pledge Amendment, dated , 19__, is
delivered pursuant to Section 7 of the
Pledge Agreement referred to below. The undersigned hereby
agrees that this Pledge Amendment
may be attached to the Pledge Agreement, dated December
[__], 1994, between the undersigned and
United States Trust Company of New York, as Trustee on
behalf of and for the ratable benefit of the
Secured Parties referred to therein and that the [Additional
Shares] [and] [Additional Debt] listed on
this Pledge Amendment shall be and become part of the
Pledged Collateral referred to in the Pledge
Agreement and shall secure all Obligations of the
undersigned. The terms defined in the Pledge
Agreement or Indenture are being used herein as therein
defined.
SELLCO CORPORATION
By:____________________________
Title:
Stock Certificate Number
Stock Issuer Class of Stock No(s). Par Value of Shares
Original
Description Debt Certificate Final Principal
Issuer of Debt No(s). Maturity Amount
<PAGE>
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- ----------------------------X
In re
:
CHAPTER 11
JWP INC.,
: Case No. 93-B-46404 (JHG)
Debtor.
:
- ----------------------------X
ORDER (A) APPROVING THE DEBTOR'S THIRD AMENDED DISCLOSURE
STATEMENT, (B) ESTABLISHING PROCEDURES FOR SOLICITATION AND
TABULATION OF VOTES TO ACCEPT OR REJECT THE DEBTOR'S THIRD
AMENDED PLAN OF REORGANIZATION, AND (C) SCHEDULING
HEARING ON CONFIRMATION OF THE DEBTOR'S THIRD AMENDED PLAN OF
REORGANIZATION AND APPROVING NOTICE THEREOF
Upon the motion (the "Motion") of JWP INC. (the "Debtor")
dated
August 9, 1994 for an order pursuant to (S)(S) 1125 and 1126 of
title 11 of the United States Code (the "Bankruptcy Code") and
Rules 3017, 3018 and 3020 of the Federal Rules of Bankruptcy
Procedure (the "Bankruptcy Rules") scheduling (a) a hearing on
approval of the Debtor's Proposed Third Amended Disclosure
Statement, dated August 9, 1994, and a hearing (i) on
establishing procedures for solicitation and tabulation of votes
(the "Voting Procedures") to accept or reject the Third Amended
Joint Plan of Reorganization proposed by the Debtor and its
affiliate, SellCo Corporation ("SellCo"), dated August 9, 1994
(the "Third Amended Plan"), and (ii) scheduling a hearing on
confirmation of the Third Amended Plan and approving notice
thereof; and notice of the Motion having been given to the
Official Committee of Unsecured Creditors (the "Creditors'
Committee"), the Official Committee of Junior Creditors
and Interest Holders (the "Junior Creditors' Committee"), the
United States Trustee, the Securities and Exchange Commission
(the "SEC"), all parties who had requested a copy of the
Debtor's
Disclosure Statement dated February 14, 1994 or any amendments
thereto, and all parties in interest that have filed notices
pursuant to Bankruptcy Rule 2002 in the Debtor's chapter 11
case; and the Debtor's Second Amended Disclosure Statement,
dated
as of July 21, 1994 (the "Second Amended Disclosure Statement")
having been approved by order of this Court on July 21, 1994;
and
the Debtor having served proposed amendments to the Second
Amended Disclosure Statement (the "Amendments," the Second
Amended Disclosure Statement with the Amendments, the "Proposed
Third Amended Disclosure Statement"); and a hearing to consider
approval of the Amendments having been scheduled for August 22,
1994 (the "Disclosure Statement Hearing"); and due notice of the
Disclosure Statement Hearing having been given; and upon the
record of the Disclosure Statement Hearing and all of the
proceedings had before the Court; and the Court having
determined
after due deliberation that the Proposed Third Amended
Disclosure
Statement contains adequate information as such term is defined
in (S) 1125 of the Bankruptcy Code and there appearing
sufficient
cause for approval thereof, it is hereby
ORDERED that in accordance with (S) 1125 of the Bankruptcy
Code
and Bankruptcy Rule 3017(b), the Proposed Third Amended
Disclosure Statement be, and it hereby is approved (as approved,
the "Third Amended Disclosure Statement"); and it is further
ORDERED that the order of this Court dated July 21, 1994, (a)
approving the Debtor's Second Amended Disclosure Statement, (b)
establishing procedures for solicitation and tabulation of votes
to accept or reject the Debtor's Second Amended Joint Plan of
Reorganization proposed by the Debtor and SellCo, dated as of
July 21, 1994 (the "Second Amended Plan"), and (c) scheduling
a hearing on confirmation of the Debtor's Second Amended Plan
and
approving notice thereof, is hereby superseded by this Order;
and it is further
ORDERED that the ballots (the "Ballots") and the notification
of non-voting status (the "Notification") substantially in the
form annexed hereto as Exhibit "A" be, and they hereby are
approved; and it is further
ORDERED that, pursuant to Bankruptcy Rules 3017(c) and
3018(a),
the holders of claims and interest holders of record as of July
21, 1994 (the "Record Date") in Classes 2, 3, 4(B), 4(C), 6, 7,
8, 9, 10 and 11 of the Third Amended Plan may vote to accept or
reject the Third Amended Plan by indicating their acceptance or
rejection of the Third Amended Plan on the Ballots provided
therefor; and it is further
ORDERED that in order to be counted as a vote to accept or
reject the Third Amended Plan, a Ballot must be executed by the
holder of a claim or equity interest and returned to JWP INC.
c/o
Donlin, Recano & Company, Inc., ("Donlin Recano") either by (i)
first class mail, at P.O. Box 2034, Murray Hill Station, New
York, New York 10156-0701, or (ii) hand-delivery, Federal
Express, overnight mail or other courier service, at 419 Park
Avenue South, Suite 1206, New York, New York 10016, so that it
is
actually received no later than 5:00 p.m., New York time, on
September 23, 1994; and it is further
ORDERED that any Ballot which has been executed and timely
received by Donlin Recano but which does not indicate an
acceptance or rejection of the Third Amended Plan shall be
deemed
to be an acceptance of the Third Amended Plan; and it is further
ORDERED that any election by the holder of a Class 4(B) or
4(C)
claim allowed in an aggregate amount greater than $10,000, to
reduce such claim in the aggregate to $10,000 and, in full
satisfaction of such claim, be treated as the holder of a Class
4(A) claim under the Third Amended Plan, must be made through
the execution and return of the Ballot to Donlin Recano in the
manner set forth above, so that it is actually received no later
than 5:00 p.m., New York time on September 23, 1994; and it is
further
ORDERED that any election by the holder of an allowed claim or
interest in classes 7, 8, 9, 10 or 11 to receive $0.10 in lieu
of
each whole New Series Z Warrant that such holder is entitled to
receive under the Third Amended Plan must be made through the
execution and return of the Ballot to Donlin Recano in the
manner set forth above, so that it is actually received no
later than 5:00 p.m., New York time on September 23, 1994; and
it is further
ORDERED that, solely for the purpose of voting to accept or
reject the Third Amended Plan and not for the purpose of
allowance of or distribution on account of a claim, each claim
entitled to vote to accept or reject the Third Amended Plan be,
and it hereby is, temporarily allowed in an amount equal to the
amount of such claim as set forth in the schedules of assets and
liabilities and the statement of financial affairs filed by the
Debtor as required by Section 521 of the Bankruptcy Code and the
Official Bankruptcy Forms of the Bankruptcy Rules, and all
amendments thereto (the "Schedules") or, in the event that a
proof of claim has been timely filed, the amount set forth in
such proof of claim; provided, however, that (i) if a claim is
not listed in the Schedules, but is the subject of a timely
filed
proof of claim, such claim shall be temporarily allowed for
voting purposes only and not for the purpose of allowance or
distribution in the amount set forth in such proof of claim,
(ii)
if a claim for which a proof of claim has been timely filed is
filed as contingent or unliquidated either in whole or in part,
such claim shall be temporarily disallowed (to the extent it is
filed as contingent or unliquidated) for voting purposes only
and
not for the purpose of allowance or distribution, and (iii) if
the Debtor has served and filed an objection to a claim not
later
September 2, 1994, such claim shall be temporarily disallowed
for
voting purposes only and not for the purpose of allowance or
distribution, except to the extent and in the manner set forth
in the objection; and it is further
ORDERED that any claimant that challenges the allowance of its
claim for voting purposes pursuant to the foregoing decretal
paragraph of this Amended Order be, and it hereby is, required
to
obtain an order of this Court pursuant to Bankruptcy Rule
3018(a)
temporarily allowing such claim for purposes of voting to accept
or reject the Third Amended Plan prior to the last date for
voting to accept or reject the Third Amended Plan; and it is
further
ORDERED that the hearing on confirmation of the Third Amended
Plan (the "Confirmation Hearing") shall be held before this
Court
at the United States Bankruptcy Court, Room 523, Alexander
Hamilton Custom House, One Bowling Green, New York, New York on
September 28, 1994 at 9:30 a.m., or as soon thereafter as
counsel may be heard; and it is further
ORDERED that objections, if any, to confirmation of the Third
Amended Plan shall be in writing, and shall (a) state the name
and address of the objecting party and the nature of the claim
or
interest of such party, (b) state with particularity the basis
and nature of each objection to the Third Amended Plan and (c)
be
filed, together with proof of service, with the Court (with a
copy to the Chambers of the Honorable Jeffry H. Gallet) and
served by 4:00 p.m., New York time, on September 13, 1994 on the
following parties: (i) Stroock & Stroock & Lavan, Counsel for
the
Debtor, Seven Hanover Square, New York, New York 10004,
Attention: Lawrence M. Handelsman, Esq., (ii) Weil, Gotshal &
Manges, Co-Counsel for the Creditors' Committee, 767 Fifth
Avenue, New York, New York 10153, Attention: Michael F. Walsh,
Esq., (iii) Wachtell, Lipton, Rosen & Katz, Co-Counsel for the
Creditors' Committee, 51 West 52nd Street, New York, New York
10019, Attention: Chaim Fortgang, Esq., (iv) Tenzer, Greenblatt,
Fallon & Kaplan, Counsel for the Junior Creditors' Committee,
405
Lexington Avenue, New York, New York 10174, Attention: James D.
Glass, Esq., and (v) the Office of the United States Trustee, 80
Broad Street, New York, New York 10004, Attention: Craig
Freeman, Esq.; and it is further
ORDERED that objections to the Third Amended Plan that are not
timely filed may not be considered by the Court; and it is
further
ORDERED that the Confirmation Hearing may be adjourned from
time to time without further notice to holders of claims,
holders
of equity interests or other parties-in-interest other than the
announcement of the adjourned hearing date in open court; and it
is further
ORDERED that the Debtor be, and it hereby is, authorized and
directed to mail or cause to be mailed by first-class mail,
postage prepaid, no later than August 26, 1994 a copy of the
notice (the "Notice") of, among other things, the Confirmation
Hearing, substantially in the form annexed hereto as Exhibit
"B",
a copy of the Third Amended Disclosure Statement, including a
copy of the Third Amended Plan (without exhibits), and a copy of
this Order, to (i) all persons or entities that have filed
proofs
of claim with the Court on or before the Record Date, (ii) all
persons or entities listed in the Debtor's Schedules and lists
of
equity security holders and all amendments thereto through the
Record Date, (iii) all other known holders of claims or equity
interests against the Debtor, if any, through the Record Date,
(iv) any entity that has filed with the Court a notice of the
transfer of a claim under Bankruptcy Rule 3001(e) on or before
the Record Date, (v) all parties in interest that have filed a
request for notice pursuant to Bankruptcy Rule 2002(i) in the
Debtor's Chapter 11 case on or before the Record Date, (vi)
Co-Counsel to the Creditors' Committee, (vii) Counsel to the
Junior Creditors' Committee, (viii) the indenture trustees under
any debt instruments of the Debtor, (ix) the Office of the
United
States Trustee, and (x) the Securities and Exchange Commission;
and it is further
ORDERED that the Debtor be, and it hereby is, authorized and
directed to mail or cause to be mailed, together with the Notice
and the Third Amended Disclosure Statement, (i) a Ballot to the
holders of claims in Classes 2, 3, 4(B), 4(C), 6, 7, 8, 9, 10
and
11 of the Third Amended Plan and (ii) a Notification to the
holders of claims in Classes 1, 4(A) and 5; and it is further
ORDERED that the Debtor be, and it hereby is, directed to
cause
the Notice to be published no less than twenty-five days prior
to
the date of the Confirmation Hearing in the national editions of
The Wall Street Journal and The New York Times; and it is
further
ORDERED that, pursuant to Bankruptcy Rule 3017(e), the Debtor
be, and it hereby is, authorized to contact record holders of
the
Debtor's publicly traded securities to cause such record holders
to forward to beneficial holders of those securities the Notice,
Third Amended Plan, Third Amended Disclosure Statement and
Ballot; and it is further
ORDERED that the provision of notice in accordance with the
procedures set forth in this Amended Order shall be deemed good
and sufficient notice of the Confirmation Hearing, the time
fixed
for filing objections to the Third Amended Plan and the time
within which holders of claims may vote to accept or reject
the Third Amended Plan; and it is further
ORDERED that the Debtor be, and it hereby is, authorized and
empowered to take such steps and perform such acts as may be
necessary to implement and effectuate this Order.
Dated:
New York, New York
August 22, 1994
/s/ Jeffry H. Gallet
-------------------------------
United States Bankruptcy Judge
<PAGE>
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- ------------------------------- X
In re:
:
CHAPTER 11
Case No. 93-B-46404 (JHG)
JWP INC., :
Debtor. :
- --------------------------------X
THIRD AMENDED DISCLOSURE STATEMENT AND THIRD AMENDED JOINT PLAN
OF REORGANIZATION PROPOSED BY THE DEBTOR AND ITS AFFILIATE,
SELLCO CORPORATION
STROOCK & STROOCK & LAVAN
Attorneys for JWP INC.
Seven Hanover Square New York, New York 10004
212-806-5400
August 9, 1994
THIS IS NOT A SOLICITATION OF ACCEPTANCE OF THE PLAN.
ACCEPTANCES
MAY NOT BE SOLICITED UNTIL A DISCLOSURE STATEMENT HAS BEEN
APPROVED BY THE BANKRUPTCY COURT. THIS DISCLOSURE STATEMENT HAS
NOT BEEN APPROVED BY THE BANKRUPTCY COURT.
10F292
<PAGE>
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
----
<S> <C> <C>
I. INTRODUCTION........................................ 1
A. About This Reorganization Case.................... 1
B. Confirmation Hearing.............................. 3
C. Voting Instructions............................... 3
D. Objections........................................ 4
E. Events During the Reorganization Case............. 5
1. Official Committees........................... 5
2. Debtor-in-Possession Financing................ 6
3. Surety Bonds.................................. 7
4. Asset Sales................................... 7
5. Avoidance Actions............................. 8
II. SUMMARY.............................................. 8
A. Summary of Classes and Treatment Under the Plan... 8
B. Provisions for Employees.......................... 13
C. Bar Date-Who Must File a Claim.................... 13
D. JWP's Senior Institutional Indebtedness........... 13
1. Old Credit Agreement.......................... 13
2. Old Notes..................................... 14
E. Background Information............................ 14
1. Background of the Restructuring............... 14
2. The Standstill Agreements..................... 15
3. The "Software House" Collateral............... 15
4. The Asset Sales............................... 15
III. FINANCIAL INFORMATION................................ 18
A. Selected Historical Financial Information......... 18
B. Unaudited Pro Forma Financial Information......... 20
C. Projected Financial Information: 1994-1997
Assumptions....................................... 29
D. Valuation of Reorganized JWP...................... 43
IV. SUMMARY OF THE PLAN.................................. 46
A. Property to be Distributed Under the Plan......... 46
1. Senior Secured Notes.......................... 46
2. Series C Notes................................ 48
3. SellCo Subordinated Contingent Payment Notes.. 48
4. New Common Stock.............................. 48
5. New Series X Warrants and New Series Y
Warrants...................................... 49
6. New Series Z Warrants......................... 49
7. New Securities for Debtor-in-Possession
Lender........................................ 50
8. JWP Supplemental SellCo Note.................. 50
B. Classification and Treatment...................... 50
1. Unimpaired Claims Not Classified Under
the Plan...................................... 50
2. Claims and Interests Classified Under the
Plan.......................................... 50
C. Disputed Claims................................... 61
D. Executory Contracts............................... 61
E. Implementation of the Plan........................ 61
1. Corporate Action.............................. 61
2. 1994 Management Incentive Stock Option Plan... 61
3. Listing of New Securities and Registration
Rights....................................... 62
F. Conditions Precedent to Plan Effectiveness........ 62
1. Confirmation Order........................... 62
2. Class 4B Claims.............................. 62
3. Working Capital Facility..................... 62
4. Indenture Qualificatin....................... 63
5. Waiver....................................... 63
6. Failure of Conditions........................ 63
G. Releases, Setoffs and Recoupments, and
Discharge....................................... 63
1. Releases..................................... 63
2. Setoffs and Recoupments...................... 63
3. Discharge and Injunction..................... 63
H. Retention of Jurisdiction by the Bankruptcy
Court........................................... 64
I. Miscellaneous................................... 65
1. Fractional Shares or Debt Instruments
and Cash Option.............................. 65
2. Reservation of Warrants for the Businessland
Debentures................................... 65
3. Business Days................................ 65
4. Revesting of Assets.......................... 65
J. Timing of the Distributions..................... 65
V. CERTAIN RISK FACTORS............................... 66
A. Payment of Senior Notes......................... 66
B. Working Capital Facility........................ 66
C. Lack of Established Market for the New
Securities...................................... 66
D. Projections..................................... 67
E. Business Factors and Competitive Conditions..... 67
F. Dividends....................................... 67
G. Bonding Capacity................................ 67
H. Public Utility Holding Company Act of 1935...... 67
VI. THE COMPANY........................................ 68
A. Business........................................ 68
1. Mechanical/Electrical Services............... 68
2. Supply of Water.............................. 69
3. Information Services......................... 70
4. Other Business............................... 71
VII. REORGANIZED JWP.................................... 71
A. Business........................................ 71
B. Corporate Structure............................. 71
1. MES.......................................... 72
2. SellCo....................................... 72
VIII. MANAGEMENT AND MANAGEMENT STOCK OPTIONS............ 73
A. Changes in Management........................... 73
B. Board of Directors of Reorganized JWP........... 73
C. Management of Reorganized JWP................... 74
D. Description of the 1994 Management
Stock Option Plan............................... 74
IX. LEGAL PROCEEDINGS.................................. 78
A. Shareholder Litigation.......................... 78
B. Securities and Exchange Commission Investigation 79
C. New York County District Attorney Investigation 79
D. Jamaica Water Supply Company.................... 79
1. Rate Related Proceedings and Rate
Related Litigation........................... 79
2. New York City Condemnation Proceeding........ 80
X. FEASIBILITY OF THE PLAN........................... 81
A. Payments on the Effective Date............... 81
B. Future Payments Under the Plan............... 82
XI. CONFIRMATION OF THE PLAN.......................... 83
A. Hearing........................................ 83
B. Acceptance..................................... 83
C. Feasibility.................................... 83
D. Best Interests Test............................ 83
E. Confirmation Without Acceptance By All
Impaired Classes............................... 84
1. Unfair Discrimination..................... 84
2. Fair and Equitable Standard............... 85
XII. ALTERNATIVES TO THE PLAN.......................... 85
A. Alternative Plan of Reorganization........... 85
B. Liquidation Under Chapter 7.................. 86
XIII. SECURITIES LAW CONSIDERATIONS..................... 86
A. Issuance of Reorganization Securities........ 86
B. Subsequent Transfers of Reorganization
Securities................................... 86
XIV. CERTAIN FEDERAL INCOME TAX CONSEQUENCES........... 88
XV. CONCLUSION......................................... 102
</TABLE>
EXHIBITS
1. Plan of Reorganization (with exhibits separately bound
and available upon request)
2. Creditors' Committee
3. Junior Committee
4. 1992 Financial Statements
5. Liquidation Analysis
<PAGE>
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- ------------------------------ X
In re
:
CHAPTER 11
JWP INC.,
: Case No. 93-B-46404 (JHG)
Debtor.
:
- -------------------------------X
THIRD AMENDED DISCLOSURE STATEMENT
I. INTRODUCTION
A. ABOUT THIS REORGANIZATION CASE
In the fall of 1993, JWP INC., a Delaware corporation ("JWP"
or the "Debtor"), announced that it had reached an agreement in
principle with holders of its senior debt to restructure its
business and capitalization and, subject to documentation of
such agreement, intended to file a prepackaged plan of
reorganization. On December 21, 1993 (the "Petition Date"), an
involuntary petition for a reorganization under Chapter 11 (the
"Reorganization Case") of the United States Bankruptcy Code, 11
U.S.C. (S) 101 et seq. ("Bankruptcy Code") was filed against JWP
in the United States Bankruptcy Court for the Southern District
of New York ("Bankruptcy Court") by three subordinated debt
holders asserting claims of $2,000,000, $20,000 and $50,000,
respectively. On February 14, 1994 (the "Consent Date"), JWP
filed a consent to the involuntary petition and an order for
relief was entered. Under Sections 1107 and 1108 of
the Bankruptcy Code, JWP continues to operate its businesses as
a debtor-in-possession.
This Third Amended Disclosure Statement ("Disclosure
Statement") is provided by JWP and its affiliate, SellCo
Corporation ("SellCo"), in connection with the solicitation of
votes from those holders of impaired claims and equity
interests entitled to vote to accept or reject the proposed
Third
Amended Plan of Reorganization, dated August 9, 1994 ("Plan"), a
copy of which is annexed hereto as Exhibit 1.1 A ballot is
enclosed for each such holder. This Disclosure Statement is
being
provided to all other known parties in interest for information
purposes. Creditors whose claims are not being impaired by the
Plan are deemed to have accepted the Plan and, accordingly, are
not being provided with a ballot. See the tabular description
set
forth under "Summary of Classes and Treatment under the Plan"
immediately following this section to determine whether you are
entitled to vote on the Plan.
This Disclosure Statement was approved by the Bankruptcy Court
on August 22, 1994 as containing adequate information to enable
a
hypothetical reasonable investor typical of holders of claims
against and interests in JWP to make an informed judgment about
the Plan. The Bankruptcy Court's approval does not constitute a
recommendation of or a determination on the merits of the Plan.
JWP'S BOARD OF DIRECTORS HAS APPROVED THE PLAN AND UNANIMOUSLY
RECOMMENDS THAT THE PLAN'S ACCEPTANCE IS IN THE BEST INTERESTS
OF
JWP, ITS CREDITORS AND INTEREST HOLDERS TO WHOM RECOVERIES ARE
AVAILABLE.
- ------
1 Capitalized terms used but not defined herein have the same
meanings given to them in the Plan and reference should be made
thereto. Uncapitalized terms used herein and in the Plan that
are
defined (either explicitly or implicitly) in the Bankruptcy Code
or the Federal Rules of Bankruptcy Procedure (the "Bankruptcy
Rules") are used herein with such defined meanings unless the
context clearly requires otherwise.
<PAGE>
Each of the Statutory Committee of Unsecured Creditors and the
Official Committee of Junior Creditors and Interest Holders
participated in the negotiation of the Plan. BOTH COMMITTEES
RECOMMEND ACCEPTANCE OF THE PLAN BY THOSE PERSONS ENTITLED TO
VOTE. See "Events During the Reorganization Case-Official
Committees."
The Plan contemplates completion of the restructuring of JWP's
business and capitalization which was begun in the Fall of 1992.
During the restructuring process, the Company (i) developed an
asset disposition plan and (ii) negotiated the consensual plan
of
reorganization, initially filed by JWP on the Consent Date, with
unofficial steering committees of holders of senior debt in
the aggregate principal amount of $484,366,000 under the Old
Credit Agreement ("Old Credit Agreement Holders") and under the
Old Notes ("Old Note Holders") (Old Credit Agreement Holders and
Old Note Holders, each as defined below and referred to herein
collectively as "Lenders"). See "Summary -Senior Institutional
Indebtedness."
Until August 1993, JWP's principal businesses were divided
into
three industry segments: Mechanical/ Electrical Services
("MES"),
Supply of Water, and Information Services ("IS"). The current
status of each such segment is described in greater detail
below.
See "The Company." In summary, Reorganized JWP intends to retain
most of its core MES business, which primarily provides
mechanical and electrical systems and services for large
construction projects and commercial buildings (see "The
Company-Mechanical/Electrical Services"). JWP's two regulated
water companies have not been offered for sale by reason of
rate-related proceedings and a condemnation proceeding with
respect to the New York City water properties owned by one of
those companies. The rate-related
matters have recently been resolved. Although the condemnation
proceeding may continue for some time, JWP expects to sell these
companies in the near future.
See "The Company-Supply of Water," "Reorganized JWP" and "Legal
Proceedings-Jamaica Water Supply Company." The IS business in
the
United States, United Kingdom, Japan, Canada, and Germany, which
provided computer and
systems integration services for medium and large-sized
companies and other
organizations, has been sold. The IS business units in Belgium
and France are the subject of liquidation proceedings. See "The
Company-Information Services."
The Debtor is a holding company conducting all of its
businesses through
subsidiaries. Other than one domestic, one French and two
Belgian subsidiaries
which were engaged in the IS business, and which do not have
substantial assets
and are being liquidated (See "The Company-Information
Services"), none of the
Debtor's remaining subsidiaries ("Nondebtor Subsidiaries") has
sought
reorganization or liquidation under the Bankruptcy Code or any
other insolvency
law. The businesses and operations of the Nondebtor Subsidiaries
are not
subject to the Reorganization Case and will continue in the
ordinary course during JWP's Reorganization Case.
Consummation of the Plan will result in the restructuring of
JWP's debt and
equity as described below. See "Summary of the Plan" and
"Reorganized JWP." The
Plan provides that, in addition to holders of administrative
expense and
priority claims, certain creditors (Classes 4A and 5) will
remain unimpaired.
Holders of impaired senior claims (Classes 2, 3, 4B and 4C) will
receive a
combination of debt ("New Debt Securities") and equity
securities of
Reorganized JWP ("New Common Stock"). The holders of JWP's Old
Subordinated
Debt (as defined below) (Class 6) will receive New Series X and
New Series Y
Warrants for New Common Stock. Holders of contingent and
statutory subordinated
claims (Class 7) and certain holders of impaired equity
interests (Classes 8,
9, 10 and 11) may receive New Series Z Warrants for New Common
Stock. (New
Series X Warrants, New Series Y Warrants and New Series Z
Warrants,
collectively, "New Warrants") (New Debt Securities, New Common
Stock and New
Warrants, collectively, "New Securities"). See "Summary of the
Plan."
THIS DISCLOSURE STATEMENT CONTAINS ONLY A SUMMARY OF THE PLAN.
ALL
DESCRIPTIONS OF THE PLAN IN THIS DISCLOSURE STATEMENT ARE
QUALIFIED BY THE TERMS OF THE PLAN ITSELF WHICH ARE IN ALL
INSTANCES CONTROLLING. ALL CREDITORS AND HOLDERS OF EQUITY
INTERESTS ARE ENCOURAGED TO REVIEW THE FULL TEXT OF THE PLAN AND
TO READ CAREFULLY THIS ENTIRE DISCLOSURE STATEMENT.
PARTICULAR ATTENTION SHOULD BE GIVEN TO THE PROVISIONS AFFECTING
EACH CREDITOR'S OR SECURITY HOLDER'S RIGHTS.
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. The
statements contained in this Disclosure Statement are made as of
the date
hereof, and neither delivery of this Disclosure Statement nor
any exchange or
issuance of New Securities pursuant to the Plan will, under any
circumstances,
create any implication that the information contained herein is
correct at any time subsequent to the date hereof.
Holders of impaired claims and interests should not construe
the contents of
this Disclosure Statement as providing any legal, business,
financial or tax
advice. Each such holder should consult with its own legal,
business, financial
and tax advisors with respect to any such matters concerning
this Disclosure
Statement and the Plan and the transactions contemplated hereby
and thereby.
B. CONFIRMATION HEARING
The Bankruptcy Court will hold a hearing to consider
confirmation of the Plan
("Confirmation Hearing") commencing at 9:30 a.m. on September
28, 1994 in Court
Room 523 located at The Alexander Hamilton Custom House, One
Bowling Green, New
York, New York. The hearing may be adjourned from time to time
without further
notice other than by announcement in court on the scheduled or
adjourned date
of such hearing. At the Confirmation Hearing, the Bankruptcy
Court will (i)
determine whether the Plan has been accepted by the requisite
majority of each
voting class (See "Confirmation of the Plan-Acceptance"), (ii)
hear and
determine all objections, if any, to the Plan and to
confirmation of the Plan,
(iii) determine whether the Plan meets the requirements of the
Bankruptcy Code
(See "Confirmation of the Plan"), and (iv) determine whether the
Plan should be confirmed.
C. VOTING INSTRUCTIONS
After carefully reviewing the Plan2 and this Disclosure
Statement and its
exhibits, please indicate your vote on the enclosed Ballot, sign
and date and
return it in the envelope provided. In voting for or against the
Plan, please
use only the Ballot sent to you with this Disclosure Statement.
General
Unsecured Creditors in Class 4C who hold claims that are
contingent, disputed
or unliquidated will not be entitled to vote to accept or reject
the Plan
unless, upon motion of such creditor, the Bankruptcy Court has
estimated such
claim for voting purposes pursuant to Bankruptcy Rule 3018.
IN ORDER FOR YOUR BALLOT TO BE COUNTED, IT MUST BE COMPLETED
AS SET FORTH ABOVE AND RETURNED: IF BY MAIL, TO
JWP INC.
c/o DONLIN, RECANO & COMPANY
P.O. BOX 2034
MURRAY HILL STATION
NEW YORK, NEW YORK 10156-0701
- ------
2 The exhibits to the Plan are so voluminous that mailing them
with this
Disclosure Statement is impracticable. The exhibits to the
Plan are filed with the Bankruptcy Court, have been provided to
the Official Committees and
are available upon request to counsel for the Debtor or either
of the Official Committees.
<PAGE>
IF BY HAND DELIVERY, FEDERAL EXPRESS OR OTHER COURIER, TO
JWP INC.
c/o DONLIN, RECANO & COMPANY
419 PARK AVENUE SOUTH
SUITE 1206
NEW YORK, NEW YORK 10016
ALL BALLOTS MUST BE RECEIVED NO LATER THAN 5:00 P.M., NEW YORK
TIME, ON SEPTEMBER 23, 1994.
D. OBJECTIONS
Objections to confirmation of the Plan, if any, must be in
writing, must
specify with particularity the provisions of the Plan to which
objection is
made, and must be both filed with the Clerk of the Bankruptcy
Court and a copy
delivered to the Chambers of the Hon. Jeffry H. Gallet, Room 528
at The
Alexander Hamilton Custom House, One Bowling Green, New York,
New York 10004 at
or before 4:00 p.m. New York City Time on September 13, 1994,
with copies of
such objection to be delivered also at or before 4:00 p.m. New
York City time on September 13, 1994 to
STROOCK & STROOCK & LAVAN
Attorneys for JWP
Seven Hanover Square
New York, New York 10004
Attention: Lawrence M. Handelsman, Esq.
212-806-5400
WEIL, GOTSHAL & MANGES
Co-Counsel for the Creditors' Committee
767 Fifth Avenue
New York, New York 10153
Attention: Michael F. Walsh, Esq.
212-310-8000
WACHTELL, LIPTON, ROSEN & KATZ
Co-Counsel for the Creditors' Committee
51 West 52nd Street
New York, New York 10019
Attention: Chaim J. Fortgang, Esq.
Richard G. Mason, Esq.
212-403-1000
TENZER, GREENBLATT, FALLON & KAPLAN
Attorneys for the Junior Committee
405 Lexington Avenue
New York, New York 10174
Attention: James D. Glass, Esq.
212-573-4300
UNITED STATES TRUSTEE
80 Broad Street
New York, New York 10004
Attention: Craig Freeman, Esq.
212-668-2200
E. EVENTS DURING THE REORGANIZATION CASE
1. Official Committees
a. Statutory Committee of Unsecured Creditors. The Statutory
Committee of
Unsecured Creditors ("Creditors' Committee") was appointed,
pursuant to Section
1102 of the Bankruptcy Code, by the United States Trustee for
the Southern
District of New York. It consists of seven members, holding
claims in the
aggregate amount of approximately $200 million. The members of
the Creditors'
Committee represent all senior creditors and are listed on
Exhibit 2 hereto.
The members of the Creditors' Committee are institutions holding
senior debt
which is treated in Classes 2 and 3 under the Plan, some of
which institutions
were represented on the unofficial steering committees that
initially negotiated the terms of the Plan with JWP.
b. Official Committee of Junior Creditors and Interest
Holders. Following the
United States Trustee's denial of a request to appoint an
additional creditors'
committee consisting of holders of JWP's Old Subordinated Debt
("Subordinated
Debtholders"), certain of those holders moved the Bankruptcy
Court to direct
the United States Trustee to appoint such a committee over the
objections of
the Debtor and the Creditors' Committee. Prior to the hearing on
the motion,
JWP and the Creditors' Committee, after discussions with certain
Subordinated
Debtholders, consented to the appointment of an Official
Subordinated
Debtholders' Committee (the "Subordinated Debtholders'
Committee") in
consideration of the proposed Subordinated Debtholders'
Committee's (i)
agreement to a schedule contemplating a hearing on confirmation
of the Plan no
later than June 23, 1994, (ii) agreement on the scope of the
Subordinated
Debtholders' Committee's role in the Reorganization Case, and
(iii) agreement
to a cap on the fees and expenses to be incurred by and on
behalf of the Subordinated Debtholders' Committee.
The stipulation reflecting the agreement among the Debtor, the
Creditors'
Committee and the proposed Subordinated Debtholders' Committee,
and approved by
the Bankruptcy Court on April 1, 1994, provided, among other
things, that those
parties would jointly object to the appointment of any further
additional
committees. Subsequently, the Bankruptcy Court declined to
appoint additional
committees and ordered that the Subordinated Debtholders'
Committee would
represent all previously unrepresented creditors and interest
holders and be
deemed the Official Committee of Junior Unsecured Creditors and
Interest Holders (the "Junior Committee")3.
On April 14, 1994, the United States Trustee appointed the
Junior Committee
consisting of five members holding an aggregate $2,102,000
principal amount of
junior subordinated debt. The members of the Junior Committee
are listed on Exhibit 3 annexed hereto.
Pursuant to the stipulation, the Junior Committee's role is
limited to the
following: to review and analyze the valuation of JWP and its
present and
former subsidiaries, to investigate the treatment of holders of
claims or
interests junior to the Lenders in any proposed plan of
reorganization, to
investigate any potential avoidance claims, including claims for
preference,
fraudulent conveyance, improper transfers or equitable
subordination, and to
examine the financial dealings between JWP and its present and
former Lenders.
In addition, the fees and expenses of the Junior Committee,
including but not
limited to the fees and expenses of its attorneys and any
financial advisor,
shall not exceed $575,000, unless the Bankruptcy Court orders
otherwise upon a
determination that the incurrence of such additional fees and
expenses is in
the best interests of JWP's estate and necessary to protect the
interests of junior creditors and equity holders.
Since its appointment, the Junior Committee, by its counsel
and investment
advisor, has performed the duties it undertook in the
stipulation approved by
the Bankruptcy Court. These included a review and analysis of
the valuation of
JWP, an investigation of the treatment of holders of claims and
interests
junior to the Lenders, an investigation of potential avoidance
claims and an examination of the financial dealings between JWP
and the Lenders.
- ------
3 In light of recent negotiations resulting in the Plan now
proposed and investigations commenced by the Junior Committee,
the confirmation hearing will be later than planned.
<PAGE>
In its investigation of the Debtor's businesses, asset sales
and transactions
with the Lenders, the Junior Committee served broad-ranging
document demands
upon the Debtor and its counsel and investment advisor and upon
counsel for the
Creditors' Committee. In response to the document demands, these
parties
produced and the Junior Committee examined several hundred
thousand pages of
documents relevant to its investigations. Following the document
production,
the Junior Committee took the depositions of four people to
establish the facts
with respect to the events of the past two years.
On a parallel track with the discovery, the Junior Committee's
investment
advisor, Rothschild Inc., conducted several weeks of due
diligence for the
purpose of establishing the reorganization value of the Debtor.
Rothschild
Inc.'s valuation and the basis on which it was made is set forth
below.
Although differing from the valuation performed by the Debtor's
investment
advisor, the Junior Committee valuation established that
reorganization value
is not sufficient to pay senior creditors in full. See
"Financial
Information-Valuation of Reorganized JWP."
As a result of the investigation and the Rothschild Inc.
valuation, the
Junior Committee completed the negotiations leading to and
supports the Plan
which is now proposed by the Debtor and SellCo.
The Official Committees collectively represent all creditors
of
and interest
holders in JWP and, among their other rights and duties, have
monitored and
will continue to monitor the progress of the Reorganization
Case. The fees and
expenses of any professionals retained, with approval of the
Bankruptcy Court,
by the Official Committees will be, subject to the further
approval of the
Bankruptcy Court, administrative expenses charged to JWP's
estate.
2. Debtor-in-Possession Financing. In order to assure
continuity of
operations during the Reorganization Case, JWP and a substantial
number of its
Nondebtor Subsidiaries, as Guarantors, entered into a credit
agreement (the
"DIP Loan") with Belmont Capital Partners II, L.P. ("Belmont")4
that became
initially effective upon the interim approval of the Bankruptcy
Court on
February 16, 1994 and approved by final order of the Bankruptcy
Court on March
4, 1994. The DIP Loan provides a credit facility of up to $35
million during
the Reorganization Case at an initial interest rate of 12% per
annum. The DIP
Loan is secured by a perfected first lien on substantially all
of JWP's assets,
including a pledge of 100% of the capital stock of the Nondebtor
Subsidiaries
which are Guarantors and, in most instances, a perfected first
lien on all of
the assets of each Guarantor. The DIP Loan is intended to be
repaid on the
Effective Date of the Plan and matures by its terms on the
earliest of (i)
one-year from its approval by the Bankruptcy Court, (ii) the
Effective Date of
the Plan, (iii) termination of the DIP Loan commitment, or (iv)
the occurrence
of an event of default thereunder. The DIP Loan also contains an
affirmative
covenant that JWP will obtain, within six months of the initial
advance under
the DIP Loan, a commitment for the financing necessary to assure
implementation
of the Plan. The initial advance under the DIP Loan in the
amount of
$15,000,000 occurred on February 17, 1994 and, as of the date
hereof,
$25,000,000 in principal amount of borrowings were outstanding
thereunder. See
"Summary of the Plan-Conditions Precedent to Plan Effectiveness."
To induce Belmont to make the DIP Loan, JWP agreed that, upon
maturity of the
DIP Loan, Belmont shall be entitled to "Additional Interest"
which, depending
on the length of time the DIP Loan is outstanding, could range
from 1% to a
maximum of 5.5% of each type of consideration issued to
creditors under the
Plan (the "Additional Interest Amount")5. In lieu of delivering
the Additional
Interest in the form of New Securities, JWP may elect to make
payment thereof
to Belmont in cash equal to the amount of such New Securities.
- ------
4 The Debtor's records reflect that Belmont, as a creditor of
JWP in the
Reorganization Case, holds, as of the date hereof, $32,702,927
of Old Notes
(including principal and interest) and $9,856,786 of debt
(including
principal and interest) under the Old Credit Agreement.
5 Assuming confirmation of the Plan on or about September 28,
1994 and an
Effective Date on or before October 17, 1994, the Additional
Interest Amount
will be 3.5%.The calculations in this Disclosure Statement are
based on the assumption of an Additional Interest Amount of 3.5%.
As of the date of this Disclosure Statement, JWP is in default
of certain
covenants of the DIP Loan. Pursuant to written waivers of
default, dated April
27, 1994 and May 6, 1994, JWP has been permitted to draw on its
line of credit.
Under the circumstances, any future advances will require a
further written waiver of any defaults.
3. Surety Bonds. A crucial element of the MES business is the
ability of the
MES Nondebtor Subsidiaries to provide project owners or general
contractors
with bonds either for performance of contracts awarded
("performance bonds") or
as a condition of bidding for contracts for future work ("bid
bonds"). Prior to
the Reorganization Case, Seaboard Surety Company ("Seaboard")
was the primary
source of performance and bid bonds for the largest portion of
the MES
business. As a condition of obtaining bonds from Seaboard,
historically, JWP
guaranteed the obligations of the MES Nondebtor Subsidiaries to
Seaboard pursuant to a General Agreement of Indemnity ("GAI").
In order to enable the MES Nondebtor Subsidiaries to continue
to receive
performance or bid bonds from Seaboard, JWP sought and obtained
the approval of
the Bankruptcy Court for the terms of a new agreement that
covers any bonds
executed or procured by Seaboard after the Consent Date ("New
Bonds").
Accordingly, JWP entered into a new general agreement of
indemnity ("New GAI")
with Seaboard pursuant to which JWP guaranteed the obligations
of Nondebtor
Subsidiaries under New Bonds. Any claims arising under the New
GAI will be
superpriority claims in the Reorganization Case, junior only to
(i) the claims
of Belmont under the DIP Loan, (ii) the fees payable to the
United States
Trustee pursuant to 28 U.S.C. (S) 1930 and (iii) the fees and
expenses of
professionals retained by the Debtor and the Creditors'
Committee, not to
exceed $1,500,000, exclusive of fees paid during the pendency of
the
Reorganization Case. Superpriority claims, if any, granted to
any other bonding
company which provides bonds during the Reorganization Case
shall not be
afforded better treatment than those of Seaboard. All
superpriority Seaboard
claims that are fixed and liquidated as of the Effective Date
will be paid in
cash, in full, on the Effective Date. All remaining claims,
i.e., contingent or
unliquidated claims, under the New GAI will be unimpaired, will
not be
discharged and will survive as obligations of Reorganized JWP
and MES.
A surety company, other than Seaboard, which had been the
primary source of
surety bonds for certain MES Nondebtor Subsidiaries, which
together comprised
approximately 20% of JWP's 1993 revenues of those MES
subsidiaries which JWP
currently plans to retain, is no longer engaged in the business
of issuing such
bonds. However, the absence of available bonding for these
subsidiaries has not
resulted in a material reduction in their backlog. The Debtor
and these
subsidiaries are actively engaged in discussions with another
surety company
which has substantially completed due diligence for the purpose
of entering into a new surety bonding arrangement.
4. Asset Sales. As set forth in greater detail herein, a major
component of
JWP's restructuring is the sale of all of its non-core
businesses and certain
of its core MES businesses. See "Background Information-Asset
Sales" and
"Reorganized JWP." Prior to the Consent Date, JWP had completed
the sale of
more than twenty subsidiaries. JWP expects to continue such
sales during and
subsequent to the Reorganization Case. An agreement in principle
has been
reached (subject to, among other things, a satisfactory
definitive contract of
sale and the approval, after notice and a hearing, of the
Bankruptcy Court) for
the sale of JWP Energy Products, Inc. (a non-core business) and
an agreement in
principle is being negotiated for the sale of University Energy
Services of
California, Inc. and its affiliate, University Cogeneration,
Inc. (a non-core business). However, there is no assurance that
these transactions will occur.6
If acceptable offers are received for any of the other
businesses being held
for sale (see "Reorganized JWP"), JWP intends to take all
necessary action to
effect the sales of such businesses. Businesses held for sale
which have not
been sold prior to the Effective Date will, with certain
exceptions, become
direct or indirect subsidiaries of SellCo, a JWP subsidiary
formed solely for
the purpose of owning JWP subsidiaries to be sold.
- ------
6 A letter of intent for the sale of JWP Telecom, Inc. (a
non-core business) has expired.
<PAGE>
5. Avoidance Actions. Several parties in interest have
asserted that an
investigation into whether certain sales of assets, certain 1992
payments of
asset sales proceeds in the amount of $51.9 million made in
reduction of Old
Credit Agreement debt and a 1992 pledge of the stock of certain
Nondebtor
Subsidiaries are transactions that are avoidable under the
Bankruptcy Code as
fraudulent conveyances, preferences or obtained through improper
control. The
Debtor has examined all such transactions and does not believe
there is a basis for such assertions.
This Disclosure Statement sets forth the facts of those
transactions and,
further, describes the Series A Secured Notes to be distributed
under the Plan,
which Notes were specifically negotiated to recognize and
account for the
aforesaid $51.9 million payment by (i) issuing $51 million
principal amount of
the Series A Secured Notes in respect of the Lenders' aggregate
unsecured
claims only to the Old Note Holders (Class 2) (and none to Old
Credit Agreement
Holders (Class 3)) (See "Background Information"), and (ii)
providing to the
holders of all other senior impaired unsecured claims (except
Old Credit
Agreement Holders) (Classes 4B and 4C) treatment equal to that
afforded the
Lenders' aggregate unsecured claims by issuing to Classes 4B and
4C an
additional principal amount of Series A Secured Notes in the
same ratio to the
aggregate Class 4B and 4C claims as the $51 million principal
amount of Series
A Secured Notes bears to the aggregate amount of allowed
unsecured claims in
Class 2 and Class 3. See "Summary of the Plan."
The $11,357,000 principal amount of Series B Secured Notes to
be distributed
under the Plan to Old Note Holders and Old Credit Agreement
Holders, also
described under "Summary of the Plan," reflects the 1992 stock
pledge. The
Debtor believes that the ninety-day period for which a
preference might have
been asserted in respect of the stock pledge expired in December
1992. The
Junior Committee believes that the one-year preference period
applies; even if
this is true, the preference period would still have expired
prior to the
bankruptcy filing. The distribution of the Series B Secured
Notes reflects the
provisions of a December 1992 agreement between the Old Note
Holders and the
Old Credit Agreement Holders that the proceeds of the pledged
stock (and
subsequent substitute collateral) would be distributed pari
passu among them.
The amount of Series A and Series B Secured Notes distributed
to each of
Classes 2, 3, 4B and 4C, as applicable, is taken into account in
calculating
the Residual Percentage of the remaining New Securities to be
distributed among
them. See "Background Information" and "Summary of the Plan."
II. SUMMARY
A. SUMMARY OF CLASSES AND TREATMENT UNDER THE PLAN
For a fuller description of each class and its treatment, see
"Summary of the Plan-Classification and Treatment."
<TABLE>
<CAPTION>
Treatment (Unimpaired)
No Solicitation
Unclassified to Accept
- --------------------------------------------------
- -------------------------------------------------------
<S> <C>
Administrative Expense Claims: all claims arising Paid in full
in cash on the later of the Effective Date
on and after the Petition Date for preservation of or when due
unless the claim holder has agreed to a
the Estate. different treatment.
Paid in full in cash on the later of the Effective Date
or the date such claim becomes an allowed claim; or,
Priority Tax Claims: claims of governmental units at the option of JWP, as specified in Section
under Section 507(a)(7) of the Bankruptcy Code. 1129(a)(9)(C) of the Bankruptcy Code.
Classified
Class 1 - Priority Claims, other than administrative expense and
priority tax claims.
Treatment
(Unimpaired)
No Solicitation
Class 1
Deemed to Accept
Allowed
priority claims shall be paid in full in cash
JWP believes that the only priority claims will or, in the case of employee claims for vacation pay, if
consist of claims arising between the Petition Date any,
reinstated on the Effective Date, unless the claim
and the Consent Date. holder has agreed to a different treatment.
Class 2 - Old Note Holders Claims
Treatment
(Impaired)
Class 2
Vote Solicited
- ------------------------------------------------
- ---------------------------------------------------
(i) $51,000,000 principal amount of Series A 7%
Senior Secured Notes of Reorganized JWP, plus (ii)
$7,348,129 principal amount of Series B 7% Senior
Secured Notes of Reorganized JWP, plus (iii)
All claims of the Old Note Holders arising under $33,315,547
principal amount of 11% Series C Notes
and evidenced by the Old Notes, in the aggregate of Reorganized
JWP, plus (iv) $25,541,920 principal
principal amount of $328,572,000, plus interest amount of 12%
SellCo Subordinated Contingent
thereon to the Petition Date in the amount of Payment Notes, plus (v) 4,997,332 shares of New
$29,593,112. Common Stock.*
- ------
* The estimated Class 2 principal amount of 11% Series C Notes
and 12% SellCo Subordinated Contingent Payment Notes and the number of shares
of New Common Stock are calculated on the assumption that the aggregate
Class 4B and 4C allowed claims will be $85,000,000. If the aggregate Class 4B
and 4C allowed claims are greater or less than $85,000,000, the distribution
of such New Securities to Class 2 will vary. See the Table at "Summary of
Plan-Classification and Treatment-General Unsecured
Creditors-Class 4C" for
the effect of an increase or decrease in the aggregate amount
of Class 4B and 4C claims ultimately allowed.
Class 3 - Old Credit Agreement Holders Claims
Treatment
(Impaired)
Class 3
Vote Solicited
- ---------------------------------------------------
- ----------------------------------------------------
(i)$4,008,871 principal amount of Series B 7%
Senior Secured Notes of Reorganized JWP, plus (ii)
$18,175,748 principal amount of 11% Series C Notes
All claims arising under and evidenced by the Old of Reorganized JWP, plus (iii) $13,934,740 principal
Credit Agreement, in the principal amount of amount of 12% SellCo Subordinated Contingent
$155,794,042, plus interest thereon to the Petition Payment Notes, plus (iv) 2,726,362 shares of New
Date in the amount of $11,784,088. Common Stock.*
- ------
* The estimated Class 3 principal amount of 11% Series C Notes
and 12% SellCo Subordinated Contingent Payment Notes and the number of shares
of New Common Stock are calculated on the assumption that the aggregate
Class 4B and 4C allowed claims will be $85,000,000. If the aggregate Class 4B
and 4C allowed claims are greater or less than $85,000,000, the distribution
of such New Securities to Class 3 will vary. See the Table at "Summary of
Plan-Classification and Treatment-General Unsecured
Creditors-Class 4C" for
the effect of an increase or decrease in the aggregate amount
of Class 4B and 4C claims ultimately allowed.
Class 4 - General Unsecured Claims
Class 4
Treatment
- --------------------------------------
All unsecured claims that are not claims for
administrative expenses or priority tax claims or
otherwise classified in Class 1, 2, 3, 5, 6 or 7. See below: 4A,
4B and 4C.
Class 4A - Convenience Class
Treatment
(Unimpaired)
No Solicitation
Deemed to Accept
- ----------------------------------------------------
- ------------------------------------------------------
All claims in Class 4 of any holder that are $10,000
or less in the aggregate or, at the election of the Paid in
full, in cash on the Effective Date or as soon
holder, reduced to $10,000 in the aggregate. as practicable thereafter.
Class 4B -
Treatment
(Aggregate
4B and 4C)
(Impaired)
Vote Solicited
- --------------------------------------------- --------------
Other Borrowed Money Class 4 claims
All Class 4 claims which constitute "Senior
Indebtedness" with respect to Class 6 claims.
Class 4C -
(i) $8,427,520 principal amount of Series A 7%
Senior Secured Notes, plus (ii) $8,508,704 principal
amount of 11% Series C Notes of Reorganized JWP,
plus (iii) $6,523,340 principal amount of 12% SellCo
All Class 4 claims not included in Classes 4A and Subordinated
Contingent Payment Notes, plus (iv)
4B. 1,276,306 shares of New Common Stock.*
Class 5 - Unimpaired Contingent Claims
Treatment
(Unimpaired)
No Solicitation
Class 5
Deemed to Accept
- ----------------------------------------------------
- ----------------------------------------------------
(i) All unsecured claims that are listed on Schedule
1 to the Plan, subject, in certain cases, to All Class 5 claims are reinstated and the legal,
conditions precedent (see Schedule 1 to the Plan) equitable and contractual rights of each holder of a
and (ii) all priority employee claims. Class 5 claim are unaltered.
- ------
* The estimated aggregate Class 4B and 4C principal amounts of
the New Debt Securities and the number of shares of New Common Stock are
calculated on the assumption that aggregate Class 4B and 4C allowed claims will
be $85,000,000.
If aggregate Class 4B and 4C allowed claims are greater or
less than $85,000,000, the distribution of such New Securities to
Classes 4B and 4C
will vary. See the Table at "Summary of Plan-Classification
and
Treatment-General Unsecured Creditors-Class 4C" for the effect
of an increase
or decrease in the aggregate amount of Class 4B and 4C claims
ultimately allowed.
Class 6 - Subordinated Debt Claims
Treatment
(Impaired)
Class 6
Vote Solicited
- --------------------------------------------------
- --------------------------------------------------------
All claims of (i) holders of $7,040,000 principal
amount of JWP's 73/4% Convertible Subordinated
Debentures, due 2012, plus interest thereon to the
Petition Date in the amount of $441,027 and (ii) If the claims in Classes 2, 3 and 4B, voting as a single
holders of $9,600,000 principal amount of JWP's class, accept the Plan, (i) 600,000 five-year New
12% Subordinated Notes, due 1996, plus interest Series X Warrants, plus (ii) 600,000 five-year New
thereon to the Petition Date in the amount of Series Y Warrants, each of which will entitle the
$1,411,200. holder to purchase one share of New Common Stock.
Exercise Price:
(i) Series X: $12.55.
(ii) Series Y: $17.55.
The exercise prices of the New Warrants are subject
to adjustment in order to limit the recovery of the
holders of claims in Class 6 to 100% of their claims.
Class 7 - Contingent and Statutory Subordinated Claims
Treatment
(Impaired)
Class 7
Vote Solicited
- ---------------------------------------------------
- -----------------------------------------------------
(i) The indemnification or contribution claims, if
any, by current or former officers and directors of
JWP or by other parties in connection with the If each of Classes 4C and 7 accepts the Plan, Class 7
claims asserted in AUSA Life Insurance Company, will receive 1,388 two-year New Series Z Warrants,
et al. v. Andrew T. Dwyer et al., 93 CIV. 6830 each of which will entitle the holder to purchase one
(CLB) (S.D.N.Y.) (the "Old Note Holders share of New Common Stock at the exercise price of
Litigation"), and (ii) any intercompany claims that $50.00. If either of Classes 4C or 7 does not accept
the Court determines should be subordinated to the Plan, Class 7 will not receive or retain any
general unsecured claims. property under the Plan.*
Class 8 - Old Preferred Stock Interests
Treatment
(Impaired)
Class 8 Vote Solicited
- ----------------------------------------------------------------------------------------------------
If each of Classes 4C, 6, 7 and 8 accepts the Plan,
Class 8 will receive 29,297 two-year New Series Z
Warrants, each of which will entitle the holder to
purchase one share of New Common Stock at the
exercise price of $50.00. If any of Classes 4C, 6, 7 or
Equity interests evidenced by the issued and 8 does not accept the Plan, neither Class 8 nor any
outstanding shares of JWP's 4.25% Convertible class junior to it will receive or retain any property
Exchangeable Preferred Stock. under the Plan.*
- ------
* The classification, treatment and voting rights of the holders
of these claims and interests are subject to various qualifications and
conditions, which are more fully set forth in the Plan. See "Summary of
the Plan-Classification and Treatment."
Class 9 - Old Common Stock and Certain Related Interests
Treatment
(Impaired)
Class 9
Vote Solicited
- -----------------------------------------------------
- --------------------------------------------------------
Equity interests evidenced by (i) the issued and
outstanding shares of JWP's Old Common Stock
and (ii) options, warrants, or rights, contractual or
otherwise, to acquire Old Common Stock,
including (a) options issued pursuant to the 1986
Incentive Stock Option and Appreciation Plan; If each of Classes 4C, 6, 7, 8, 9, 10 and 11 accepts the
1991 Stock Option Plan; and 1992 Stock Option Plan, Class 9 will receive 195,667 two-year New
Plan and (b) equity interests under the $43,000,000 Series Z Warrants, each of which will entitle the
principal amount of Businessland, Inc. 51/2% holder to purchase one share of New Common Stock
Convertible Subordinated Debentures, due 2007 at the exercise price of $50.00. If any of Classes 4C,
and the related Share Issuance Agreement, dated 6, 7, 8, 9, 10 or 11 does not accept the Plan, Class 9
August 6, 1993, between JWP and ENTEX will not receive or retain any property under the
Information Services, Inc. Plan.*
Class 10 - Members of the Plaintiff Class Certified in In re JWP
INC. Securities Litigation.
Treatment
(Impaired)
Class 10
Vote Solicited
- -------------------------------------------------------------------------------------------------------------
Claims against JWP in connection with Old
Common Stock, within the meaning of Section If each of Classes 4C, 6, 7, 8, 9, 10 and 11 accepts the
510(b) of the Bankruptcy Code, including those of Plan, Class 10 will receive 22,059 two-year New
(i) members of the plaintiff class in the Shareholder Series Z Warrants, each of which will entitle the
Litigation (ii) current or former officers or holder to purchase one share of New Common Stock
directors or other defendants asserting or capable at the exercise price of $50.00. If any of Classes 4C,
of asserting reimbursement, indemnification or 6, 7, 8, 9, 10 or 11 does not accept the Plan, Class 10
contribution claims in connection with the will not receive or retain any property under the
Shareholder Litigation. Plan.*
Class 11 - Warrants of Participation
Treatment
(Impaired)
Class 11
Vote Solicited
- -----------------------------------------------------------------------------------------------------------
If each of Classes 4C, 6, 7, 8, 9, 10 and 11 accepts the
Plan, Class 11 will receive 1,589 two-year Series Z
Warrants, each of which will entitle the holder to
purchase one share of New Common Stock at the
exercise price of $50.00. If any of Classes 4C, 6, 7, 8,
Equity interests evidenced by the 1,152,622 9, 10 or 11 does not accept the Plan, Class 11 will not
Warrants of Participation dated as of July 1, 1969. receive or retain any property under the Plan.*
- ------
* The classification, treatment and voting rights of the holders
of these claims and interests are subject to various qualifications and
conditions, which are more fully set forth in the Plan. See "Summary of
the Plan-Classification and Treatment."
</TABLE>
B. PROVISIONS FOR EMPLOYEES
Because the Plan and the Reorganization Case relate only to
JWP and not to
its Nondebtor Subsidiaries, the rights of trade creditors and
employees of such
Nondebtor Subsidiaries are not affected by the filing of the
Reorganization
Case. Following the Consent Date, JWP obtained orders of the
Bankruptcy Court
designed to ensure that the employees of JWP are also unaffected
by the filing.
Pursuant to the terms of the Plan, JWP intends that salaries
or wages, as the
case may be, expense reimbursements, accrued paid vacation,
health-related
benefits, and similar employee benefits of employees of JWP will
be unimpaired
under the Plan. To ensure the continuity of its work force and
to accommodate
further the unimpaired treatment of employee benefits, JWP
sought the approval
of the Bankruptcy Court to pay all accrued pre-petition salaries
or wages and
expense reimbursement, to permit employees to utilize their paid
vacation time
which accrued prior to the Petition Date and to continue paying
medical
benefits under JWP's health plan. The Bankruptcy Court has
authorized the
payment of pre-petition wages, including payment of medical
benefits and
utilization of accrued paid vacation time, up to $2,000 per
employee. The
Bankruptcy Court has also (i) approved a severance and stay
bonus plan adopted
by JWP in June 1993, as modified,7 and (ii) authorized JWP's
contributions to
the employee savings and retirement plans. Employee claims and
benefits not
paid or honored, as the case may be, prior to consummation of
the Plan will be
paid or honored in full upon consummation of the Plan or as soon
thereafter as
such payment or other obligation becomes due or performable. JWP
believes the
only employee claims that may remain on the Effective Date will
be for unutilized vacation time.
C. BAR DATE - WHO MUST FILE A CLAIM
JWP has filed schedules listing every known creditor whose
claim is proposed
to be impaired under the Plan. Any person or entity asserting a
claim that is
proposed to be impaired under the Plan and whose claim is listed
as contingent,
unliquidated or disputed or who disagrees with the liquidated
amount for which
its claim is listed was required to file a proof of claim with
the Bankruptcy
Court. By a notice mailed on March 1, 1994 and published in the
national
editions of The Wall Street Journal and The New York Times on
March 9, 1994,
creditors were advised to examine the schedules filed with the
Bankruptcy Court
to determine whether they must file proofs of claim. All other
impaired
creditors listed on the schedules filed with the Bankruptcy
Court are deemed to
have allowed claims. Holders of equity interests were not
required to file
proofs of claim or interest unless they were asserting claims
not based solely on the ownership of such interests.
The Bankruptcy Court fixed April 8, 1994 as the last date on
which any
creditor who was required to file a proof of claim must have
filed such proof
of claim ("Bar Date"). If such proof of claim was not timely
filed, the
impaired creditor will not participate in any distributions to
which it might
otherwise be entitled under the Plan and will be forever barred
from asserting its claim against JWP.
Holders of claims arising from JWP's rejection of an executory
contract or
unexpired lease were not required to file claims by the Bar Date
and will be
given notice of such rejection and a period of twenty (20) days
from such notice to file a proof of claim.
D. JWP'S SENIOR INSTITUTIONAL INDEBTEDNESS
The principal senior claims against JWP which are being
impaired under the
Plan are, in the aggregate, approximately $525,743,200. Those
claims arise
under the credit agreement and senior notes described below.
1. Old Credit Agreement. JWP is party to that certain Amended
and Restated
Credit Agreement dated as of September 11, 1992, as amended from
time to time, between and among JWP and the signatory Banks,
- ------
7 The stay bonus is an inducement for JWP employees not to seek
other
employment, and the severance portion of the plan is intended
to provide for
employees whose employment may be terminated without cause.
<PAGE>
Fleet Bank (formerly Norstar Bank), as Agent and Issuing Bank,
and Credit
Suisse, Bank of America National Trust and Savings Association
and Chemical
Bank as co-lead managers ("Old Credit Agreement") initially
affording JWP an
unsecured credit facility, to which Banks JWP owed the aggregate
of
approximately $155,794,042 principal amount and $11,784,088 of
accrued
interest, totalling $167,578,130 at December 21, 1993 ("Old
Credit Agreement Debt").
2. Old Notes. A group of insurance companies or their
successors and assigns
(the "Old Note Holders") holding senior unsecured debt (the "Old
Notes") issued by JWP, as follows:
<TABLE>
<CAPTION>
Principal and
Interest Unpaid
Issued in the at December 21,
Notes Principal Amount 1993
- ---------------------------------------------- ---------------- ---------------
<S> <C> <C>
9.10% Senior Serial Notes due March 31, 1994.. $ 5,000,000 $ 5,390,647
9.33% Senior Serial Notes due March 31, 1995.. 5,000,000 5,412,445
9.51% Senior Serial Notes due March 31, 1996.. 5,000,000 5,421,727
9.65% Senior Serial Notes due March 31, 1997.. 5,000,000 5,428,944
9.83% Senior Serial Notes due March 31, 1998.. 5,000,000 5,439,120
9.10% Senior Notes due March 6, 2002.......... 60,000,000 64,768,016
9.95% Senior Notes due November 15, 2005...... 60,000,000 65,417,449
9.56% Senior Notes due November 30, 1997...... 5,000,000 5,421,827
10.25% Senior Notes due December 1, 1998...... 50,000,000 54,594,252
10.35% Senior Notes due November 30, 2005..... 50,000,000 54,648,074
10.27% Senior Notes due November 30, 2005..... 20,000,000 21,836,163
10.95% Senior Notes due December 15, 2002..... 30,000,000 33,095,314
9.25% Senior Notes due December 15, 1996...... 40,000,000 31,291,135
---------------- ---------------
TOTAL......................................... $340,000,000 $358,165,112
</TABLE>
E. BACKGROUND INFORMATION
1. Background of the Restructuring. JWP's unaudited 1992
financial statements (annexed hereto as Exhibit 4) reflect a net
loss of approximately $600 million and negative cash flow from
operations of approximately $50 million. These losses and
negative cash flow were brought on by several circumstances,
including rapid technology changes and price wars in the IS
business, the costs of integrating numerous acquired MES and IS
business units, and weakened economic conditions in the United
States, Canada and the United Kingdom, particularly, in the
construction industry, all of which combined to depress
JWP's operating margins and to create a liquidity crisis.
Consequently, JWP was unable to obtain an increased revolving
credit facility in the Summer of 1992. From September 1992 until
February 1994 when the DIP Loan was made, JWP did not have
available undrawn credit facilities. Cash flow from operations
was insufficient to meet JWP's debt service obligations and
working capital requirements. Accordingly, JWP funded its
operations from working capital and the proceeds of sales of
business units and other assets.
In the second half of 1992, JWP developed an asset disposition
program to sell certain operations that were determined to be
non-core to its MES and
domestic IS businesses. It was subsequently determined that the
Water Supply
business which had been identified for sale would not be sold,
due to
litigation and uncertainties related to certain regulatory
proceedings. See
"Legal Proceedings-Jamaica Water Supply Company." Thereafter, in
March 1993,
JWP's Board of Directors concluded that the personal computer
industry did not
provide the stable operating environment that JWP needed to
restructure, and
the decision was made to sell the domestic IS business.
Discussions with Lenders commenced in the second half of 1992
as JWP
implemented the first phase of the asset disposition program.
The
asset disposition program was intended to cut costs, to raise
funds to reduce indebtedness, and to narrow the focus of JWP's
operations. A portion of the sales proceeds ($51,900,000) was
used in October of 1992 to repay Old Credit Agreement Holders,
pursuant to the terms of the Old Credit Agreement.
These payments gave rise to negotiations with the Old Note
Holders in late 1992, with the result that JWP, the Old Note
Holders and the Old Credit
Agreement Holders agreed on December 10, 1992 that the Old Note
Holders would
have a $51 million priority as against the Old Credit Agreement
Holders from
future asset sales and the cash flow of JWP (the "Intercreditor
Agreement").
The asset sales did not provide sufficient cash to stabilize the
working
capital required for JWP's remaining business. As a result,
JWP's business
prospects began to deteriorate and its backlog started to
decline rapidly in
the face of adverse publicity and JWP's inability promptly to
restructure its indebtedness.
After April 1993, JWP did not make principal payments or
interest payments on
any of this indebtedness. As of the Petition Date, JWP's
principal indebtedness
outstanding under its Old Note Agreements and its Old Credit
Agreement
aggregated $484,366,000. As of December 21, 1993, the principal
amount of the
Old Subordinated Debt was $16,640,000.
2. The Standstill Agreements. Beginning in late 1992, JWP
proposed a series
of standstill agreements with its Lenders (the "Standstill
Agreements")
intended to afford JWP sufficient time to develop a plan to
raise funds for
debt repayment, reduce costs, and narrow the focus of JWP's
operations.
Although agreements in principle were reached concerning
forbearance of
remedies while reduced debt service was paid, no Standstill
Agreements were
actually executed. Since April 30, 1993, no standstill agreement
in principle
has been in place and JWP ceased making principal and interest
payments.
However, interest continued to accrue, until the Petition Date,
under the terms
of the respective loan agreements, which in certain
circumstances include
default rate premiums of an additional 2% and, in one case, 4%.
At the Petition
Date, the accrued interest on the aggregate debt to the Lenders
was $41,377,200.
3. The "Software House" Collateral. On September 11, 1992, JWP
pledged the
stock of its subsidiary Software House, Inc. ("Software House")
and certain
other subsidiaries as collateral for its obligations under its
Revolving Credit
Agreement. In 1992, JWP sold substantially all of the assets of
these
subsidiaries (other than Software House) and applied the
proceeds
(which
constituted a portion of the aforementioned $51,900,000) to
reduce indebtedness
under the Revolving Credit Agreement. Pursuant to the
Intercreditor Agreement,
it was agreed that all net proceeds from the sale or other
disposition of
Software House and other amounts received by the Lenders would
be shared in
accordance with the terms of the Intercreditor Agreement.
However, no further
principal payments were made to the Lenders after the 1992 asset
sales except
for the net proceeds, in the amount of $656,250, from the sale
of
Maris
Equipment Company ("Maris") which was deposited with Fleet Bank
as agent.
Subsequently, in May 1993 Software House sold substantially
all
of its assets
and the Lenders agreed to permit JWP to use the net proceeds of
approximately
$11,357,000 for working capital upon the pledge by JWP of
substitute collateral
for Software House. JWP pledged as substitute collateral for
Software House the
stock of three of its subsidiaries consisting of University
Energy Services of
California Inc., Maris and JWP Telecom Inc. At or about the time
the sale of
Maris was consummated and as a condition to the Lender's consent
to such
consummation, JWP pledged as additional collateral the stock of
its
subsidiaries, JWP Pacific International Inc. and JWP Energy
Products Inc.
Accordingly, the only secured portion of the obligations owing
to the Lenders
by JWP is secured at present by the outstanding capital stock of
JWP Telecom,
Inc., University Energy Services of California Inc., JWP Energy
Products Inc.,
JWP Pacific International Inc., the stock of Maris and certain
remaining assets
of Maris (consisting of a $3.7 million note made by the
purchaser
of the Maris
assets and guarantees and other rights and property relating to
the sale).
4. The Asset Sales. Since September 1992, JWP, either itself
or
through its
subsidiaries, has sold more than twenty businesses and certain
other
miscellaneous assets, generating approximately $143 million in
cash proceeds.
$51.9 million of these proceeds were paid in 1992 in respect of
principal under
the Old Credit
Agreement. In 1993, approximately $656,250 was paid to and is
being held by
Fleet Bank, as agent, from the proceeds of the sale of Maris. In
addition, the
Bank of Montreal received $2.79 million in 1993 in reduction of
a
line of
credit from the sale of real estate ("Scarborough building") on
which it held a
mortgage. The balance of the cash sales proceeds in the amount
of
approximately
$87.97 million was or will be used by JWP for working capital
and
to maintain
the operations of its remaining businesses.
The following table lists businesses and other assets sold
since September
1992 and cash proceeds thereof.
Asset Sales Completed Since September 1992
(Dollars in Thousands)
<TABLE>
<CAPTION>
Gross Cash Cash Received Total Gross
Received From Purchaser Amount of Cash
Transaction At Closing After Closing Received
- ----------------------------------------------------------------- -------------- --------------
<S> <C> <C> <C>
September 1992-December 1992
JWP Amcec Corporation, JWP Air Technologies, Inc. and
Enviro-Gro Technologies Company(1)................... $68,900,000 $19,142,000 $ 88,042,000
NetFrame shares...................................... 1,400,000 -0- 1,400,000
------------ -------------- --------------
$ 70,300,000 $19,142,000 $ 89,442,000
January 1993 to date
New England Fertilizer Company Partnership Interest.. $ 2,500,000 $ -0- $ 2,500,000
A to Z Equipment Corp. .............................. 2,372,108 111,034 2,483,142
Businessland Canada, Ltd.(2)......................... 6,850,635 194,801 7,045,436
Software House, Inc.................................. 12,807,500 198,726 13,006,226
Sutter Hill Industries Inc........................... 1,407,840 443,081 1,850,921
Scarborough, Ontario building-Comstock(3)............ 2,793,960 -0- 2,793,960
NetFrame shares...................................... 2,062,500 -0- 2,062,500
Case/Acme Systems, Inc............................... 500,000 500,000 1,000,000
JWP Information Services, Inc........................ -0- -0- -0-
Hetra Computer & Communication Industries, Inc....... 827,107 621,944 1,449,051
JWP Information Services Ltd. (UK)(4)................ 2,620,571 -0- 2,620,571
Transtel Communications Ltd.(5)...................... 9,000 80,661 89,661
Huen Electric, Inc................................... 3,007,392 -0- 3,007,392
Afgo Engineering Corp. of Washington................. 325,000 -0- 325,000
Businessland Holding Ltd. (Japan).................... 2,700,000 -0- 2,700,000
Maris Equipment Company(6)........................... 350,000 306,250 656,250
JWP Controls Inc..................................... 1,616,049 -0- 1,616,049
JWP McPhee Inc....................................... 500,000 1,050,000 1,550,000
JWP Network Integration Services, Inc................ 2,277,804 -0- 2,277,804
Kerby Saunders-Warkol, Inc........................... 375,554 -0- 375,554
Resource Recovery Technologies, Inc. shares.......... 2,299,885 -0- 2,299,885
JWP Holdings GmbH.................................... 716,100 -0- 716,100
JWP Technical Services Corp.(7)...................... 402,000 402,000
JWP Pacific International(8)......................... 1,049,985 -0- 1,049,985
------------ -------------- --------------
$ 50,370,989 $ 3,506,497 $ 53,877,486
TOTALS...............................................$120,670,989 $22,648,497 $143,319,486
============ ============== ==============
- ------------------------------------------------------------------------------------------------
(1) Total gross amount received includes $21,044,000 repayment
of working capital advances from JWP INC. to the various operations.
(2) C$9,078,000 converted at C$1:US$0.7761
(3) C$3,600,000 converted at C$1:US$0.7761
(4) Pounds1,747,047 converted at Pounds1:US$1.50
(5) Pounds59,734 converted at Pounds1:US$1.50
(6) All cash proceeds have been directed into a creditor escrow
account at Fleet Bank.
(7) Cash proceeds pledged to and reside in an account under the
control of
Belmont Capital Partners, L.P. pursuant to the DIP Loan.
(8) Initial collection of balance sheet net assets; operations
being liquidated.
</TABLE>
In 1993, JWP's liquidity continued to worsen. This cash drain
was a result of weakened operating performance, the required
infusion of working capital into operating units, extraordinary
legal, accounting and financial advisory fees,
and the funding of a cash escrow account for payment of claims
under JWP's partial self-insurance program, which was required
because of JWP's inability to obtain letters of credit for this
purpose.
In August 1993, JWP concluded Reorganized JWP should be built
around a smaller domestic and international MES business that
would be less volatile, require less capital and bonding, be
easier to control and manage and result in a significant
reduction in overhead costs. A number of factors were considered
in determining which MES units to retain and which to sell.
Subsidiaries that are to be retained generally have lower
bonding
and capital requirements, can generate steady cash flow from
recurring maintenance and service revenues to service
Reorganized
JWP's debt, operate in markets where growth potential
exists, have the management infrastructure to support systems
and
significant growth and offer the opportunity for high returns on
net assets. The international MES companies are to be retained
to
provide access to markets which could provide higher margins and
serve as a buffer from U.S. business cycles.
III. FINANCIAL INFORMATION
A. SELECTED FINANCIAL INFORMATION
(Dollars in millions, except per share data)
The following table sets forth certain historical consolidated
financial data of JWP for the five years ended December 31,
1993.
This information has been derived from the Consolidated
Financial
Statements of JWP, including the respective notes thereto,
included elsewhere herein and should be read in conjunction with
Management Discussion and Analysis of JWP INC. and Subsidiaries
Financial Statements and Results of Operations and the unaudited
pro forma financial information included elsewhere herein. The
information presented for each of the four years ended December
31, 1993 is unaudited. See "Financial Statements" (Exhibit 4
hereto) and "Pro Forma Financial Information". See Note 1 to the
Consolidated Financial Statements regarding JWP's ability to
continue as a going concern, the class action lawsuit filed
against JWP, debt in default and the restatement of JWP's
Consolidated Financial Statements for the year ended December
31,
1991 and 1990. See also Notes (a) and (b) below with respect to
the restatement of the 1990 and 1991 financial statements,
respectively.
SELECTED HISTORICAL FINANCIAL DATA
(Dollars in millions, except per share data)
<TABLE>
<CAPTION>
Years Ended December 31,
1993 1992 1991 1990 1989
----------- ----------- --------------- --------------- ---------
(Unaudited) (Unaudited) (Unaudited) (Unaudited) As Restated (b) As Restated (a)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data (a) (b) (c) (d):
Revenues:
Mechanical/Electrical Services............ $2,194.7 $2,404.5 $2,318.1 $2,057.6 $1,547.6
Cost of sales.................................2,043.5 2,160.7 1,973.6 1,726.2 1,275.7
Selling, general and Administrative........... 216.7 440.7 286.9 248.6 191.9
Restructuring charges........................... - 38.7 - - -
------- ----------- --------------- ---------------
Total cost and expenses.................... 2,260.2 2,640.1 2,260.5 1,974.8 1,467.6
Operating (Loss) Income........................ (65.5) (235.6) 57.6 82.8 80.0
Interest expense, net...........................(50.2) (44.2) (43.9) (36.6) (29.1)
Gain (loss) on net assets held for sale (sold).. 1.0 (76.1) (6.6) - -
(Credit) provision for income taxes............ (0.7) 7.6 2.4 17.5 18.7
---------- ----------- --------------- ---------------
(Loss) income from continuing operations.... (114.0) (363.5) 4.7 28.7 32.2
(Loss) income from discontinued operations (e)
(Loss) income from discontinued operations, net of income
taxes........................................... 11.3 (203.7) 24.3 21.6 14.4
(Loss) from disposal of businesses............. (20.1) (49.5) - - -
----------- ----------- --------------- ------------------------
(Loss) income from discontinued operations.... (9.1) (253.2) 24.3 21.6 14.4
Cumulative effect of change in method of accounting for
income taxes........................... - 4.3 - - -
Net (loss) income............................ $(123.1) $(612.4) $29.0 $50.3 $46.6
========== =========== =============== =============== ==
(Loss) income per share (a)(b)(c)(d):
Continuing operations.................. $(2.84) $(9.00) $0.10 $0.75 $0.91
Discontinued operations (e)................... (0.22) (6.24) 0.63 0.57 0.40
Cumulative effect of change in method of accounting for
income taxes........................... - 0.11 - - -
----------- ----------- --------------- --------------- ---------
Net (loss) income per share............. $(3.06) $(15.13) $0.73 $1.32 $1.31
=========== =========== =============== =============== =========
Balance sheet data (at end of period) (a)(b):
Working capital (deficit)...................(452.3) (364.9) 368.1 377.3 314.9
Property, plant and equipment, net.......... 39.3 51.1 323.4 249.0 226.4
Total assets............................... 806.4 907.6 2,233.8 1,484.2 1,242.5
Long-term debt, including current maturities. 4.5 6.0 463.0 381.3 326.7
Debt in default............................. 501.0 501.0 - - -
Capital lease obligations.................... 2.6 3.9 27.0 30.0 28.4
Shareholders' (deficit) equity..............(302.3) (175.0) 456.1 370.5 311.9
Book value per common share................. (7.95) (4.84) 10.82 10.00 8.36
Other data:
Capital expenditures......................... 17.3 68.4 58.8 44.2 43.6
Depreciation and amortization............... 35.2 69.0 49.1 33.9 23.6
</TABLE>
See accompanying notes to Selected Historical Data
NOTES TO SELECTED HISTORICAL FINANCIAL DATA
(a) JWP has restated its previously reported financial
statements
for the year ended December 31, 1990. As a result, net income
for
the year ended December 31, 1990 has been reduced from the
previously reported amount of $59.3 million to $50.3 million and
earnings per share reduced from $1.56 per share to $1.32 per
share. The restatement of 1990 operating results reflects
pre-tax
charges consisting of $8.3 million related to continuing
operations and $1.3 million to discontinued operations. The 1990
restatement of continuing operations reflects $4.8 million of
adjustments to correct the accounting for goodwill and a net
$3.5
million reduction in the carrying value of certain assets,
primarily long-term investments. The 1990 restatement had the
effect of decreasing shareholders' equity at December 31, 1990
by
$9.1 million.
(b) JWP has restated its previously reported financial
statements
for the year ended December 31, 1991. As a result, net income
for
the year ended December 31, 1991 has been reduced from the
previously reported amount of $60.3 million to $29.0 million and
earnings per share has been reduced from $1.54 per share to
$0.73
per share. The 1991 restatement reflected pre-tax charges of
$47.9 million, of which $36.7 million relates to continuing
operations and $11.2 million applicable to discontinued
operations. The 1991 restatement of continuing operations
reflected a $4.5 million increase in insurance reserves, a $6.6
million loss from the sale of a business which the Company had
decided to sell in 1991 and a $25.6 million reduction in the
carrying value of certain assets, principally receivables.
Substantially all of the restated 1991 charges applicable to
discontinued operations related to JWP's Information Services
business and included $9.9 million of costs and expenses
relating
to the acquisition of Businessland, Inc., which was acquired by
JWP in August 1991. These costs and expenses
were previously charged to reserves established as part of
the acquisition.
The 1991 restatement, together with the 1990 restatement,
described in Note
(a) above, had the effect of decreasing previously reported
shareholders'
equity at December 31, 1991 by $40.4 million.
(c) The Statement of Operations data include the results of the
purchased
businesses from acquisition dates except for the acquisition
of Neeco, Inc.
("Neeco") on May 22, 1990. The acquisition of Neeco was
accounted for as a
pooling of interests and, accordingly, all financial data
has
been restated
to include the accounts of Neeco, which data are included in
discontinued
operations.
(d) Net (loss) income per share has been adjusted to reflect a
three-for-two
stock split effected July 16, 1990 and a three-for-two stock
split effected
June 12, 1989.
(e) The Statement of Operations data has been reclassified for
all periods
presented to reflect JWP's Information Services and Supply
of
Water
businesses as discontinued operations.
B. UNAUDITED PRO FORMA FINANCIAL INFORMATION
The unaudited Pro Forma Consolidated Balance Sheet as of
December 31, 1993
and the unaudited Pro Forma Consolidated Statements of
Operations
for the year
ended December 31, 1993 set forth below have been prepared using
the principles
of Fresh Start Accounting as required by the American Institute
of Certified
Public Accountants' Statement of Position 90-7, "Financial
Reporting by
Entities in Reorganization Under the Bankruptcy Code" and are
based on the
historical unaudited consolidated financial statements of JWP,
adjusted to give
effect to the Plan. The unaudited Pro Forma Consolidated Balance
Sheet reflects
adjustments as if the Plan described above had occurred on
December 31, 1993
and also gives effect to other adjustments described therein.
The
unaudited Pro
Forma Consolidated Statements of Operations for the year ended
December 31,
1993 reflects adjustments as if the Plan had occurred on January
1, 1993.
The pro forma financial information should be read in
conjunction with the
historical consolidated financial statements, including the
notes
thereto, and
Management's Discussion and Analysis of Financial Condition and
Results of
Operations, included in Exhibit 4 to the Disclosure Statement.
The pro forma
financial information does not purport to be indicative of the
financial
position or results that actually would have been obtained had
the
restructuring been completed as of the date and for the period
presented or
that may be expected in the future.
The pro forma data should be read together with the other
information
contained herein under the headings "Selected Historical
Financial
Information," and in Exhibit 4 hereto, "Management Discussion
and
Analysis of
JWP and Subsidiaries Financial Statements and Results of
Operations for the
three years ended December 31, 1992 (unaudited)" and "Management
Discussion and
Analysis of JWP and Subsidiaries Financial Information for the
two years ended
December 31, 1993 (unaudited)" and the unaudited Consolidated
Financial
Statements of JWP and Subsidiaries and related notes thereto as
of December 31,
1992 and 1991 and for the three years ended December 31, 1992
and
the unaudited
Condensed Consolidated Financial Statements of JWP and
Subsidiaries and related
notes thereto as of December 31, 1993 and 1992 and for the two
years ended
December 31, 1993.
PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1993
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma Adjustments to record Proposed Plan Confirmation
- --------------------------------------------------------
Debt Discharge
& Exchange FreshStart ProForma
of Stock Adjustments Reorganized
Historical (Note (b)) (Note (g)) (Note (h))
- ------------ ----------------- ------------ ------------
(In thousands)
ASSETS
<S> <C> <C> <C> <C>
Current Assets
Cash and cash equivalents.................................. $ 39,534 $ - $ - $39,534
Accounts receivable, net................................... 455,944 - - 455,944
Costs and estimated earnings in excess of billings on
uncompleted contracts...................................... 61,987 - (2,259) 59,728
Inventories................................................ 5,221 - - 5,221
Prepaid expenses and other................................. 13,240 - - 13,240
Net assets held for sale................................... 20,454 - - 20,454
------------ ----------------- ------------ ------------
Total Current Assets....................................... 596,380 - $(2,259) 594,121
------------ ----------------- ------------ ------------
Net assets held for sale................................... 63,161 (20,787)(c) - 42,374
Investments, notes and other long-term receivables......... 19,737 - - 19,737
Property, plant and equipment, net......................... 39,266 - (6,360) 32,906
Other assets
Excess of cost of acquired businesses over net assets, less
amortization............................................... 58,973 - (58,973) -
Miscellaneous.............................................. 28,925 - (3,688) 25,237
------------ ----------------- ------------ ------------
87,898 - (62,661) 25,237
------------ ----------------- ------------ ------------
Total Assets............................................... $806,442 $(20,787) $(71,280) $714,375
============ ================= ============ ============
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
Current Liabilities
Notes payable.............................................. $ 172 $ - $ - $ 172
New working capital facility (a)........................... - - - -
Current maturities of long-term debt and capital lease
obligations................................................ 2,327 10,613 (c) (529) 12,411
Debt in default............................................ 501,007 (501,007)(c) - -
Accounts payable........................................... 209,867 (400)(d) - 209,467
Billings in excess of costs and estimated earnings on
uncompleted contracts...................................... 115,179 - - 115,179
Other accrued expenses and liabilities..................... 220,152 (91,959)(d) 21,079 149,272
------------ ----------------- ------------ ------------
Total Current Liabilities.................................. 1,048,704 (582,753) 20,550 486,501
------------ ----------------- ------------ ------------
Long-term debt............................................. 2,538 127,957 (c) (14,720) 115,775
------------ ----------------- ------------ ------------
Other long-term obligations and deferred credits........... 57,462 (29,493)(d) 3,000 30,969
------------ ----------------- ------------ ------------
Shareholders' (Deficit) Equity
Old Series A Preferred Stock............................ 21,250 (21,250)(e) - -
Old Common Stock........................................... 4,072 (4,072)(e) - -
New Common Stock........................................... - 933 (e) - 933
Old Warrants of Participation.............................. 576 (576)(e) - -
New Warrants............................................... - - (e) 2,179 2,179
Capital surplus............................................ 204,247 24,965 (e) (151,194) 78,018
Cumulative translation adjustment.......................... (6,068) - 6,068 -
(Deficit)..................................................(526,339) 463,502 (f) 62,837 -
------------ ----------------- ------------ ------------
Total Shareholders' (Deficit) Equity....................... (302,262) 463,502 (80,110) 81,130
------------ ----------------- ------------ ------------
Total Liabilities & Shareholders' (Deficit) Equity........ $806,442 $ (20,787) $(71,280) $714,375
============ ================= ============ ============
See Notes to Pro Forma Consolidated Balance Sheet
</TABLE>
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
(Unaudited)
The following notes set forth an explanation of the
assumptions
used in preparing the unaudited Pro Forma Consolidated Financial
Statements. All amounts are in thousands, except per share data.
(a) Excludes any outstanding balances under an anticipated
post-confirmation domestic working capital facility of
approximately $40 million. The Company expects that the average
outstanding balance for the first year of the facility will
approximate $15 million.
(b) Reflects adjustments relating to discharge of debt and
exchange of newly issued debt and equity securities under the
restructuring.
(c) Reflects the discharge of old debt and issuance of new debt
under the restructuring as follows:
<TABLE>
<CAPTION>
Historical Restructure Pro
Carrying Discharge/ Forma
Amount Exchange Balance
---------- ----------- ---------
<S> <C> <C> <C>
Senior Notes Payable under Revolving Credit
Facility............... $155,795 $(155,795) -
Senior Notes Payable under various
indentures...................... 328,572 (328,572) -
Subordinated Note
Payable................... ............... 9,600 (9,600) -
Convertible Subordinated
Debentures................................ 7,040 (7,040) -
---------- -----------
Total Debt in Default....................... $501,007 $(501,007) -
========== ===========
Other Senior Notes (included in current maturities of long-term
debt)................................. $ 744 $ (744) -
========== ===========
New 7% Series A Senior Secured Notes (included in long-term
debt).................................... - $60,781 $ 60,781
=========== =========
New 7% Series B Senior Secured Notes (included in current
maturities of long-term debt)....... - $11,357 $ 11,357
=========== =========
New 11% Series C Senior Subordinated Notes (included in
long-term debt)....................... - $62,176 $ 62,176
=========== =========
New 12% SellCo Subordinated Contingent Payment Non-Recourse
Notes.. - 47,668 47,668
Estimated Discount to Reflect Amounts Available to Redeem
Non-Recourse SellCo Notes............. - (26,881) (26,881)
----------- ---------
Total SellCo Subordinated Contingent Payment Notes
(included in net assets held for
sale-long-term)................... - $20,787 $20,787
=========== =========
New 8% Supplemental SellCo Note (included in long-term
debt)................................... - $ 5,000 $ 5,000
=========== =========
Total................................... $501,751 $(341,650) $160,101
====== =========== =========
</TABLE>
The proforma adjustments to the recorded debt balances reflect
the differences between the historical carrying amounts of the
old debt securities
and the face amount of the new debt securities issued under
JWP's restructuring
plan. The 7% Series B Senior Secured Notes are included in
current maturities
of long-term debt because JWP anticipates that such notes will
be redeemed
within one year from the net proceeds of sales of related
assets.
It has been assumed that the Additional Interest Amount
payable
to Belmont will be equivalent to a 3.5% share of the Series A
Senior Secured Notes, the Series C Notes, the SellCo
Subordinated
Contingent Payment Notes and the New JWP equity securities,
including warrants (but excluding the Management Stock
Options). Accordingly, the total face amount of the new debt
securities, the new warrants and the number of New JWP Common
Shares issued reflect the additional 3.5% distribution to
Belmont. An equivalent 3.5% amount of Series B
Senior Secured Notes is assumed to be paid in cash in lieu of
additional Series B Senior Secured Notes.
(d) Reflects reduction of recorded amounts of accrued interest,
insurance reserves, other impaired liabilities and unexpired
leases to be rejected by JWP as follows:
<TABLE>
<CAPTION>
(In thousands)
------------------------------
Accounts Accrued Long-term
Payable Expenses Liabilities Total
-------- -------- ----------- --------
<S> <C> <C> <C> <C>
Accrued interest.......................... $ - $ 43,315 $ - $ 43,315
Insurance reserves............................ - 9,600 26,800 36,400
Amount due to JWP Information Services, Inc... - 24,933 - 24,933
Foreign debt guarantees....................... - 6,037 - 6,037
Stock price guarantees........................ - 5,118 - 5,118
Preferred dividends in arrears................ - 2,257 - 2,257
Unexpired leases.............................. - - 1,718 1,718
Director's retirement benefits................ - - 975 975
Other impaired claims......................... 400 699 - 1,099
-------- -------- ----------- --------
Total......................................... $ 400 $ 91,959 $ 29,493 $121,852
======== ======== =========== ========
</TABLE>
(e) Reflects the elimination of the recorded book value of Old
Common Stock, Old Preferred Stock and Warrants of Participation
upon consummation of the restructuring and the issuance of
1,502,591 New Warrants and 9,326,425 shares of New Common Stock,
$.10 par value.
(f) Deficit was reduced by the following:
<TABLE>
<CAPTION>
<S> <C>
Net reduction in debt upon discharge of old debt and issuance of new
debt. See Note (c) above.......................................... $341,650
Reduction in recorded amounts of accrued interest, insurance
reserves, other impaired claims and unexpired
leases to be rejected by JWP
upon consummation the restructuring. See Note (d) above...... 121,852
--------
Total.......................................................... $463,502
========
</TABLE>
(g) JWP has accounted for the reorganization using fresh-start
reporting. Accordingly, all assets and liabilities are restated
to reflect their reorganization value, which approximates
estimated fair value at the date of confirmation assuming a
reorganization equity value of $81,130 including $2,179
allocated
to the New Warrants on the basis of a valuation made by JWP's
financial advisor. See "Financial Information-Valuation."
The following table summarizes the estimated adjustments to
record the reorganization under fresh-start accounting in
accordance with AICPA Statement of Position 90-7, Financial
Reporting by Entities in Reorganization Under the Bankruptcy
Code. The adjustments made to the respective asset and
liabilities categories are preliminary estimates. The allocation
of reorganization equity value to the individual assets and
liabilities will be made after consummation of the
restructuring.
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
(Unaudited) (Continued)
Footnote (g) (continued)
Fresh Start Accounting Adjustments (In thousands)
<TABLE>
<CAPTION>
Costs in Net Assets Property
Excess of Held Plant & Misc.
Billings For Sale Equipment Goodwill Assets Deficit
---------- ---------- ----------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Assets
To record discounted value of 12% SellCo Notes using a dis-
count rate of 14%................. 3,819 3,819
To record accrued interest to maturity on 12% SellCo Notes
based upon discounted proforma carrying value and assum-
ing a discount rate of 14%...................... (3,819) (3,819)
To eliminate goodwill and other intangible assets (58,973) (5,488) (64,461)
To reflect costs and estimated earnings in excess of billings at
estimated fair market value............... (2,259) (2,259)
To reflect fixed assets at estimated fair market value.......... (6,360) (6,360)
To reflect unamortized debt issuance expense on post-confir-
mation working capital credit facility.......................... 1,800
---------- ---------- ---------- ----------- ----------
$ (2,259) $ 0 $ (6,360) $ (58,973) $ (3,688)
========== ========== ========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
Current Other Cumulative
Maturities Accrued Long-Term Long-Term New Capital Translation
Long-Term Debt Expenses Debt Liabilities Warrants Surplus Adjustments
-------------- -------- ---------- ----------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Liabilities
To record 7% Series A and Series B
Senior Notes at estimated fair
market value using a discount
rate of 12%......................... (529) (4,200) 4,729
To record 11% Series C Senior Sub-
ordinated Notes at estimated fair
market value using a discount
rate of 14%......................... (9,282) 9,282
To record 8% Supplemental SellCo
Note at estimated fair market
value using a discount rate of
14%................................. (1,238) 1,238
To reflect liability for cash to be
paid in lieu of issuance of certain
Series B Senior Notes............... 412 (412)
To adjust for above fair market
value leases........................ 2,000 3,000 (5,000)
To reflect accrued severance and
other post-employment liabili-
ties................................ 3,000 (3,000)
To reflect accrued interest on Debt-
or-in Possession financing.......... 1,367 (1,367)
To reflect accrued professional and
other fees related to confirmation
of the proposed plan................ 7,500 (7,500)
To reflect accrued debt issuance
costs on post-confirmation work-
ing capital facility................ 1,800
To record potential Federal and
State income tax liability arising
from the sale of water compa-
nies................................ 5,000 (5,000)
Equity
To eliminate cumulative translation
adjustment.......................... 6,068 (6,068)
To eliminate deficit................ (229,212) 229,212
To record estimated fair value of
new warrants........................ 2,179 (2,179)
To record reorganization equity
value in excess of par value of
common stock........................ 78,018 (78,018)
-------------- -------- ---------- ----------- -------- ----------- -----------
$(529) $21,079 $(14,720) $3,000 $2,179 $(151,194) $6,068 $62,837
============== ======== ========== =========== ======== =========== ====================
</TABLE>
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
(Unaudited) (Continued)
(h) See "Historical and Pro Forma Capitalization" of JWP which
sets forth the unaudited consolidated capitalization of JWP as
of
December 31, 1993 as if the Plan became effective on such date.
(i) JWP has a net operating loss carryforward for U.S. income
tax
purposes which approximates $500 million and which expires in
years through 2008. The proforma financial statements assume
that
the amount of net operating loss carryforwards available to
offset post-confirmation taxable income will be subject to
restrictions and substantial reductions governed by Section 382
of the Internal Revenue Code.
Additionally, the pro forma financial statements assume that any
net deferred tax asset which may be recognized for financial
reporting purposes will be offset by a valuation allowance of
the
same amount, which valuation allowance would be attributable to
the uncertainty of the realization of the pre-confirmation net
operating loss carryforward.
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
(Unaudited) (Concluded)
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1993
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma Adjustments
Operations Sold,
or Other Held for
Sale Pro Forma Pro Forma Historical (Note
(a)) Adjustments Reorganized
----------- ------------- ---------------- --------------
<S> <C> <C> <C> <C>
Revenues................................... $2,194,735 $(340,413) $ - $1,854,322
Costs and Expenses
Cost of sales.............................. 2,043,558 (313,390) - 1,730,168
Selling, general and administrative........ 216,709 (32,938) (20,269)(b) 163,502
------------------------ ---------------- --------------
2,260,267 (346,328) (20,269) 1,893,670
----------- ------------- ---------------- --------------
Operating (Loss)........................... (65,532) 5,915 20,269 (39,348)
Interest expense, net...................... (50,187) 476 30,699 (c) (19,012)
Gain on sale of businesses................. 1,028 (1,028) - -
----------- ------------- ---------------- --------------
(Loss) Before Income Taxes................. (114,691) 5,363 50,968 (58,360)
(Credit) provision for income taxes........ (700) - - (700)
----------- ------------- ---------------- --------------
(Loss) From Continuing Operations.......... (113,991) 5,363 50,968 (57,660)
----------- ------------- ---------------- --------------
Discontinued Operations
(Loss) from operations..................... 11,263 (11,263) - -
(Loss) from disposal of businesses......... (20,350) 20,350 - -
------------------------ ---------------- --------------
(Loss) from discontinued operations........ (9,087) 9,087 - -
----------- ------------- ---------------- --------------
Net (Loss)................................. (123,078) 14,450 50,968 (57,660)
Old Preferred Stock Dividend Requirements.. (1,806) - 1,806 (d) -
----------- ------------- ---------------- --------------
Net Loss Attributable to Common Stock...... $(124,884) $14,450 $52,774 $(57,660)
=========== ============= ================ ==============
(Loss) Per Share
Continuing operations...................... $(2.84) $(6.18)(e)
Discontinued operations.................... (0.22) -
----------- --------------
Net (Loss)................................. $(3.06) $(6.18)(e)
Average Number of Common Shares
Outstanding................................ 40,817 9,326 (e)
=========== ==============
</TABLE>
See Notes to Pro Forma Consolidated Statement of Operations
(Unaudited)
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1993
(Unaudited)
(a) Reflects adjustments to JWP's historical condensed
consolidated statement of operations to eliminate revenues, cost
and expenses, interest and losses on sale or disposal in respect
to businesses sold or held for sale.
(b) Reflects the following adjustments to selling, general and
administrative expenses:
(In thousands)
<TABLE>
<CAPTION>
<S> <C>
To eliminate amortization of goodwill and other
intangibles........................ $(5,882)
To eliminate legal, consulting and other professional fees
arising from shareholder
litigation, debt restructuring and the restatement of JWP's
financial statements... (12,000)
To reduce depreciation expense as a result of fair market value
adjustment to fixed assets........................... (1,387)
To reduce rent expense for above fair market value leases (1,000)
--------------
$(20,269)
==============
</TABLE>
(c) Reflects the following adjustments to interest expense:
<TABLE>
<CAPTION>
(In thousands)
<S> <C>
To eliminate interest expense related to exchanged
debt........................... $(48,697)
To record interest expense on 7% Series A Senior Notes based
upon the proforma
discounted carrying value and assuming a discount rate of
12%..................... 6,668
To record interest expense on 7% Series B Senior Notes based
upon the proforma
discounted carrying value and assuming a discount rate of
12%..................... 1,170
To record interest expense on 11% Series C Subordinated Notes
based upon the
proforma discounted carrying value and assuming a discount rate
of 14%............ 7,665
To record interest expense on 8% SellCo Recourse Notes based
upon the proforma
carrying value and assuming a discount rate of 14%. 545
To record interest expense on post-confirmation working capital
credit facility
assuming an average of $15 million outstanding at 9%... 1,350
To record amortization of debt issuance costs on
post-confirmation working capital credit facility..... 600
--------------
$(30,699)
==============
</TABLE>
(d) Reflects elimination of dividends on old preferred stock.
(e) Proforma net loss per common share is calculated based upon
the number of shares new common stock outstanding upon
confirmation of the restructuring.
HISTORICAL AND PRO FORMA CAPITALIZATION
The following unaudited table sets forth the unaudited
consolidated capitalization of JWP at December 31, 1993, and the
unaudited consolidated pro forma capitalization of JWP as of
such
date as adjusted to give effect to the restructuring as if it
became effective on such date. The pro forma information
presented below assumes a revaluation of JWP's assets and
liabilities pursuant to principles of Fresh-Start Accounting.
The
information presented below should be read in conjunction with
the unaudited Condensed Consolidated Financial Statements and
the
unaudited Pro Forma Financial Information and related notes
appearing elsewhere herein. See "Financial Statements" and "Pro
Forma Financial Information."
<TABLE>
<CAPTION>
Pro Forma Adjustments to Record
Plan Confirmation (a)
- -------------------------------------
Debt
Discharge and
Historical Exchange of Fresh Start Pro Forma
(Unaudited) Stock Adjustments (Unaudited)
----------- ------------- ----------- -----------
($ in thousands)
<S> <C> <C> <C> <C>
Notes Payable Comstock Canada....................... $172 $- $- $172
New Working Capital Facility........................ - - - -
Current Maturities of Long-Term Debt and Capital
Lease Obligations................................... 2,327 (744) - 1,583
New 7% Series B Senior Notes........................ - 11,357 (529) 10,828
Debt in Default:
Senior Notes Payable Under Revolving
Credit Facility..................................... 155,795 (155,795) - -
Senior Notes Payable Under Various Indentures....... 328,572 (328,572) - -
Subordinated Notes Payable.......................... 9,600 (9,600) - -
Convertible Subordinated Debentures................. 7,040 (7,040) - -
----------- ------------- ----------- -----------
Total Short-Term Debt............................... 503,506 (490,394) (529) 12,583
Long-Term Debt:
New 7% Series A Senior Notes........................ - 60,781 (4,200) 56,581
Capital Lease Obligations and Other Long-Term
Debt (b)............................................ 4,699 - - 4,699
New 12% Sellco Subordinated Non-Recourse
Notes............................................... - 20,787 - 20,787
New 11% Series C Senior Subordinated Notes.......... - 62,176 (9,282) 52,894
New 8% Supplemental SellCo Note..................... - 5,000 (1,238) 3,762
----------- ------------ ----------- -----------
Subtotal Long-Term Debt............................. 4,699 148,744 (14,720) 138,723
Less Reclassification of New 12% Sellco Notes to Net
Assets Held for Sale................................ - (20,787) - (20,787)
----------- ------------- ----------- -----------
Total Long-Term Debt................................ 4,699 127,957 (14,720) 117,936
Shareholders' Deficit (Equity):
Old Series A Preferred Stock........................ 21,250 (21,250) - -
Old Common Stock.................................... 4,072 (4,072) - -
New Common Stock.................................... - 933 - 933
Warrants of Participation........................... 576 (576) - -
New Warrants........................................ - - 2,179 2,179
Capital Surplus..................................... 204,247 24,965 (151,194) 78,018
Cumulative Translation Adjustment................... (6,068) - 6,068 -
(Deficit)........................................... (526,339) 463,502 62,837 -
----------- ------------- ----------- -----------
Total Shareholders' (Deficit) Equity................ (302,262) 463,502 (80,110) 81,130
Total Capitalization................................ $205,943 $101,065 $(95,359) $211,649
=========== ============= =========== ===========
- ------
(a) See Notes to Pro Forma Balance Sheet (Unaudited) for a
discussion of the pro forma adjustments.
(b) Includes $2,161 of long-term capital lease obligations which
are included
in the caption "Other long-term obligations" in JWP's
consolidated balance sheet as of December 31, 1993.
</TABLE>
C. PROJECTED FINANCIAL INFORMATION: 1994-1997 ASSUMPTIONS
1. Basis of Presentation
The following projections have been prepared by management to
present the effects of the restructuring and consummation of the
Plan and to assess whether Reorganized JWP could meet its
restructured financial obligations, but are not facts and should
not be relied upon as being necessarily representative of
future results. The estimates and assumptions underlying the
projections are inherently uncertain, being based upon events
that have not taken place, are subject to significant economic,
competitive and other uncertainties and contingencies beyond
Reorganized JWP's control and involve judgments based upon
past performance and industry trends which may not necessarily
be
indicative of future performance or trends. Consequently, there
can be no assurance that the projected results can be realized,
or that actual results will not be higher or lower than those
projected. Management believes that the basis for such
projections is reasonable, taking into account the purpose for
which they were prepared. However, the projections were not
prepared with a view towards compliance with the published
guidelines of the Securities and Exchange Commission or the
American Institute of Certified Public Accountants regarding
projections or forecasts. JWP's independent auditors, have
neither examined, reviewed, performed agreed-upon procedures,
nor
compiled the following projections and, consequently, do not
express an opinion or any other form of assurance with respect
thereto. Management believes, however, that the projections are
presented on a basis consistent with generally accepted
accounting principles as applied to JWP's historical financial
statements. There can be no assurance that the assumptions
underlying the projections will prove correct or that
Reorganized
JWP's actual ability to cover its future principal and cash
interest payment obligations will not differ from the
information
reflected below. See "Key Assumptions." CREDITORS HOLDING
IMPAIRED CLAIMS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THE
FOLLOWING PROJECTIONS IN DETERMINING WHETHER TO VOTE TO ACCEPT
OR REJECT THE PLAN.
The estimates and assumptions underlying the projections are
based on matters as they exist on the date hereof, and not as of
any future date. No representation is made as to the
completeness
or accuracy of the material contained herein, nor should it be
relied upon as a promise or representation as to future
performance. The projections include levels of revenues that
have
not been realized. Moreover, Reorganized JWP may be vulnerable
to
competitive pressures because of its liquidity needs, which are
publicly known. These factors may adversely affect Reorganized
JWP's businesses, its growth opportunities and relationships
with
its customers, suppliers, bonding companies and employees.
Neither JWP nor Reorganized JWP intends to update or otherwise
revise the following projections to reflect circumstances
existing after the date hereof 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, except as
required by applicable law.
The projections should be read together with the other
information contained herein under the headings "Selected
Financial Information," and, in Exhibit 3 hereto, "Management's
Discussion and Analysis of Consolidated Financial Statements and
Results of Operations for the three years ended December 31,
1993".
2. Projected Operating Results
JWP projections for 1994-1997 are the consolidation of the
operating forecasts that were initially prepared by the
individual business units' management. These forecasts were
thereafter reviewed by JWP management. The forecast represents
further shrinkage of JWP's mechanical and electrical businesses
to provide, among other things, the cash required to repay the
indebtedness of a reorganized JWP. The forecast does not
incorporate any strategies to offset JWP's dependence on either
the new construction market or bonding availability.
The operating business forecasts have been prepared based upon
the assumption that (i) bonding becomes more readily available
for large and longer term projects by mid-1994, (ii) the market
conditions throughout the forecast period will remain highly
competitive with excess capacity and low margins, and (iii)
working capital financing is available. However, the projections
for the forecast period do not include any such large size
projects unless they are currently included in the backlog.
Generally, JWP and the operating company management believe
that 1994 will be weaker for the contracting market,
particularly
in the Midwest U.S., Canada and the United Kingdom. This is
based
on the expected continued overall weaknesses in each of these
markets and, because of JWP's financial difficulties during
late 1992 and 1993, potential customers were hesitant to award
business to JWP companies thereby resulting in a significant
decrease in backlog as of the end of 1993. In addition, certain
operating units experienced higher than normal revenues in 1993
relating to large, one-time projects.
Should JWP remain in bankruptcy beyond fall 1994, the
operating
businesses will be confronted with continued pressures with
respect to generating new awards beyond those assumptions
inherent in these financial projections. These businesses had
assumed that in fall 1994, the parent company would emerge from
bankruptcy and, therefore, the cloak of financial instability
would be lifted. Should this assumption prove to be incorrect,
potential customers may be likely to continue to hesitate in
awarding projects to JWP's operating businesses. This may have a
negative affect on JWP's projected financial performance,
particularly for 1994 and 1995. The operating businesses will
continue to review and assess their operating cost structures in
the normal course to attempt to mitigate any resultant revenue
or
gross profit pressures.
3. Pro forma Balance Sheet Adjustments
In preparing the estimated condensed balance sheet as of
December 31, 1993, pro forma adjustments were made to the
estimated December 31, 1993 balance sheet to account for the
proposed debt discharge and exchange of stock and for
fresh start accounting and other reorganization adjustments.
Additionally, JWP has prepared an estimated pro forma
capitalization table as of December 31, 1993, which reflects the
estimated pro forma debt and equity structure upon
confirmation of the reorganization plan. The pro forma
consolidated balance
sheet and capitalization table, each as of December 31, 1993,
are
presented
herein.
The year end 1993 balance sheet incorporates JWP's estimate of
certain
restructuring transactions to reflect the debt and other
obligations of the
holding company which would be exchanged as a result of the
reorganization. The
exchanged obligations include indebtedness (principal and
accrued
interest)
under JWP's revolving credit agreement, senior note agreements,
guarantees of
foreign indebtedness relating to financing agreements for JWP's
former
information services operations in France and Belgium, an amount
due to JWP's
former information services company in the United States
(currently under
control of a trustee appointed by the U.S. Bankruptcy Court
pursuant to a
Chapter 7 filing), and miscellaneous other indebtedness and
guarantees.
It is assumed that pursuant to JWP's plan of reorganization
that all
subsidiary operating company obligations and indebtedness,
including those
relating to domestic and foreign working capital lines of credit
and surety
credit, will be unimpaired.
Additionally, it is assumed that JWP's preferred stock, common
stock,
warrants of participation and stock options will have minimal
recovery under
the reorganization plan by way of issuance of new warrants.
It is assumed for purposes of the projections that as of
January 1, 1994, JWP
adopted "Fresh Start Accounting" as set forth in Statement of
Position 90-7,
"Financial Reporting By Entities In Reorganization Under The
Bankruptcy Code",
issued by the American Institute of Certified Public
Accountants.
(This
statement will be adopted upon emergence from bankruptcy.)
Pursuant to
Statement of Position 90-7, JWP's assets and liabilities will be
revalued and
will be adjusted to their estimated fair values, and JWP's
retained deficit
eliminated.
The net assets were revalued to be equal to the
post-restructuring equity
value of the new JWP-estimated at $81.1 million as of December
31, 1993 by
JWP's financial advisor. See "Estimated Pro Forma
Capitalization" which sets forth the unaudited estimated pro
forma consolidated
capitalization of Reorganized JWP as of December 31, 1993 as if
the Plan became
effective on such date. A subsequent re-valuation was completed
as of March 31, 1994 based upon the financial results for the
first quarter of 1994 (see attached exhibits). JWP's financial
advisor concluded that on the basis of the information received
from JWP, there was no material change in the net asset
valuation.
Finally, it has been assumed that the Additional Interest
Amount payable to Belmont will be equivalent to a 3.5% share of
the Series A Senior Secured Notes, the Series C Notes, the
Sellco
Subordinated Contingent Payment Notes and the New JWP equity
securities, including warrants (but excluding the Management
Stock Options). Accordingly, the total face amount of the new
debt securities, the new warrants and the number of New JWP
Common Shares issued reflect the additional 3.5% distribution to
Belmont. An equivalent 3.5% amount of Series B Senior Secured
Notes is assumed to be paid in cash in lieu of additional Series
B Senior Secured Notes.
4. The Retained Operating Companies
The consolidated projections include those operating units
which JWP presently intends to keep as part of its on-going
organization. The principal units are:
JWP Welsbach Electric Corp.
JWP/J.C. Higgins Corp.
JWP Penguin Air Conditioning Corp.
JWP Forest Electric Corp.
JWP/Zack Inc.
JWP/Hyre Electrical Co. of Indiana, Inc.
JWP Gowan Inc.
Heritage Air Systems, Inc.
JWP West (d/b/a University Mechanical
Contractors)
Gibson Electric Co., Inc.
JWP Trautman & Shreve, Inc.
Hansen Mechanical Contractors, Inc.
Comstock Canada
Drake & Scull Engineering Limited
Dynalectric group of companies
Businesses which are intended to be sold are consolidated into
Sellco Net Assets at their estimated realizable value.
Transaction expenses, taxes and any retained liabilities
relating
to the sales of the designated companies are assumed to reduce
the proceeds available to repay the Series A and B Senior
Secured Notes, SellCo Recourse Notes, and the SellCo
Subordinated
Contingent Payment Notes, as described below.
The debt to be repaid from currently planned asset sales
includes the $60.8 million Series A 7% Senior Secured Notes, the
$11.4 million Series B 7% Senior Secured Notes and the 12%
SellCo
Subordinated Contingent Payment Notes. The non-recourse SellCo
Subordinated Contingent Payment Notes are reflected as an offset
to SellCo Net Assets in the amount of $20.8 million, which
amount
is equal to the estimated net proceeds to be realized from the
SellCo Net Assets less any retained liabilities not assumed by
the prospective purchasers and less the principal amount of and
accrued interest on the Series A and B Senior Secured Notes, and
the face amount of the $5 million 8% Supplemental SellCo
Note. The projections assume that the retained liabilities will
include federal and state income taxes payable on the gain on
the
sale of the water companies. If the sales proceeds are
insufficient to cover the full face amount of the non-recourse
SellCo Subordinated Contingent Payment Notes, such remaining
debt
would be extinguished for a nominal amount.
The following operating businesses are included in SellCo Net
Assets:
JWP Brandt Engineering Co. Inc.
Wachtel, Duklauer & Fein Incorporated
University Mechanical Contractors Inc. (WA)
Superior Engineering Corporation
University Cogeneration, Inc.
Jamaica Water Supply Company & Sea Cliff
Water Co.
General Energy Development, Inc.
These operations are assumed to be sold by June 30, 1995.
Prior
to such sales, these operations are assumed to be break-even on
a
cash flow basis. Also included in Sellco Net Assets are net cash
proceeds and the face amount of various receivables, notes and
other assets, net of liabilities, taken as consideration for the
previously concluded sales of various businesses.
Presently, JWP has already concluded the sale of substantially
all of the assets of Kerby Saunders-Warkol, Inc. and JWP
Technical Services. In addition, JWP Pacific International is
currently being liquidated.
5. Insurance Expense Provision/Cash and Letters of Credit
Collateral
The insurance premiums and estimated future claims payouts for
the then-existing plan year are included in the operating
companies projected results within cost of work and selling,
general and administrative expenses.
Under JWP's insurance program, JWP has posted cash and letters
of credit as security collateral with the insurance carriers to
cover the estimated future unpaid liability for the present and
prior plan years. At December 31, 1993, there were approximately
$36.4 million in letters of credit outstanding to JWP's
insurance
carriers as security for the estimated future claims payouts
relating to prior plan years. Since the plan year ended
September
30, 1992 JWP has been unable to obtain letters of credit
covering
the then current plan year's projected future liability.
Therefore, JWP has been required to post cash collateral with
the
insurance carriers in lieu of the letters of credit.
The cash in this collateral account was $21.4 million as of
December 31, 1993. Moreover, since October 1, 1992 JWP has not
been able to fully apply the cash collateral held by its
insurance carriers to pay the plan year loss payouts-i.e., JWP
has had to fund additional amounts of monies despite having
cash in its collateral accounts.
For the purposes of these projections JWP is assuming that (i)
it will retain the residual liability relating to prior years'
claims for these future payouts
for the operations to be sold, (ii) all amounts billed to the
on-going
operating units for estimated future payouts will be passed
through to the
insurance carrier as cash collateral for this liability, (iii)
existing letters
of credit covering prior plan years and any liability for
payouts
from the plan
years prior to October 1, 1992 not covered by letters of credit
will be
impaired and treated as Class 4B claims pursuant to the Plan,
(iv) no new
letters of credit will be available to cover the current or
future plan years'
estimated ultimate payout liabilities or to post with the
insurance carriers as
a means to recover the cash collateral account balance, (v) any
excess cash
collateral, above an amount to cover the projected remaining
future payout
liabilities, will be released back to JWP during 1995, and (vi)
beginning
January 1, 1996 JWP is able to fully utilize specific plan year
cash collateral
on deposit with its insurance carriers to fund loss payouts as
the losses are
paid by the carrier.
6. Long Term Debt/Working Capital Lines of Credit/Interest
Expense
JWP assumes that it will have a new $40 million working
capital
line of
credit upon the confirmation of the Plan and that its foreign
subsidiaries will
maintain their existing lines of credit.
For the forecast period, the average amounts outstanding under
various
working capital lines of credit and the interest rates are as
follows:
<TABLE>
<CAPTION>
Average Outstandings
- ---------------------------------
Interest Rate 1994 1995 1996 1997
------------- ---- ---- ---- ----
(Amounts in $millions)
<S> <C> <C> <C> <C> <C>
Domestic U.S. Working Capital Line.. 9%-10% 15.0 22.5 15.0 15.0
Foreign Working Capital Lines....... 8%-12% 9.2 4.3 4.3 4.3
</TABLE>
The $62.2 million Series C Notes have an 11% coupon, with
interest during the first eighteen months being paid-in-kind.
This paid-in-kind interest is added to the principal balance.
This debt does not carry any mandatory repayment provisions
during the projection period. The final maturity will be seven
years from the date of issuance.
JWP's financial advisors estimate that the fair market rates
of
interest on the $62.2 million 11% Series C Notes, the $60.8
million Series A 7% Senior Secured Notes, the $11.4 million
Series B 7% Senior Secured Notes and the $5 million 8%
Supplemental SellCo Note are 14%,12%,12% and 14%, respectively.
Each of these indebtedness obligations have been recorded at
their respective present values which, because the estimated
market rates of interest are greater than the stated coupon
rates, are less than the face amounts.
Interest expense is shown net of interest income. Cash
balances
are assumed to earn interest at 3% per annum based on the
average year-end amount.
7. Income Tax Provision
As of December 31, 1993, JWP has net operating loss
carry-forwards ("NOLs") available to offset future U.S. federal
tax liabilities which is estimated to exceed $500 million. The
NOL relates to taxable years prior to the confirmation
of the restructuring plan. JWP has conservatively assumed that
usage of these NOLs will be limited by Section 382(l)(6) of the
Internal Revenue Service Code (the "Code") after the
confirmation
of the Plan. The annual limitation at JWP's estimated 35%
marginal federal income tax rate is approximately $1.71 million,
or a maximum total benefit of approximately $23.9 million over a
fourteen year period.
JWP estimates that it will have a net deferred tax asset as of
the confirmation date which primarily resulted from differences
due to the excess of amounts previously expensed for financial
reporting purposes over amounts deducted for income tax
purposes.
This net deferred tax asset has been offset
by a valuation allowance of the same amount. The valuation
allowance is
attributed to the uncertainty of the realization of the NOL.
The projections incorporate fresh start reporting which
requires JWP to
report Federal income tax expense on income before utilization
of
the
pre-confirmation NOLs. As a result, pursuant to the Statement of
Financial
Accounting Standards 109, any tax benefit taken pursuant to
Section 382 of the
Code in a given year is not credited to income but instead is
credited directly
to shareholders' equity.
U.S. state income taxes were calculated at an effective rate
of
8%. However,
to the extent that the total estimated U.S. state taxes in a
given year
aggregate less than a minimum franchise tax amount, the minimum
franchise tax
amount is projected to be paid. Foreign taxes are assumed to be
paid at an
effective rate of 33%.
The $62.2 million 11% Series C Notes, the Supplemental SellCo
Note and the
SellCo Subordinated Contingent Payment Notes are assumed to be
subject to the
applicable high yield discount obligation provisions of Section
163(e)(5) of
the Code. Accordingly, a portion of the interest expense on this
indebtedness
is assumed to be non-deductible for federal and state tax
purposes, with the
balance of the interest expense being deductible only when paid.
8. Capital Expenditures
Each of the individual operating units have projected the
annual amounts of
capital expenditures for plant and equipment. Such total amounts
approximate
the historical levels of expenditures over the past three years.
In addition,
certain expenditures have been projected at the corporate level
to provide for
overall implementation of and enhancements to JWP's systems of
internal control
and its management information systems.
9. Working Capital Requirements
The primary components of working capital-accounts receivable,
costs in excess of billings, accounts payable and billings in
excess of costs-are assumed to increase based upon increases in
revenue. However, for 1994, JWP is projecting a decrease in
working capital, primarily due to the collection of certain
accounts receivable and costs in excess of billings, partially
offset by a reduction in billings in excess of costs, relating
to
various large construction projects that have been substantially
completed during 1993 or are estimated to be completed during
1994. Moreover, the cash flow projections for 1994 assume
that significant restructuring advisory expenses are paid during
1994. The operating businesses also have on-going working
capital
management plans to improve-i.e., lower-working capital
utilization. Certain working capital improvements are included
in
the projections.
10. Cash Balances
The cash balances of JWP in the estimated proforma
consolidated
balance sheets do not necessarily represent the amount of cash
on
hand available for JWP's operations. Pursuant to various foreign
financing agreements, the cash balances in Canada and the
U.K./European operations are "fenced off" from the
remainder of the domestic U.S. operations-i.e., such cash is
generally assumed to be only available to support the operations
and debt of the foreign companies. Moreover, the cash balances
do
not reflect the amount of "float", or checks written against
such
balances, or the amounts required on a going-concern basis to
fund various local payroll accounts. In summary, the cash
generally available to support the domestic operations, the new
working capital facility, the $62.2 million 11% Series C Notes
and the $5 million Supplemental SellCo Note is substantially
less
than the overall balance stated on the estimated proforma
balance
sheets.
At December 31, 1993, the estimated cash balances are
comprised
as follows:
U.S. U.K. Canada Total
-------- ------- ------ --------
($ millions)
Book Balance....... $34.3 $3.0 $0.1 $37.4
Float/Restricted... (11.9) (2.4) 0.0 (14.3)
-------- ------- ------ --------
Total "Available".. $22.4 $0.6 $0.1 $23.1
======== ======= ====== ========
Additionally, the total foreign and domestic U.S. cash
balances
as of the end of each of the projection years, excluding amounts
classified on the balance sheet as "Restricted Cash" in the U.S.
to provide for certain insurance and tax liabilities, are
estimated as follows:
1994 1995 1996 1997
----- ----- ----- ------
($ millions)
U.S..... $29.5 $51.6 $63.0 $77.5
U.K..... 5.5 13.9 12.4 16.3
Canada.. 4.9 8.2 10.2 13.1
----- ----- ----- ------
Total... $39.9 $73.7 $85.6 $106.9
===== ===== ===== ======
ESTIMATED PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1993
(Unaudited)
Pro Forma Adjustments to record
Proposed Plan Confirmation
- --------------------------------------------------------
<TABLE>
<CAPTION>
Fresh Start
Debt and Other
Discharge Reorganization
As Exchange Adjustments Pro Forma
Reclassified (a) of Stock Note (f) Estimated
---------------- -------------- -------------- ---------
(In millions)
ASSETS
<S> <C> <C> <C> <C>
Current Assets
Cash and cash equivalents......... $37.4 $37.4
Accounts receivable, net............... 441.5 441.5
Costs in excess of billings............ 62.3 $(2.3) 60.0
Inventories............................... 5.4 5.4
Prepaid expenses and other................ 10.1 10.1
Sellco Net Assets......................... 12.2 $ 12.2
--------- -------------- -------------- ---------
Total Current Assets...................... 568.9 (2.3) 566.6
-------------- -------------- -------------- ---------
SellCo Net Assets......................... 98.1 (20.8)(b) - 77.3
Investments, Notes and Other Long-Term
Receivables......... 10.7 10.7
Insurance Funds Held in Escrow............. 21.4 21.4
Property, Plant and Equipment, net......... 40.5 (6.3) 34.2
Other Assets
Excess of cost of acquired businesses over net assets, less
amortization............................. 59.0 (59.0) -
Miscellaneous............................ 7.5 (3.7) 3.8
----------- -------------- -------------- ---------
66.5 - (62.7) $ 3.8
------------ -------------- -------------- ---------
Total Assets.............................. $806.1 $(20.8) $(71.3) $714.0
======== ============== ============= =========
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
Current Liabilities
Notes payable............................. $ 0.2 $ 0.2
Current maturities of long-term debt...... 1.9 $10.7 (b) $(0.5) 12.1
Current maturities of capital lease obligations 0.6 0.6
Debt in default................................ 501.0 (501.0)(b) -
Accounts payable............................... 207.6 (0.4)(c) 207.2
Billings in excess of costs.................... 115.4 115.4
Federal income taxes payable................... 1.6 1.6
State, foreign and local income taxes payable.. 2.7 2.7
Accrued payroll................................ 38.3 (0.2)(c) 3.0 41.1
Accrued expenses, other........................ 179.5 (91.7)(c) 11.0 98.8
--------- -------------- -------------- ---------
Total Current Liabilities...................... 1,048.8 (582.6) 13.5 479.7
-------------- -------------- -------------- ---------
Long-Term Debt................................. 2.5 128.0 (b) (14.8) 115.7
Capital Lease Obligations...................... 2.2 2.2
Other Long-Term Liabilities.................... 54.9 (29.6)(c) 10.0 35.3
---------------- -------------- -------------- ---------
Total Liabilities.............................. 1,108.4 (484.2) 8.7 632.9
-------------- -------------- -------------- ---------
Shareholders' (Deficit) Equity
Old Series A Preferred Stock................... 21.2 (21.2)(d) -
Old Common Stock............................... 4.1 (4.1)(d) -
New Common Stock............................... - 0.9 (d) 0.9
Old Warrants of Participation.................. 0.6 (0.6)(d) -
New Warrants-Reorganized JWP................... - - 2.2 2.2
Capital surplus................................ 204.2 25.0 (d) (151.2) 78.0
Cumulative translation adjustment.............. (6.1) 6.1 -
Retained Earnings (Deficit).................... (526.3) 463.4 (e) 62.9 -
--------------- -------------- -------------- ---------
Total Shareholders' (Deficit) Equity........... (302.3) 463.4 (80.0) 81.1
---------- -------------- -------------- ---------
Total Liabilities and Shareholders' (Deficit)
Equity....... $806.1 $(20.8) $(71.3) $714.0
================ ============== ============== =========
See Notes to Estimated Pro Forma Consolidated Balance Sheet.
</TABLE>
NOTES TO ESTIMATED PRO FORMA CONSOLIDATED BALANCE SHEET
(Unaudited)
The following notes set forth an explanation of the
assumptions
used in preparing the unaudited Estimated Pro Forma Consolidated
Balance Sheet as of December 31, 1993. All amounts are in
millions.
(a) To reclassify certain assets and liabilities as SellCo Net
Assets and to reclassify certain assets and liabilities included
in Net Assets Held For Sale as part of the continuing operation.
JWP INC. and SUBSIDIARIES
ESTIMATED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1993
(unaudited)
<TABLE>
<CAPTION>
Reclassify
NAHFS,
SellCo As
Historical Net Assets Reclassified
---------- ---------- ------------
(in millions)
ASSETS
<S> <C> <C> <C>
Current Assets
Cash and Cash Equivalents......................... $39.5 $(2.1) $37.4
Accounts Receivable, net................................. 455.9 (14.4) 441.5
Costs in Excess of Billings........................ 62.1 0.2 62.3
Inventories.......................................... 5.2 0.2 5.4
Prepaid Expenses and Other............................ 13.2 (3.1) 10.1
Net Assets Held For Sale ("NAHFS").................... 20.5 (20.5) -
SellCo Net Assets............................ - 12.2 12.2
---------- ---------- ------------
Total Current Assets......................... 596.4 (27.5) 568.9
Net Assets Held For Sale ("NAHFS").................. 63.1 (63.1) -
SellCo Net Assets........................ - 98.1 98.1
Investments, Notes and Other Long Term Receivables. 19.7 (9.0) 10.7
Insurance Funds Held in Escrow (1)................. 21.4 - 21.4
Plant, Property and Equipment, net. ............... 39.3 1.2 40.5
Other Assets
Excess of cost of acquired businesses over net assets, less
amortization.. 59.0 - 59.0
Miscellaneous.................................... 7.5 - 7.5
---------- ---------- ------------
66.5 - 66.5
---------- ---------- ------------
Total Assets............................ $806.4 $(0.3) $806.1
========== ========== ============
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
Current Liabilities
Notes Payable............................. $0.2 - $0.2
Current Maturities of Long Term Debt and Capital Lease
Obligations........ 2.3 0.2 2.5
Debt in Default................. 501.0 - 501.0
Accounts Payable............. 209.9 (2.3) 207.6
Billings in Excess of Costs ............. 115.2 0.2 115.4
Federal Income Taxes Payable (2). ....... 1.6 - 1.6
State Income Taxes Payable (2)... ....... 2.7 - 2.7
Accrued Payroll (2)............... 37.9 0.4 38.3
Accrued Expenses, Other (2)............. 177.9 1.6 179.5
---------- ---------- ------------
Total Current Liabilities.......... 1,048.7 0.1 1,048.8
Long Term Debt and Capital Lease
Obligations.............................. 4.7 - 4.7
Other Long Term Liabilities...... 55.3 (0.4) 54.9
---------- ---------- ------------
Total Liabilities............... .... $1,108.7 $(0.3) $1,108.4
Shareholders' (Deficit) Equity
Preferred Stock............. 21.2 - 21.2
Common Stock.............. 4.1 - 4.1
Warrant of Participation........ 0.6 - 0.6
Cumulative Translation Adjustment... (6.1) - (6.1)
(Deficit)........................... (526.3) - (526.3)
---------- ---------- ------------
Total Shareholders' (Deficit) Equity $(302.3) - $(302.3)
---------- ---------- ------------
Total Liabilities and Shareholders' (Deficit)
Equity...................... $806.4 $(0.3) $806.1
========== ========== ============
- ------
(1) Included in Condensed Consolidated Balance Sheet in "Other
assets, miscellaneous"
(2) Included in December 31, 1993 Condensed Consolidated Balance
Sheet in "Other accrued expenses and liabilities".
</TABLE>
NOTES TO ESTIMATED PRO FORMA CONSOLIDATED BALANCE
SHEET-(Continued)
(Unaudited)
(b) Reflects the discharge of old debt and issuance of new debt
under the Plan
as follows:
<TABLE>
<CAPTION>
Historical Restructure Pro
Carrying Discharge/ Forma
Amount Exchange Balance
---------- --------
(in millions)
<S> <C> <C> <C>
Senior Notes Payable Under Revolving Credit Facility $155.8 $(155.8) -
Senior Notes Payable Under Various Indentures............ 328.6 (328.6)
Subordinated Note Payable................................. 9.6 (9.6) -
Convertible Subordinated Debentures........................ 7.0 (7.0) -
------ -----------
Total Debt in Default..................................... $501.0 $(501.0) -
======== ===========
Other Senior Notes (included in current maturities of
long-term debt)................................. $0.7 $(0.7) -
========= ===========
New 7% Series A Senior Secured Notes (included in long term
debt).......................... - $60.8 $ 60.8
New 7% Series B Senior Secured Notes (included in current
maturities of long term debt)........................ - 11.4 11.4
New 11% Subordinated Notes (included in long-term debt) - $62.2 $62.2
New 12% SellCo Subordinated Contingent Payment Notes... - 47.7 47.7
Estimated Discount to Reflect Amounts Available to Repay SellCo
Notes........................................ - $(21.9) $(21.9)
-------- ----------- --------
$25.8 $25.8
New 8% Supplemental SellCo Note (included in long-term debt) - $ 5.0 $ 5.0
=========== ========
Total SellCo Subordinated Contingent Payment Notes (deducted)
from long term portion of SellCo Net Assets).............. - $20.8 $20.8
=========== ========
Total......................................... $501.7 $(341.5) $160.2
======= =========== ========
</TABLE>
The proforma adjustments to the recorded debt balances reflect
the differences between the historical carrying amounts of the
old debt securities and the estimated face amount of the new
debt
securities issued under the plan. The 7% Series B Senior Secured
Notes are included in the current maturities of long term debt
because JWP anticipates that such notes will be redeemed within
approximately one year from the net proceeds of sales of
collateral assets.
(c) Reflects reduction of recorded amounts of accrued interest,
impaired claims and unexpired leases to be rejected by JWP as
follows:
<TABLE>
<CAPTION>
Other Accounts AccruedAccrued Long-Term
Payable Expenses Payroll Liabilities Total
-------- -------- ------- ----------- ------
(in millions)
<S> <C> <C> <C> <C> <C>
Payables................................... $0.4 $- $- $- $0.4
Insurance related liabilities.............. - 9.6 - 26.8 36.4
Accrued interest........................... - 43.3 - - 43.3
Intercompany balance due to JWP Information
Services, Inc. ............................ - 24.9 - - 24.9
Foreign debt guarantees.................... - 6.0 - - 6.0
Stock price guarantees..................... - 5.1 - - 5.1
Preferred dividends in arrears............. - 2.3 - - 2.3
Unexpired leases........................... - - - 1.7 1.7
Other impaired claims...................... - 0.5 0.2 1.1 1.8
-------- -------- ------- ----------- ------
Total...................................... $ 0.4 $91.7 $0.2 $29.6 $121.9
======== ======== ======= =========== ======
</TABLE>
NOTES TO ESTIMATED PRO FORMA CONSOLIDATED BALANCE
SHEET-(Continued)
(Unaudited)
(d) Reflects the elimination of the recorded book value of Old
Common Stock, Old Preferred Stock and Warrants of Participation
upon consummation of the Plan and the issuance of 9,326,425
shares of New Common Stock, $.10 par value.
(e) Deficit was reduced by the following:
Net reduction in debt upon discharge of old debt and issuance of
new debt.
<TABLE>
<CAPTION>
<S> <C>
See Note (b)
above...................................................... $341.5
Reduction in recorded amounts of accrued interest, debt and
stock price guarantees,
estimated amounts accrued in respect of unexpired leases to be
rejected, and other impaired claims. See Note (c)above. 121.9
------
$463.4
</TABLE>
(f) JWP has accounted for the reorganization using fresh-start
reporting. Accordingly, all assets and liabilities are restated
to reflect their reorganization value, which approximates
estimated fair value at the date of reorganization assuming a
reorganization equity value of $81.1 million on the basis of a
valuation made by JWP's financial advisors. See "Financial
Information-Valuation." The following table summarizes the
estimated adjustments required to record the reorganization
under
fresh-start accounting. The adjustments made to the individual
assets and liabilities are preliminary estimates. The allocation
of reorganization value to individual assets and liabilities
will
be made after consummation of the Plan.
NOTES TO ESTIMATED PRO FORMA CONSOLIDATED BALANCE
SHEET-(Continued)
(Unaudited)
Footnote (f)-(continued)
Table to Note (f)
Fresh Start and Other Reorganization Adjustments
<TABLE>
<CAPTION>
Cost in Property Retained
Excess of Plant & Misc. Earnings
Billings Equipment Goodwill Assets (Deficit)
----------- --------- --------- ----------- ---------
(in millions)
ASSETS
<S> <C> <C> <C> <C> <C>
To eliminate goodwill and other
intangible assets....................... (59.0) (5.5) (64.5)
To reflect cost in excess of billings at
estimated net present value............. (2.3) (2.3)
To reflect fixed assets at estimated
fair market value....................... (6.3) (6.3)
To reflect unamortized debt issuance
expense on post-confirmation
working capital credit facility......... - - - 1.8 1.8
----------- --------- --------- -----------
$(2.3) $(6.3) $(59.0) $(3.7)
=========== ========= ========= ===========
</TABLE>
<TABLE>
<CAPTION>
Warrants- Long-term
Reor
Debt, Long- Other - Cumulative
Current Accrued Accrued term Long-term ganized Capital Translation
Portion Payroll Expenses Debt Liabilities JWP Surplus Adjustments
--------- ------- -------- -------- ----------- --------- --------- -----------
LIABILITIES
<S> <C> <C> <C> <C> <C> <C> <C> <C>
To record 7% Series A and Series B
Senior Notes at estimated fair
market value using a discount rate
of 12%.................................. (0.5) (4.2) 4.7
To record 11% Series C Notes at
estimated fair market value using
a discount rate of 14%.................. (9.3) 9.3
To record 8% Supplemental SellCo
Notes at estimated fair market
value using a discount rate of
14%..................................... (1.3) 1.3
To adjust for above fair market value
for leases.............................. 5.0 (5.0)
To reflect accrued severance and
other post-employment liabilities....... 3.0 (3.0)
To reflect accrued interest on
Debtor-in-Possession financing.......... 1.3 (1.3)
To reflect accrued professional and
other fees related to confirmation
of the Plan............................. 7.5 (7.5)
To reflect liability for payment in
lieu of issuance of certain Series B
Senior Notes............................ 0.4 (0.4)
To reflect accrued debt issuance
costs on post-confirmation
working capital facility................ 1.8 (1.8)
To record potential Federal and
State income tax liability arising
from sale of water companies............ 5.0 (5.0)
To reflect issuance of new warrants..... 2.2 (2.2)
To eliminate cumulative translation
adjustments............................. 6.1 (6.1)
To eliminate deficit.................... (229.2) 229.2
To record reorganization equity
value in excess of par value of
common stock............................ - - - - - - 78.0 - (78.0)
--------- --------------- -------- ----------- --------- --------- -----------
- --------- $(0.5) $3.0 $11.0 $(14.8) $10.0 $2.2 $(151.2) $6.1 $62.9
========= =============== ======== =========== ========= ========= ===========
</TABLE>
JWP INC.
PROJECTED PRO FORMA CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
Estimated
Proforma
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
--------- -------- -------- -------- --------
(in millions)
ASSETS
<S> <C> <C> <C> <C> <C>
Cash and Cash Equivalents................... $ 37.4 $ 39.9 $ 73.7 $85.6 $106.9
Accounts Receivable......................... 441.5 363.3 377.1 411.8 430.2
Costs in Excess of Billings................. 60.0 53.3 51.1 54.7 56.7
Inventories................................. 5.4 5.4 6.1 6.6 6.7
Prepaid Expenses and Other.................. 10.1 8.5 10.0 10.9 11.4
SellCo Net Assets........................... 12.2 72.4 0.0 0.0 0.0
--------- ---------------- -------- --------
Total Current Assets........................ 566.6 542.8 518.0 569.6 611.9
SellCo Net Assets........................... 77.3 0.0 0.0 0.0 0.0
Investments, Notes & Long Term Receivables.. 10.7 14.9 13.7 13.7 13.7
Insurance Funds Held in Escrow.............. 21.4 35.8 43.9 51.2 56.4
Other Restricted Cash....................... 0.0 4.8 5.1 5.1 0.1
Property, Plant & Equipment................. 88.1 95.4 104.5 113.8 123.5
Less: Accumulated Depreciation.............. 53.9 63.6 73.6 82.9 92.8
--------- --------------- -------- --------
Property, Plant & Equipment, Net............ 34.2 31.8 30.9 30.9 30.7
Other Assets
Intangibles-Other........................... 3.8 2.7 1.8 0.9 0.6
--------- -------- -------- -------- --------
TOTAL ASSETS................................ $714.0 $632.8 $613.4 $671.4 $713.4
========= ================ ======== ========
LIABILITIES
Notes Payable............................... $ 0.2 $ 0.0 $ 0.0 $ 0.0 $ 0.0
Long-Term Debt, Current Portion............. 12.1 64.4 0.3 0.3 0.3
Capital Lease Obligation, Current Portion... 0.6 0.4 0.2 0.2 0.2
Accounts Payable............................ 207.2 177.0 190.3 209.1 216.8
Billings in Excess of Costs................. 115.4 79.5 81.3 85.1 87.8
Federal Income Taxes Payable................ 1.6 1.6 1.6 6.6 1.6
Other Income Taxes Payable.................. 2.7 2.6 5.6 4.4 4.4
Accrued Payroll and Benefits................ 41.1 37.8 38.8 39.6 40.2
Accrued Expenses, Other..................... 98.8 82.0 82.4 83.4 84.4
--------- ---------------- -------- --------
Total Current Liabilities................... 497.7 445.3 00.5 428.7 435.7
Long-Term Debt.............................. 115.7 66.5 71.5 73.1 74.9
Capital Lease Obligation, Long-Term......... 2.2 1.2 0.9 0.5 0.2
Other Long-Term Liabilities................. 35.3 50.1 58.2 58.9 62.6
--------- ---------------- -------- --------
TOTAL LIABILITIES........................... $632.9 $563.1 $531.1 $561.2 $573.4
--------- ---------------- -------- --------
SHAREHOLDER'S EQUITY (DEFICIT):
Warrants-Reorganized JWP.................... 2.2 2.2 2.2 2.2 2.2
Paid in Capital/Common Stock-12/31/93....... 78.9 78.9 78.9 78.9 78.9
Pre-Reorganization Tax Benefits............. 0.0 0.0 3.4 8.3 10.0
--------- ---------------- -------- --------
Total Shareholders' Equity (Deficit)........ 81.1 81.1 84.5 89.4 91.1
Retained Earnings
Beginning of Year........................... 0.0 0.0 (11.4) (2.2) 20.8
Net Income/(Loss)........................... 0.0 (11.4) 9.2 23.0 28.1
--------- ---------------- -------- --------
Ending Year Retained Earnings............... 0.0 (11.4) (2.2) 20.8 48.9
--------- -------- -------- -------- --------
TOTAL SHAREHOLDERS' EQUITY.................. $81.1 $69.7 $82.3 $110.2 $140.0
--------- ---------------- -------- --------
TOTAL LIABILITIES & SHAREHOLDERS'
EQUITY...................................... $714.0 $632.8 $613.4 $671.4 $713.4
========= ======== ======== ======== ========
</TABLE>
See accompanying "Notes To Estimated Pro Forma Consolidated
Balance Sheet" and "Projected Financial Information: 1994-1997
Assumptions."
<TABLE>
<CAPTION>
JWP INC.
PROJECTED CONSOLIDATED INCOME STATEMENTS
(unaudited)
(For the Twelve Months Ended)
---------------------------------------
12/31/94 12/31/95 12/31/96 12/31/97
--------- --------- --------- ---------
($ Millions)
<S> <C> <C> <C> <C>
Revenue..................................... $1,515.5 $1,660.4 $1,823.9 $1,928.8
Cost of Sales............................... 1,369.0 1,490.0 1,631.8 1,721.5
--------- --------- --------- ---------
Gross Profit................................ 146.5 170.4 192.1 207.3
Gross Margin %.............................. 9.7% 10.3% 10.5% 10.7%
Selling, General & Administrative Expense... 137.1 136.7 146.2 153.2
S, G & A % Revenue.......................... 9.0% 8.2% 8.0% 7.9%
Operating Income............................ 9.4 33.7 45.9 54.1
Operating Margin %.......................... 0.6% 2.0% 2.5% 2.8%
Interest Expense, Net....................... 18.0 17.4 9.4 9.2
--------- --------- --------- ---------
Income Before Taxes......................... (8.6) 16.3 36.5 44.9
Income Taxes................................ 2.8 7.1 13.5 16.8
--------- --------- --------- ---------
Net Income (Loss)........................... $(11.4) $ 9.2 $23.0 $28.1
========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
JWP INC.
PROJECTED CONSOLIDATED STATEMENTS OF CASH FLOW
(unaudited)
(For the Twelve Months Ended)
---------------------------------------
12/31/94 12/31/95 12/31/96 12/31/97
--------- --------- --------- ---------
($ Millions)
<S> <C> <C> <C> <C>
Net Income.................................. $(11.4) $ 9.2 $23.0 $28.1
Non-cash expenses
Depreciation................................ 8.1 7.7 7.0 7.6
Amortization................................ 1.1 0.9 0.9 0.3
Non-Cash Interest/Accretion................. 16.5 9.2 1.9 2.1
Pre-Reorganization Tax Benefits Taken....... 0.0 3.4 4.9 1.7
Change in Operating Assets and Liabilities.. 0.4 5.6 (11.6) (13.8)
--------- --------- --------- ---------
Cash Flow From Operations................... 14.7 36.0 26.1 26.0
Reduction in SellCo Net Assets.............. 17.2 72.4 0.0 0.0
Payment of subsidiary & corporate debt...... (14.8) (68.7) (0.7) (0.7)
--------- --------- --------- ---------
Cash Flow From Financing Activities......... 2.4 3.7 (0.7) (0.7)
Sale of Miscellaneous Assets................ 0.4 0.0 0.0 0.0
Capital Expenditures........................ (7.2) (7.8) (8.0) (8.5)
Decrease (Increase) in Other Assets, Net.... (7.8) 1.9 (5.5) 4.5
--------- --------- --------- ---------
Cash From (Used In) Investment Activities... (14.6) (5.9) (13.5) (4.0)
Increase In Cash............................ $2.5 $33.8 $11.9 $21.3
========= ========= ======= =========
Cash At Beginning Of Period................. $37.4 $39.9 $73.7 $85.6
Cash At End of Period....................... $39.9 $73.7 $85.6 $106.9
</TABLE>
See accompanying "Notes to Estimated Pro Forma Consolidated
Balance Sheet" and "Projected Financial Information:
1994-1997-Assumptions."
ESTIMATED PRO FORMA CAPITALIZATION
The following unaudited table sets forth the unaudited
estimated consolidated capitalization of JWP at December 31,
1993, and the unaudited estimated consolidated pro forma
capitalization of JWP as of such date as adjusted to give effect
to the restructuring as if it became effective on such date. The
pro forma information presented below assumes a revaluation of
JWP's assets and liabilities pursuant to principles of
Fresh-Start Accounting. The information presented below should
be
read in conjunction with the unaudited Condensed Consolidated
Financial Statements and the unaudited Pro Forma Financial
Information and related notes appearing elsewhere herein. See
"Financial Statements" and "Pro Forma Financial Information."
Pro Forma Adjustments to Record
Plan Confirmation (a)
<TABLE>
<CAPTION>
- -------------------------------------------------
Estimated
Historical Discharge and Pro Forma
12/31/93 Exchange of Fresh Start 12/31/93
(Unaudited) Stock Adjustments (Unaudited)
- ----------- ------------- ----------- -----------
(in millions)
<S> <C> <C> <C> <C>
Notes Payable
Comstock Canada and miscellaneous domestic
companies............................................. $0.2 $- $- $0.2
New Working Capital Facility.......................... - - - -
Current Maturities of Long-Term Debt and Capital
Lease Obligations(b).................................. 2.5 (0.7) - 1.8
New 7% Series B Senior Notes.......................... - 11.4 (0.5) 10.9
Debt in Default:
Senior Notes Payable Under Revolving Credit Facility.. 155.8 (155.8) - -
Senior Notes Payable Under Various Indentures......... 328.6 (328.6) - -
Subordinated Notes Payable............................ 9.6 (9.6) - -
Convertible Subordinated Debentures................... 7.0 (7.0) - -
----------- ------------- ----------- ----------
Total Short-Term Debt................................. 503.7 (490.3) (0.5) 12.9
----------- ------------- ----------- ----------
Long-Term Debt:
Capital Lease Obligations and Other Long-Term Debt.... 4.7 - - 4.7
New 7% Series A Senior Notes.......................... - 60.8 (4.2) 56.6
New 12% SellCo Subordinated Notes..................... - 20.8 - 20.8
New 11% Series C Notes................................ - 62.2 (9.3) 52.9
New 8% Supplemental SellCo Notes...................... - 5.0 (1.2) 3.8
----------- ------------ ----------- -----------
Subtotal Long-Term Debt............................... 4.7 148.8 (14.7) 138.8
Less Reclassification of New 12% SellCo Notes to
SellCo Net Assets..................................... - (20.8) - (20.8)
----------- ------------- ----------- -----------
Total Long-Term Debt.................................. 4.7 128.0 (14.7) 118.0
----------- ------------- ----------- -----------
Shareholders' Deficit (Equity):
Old Series A Preferred Stock.......................... 21.2 (21.2) - -
Old Common Stock...................................... 4.1 (4.1) - -
New Common Stock...................................... - 0.9 - 0.9
Old Warrants of Participation......................... 0.6 (0.6) - -
Warrants-Reorganized JWP.............................. - - 2.2 2.2
Capital Surplus....................................... 204.2 25.0 (151.2) 78.0
Cumulative Translation Adjustment..................... (6.1) - 6.1 -
(Deficit)............................................. (526.3) 463.4 62.9 -
----------- ------------- ----------- -----------
Total Shareholders' (Deficit) Equity.................. (302.3) 463.4 (80.0) 81.1
----------- ------------- ----------- -----------
Total Capitalization.................................. $206.1 $101.1 $(95.2) $212.0
=========== ============= =========== ===========
</TABLE>
- ------
(a) See Notes to Estimated Pro Forma Balance Sheet (Unaudited)
for a discussion of the pro forma adjustments.
(b) Includes $0.2 miscellaneous capital lease obligations that
have been excluded from the previously presented "Historical And
Pro Forma Capitalization" table.
D. VALUATION OF REORGANIZED JWP
1. Lazard Freres & Co., Financial Advisor to the Debtor. In
connection with the distribution of the New Securities under the
Plan, it is necessary to determine the enterprise value of
Reorganized JWP for the purpose of creating a capital structure
of Reorganized JWP and to allocate that structure among
creditors
and interest holders. Accordingly, JWP directed its financial
advisor, Lazard Freres & Co. ("Lazard"), to make a determination
of the enterprise value of Reorganized JWP as of an assumed date
of January 1, 1994, based on information made available by JWP
to
Lazard. "Enterprise value" is the going concern present value of
Reorganized JWP on an unleveraged basis.
In reaching its conclusions, Lazard, among other steps (a)
reviewed certain public and non-public financial statements of
JWP for the three fiscal years ended December 31, 1993; (b)
reviewed certain internal financial and operating data
concerning
the operating businesses of JWP, including financial projections
through December 31, 1997, as prepared by JWP management and
summarized in the projected financial information included in
this Disclosure Statement; (c) prepared a discounted cash flow
analysis of the JWP businesses, based on the projected financial
information and discussions with the JWP tax professionals as to
the amount and availability of the JWP net operating loss
carryforwards8; (d) analyzed the market valuations of certain
publicly traded companies whose operating businesses are
believed
to be comparable to those of JWP; (e) considered the financial
terms, to the extent publicly available, of certain acquisitions
of companies whose operating businesses were determined to
be comparable to those of JWP as well as considered the market
prices of certain relevant assets being sold by JWP; (f)
considered certain general economic and industry information
relevant to the businesses of JWP; (g) discussed the current
operations and prospect of the businesses with the senior
management of JWP; (h) reviewed, from a financial point of view,
the Plan and the terms of the New Debt, New Common Stock and New
Warrants, assuming consummation of the JWP Plan according to its
terms and conditions; and (i) made such other investigations and
analyses as Lazard deemed necessary or appropriate to its
determination.9
- ------
8 To arrive at the discounted operating asset valuation of the
on-going MES operations as well as to arrive at the discounted
value of the net operating losses of Reorganized JWP, Lazard
used
a range of discount rates of between 10% and 30% for the
domestic
MES operations and a range of discount rates of between 20% and
40% for the international MES operations. In addition, to
estimate the operating asset value of MES beyond the JWP
projection period, which ends December 31, 1997, Lazard used a
range of multiples of between 3 and 7-and then capitalized the
1997 EBITDA at these multiples before discounting this
capitalized value back at the rates described above and adding
this value to the discounted value of the MES free cash flow for
the years 1994 through 1997. For this purpose, EBITDA equals
earnings before interest, taxes, depreciation and amortization.
9 For illustrative purposes, the following description explains
how Lazard arrived at the total enterprise value of Reorganized
JWP of $228.9 million (which is between the range of $225
million
and $250 million). First, Lazard calculated the operating asset
value of MES at $108.9 million, using the methodology described
in the footnote immediately preceding. To that, Lazard added the
present value of the Dynalectric companies, of $26 million, as
well as the present value of the various assets and operations
to
be sold as part of the Plan of Reorganization, which Lazard
calculated at $88.9 million.
<PAGE>
Lazard based its valuation of the Dynalectric companies on
Lazard's attempts in 1993 to sell the Dynalectric companies as a
separate company to a third party. The Lazard valuation of JWP's
interest in Jamaica Water Securities Company was based on
Lazard's view of what the public market equity value, net of
taxes payable as a result of the sale, of the water companies
would be in 1994. The values of the assets to be sold, aside
from
the water companies, as part of the Plan of Reorganization, were
provided by JWP management, in part based upon transactions
which
have already been consummated or for which agreements to sell
have been reached with third parties and in part based upon JWP
management's estimate of the net realizable value of the various
assets and operations including taking into account the expected
timing of any of these dispositions. Finally, to these various
asset values, Lazard added the present value of Reorganized
JWP's
net operating losses in accordance with the methodology
described
in the footnote immediately preceding.
Lazard relied on the accuracy and reasonableness of the
projections and the underlying assumptions as prepared by
management of JWP. Lazard's valuation assumes that the operating
results projected by JWP will be achieved in all material
respects, including revenue growth, improvements in operating
margins, earnings and cash flow, improvement in the collection
of
accounts receivable and other techniques for managing working
capital, expenses and other elements, as well as that
Reorganized
JWP will have access to working capital financing and that its
access to surety and bid bonds will continue. Certain of the
projected results are materially better than certain historical
results of operations of JWP. No assurance can be given that the
projected results will be achieved. To the extent that the
valuation is dependent on JWP's achievement of the projections,
the valuation must be considered speculative. Lazard has also
assumed that general financial and market conditions as of the
assumed Effective Date of the Plan will not differ materially
from those conditions prevailing as of the date of this
Disclosure Statement.
As a result of its analysis, reviews, discussions and
considerations and based upon economic, monetary and market
conditions existing on the date hereof, Lazard estimates that
the
enterprise value of Reorganized JWP and its subsidiaries as of
January 1, 1994 would be in a range of between $225 million
to $250 million. Lazard estimates the equity value of
Reorganized
JWP at $81.1 million.10 It is not a prediction of the future
trading prices of securities of Reorganized JWP. Events
occurring
after the date hereof could materially affect the assumptions
used in preparing this valuation and Lazard has not undertaken
to reaffirm or to revise this valuation or otherwise comment on
any events occurring after the date hereof.11
2. Rothschild Inc. Financial Advisor to the Junior Committee.
Rothschild Inc. ("Rothschild") was retained by the Junior
Committee to perform financial advisory services including, but
not limited to, an enterprise valuation of Reorganized JWP.
In conducting its analyses to develop the enterprise
valuation,
Rothschild reviewed, analyzed and considered certain information
including but not limited to:
(a) historical financial information for JWP;
(b) projected financial statements for 1994 to 1997 for JWP
prepared by management of JWP;
(c) information provided by JWP's management regarding assets
held for sale;
(d) analyses, reports and information prepared and provided by
Lazard, JWP's financial advisor;
(e) various reports, memoranda, analyses and correspondence by
JWP and other parties to the bankruptcy produced by them through
document discovery requested by counsel to the Junior Committee;
(f) market valuations of companies in businesses similar to
those of JWP;
(g) conditions in the capital markets and general economic
conditions; and
(h) the draft Amended Disclosure Statement dated May 31, 1994.
- ------
10 To arrive at the equity value of Reorganized JWP of $81.1
million, which is the opening pro-forma book value of
Reorganized
JWP, Lazard used the $228.9 total enterprise valuation described
above and from that subtracted the present value of the
post-reorganization obligations of Reorganized JWP: i.e., the
present value of the reinstated debt from MES' international
operations as well as estimated outstandings under the DIP
facility ($6.7 million): the present value of the Series A
Secured Notes ($56.6 million); the present value of the Series B
Secured Notes ($10.8 million); the present value of the Series C
Notes ($52.9 million); the present value of the JWP Supplemental
SellCo Note ($3.8 million); and the present value of the SellCo
Subordinated Contingent Payment Notes ($17 million).
11 Lazard did, however, review the Debtor's financial statements
for the fiscal quarter ended March 31, 1994 (see Exhibit 4
hereto) and concluded that the enterprise value would be
slightly
higher, but not of a material difference. Based on such
financial
statements, Lazard also concluded that there is no change in the
equity value.
<PAGE>
Rothschild also conferred with the senior management of JWP
and
Jamaica Water Supply Company to discuss and review the business
of the operating subsidiaries of JWP and the aforementioned
projections which management prepared.
In arriving at its conclusion as to valuation, Rothschild
relied on the accuracy of the information and reasonableness of
the projections and underlying assumptions provided by JWP's
management.
Based on the analyses of the above information, and other
information deemed relevant by Rothschild, Rothschild believes
that as of January 1, 1994, the enterprise value of Reorganized
JWP is between $345 million and $415 million12. While Rothschild
believes that this is the inherent value of Reorganized JWP,
it is unlikely that this value will be reflected in the trading
value of the Reorganized JWP securities in the near term.
3. Differences in Enterprise Value. Although the financial
advisors for the Debtor and the Junior Committee, Lazard and
Rothschild, arrived at significantly different estimated
enterprise values for JWP, it is important to note that the
financial advisors express their own independent opinions. It is
not unusual, as in this case, for highly qualified experts to
arrive at different valuations utilizing essentially the same
information. In conducting valuation analyses, experts may use
similar techniques but still come to different conclusions based
on the judgmental nature by which such techniques are applied.
The valuation reports of Lazard and Rothschild may be examined
by any party in interest who has executed and delivered a
confidentiality agreement, which agreement may be obtained from
counsel to the Debtor.
- ------
12 Rothschild's calculation of the enterprise value of
Reorganized JWP is based on a sum of the values of (i) the
ongoing operating assets of JWP, including the Dynalectric
Companies, (ii) the value of Jamaica Water Supply Company and
Sea
Cliff Water Company, (iii) the present value of the assets held
for sale, and (iv) the present value of the net operating
losses.
<PAGE>
Rothschild valued the ongoing operating assets of JWP by
discounting the cash flows attributable to the assets, after
extending JWP's projections by one year to 1998, using a
discount
rate of between 18% and 22% and a terminal multiple of EBITDA in
1998 of between 5.0 and 7.0 times. In addition to the value of
the discounted cash flows, Rothschild also considered the value
of excess cash in JWP, investments held by JWP, other than
assets
held for sale, and of the possible substitution of cash held in
escrow for insurance purposes by letters
of credit.
Rothschild valued Jamaica Water Supply Company and Sea Cliff
Water Company based on Rothschild's view of the likely trading
value of those companies as public companies. The value
attributed to JWP's interest in the Water Companies was
calculated by taking account of the value attributable to
minority shareholders and the taxes payable by JWP on the sale
of
its interest.
The values of assets held for sale as part of the reorganization
of JWP, other than the Water Companies, were provided by the
management of JWP and reviewed by Rothschild. Rothschild
calculated the present value of assets held for sale
using an average 9 month period to the receipt of proceeds and a
discount rate of 20%.
Rothschild valued JWP's net operating losses assuming that the
Internal Revenue Service adopts Lazard's equity valuation for
JWP
and by using a discount rate of between 18% and 22%.
IV. SUMMARY OF THE PLAN
The following discussion is qualified in its entirety by the
provisions of the Plan, which is annexed hereto as Exhibit 1.
In addition to administrative expense claims and priority tax
claims, which will be paid in full in accordance with the
Bankruptcy Code, the Plan divides all other claims against and
equity interests in JWP into eleven classes.
<TABLE>
<CAPTION>
CLASS
STATUS
<S> <C>
- -------------------------------------
Class 1: Priority Claims...................................Unimpaired-not entitled to vote
Class 2: Old Note Claims...................................Impaired-entitled to vote
Class 3: Old Credit Agreement Claims.......................Impaired-entitled to vote
Class 4A: Convenience: $10,000 and under....................Unimpaired-not entitled to vote
Class 4B: Other Borrowed Money Claims.......................Impaired-entitled to vote
Class 4C: General Unsecured Claims..........................Impaired-entitled to vote
Class 5: Unimpaired Contingent Claims......................Unimpaired-not entitled to vote
Class 6: Subordinated Debt Claims..........................Impaired-entitled to vote
Class 7: Contingent and Statutory Subordinated Claims......Impaired-entitled to vote
Class 8: Old Preferred Stock...............................Impaired-entitled to vote
Old Common Stock (including Employee Stock Options
Class 9: and Other Rights).................................Impaired-entitled to vote
Class 10: Class Action Plaintiffs...........................Impaired-entitled to vote
Class 11: Warrants of Participation.........................Impaired-entitled to vote
</TABLE>
A. PROPERTY TO BE DISTRIBUTED UNDER THE PLAN
The reorganization of JWP will result, under the Plan, in a
corporate restructuring that will, among other things, reflect
the New Securities and, in the case of New Debt Securities, the
sources of payment therefor. Reorganized JWP will have two
significant wholly-owned subsidiaries:
- -- MES Corporation ("MES"), a newly-organized nondebtor
subsidiary and a holding company which will own, directly and
indirectly, the wholly-owned Nondebtor Subsidiaries that
constitute the continuing core business operations providing
mechanical/electrical services.
- -- SellCo Corporation ("SellCo"), a newly-organized non-debtor
subsidiary and a holding company which is a co-proponent of the
Plan and will own, directly and indirectly, the Nondebtor
Subsidiaries which constitute the operating businesses that are
actively being marketed or held for eventual sale.
Reorganized JWP will also retain, as direct subsidiaries, the
five Nondebtor Subsidiaries listed on Schedule 4 of the Plan,
the
stock of which is pledged as the substitute for the original
Software House Collateral (see "Background Information-Software
House Collateral") and Dyn Specialty Contracting, Inc.
(see "Reorganized JWP").
In addition to the cash payments to be made in respect of
administrative expense, priority tax and Class 4A claims, the
following New Securities will be distributed, as applicable,
under the Plan to Classes 2, 3, 4B, 4C, 6, 7 8, 9, 10 and 11:
1. Senior Secured Notes. Reorganized JWP will issue to Classes
2, 3, 4B and 4C, as applicable, two series of senior secured
notes:
- -- Series A Senior Secured Notes (the terms of which are
described immediately below): as a result of the Intercreditor
Agreement, Series A Senior Secured Notes are to be issued (i) in
the principal amount of $51 million to the Old Note Holders and
(ii) to the holders of Class 4B Borrowed Money Claims and Class
4C General Unsecured Claims in the principal amount necessary to
provide the same percentage of their aggregate unsecured debt as
the percentage $51 million is of the aggregate unsecured debt in
the amount of $514,386,200 held by the Old Note Holders and Old
Credit Agreement Holders. $51 million equals 9.9% of
$514,386,200. Thus, the principal amount of Series A Senior
Secured Notes issued to Class 4B and Class 4C will be equal to
9.9% of the aggregate Class 4B and 4C claims ultimately allowed.
See below "Classification and Treatment-General Unsecured
Creditors-Class 4C" for a table setting forth the range of
Series
A Senior Secured Notes that could be issued to Classes 4B and
4C.
- -- Series B Senior Secured Notes in the principal amount of
$11,357,000 recognizes the secured portion of the debt held by
the Lenders. See "Background Information."
The terms of the two series of senior secured notes are:
a. Series A Senior Secured Notes. Three-year Series A 7%
Senior
Secured Notes ("Series A Secured Notes") to be issued by
Reorganized JWP in the initial principal amount of (a)
$51,000,000 to the Class 2 Old Note Holders, plus (b) to holders
of the Class 4B Borrowed Money Claims and Class 4C General
Unsecured Claims, the amount that bears the same ratio to the
aggregate allowed claims of Classes 4B and 4C as $51,000,000
bears to the aggregate allowed unsecured claims of the Old Note
Holders and the holders of Old Credit Agreement Debt, plus (c)
to
Belmont, the Additional Interest Amount unless Reorganized JWP
elects to pay such Additional Interest Amount in cash. The
Series
A Secured Notes will be guaranteed by SellCo, which guaranty
shall be secured by a priority pledge of the capital stock of
each of the Nondebtor Subsidiaries which constitute SellCo
listed
on Schedule 5 of the Plan, subject only to the Working Capital
Lien (see "Summary of the Plan-Conditions Precedent-Working
Capital Facility"), will also be guaranteed by MES, and will be
secured by, among other things, a first priority pledge of the
capital stock of MES* and SellCo, a first priority security
interest in the Series A Substitute Collateral, a second
priority
security interest in the Series B Substitute Collateral, and a
second priority pledge of the capital stock of the Nondebtor
Subsidiaries consisting of the substitute collateral for the
original Software House Collateral listed on Schedule 4 of the
Plan. There is a mandatory redemption of $10,000,000 principal
amount, less any prepayments pursuant to the Indenture governing
the Series A Secured Note, on the second anniversary of the
Effective Date. Interest on the Series A Secured Notes,
commencing on the Effective Date, shall be compounded
semi-annually and payable by the issuance of additional Series A
Secured Notes. For a full description of the terms, conditions
and covenants of the Series A Secured Notes and the form of
Series A Secured Note, see the Series A Secured Note Indenture
annexed to the Plan as Exhibit A.
b. Series B Senior Secured Notes. Three-year Series B 7%
Senior
Secured Notes ("Series B Secured Notes") to be issued by
Reorganized JWP in the initial principal amount of $11,357,000
to
the Class 2 Old Note Holders and the holders of Class 3 Old
Credit Agreement Debt in the respective Class 2 and Class 3
Series B Percentages, plus, to Belmont, the Additional Interest
Amount unless Reorganized JWP elects to pay such Additional
Interest Amount in cash. The Series B Secured Notes will be
guaranteed by SellCo, which guaranty shall be secured by a
pledge
of the capital stock of each of the Nondebtor Subsidiaries
which constitute SellCo listed on Schedule 5 of the Plan,
subject
only to the Working Capital Lien and the lien in favor of the
Series A Secured Notes, will also be guaranteed by MES, and will
be secured by a first priority pledge of the capital stock of
the
Nondebtor Subsidiaries constituting the substitute collateral
for
the original Software House Collateral listed on Schedule 4 of
the Plan and an assignment of a note and a right to a deferred
payment in consideration of the sale of the assets of Maris
Equipment Company, one of the said Nondebtor Subsidiaries, a
first priority security interest in the Series B Cash Collateral
and Substitute Collateral13, a second priority pledge of the
capital stock of MES* and SellCo and a second priority security
interest in the Series A Substitute Collateral.
- ------
13 The Plan also provides that net cash proceeds of the sales of
the stock of Nondebtor Subsidiaries or sales of the assets of
Nondebtor Subsidiaries which are to be collateral for the Series
B Secured Notes received prior to the Effective Date will be
Series B Cash Collateral. Series B Cash Collateral will be
distributed on or shortly after the Effective Date as a
mandatory
prepayment of the Series B Secured Notes. Non-cash proceeds, if
any, of such sales of stock or assets will constitute Series B
Substitute Collateral and continue to secure the Series B
Secured
Notes. Non-cash proceeds of stock or assets of Nondebtor
Subsidiaries which are to be collateral for the Series A Secured
Notes and which are consummated after December 1, 1993 and which
have not been converted to cash prior to the Effective Date will
constitute Series A Substitute Collateral.
* In the event of a default under either the Series A Secured
Note or the Series B Secured Notes, foreclosure on the pledge of
the capital stock of MES may be subject to a "standstill"
agreement with a working capital lender for a period to be
negotiated between the Creditors Committees and a working
capital lender.
<PAGE>
Interest on the Series B Secured Notes shall be compounded
semi-annually, commencing on the Effective Date, and payable by
the issuance of additional Series B Secured Notes. For a
full description of the terms, conditions and covenants of the
Series B Secured Notes and the form of Series B Secured Note,
see
the Series B Secured Note Indenture annexed to the Plan as
Exhibit B.
2. Series C Notes. Reorganized JWP will issue to Classes 2, 3,
4B and 4C, $60,000,000 principal amount of seven-year Series C
11% subordinated notes ("Series C Notes"), plus, to Belmont, the
Additional Interest Amount (unless Reorganized JWP elects to pay
such Additional Interest Amount in cash). The Series C Notes
will
be senior indebtedness of Reorganized JWP, but subordinate
to (i) the Series A and Series B Secured Notes and (ii) up to
$100 million of a new working capital credit facility of
Reorganized JWP or MES, and will be guaranteed by MES subject to
payment in full of the Series A and Series B Secured Notes.
Interest, commencing on the Effective Date, on the Series C
Notes shall be payable, semi-annually, by the issuance of
additional Series C Notes for the first eighteen months after
the
Effective Date and, thereafter, payable quarterly in cash. For a
full description of the terms, conditions and covenants of the
Series C Notes and the form of Series C Note, see the Series C
Note Indenture annexed to the Plan as Exhibit C.
3. SellCo Subordinated Contingent Payment Notes. As the means
of segregating asset sales proceeds under the Plan for the
benefit of impaired creditors, SellCo will issue to Classes 2, 3
and 4B $46,000,000 principal amount of
ten-year 12% subordinated notes (the "SellCo Subordinated
Contingent Payment
Notes"), plus, to Belmont, the Additional Interest Amount
(unless
Reorganized
JWP elects to pay such Additional Interest Amount in cash). The
SellCo
Subordinated Contingent Payment Notes will be junior and
subordinated
indebtedness of SellCo so long as any portion of indebtedness on
account of the
Series A or Series B Secured Notes or the guaranty of SellCo in
respect thereof
remain outstanding. The SellCo Subordinated Contingent Payment
Notes will be
secured by a pledge of the capital stock of the Nondebtor
Subsidiaries owned by
SellCo and listed on Schedule 5 to the Plan, subject only to the
Working
Capital Lien and the lien in favor of the Series A Secured Notes
and the Series
B Secured Notes, and a first priority pledge of the JWP
Supplemental SellCo
Note. See Paragraph 8 below for a summary of the terms of the
JWP
Supplemental
SellCo Note. Subject to the prior payment in full of the Series
A
Secured Notes
and the Series B Secured Notes and establishment of a cash
reserve for the
payment of capital gains taxes arising from the sales of
Nondebtor
Subsidiaries, the Sellco Subordinated Contingent Payment Notes
will be
mandatorily prepayable to the extent of Net Cash Proceeds from
the sale of
stock or the assets of such Nondebtor Subsidiaries. Interest,
commencing on the
Effective Date, on the SellCo Subordinated Contingent Payment
Notes will be
compounded semi-annually and payable in additional SellCo
Subordinated
Contingent Payment Notes until the earlier to occur of payment
in
full of the
original principal amount of such Notes or the maturity date.
If,
at any time
after the fifth anniversary of the Effective Date and prior to
the maturity
date, the value, as determined by an independent appraiser
selected by
Reorganized JWP, of the consolidated assets of SellCo (excluding
the JWP
Supplemental SellCo Note) and the Nondebtor Subsidiaries listed
on Schedule 5
of the Plan is less than $250,000, then the SellCo Subordinated
Contingent
Payment Notes will be deemed canceled. For a full description of
the terms and
conditions of the SellCo Subordinated Contingent Payment Notes
and the form of
SellCo Subordinated Contingent Payment Note, see the SellCo
Subordinated
Contingent Payment Note Indenture, annexed to the Plan as
Exhibit
D.
4. New Common Stock. The amended and restated certificate of
incorporation of
Reorganized JWP, to be filed on or before the Effective Date,
will authorize a
single class of 13,700,000 shares of new common stock ("New
Common Stock"), of
which (i) 9,000,000 shares will be reserved for issuance to
Classes 2, 3, 4B
and 4C, (ii) 1,000,000 shares will be reserved for issuance
under
the 1994
Management Stock Option Plan, (iii) 1,450,000 shares will be
reserved for
issuance upon exercise of New Warrants by Classes 7, 8, 9, 10
and
11, and (iv)
up to 608,202 shares14 will be reserved for the Additional
Interest Amount in
respect of New Common Stock and New Warrants.
- ------
14 Reflects maximum possible Additional Interest Amount of 5.5%.
However, the Debtor has assumed a 3.5% Additional Interest
Amount
of New Common Stock, or 379,016 shares, will be issued.
<PAGE>
5. New Series X Warrants and New Series Y Warrants.
Reorganized
JWP will
issue to holders of Old Subordinated Debt (Class 6) two series
of
five-year
warrants (which, together with the warrants described in
Paragraph 6 below are,
collectively, "New Warrants"), each of which will entitle the
holder thereof to
purchase one share of New Common Stock: (i) 600,000 New Series X
Warrants, plus
to Belmont the Additional Interest Amount; exercise price:
$12.55
per share and
(ii) 600,000 New Series Y Warrants, plus to Belmont the
Additional Interest
Amount; exercise price: $17.55 per share. If the market value of
the New Common
Stock has reached and remained at $30.46 per share for ten of
the
preceding
fifteen trading days at any time prior to the expiration of five
years from the
date of issuance, the holders of Class 6 claims, upon exercise
of
the New
Series X Warrants and the New Series Y Warrants, will have
received, in value,
the full amount of their claims. At that time, Reorganized JWP
will notify the
registered holders of such Warrants that the New Series X
Warrants and New
Series Y Warrants will expire in fifteen days, thereby giving
such holders a
final opportunity to exercise such Warrants to purchase New
Common Stock. The
New Series X Warrants and New Series Y Warrants will contain
certain
antidilution and other provisions. For a full description of the
terms and
conditions of the New Series X Warrants and the New Series Y
Warrants, see the
forms of Warrant Agreements annexed to the Plan as Exhibits O
and
P,
respectively.
6. New Series Z Warrants. Reorganized JWP will issue to
holders
of other
subordinated claims (Class 7) and impaired equity interests
(Classes 8, 9, 10
and 11) 250,000 two-year New Series Z Warrants, each of which
will entitle its
holder to purchase one share of New Common Stock; exercise
price:
$50.00, which
are allocated among such classes. See "Classification and
Treatment" for such
allocations. The New Series Z Warrants will contain antidilution
and other
provisions similar to the New Series X Warrants and New Series Y
Warrants.
Persons entitled to receive New Series Z Warrants may elect,
instead, to
receive $.10 for each such Warrant. See "Implementation of the
Plan." For a
full description of the New Series Z Warrants, see the form of
Warrant
Agreement annexed to the Plan as Exhibit R.
The New Series Z Warrants being issued to Classes 7, 8, 9, 10
and 11 have an
exercise price of $50.00 per share, which, based on the total
number of shares
of Reorganized JWP to be outstanding at the Effective Date,
equates to an
enterprise value of approximately $650 million for Reorganized
JWP. Since
Lazard values the Reorganized JWP as of January 1, 1994 at a
range of $225
million to $250 million, and Rothschild values Reorganized JWP
as
of January 1,
1994 at a range of $345 million to $415 million, in all
probability, the New
Series Z Warrants will have little value upon the Effective Date
of the Plan.
There is also no certainty that the New Common Stock will trade
at above $50
per share within the two year period by which the New Series Z
Warrants must be
exercised. However, the Debtor projects that the net income of
the Reorganized
JWP will increase from a loss of $11.4 million for 1994 to net
income of $23.0
million in 1996. See "Financial Information-Projected
Consolidated Income
Statements." To the extent that Reorganized JWP achieves or
exceeds these
projections, and dependent upon prevailing stock market
multiples
for similar
securities, it is likely that the improvement in earnings will
be
reflected in
the market price of the New Common Stock.
Pursuant to the Plan, holders of New Series Z Warrants have
the
option to
receive $.10 in lieu of a warrant, provided that Reorganized JWP
shall not be
required to make any payment of less than one ($1) dollar.
Lazard
and
Rothschild believe that the value of $.10 per warrant exceeds
the
market price
at which the New Series Z Warrants are likely to trade after the
Effective Date
of the Plan.
The exercise price of the New Series X and New Series Y
Warrants being
distributed to Class 6 is lower than the exercise price of the
New Series Z
Warrants, and the exercise term of the New Series X and New
Series Y Warrants
is longer than the term of the New Series Z Warrants. This
difference is
attributable to a number of factors, including that Class 6 is
entitled to
priority in distribution pursuant to the Bankruptcy Code and
that
equitable
subordination claims that could be asserted by Class 6 would not
be available
to the equity classes receiving the Series Z Warrants.
Although the Debtor and the Creditors' Committee deny any
basis
for equitable
subordination of the Lenders' claims, in an effort to avoid the
risks and delay
inherent in such litigation, the parties negotiated the issuance
of the New
Series X and New Series Y Warrants to the Class 6 creditors.
Despite the fact that, based upon the valuations by Lazard and
Rothschild,
there is insufficient value in Reorganized JWP to satisfy all
creditors, and
therefore there is no obligation under the Bankruptcy Code to
provide any
distribution to holders of equity interests, the Junior
Committee, after
protracted negotiations, successfully negotiated the issuance
and
distribution
of New Series Z Warrants to Classes 7, 8, 9, 10 and 11.
The exercise price of $50 a share equates to an enterprise value
of
approximately $650 million for Reorganized JWP. This enterprise
value is
approximately equivalent to the total amount of allowed claims
that have
priority in distribution to the holders of equity interests
pursuant to the
Bankruptcy Code.
7. New Securities For Debtor-in-Possession Lender. The Plan
authorizes the
issuance of additional Series A Secured Notes, Series B Secured
Notes, Series C
Notes, SellCo Subordinated Contingent Payment Notes, New Common
Stock and New
Warrants to Belmont in respect of the Additional Interest
Amount.
See "Events
during the Reorganization Case" and "Implementation of the
Plan."
8. JWP Supplemental SellCo Note. JWP will also issue an
intercompany note to
SellCo (the "JWP Supplemental SellCo Note") in the principal
amount
approximately equal to the net cash proceeds, less $1,000,000,
generated by
sales of businesses between December 1, 1993 and the date on
which such Note is
issued which would have been, under the Plan, subsidiaries of
SellCo. Such net
cash proceeds, initially intended to be paid as a prepayment of
the Series A
Secured Notes, were used by JWP for working capital needs. It is
estimated that
the principal amount of the JWP Supplemental SellCo Note will be
approximately
$5,000,000. The JWP Supplemental SellCo Note will (a) be senior
indebtedness of
Reorganized JWP, (b) accrue interest at the rate of 8% per
annum,
compounded
semi-annually, and payable upon maturity and (c) mature on the
earlier of (i)
ten years or (ii) one day prior to the date, but not earlier
than
five years
from the Effective Date, upon which the SellCo Subordinated
Contingent Payment
Notes are deemed canceled upon a determination that the value of
the assets of
SellCo (excluding the JWP Supplemental SellCo Note) is less than
$250,000.
B. CLASSIFICATION AND TREATMENT
1. Unimpaired Claims Not Classified Under the Plan.
Administrative Expense and Priority Tax Claims. Administrative
expense claims
are those expenses, incurred by JWP after the Consent Date,
which
are necessary
to preserve the estate, including usual ordinary course costs,
wages and
salaries, taxes, and such professional fees as are approved by
the Bankruptcy
Court. JWP intends to pay all administrative expenses of
operations as they
become due in the Reorganization Case. Fees of professionals
employed at the
expense of the estate, whose compensation is subject to the
approval of the
Bankruptcy Court, will be paid in the amounts awarded after
entry
of an order
by the Bankruptcy Court. JWP is unable, at this time, to
estimate
the amount of
professional fees that will be sought or that may be allowed.
Several parties
have expressed an intent to challenge the reorganization values
developed by
Lazard Freres & Co., the investment adviser relied on by the
Debtor and its
senior creditors. If there is significant or protracted
litigation in
connection with the confirmation process and the Plan, it is
likely that
professional fees will escalate to a currently undeterminable
amount.
Priority tax claims, under Section 507(a)(7) of the Bankruptcy
Code, consist,
generally, of taxes that are or were due within the three years
prior to the
Petition Date, except that tax claims arising between the
Petition Date and the
Consent Date, if any, will have priority under Section 507(a)(2)
of the
Bankruptcy Code. The Plan provides that payment of priority tax
claims will be
made, at JWP's option, either in cash on the Effective Date (or
as soon as
practicable thereafter) or, pursuant to Section 1129(a)(9)(C) of
the Bankruptcy
Code, by deferred cash payments over a period of six years from
the date of
assessment, with interest thereon at a rate to be determined by
the Bankruptcy
Court. JWP estimates that allowed priority tax claims are not
likely to exceed
$288,000.
2. Claims and Interests Classified Under the Plan.
a. Unimpaired Claims.
(1) Priority Claims-Class 1. Class 1 consists of priority
claims under
Section 507(a) of the Bankruptcy Code other than claims for
administrative
expenses or claims of a governmental unit under Section
507(a)(7). In addition
to administrative expense and priority tax claims, which are
separately
treated, the only claims afforded priority under Section 507(a)
of the
Bankruptcy Code that JWP believes would be relevant to the
Reorganization Case
and the Plan would be (i) for debts other than wages and
benefits
incurred
between the Petition Date and the Consent Date and (ii) those
for
wages,
salaries and employee benefit plans. JWP estimates that claims
incurred between
the Petition Date and the Consent Date will not exceed $359,000.
Since JWP has been authorized by the Bankruptcy Court to pay
virtually all
employee claims prior to confirmation of the Plan, JWP does not
believe there
will be any Class 1 priority wage-related claims other than,
perhaps,
unutilized vacation time which will be reinstated. In the event
JWP has not
paid all wage, salary and employee benefit plan claims promptly
after the
Consent Date, such claims will nonetheless remain unimpaired and
be classified
in Class 5. Holders of Class 1 claims are deemed to have
accepted
the Plan and
are not entitled to vote on the Plan. Allowed Class 1 claims
will
be paid in
full, in cash, on the Effective Date or as soon as practicable
thereafter.
(2) Convenience Class-Class 4A. A claimant who holds General
Unsecured Claims
of $10,000 or less in the aggregate or who elects to reduce his
claims to
$10,000 in the aggregate is unimpaired and classified in Class
4A. Holders of
allowed Class 4A claims will be paid in full in cash on the
Effective Date or
as soon as practicable thereafter. A holder of a General
Unsecured Claim in
Class 4 who elects Class 4A treatment by reducing his claims, in
the aggregate,
to $10,000 accepts payment under the Plan as payment in full.
JWP
has scheduled
and received proofs of claim in Class 4A that are, in the
aggregate,
approximately $220,000. In addition, it is anticipated that
holders of Class 4B
claims of up to $30,000 may elect to reduce their claims to
$10,000, which
election could add up to approximately $30,000 to the allowed
Class 4A claims.
Holders of Class 4A claims are unimpaired and are not entitled
to vote on the
Plan.
(3) Unimpaired Contingent Claims-Class 5. JWP has determined
it
is essential
to the feasibility of the Plan, and to Reorganized JWP's ability
to preserve
the value of the New Securities, that certain significant
ordinary course
obligations remain unimpaired. In addition to (a) administrative
expense and
priority tax claims (unclassified) and (b) claims arising
between
the Petition
Date and the Consent Date (Class 1), employee claims that have
not been
otherwise addressed in the Plan and claims of certain bonding
companies that
satisfy the requirements of subsection H of Article III of the
Plan, as
described below, unimpaired claims are those listed on Schedule
1
to the Plan
and are classified in Class 5. On the Effective Date, Class 5
claims will be
reinstated and will have the same legal status as if the
Reorganization Case
had not been filed, with the rights and obligations of
Reorganized JWP and the
Class 5 claimant unaltered.
In addition to the employee claims discussed above, the
unimpaired claims
include what are essentially contingent and/or unliquidated
obligations, such
as guarantees made by JWP to certain bonding companies in
respect
of bonds
issued for the account of operating Nondebtor Subsidiaries
(which
guarantees
constitute the largest part of the unimpaired claims) that are
required to
maintain operations of the Nondebtor Subsidiaries. Such
guarantee
claims could
be in the range of $700 million to $1.5 billion. Based on past
experience, JWP
believes these contingent obligations are unlikely to become
fixed, liquidated
liabilities of Reorganized JWP. Impairment of these claims,
however, (in
particular, the bonding companies' contingent claims) could
result in
significant disruption of the businesses and operations of the
Nondebtor
Subsidiaries and, possibly, the liquidation of JWP and the
Nondebtor
Subsidiaries. The legal, equitable and contractual rights of
Class 5 creditors
will remain unaltered under the Plan.
It is contemplated that, on the Effective Date, Reorganized
JWP, MES and
certain Nondebtor Subsidiaries will enter into agreements with
bonding
companies, other than Wellington Guarantee and Reliance
Insurance
Corp. (each a
"Bonding Company") substantially in the form of Exhibit K to the
Plan or such
other agreement acceptable to the Debtor and the Creditors'
Committee (a
"Claims Reduction Agreement"). Pursuant to subsection H of
Article III of the
Plan, regardless of whether Reorganized JWP, MES and certain
Nondebtor
Subsidiaries have also executed a Claims Reduction Agreement,
(A)
the
pre-petition claims of a Bonding Company listed on Schedule 1 to
the Plan that
has executed a Claims Reduction Agreement shall be (w) included
in Class 5, (x)
allowed (whether contingent or fixed, liquidated or
unliquidated), (y) assumed
by MES as primary obligations of MES and (z) treated as
reinstated and
unimpaired as against Reorganized JWP15, (B) all contractors'
general
agreements of indemnity or other
- ------
15 Under certain circumstances, if a Bonding Company listed on
Schedule 1 to the Plan has entered into a Claims Reduction
Agreement, but declines or fails to provide bonds to Nondebtor
Subsidiaries in accordance with the terms of such agreement or
subsequently consents to a Claims Reduction Agreement amendment
which is materially adverse to Reorganized JWP or MES, the
unimpaired and reinstated Class 5 contingent claims of such
Bonding Company shall, by operation of such agreement and
without
any requirement of further action, be permanently reduced to
zero
as against the Debtor, Reorganized JWP and MES.
<PAGE>
similar instruments pursuant to which bonds were executed or
procured prior to
the Effective Date of the Plan shall remain in full force and
effect and (C)
the terms of Section 4 of the agreement attached to the Plan as
Exhibit K shall
be effective as against Reorganized JWP, MES and those certain
Nondebtor
Subsidiaries and shall be deemed to have been incorporated into
the Plan by
reference. The claims of a Bonding Company listed on Schedule 1
that has
refused to execute such an agreement will be classified and
treated as Class 4B
claims which JWP will seek to have expunged under Section 502(e)
of the
Bankruptcy Code, following notice and a hearing to the affected
Bonding
Company. At least one of the bonding companies has stated that
it
does not
believe that its contingent claims are subject to expungement
under Section
502(e).
Holders of Class 5 claims are deemed to have accepted the Plan
and are not
entitled to vote on the Plan.
b. Impaired Claims.
There are six classes of impaired claims.
In addition to the claims of the Lenders (Class 2 and 3), the
remaining
claims which constitute "Senior Indebtedness" under the
Indentures covering the
Old Subordinated Debt (Class 6) are classified in Class 4B for
the purpose of
effectuating the terms of the Intercreditor Agreement without
affecting the
distributions to Class 4B. For all other purposes under the
Plan,
the claims in
Class 2, 3 and 4B are treated as a single class of senior
indebtedness claims
against JWP.
(1) Old Note Claims-Class 2. Holders of claims under the Old
Notes are
impaired. Old Note claims aggregate $328,572,000 principal
amount, plus
interest thereon of $29,593,112.
Holders of Class 2 allowed claims will receive their Ratable
Shares of (i)
$51,000,000 principal amount of Series A 7% Senior Secured Notes
of Reorganized
JWP; plus (ii) the Class 2 Series B Percentage of $11,357,000
principal amount
of Series B 7% Senior Secured Notes of Reorganized JWP
reflecting
the Class 2
Percentage of the aggregate allowed claims of Classes 2 and 3
after deducting
the $51,000,000 distribution of the Series A Secured Notes; plus
(iii) the
Class 2 Residual Percentage of (A) $60,000,000 principal amount
of 11% Series C
Notes of Reorganized JWP, (B) $46,000,000 principal amount of
12%
SellCo
Subordinated Contingent Payment Notes and (C) 9,000,000 shares
of
New Common
Stock.
Based on the Lazard valuation and depending upon the aggregate
amount of
Class 4B and 4C claims ultimately allowed, JWP estimates that
the
consideration
to be received by Class 2 claimants will have a value of
approximately $.40 for
each dollar of allowed Class 2 claims. Based on the Rothschild
valuation and
using the model developed by Lazard, such consideration will
have
a value of
$.64 for each dollar of allowed Class 2 claims.
Holders of Class 2 claims are impaired and entitled to vote on
the Plan
together with the holders of claims in Classes 3 and 4B as a
single class.
(2) Old Credit Agreement Claims-Class 3. Holders of claims
under the Old
Credit Agreement are impaired. Old Credit Agreement claims
aggregate
$155,794,000 principal amount, plus interest thereon of
$11,784,088.
Holders of Class 3 allowed claims will receive their Ratable
Shares of: (i)
the Class 3 Series B Percentage of $11,357,000 principal amount
of Series B 7%
Senior Secured Notes of Reorganized JWP reflecting the Class 3
Percentage of
the aggregate allowed claims of Classes 2 and 3 after deducting
the $51,000,000
distribution of the Series A Secured Notes to the holders of
Class 2 Claims;
plus (ii) the Class 3 Residual Percentage of (A) $60,000,000
principal amount
of 11% Series C Notes of Reorganized JWP, (B) $46,000,000
principal amount of
12% SellCo Subordinated Contingent Payment Notes and (C)
9,000,000 shares of
New Common Stock.
Based on the Lazard valuation and depending upon the amount of
Class 4B
claims ultimately allowed, JWP estimates that the consideration
to be received
by Class 3 claimants will have a value of approximately $.27 for
each dollar of
allowed Class 3 claims. Based on the Rothschild valuation and
using the model
developed by Lazard, such consideration will have a value of
approximately $.50
for each dollar of allowed Class 3 claims.
Holders of Class 3 claims are impaired and entitled to vote on
the Plan
together with the holders of claims in Classes 2 and 4B as a
single class.
(3) Other Borrowed Money Claims-Class 4B. Other Borrowed Money
Claims consist
of claims which constitute "Senior Indebtedness" (other than the
claims of
Classes 2 and 3) under the Indentures governing the Old
Subordinated Debt
claims in Class 6, including the claims held by three banks (the
"Letter of
Credit Banks") which have outstanding letters of credit
("Letters
of Credit"), in one case, guaranteed by JWP, in the aggregate
amount of approximately $36 million to collateralize obligations
under JWP's partial self-insurance program and
which, in addition, hold promissory notes of JWP. In order to
effectuate the
terms of the Intercreditor Agreement between the holders of
claims in Classes 2
and 3, the allowed claims of Class 4B are treated, for
distribution purposes,
with the allowed claims of Class 4C. See the discussion of Class
4C recoveries
immediately below. Holders of Class 4B claims are impaired and
entitled to vote
on the Plan together with the holders of claims in Classes 2 and
3 as a single
class.
(4) General Unsecured Creditors-Class 4C. General Unsecured
Creditors consist
of all creditors not included in Classes 2, 3, 4A, 4B, 5, 6 and
7, together
with (i) parties to executory contracts or unexpired leases
which
are rejected
by JWP after the Consent Date and at or prior to the
confirmation
of the Plan,
and (ii) any bonding company (other than Wellington Guarantee
and
Reliance
Insurance Corp.), which provided performance or bid bonds to
Nondebtor
Subsidiaries and is listed on Schedule 1 to the Plan, which
fails
to enter into
an agreement, substantially in the form annexed to the Plan as
Exhibit K, establishing the terms and conditions on which such
bonding company's claims
shall remain in Class 5 and be reinstated and unimpaired.
Certain claims in Class 4C are contingent, unliquidated and,
in
some cases,
disputed claims. If any such Class 4C Creditor has filed a proof
of claim in
the Reorganization Case (see "Bar Date-Who Must File a Claim"),
JWP intends
either to seek estimation of such claim by the Bankruptcy Court
pursuant to
Section 502(c) of the Bankruptcy Code or, in appropriate cases
such as
contingent indemnification or contribution claims, to seek to
have such claims
disallowed and expunged under Section 502(e) of the Bankruptcy
Code.
Holders of allowed Class 4B and 4C claims will receive their
Ratable Shares
of (i) the principal amount of Series A 7% Senior Secured Notes
that bears the
same ratio to the aggregate amount of allowed claims of Class 4B
and 4C as
$51,000,000 bears to the aggregate amount of allowed unsecured
claims of
Classes 2 and 3; plus, (ii) the Class 4B and 4C Residual
Percentage of (A)
$60,000,000 principal amount of 11% Series C Notes of
Reorganized
JWP; (B)
$46,000,000 principal amount of 12% SellCo Subordinated
Contingent Payment
Notes and (C) 9,000,000 shares of New Common Stock.
Holders of allowed Class 4C claims are impaired and entitled
to
vote on the
Plan. Holders of contingent, disputed or unliquidated Class 4C
claims may only
vote if the Bankruptcy Court has estimated such holder's claim
for voting
purposes pursuant to Bankruptcy Rule 3018.
JWP has estimated the aggregate Class 4B and 4C claims that
will ultimately
be allowed by the Bankruptcy Court will be approximately
$85,000,000. Based on
that assumption and the Lazard valuation, JWP estimates that the
consideration
to be received by Class 4B and 4C claimants will have a value of
approximately
$.34 for each dollar of the aggregate allowed Class 4B and 4C
claims. Based on
the Rothschild valuation and using the model developed by
Lazard,
such
consideration will have a value of approximately $.58 for each
dollar of the
aggregate allowed Class 4B and 4C claims. HOWEVER, THERE CAN BE
NO ASSURANCE
THAT ALLOWED CLASS 4B AND 4C CLAIMS WILL NOT EXCEED JWP'S
ESTIMATE, THEREBY
HAVING A SUBSTANTIAL EFFECT ON THE RATABLE SHARES OF THE SERIES
C
NOTES, SELLCO
SUBORDINATED CONTINGENT PAYMENT NOTES AND NEW COMMON STOCK TO BE
DISTRIBUTED
UNDER THE PLAN TO CLASSES 2, 3, 4B AND 4C. IF, PRIOR TO
CONFIRMATION, JWP
ESTIMATES THAT THE AGGREGATE CLASS 4B AND 4C CLAIMS LIKELY TO BE
ALLOWED BY THE
BANKRUPTCY COURT WILL EXCEED $100,000,000, THE PLAN WILL NOT BE
CONFIRMED
UNLESS SUCH CONDITION IS WAIVED, IN WRITING, BY THE HOLDERS OF
AT
LEAST
TWO-THIRDS IN AMOUNT OF EACH OF CLASS 2 AND CLASS 3 CLAIMS WHICH
HAVE VOTED ON
THE PLAN. SHOULD THE ALLOWED CLASS 4B AND 4C CLAIMS REACH, FOR
EXAMPLE,
$150,000,000 AND THE PLAN BE CONFIRMED, THE ESTIMATED VALUES OF
THE RECOVERIES
TO EACH OF CLASSES 2, 3, 4B AND 4C WOULD DECREASE TO $.38, $.24
AND $.31 BASED
ON THE LAZARD VALUATION AND $.58, $.51 AND $.44 BASED ON THE
ROTHSCHILD
VALUATION FOR EACH DOLLAR OF ALLOWED CLAIMS, RESPECTIVELY, FROM
THE VALUES
ESTIMATED AT $85 MILLION OF ALLOWED CLASS 4B AND 4C CLAIMS.
For example, the Letter of Credit Banks have outstanding
Letters of Credit,
in one case, guaranteed by JWP, in the amounts of $12 million,
$16 million and
$8 million, respectively which collateralize obligations under
JWP's partial
self-insurance program.16 One of the Letter of Credit Banks had
filed a proof
of claim in the approximately amount of $27 million, but
subsequently settled
its claim for approximately $18 million. The two other Letter of
Credit Banks
have filed proofs of claim based on the Letters of Credit and
related JWP
promissory notes in amounts that are far in excess of the face
amounts of the
respective Letters of Credit. If the claims of these two Letter
of Credit Banks
are allowed in the full amounts asserted, the Debtor's estimate
of $85 million
as the likely amount of aggregate allowed Class 4B and 4C claims
would be
exceeded by approximately $25 million.
In addition, the Debtor has scheduled an intercompany claim
owing to its
subsidiary JWP Information Services Inc. ("JWPIS") in the amount
of $24.9
million. See "The Company-Information Services." The Chapter 7
trustee for
JWPIS (the "JWPIS Trustee") has filed a proof of claim in the
amount of $50
million. If the claim of the JWPIS Trustee is allowed in full,
the Debtor's
estimate of $85 million as the likely amount of aggregate Class
4B and 4C
claims would be further exceeded by $25.1 million.
The following table illustrates the range of the distributions
that would be
made to Classes 2, 3, 4B and 4C, depending upon the amount of
Class 4B and 4C
claims that are ultimately allowed.
<TABLE>
<CAPTION>
If Class 4B and 4C allowed claims are:
Class 2 Class 3 Classes 4B and 4C
- --------------------------------------------------------------------- ----------- -----------------
<S> <C> <C> <C>
$50,000,000 Series A Notes................................ $51,000,000 $0 $4,957,365
Series B Notes................................ 7,348,129 4,008,871 0
Series C Notes................................ 35,381,587 19,302,904 5,315,509
SellCo Subordinated Contingent Payment Notes.. 27,125,883 14,798,893 4,075,224
New Common Stock shares....................... 5,307,238 2,895,436 797,326
$60,000,000 Series A Notes................................$51,000,000 $0 $5,948,838
Series B Notes................................ 7,348,129 4,008,871 0
Series C Notes................................ 34,765,597 18,966,843 6,267,560
SellCo Subordinated Contingent Payment Notes.. 26,653,625 14,541,246 4,805,129
New Common Stock shares....................... 5,214,840 2,845,026 940,134
$70,000,000 Series A Notes................................ $51,000,000 $0 $6,940,311
Series B Notes................................ 7,348,129 4,008,871 0
Series C Notes................................ 34,170,689 18,642,283 7,187,028
SellCo Subordinated Contingent Payment Notes.. 26,197,529 14,292,417 5,510,055
New Common Stock shares....................... 5,125,603 2,796,342 1,078,054
$80,000,000 Series A Notes................................ $51,000,000 $0 $7,931,784
Series B Notes................................ 7,348,129 4,008,871 0
Series C Notes................................ 33,595,799 18,328,643 8,075,558
SellCo Subordinated Contingent Payment Notes.. 25,756,779 14,051,960 6,191,261
New Common Stock shares....................... 5,039,370 2,749,296 1,211,334
$85,000,000 Series A Notes................................ $51,000,000 $0 $8,427,520
Series B Notes................................ 7,348,129 4,008,871 0
Series C Notes................................ 33,315,547 18,175,748 8,508,704
SellCo Subordinated Contingent Payment Notes.. 25,541,920 13,934,740 6,523,340
New Common Stock shares....................... 4,997,332 2,726,362 1,276,306
$90,000,000 Series A Notes................................ $51,000,000 $0 $8,923,256
Series B Notes................................ 7,348,129 4,008,871 0
Series C Notes................................ 33,039,933 18,025,383 8,934,684
SellCo Subordinated Contingent Payment Notes.. 25,330,615 13,819,460 6,849,925
New Common Stock shares....................... 4,955,990 2,703,807 1,340,203
</TABLE>
- ----------------------------------------------------------------
16 The Debtor intends to draw upon the Letters of Credit up to
the full amounts thereof.
<PAGE>
<TABLE>
<CAPTION>
If Class 4B and 4C allowed claims are:
Class 2 Class 3 Classes 4B and 4C
- --------------------------------------------------------------------- ---------- -----------------
<S> <C>m <C> <C>
$100,000,000 Series A Notes................................ $51,000,000 $0 $9,914,729
Series B Notes................................ 7,348,129 4,008,571 0
Series C Notes................................ 32,502,161 17,731,994 9,765,844
SellCo Subordinated Contingent Payment Notes.. 24,918,324 13,594,529 7,487,147
New Common Stock shares....................... 4,875,324 2,659,799 1,464,877
$125,000,000 Series A Notes................................ $51,000,000 $0 $12,393,412
Series B Notes................................ 7,348,129 4,008,871 0
Subordinated Notes............................ 31,231,327 17,038,673 11,730,000
Sellco Subordinated Contingent Payment Notes.. 23,944,017 13,062,983 8,993,000
New Common Stock shares....................... 4,684,699 2,555,801 1,759,500
$150,000,000 Series A Notes................................ $51,000,000 $0 $14,872,094
Series B Notes................................ 7,348,129 4,008,871 0
Subordinated Notes............................ 30,056,132 16,397,530 13,546,338
Sellco Subordinated Contingent Payment Notes.. 23,043,035 12,571,440 10,385,526
New Common Stock shares....................... 4,508,420 2,459,630 2,031,951
</TABLE>
(5) Subordinated Debt Claims-Class 6. Class 6 consists of
claims against JWP:
i) by the holders of $7,040,000 principal amount of JWP's
73/4%
Convertible Subordinated Debentures, due 2012, plus interest
thereon to the Petition Date in the amount of $441,027; and
ii) by holders of $9,600,000 principal amount of JWP's 12%
Subordinated Notes, due 1996, plus interest thereon to the
Petition Date in the amount of $1,411,200.
The Plan provides for the issuance to each holder of an
allowed
Class 6 claim
its Ratable Share of 600,000 New Series X Warrants and 600,000
New Series Y
Warrants, but only if (i) Class 6 accepts the Plan by the
requisite majority,
(ii) such holder has delivered to Reorganized JWP the instrument
or instruments
on which its claim is based on or before the first anniversary
of
the Effective
Date and (iii) the claims in Classes 2, 3 and 4B vote to accept
the Plan in
accordance with Section 1126(c) of the Bankruptcy Code.
Class 6 is impaired and is entitled to vote on the Plan.
CLASSES RECEIVING NEW SERIES Z WARRANTS
The Plan provides for the issuance of 250,000 two-year New
Series Z Warrants,
each of which will entitle the holder to purchase one share of
New Common Stock
at the exercise price of $50.00. The Series Z Warrants are
allocated among
Class 7 (Other Subordinated Claims, described below) and the
impaired equity
interests described below (Classes 8, 9, 10 and 11). If Class 7
does not accept
the Plan, none of the classes of equity interests will retain
any
property or
receive any distributions under the Plan. However, if all of the
claims in
Class 7 are subsequently disallowed or expunged, the failure of
Class 7 to
accept the Plan will not preclude distributions to the classes
of
impaired
equity interests which accept the Plan, if they are not
otherwise
subject to
the "cram-down" provisions of the Bankruptcy Code. See
"Confirmation of the
Plan."
The Junior Committee, in conjunction with Rothschild,
determined the
appropriate allocations of the New Series Z Warrants. In
allocating the New
Series Z Warrants, a uniform market analysis of the various
claims and
interests in Classes 7 through 11 was applied as of October 2,
1992, the date
following JWP's announcement of its restated financial
statements
which gave
rise to the market decline of JWP's stock and the commencement
of
the
shareholder litigation and the litigation by the Old
Noteholders.
See "Legal
Proceedings-Shareholder Litigation."
As of October 2, 1992, the market value of the outstanding Old
Common Stock
was $157,921,948; the liquidation preference of the Old
Preferred
Stock was
$21,250,000; and the market value of the Warrants of
Participation was
$1,152,649. The total value of the Equity Interests and the
Liquidation
Preference of the Old Preferred Stock was therefore $180,324,597
as of the
close of business on October 2, 1992 (the "Equity Value").
The allocation of New Series Z Warrants is based upon the
proportionate value
that the claims or interests of Classes 7, 8, 9, 10 and 11 bear
to the Equity
Value.
No fractional New Series Z Warrants will be issued.
Accordingly, if any
holder of a claim or interest in any of Classes 7, 8, 9, 10 or
11
does not hold
a sufficient claim or interest to equate to the issuance of one
warrant, no
distribution will be made to such claimant or interest holder
under the Plan.
All New Series Z Warrants which are not distributed as a result
of fractional
share interests shall be distributed in a proportionate manner,
to the extent
practicable, to the members of each of Classes 7, 8, 9, 10 and
11
who do
receive New Series Z Warrants from the undistributed portion of
the New Series
Z Warrants allocable to such class.
Persons entitled to receive New Series Z Warrants may elect,
instead, to
receive $.10 in cash for each whole New Series Z Warrant (the
"Cash Election").
However, Reorganized JWP is not obligated to distribute cash in
lieu of New
Series Z Warrants unless the claim or interest holder is
entitled
to receive at
least $1.00, in the aggregate, in lieu of New Series Z Warrants.
See the
descriptions of the treatment of Classes 7, 8, 9, 10 and 11
below
to determine
whether a claim or interest holder in each such class would be
entitled to make
the Cash Election.
(6) Other Subordinated Claims-Class 7. Holders of:
i) the indemnification or contribution claims, if any, by
current or former
officers and directors of JWP or by other parties in connection
with the claims
asserted in the Old Note Holders Litigation, and
ii) any intercompany claims that the Court determines should
be
subordinated
to general unsecured claims,
are impaired and are entitled to vote on the Plan.
Since all of the Class 7 claims, except for the potential
Class
7
intercompany claim filed by the Chapter 7 Trustee of JWP
Information Services,
Inc. ("JWPIS") (See "The Company-Information Services") are
contingent and
unliquidated indemnification claims, the Debtor intends to move
before the
Bankruptcy Court for an order estimating each such contingent,
unliquidated
claim at $100 solely for purposes of voting to accept or reject
the Plan,
without prejudice to the right of any party in interest to
object
to the
allowance of such claim for purposes of receiving a distribution
under the
Plan.
If each of Classes 4C and 7 accepts the Plan, 1,388 New Series
Z Warrants
will be reserved for holders of Class 7 claims, each of which
will entitle the
holder to purchase one share of New Common Stock at the exercise
price of
$50.00. In the event, however, that either of Classes 4C or 7
does not accept
the Plan, Class 7 will not receive or retain any property under
the Plan. IF
CLASS 7 DOES NOT ACCEPT THE PLAN, NO CLASS JUNIOR TO IT WILL
RECEIVE ANY
DISTRIBUTION UNDER THE PLAN UNLESS ALL OF THE CLAIMS IN CLASS 7
HAVE BEEN
DISALLOWED OR EXPUNGED.
The Debtor, the Creditors' Committee and the Junior Committee
believe that it
is improbable that the contingent unliquidated claims of Class 7
will ever
ripen into liquidated claims. In all probability, the legal fees
of the
directors and officers that may be incurred in connection with
the defense of
the litigation by the Old Noteholders will be paid by their
insurers. It is
also assumed that the plaintiffs in the Old Noteholders
Litigation will settle
within the policy limits of the insurance policies that cover
these claims and,
therefore, will not seek to recover judgments against the
directors and
officers individually.
Nonetheless, in an exercise of caution, the Debtor has
reserved
New Series Z
Warrants in an amount equivalent to a cumulative $1 million
dollar liquidated
claim by Class 7. This amount equates to 0.555% of JWP's Equity
Value. Class 7
will therefore be entitled to receive 0.555% of the New Series Z
Warrants, or
1,388 Warrants.
These Warrants will be reserved in the event that Class 7
claimants actually
do incur any payment expenses, and such Warrants will be issued
in the
proportion that any such claimant's payment or expenses bears to
the aggregate
of $1 million. A holder of an allowed Class 7 claim in the
amount
of $720 would
be entitled to one whole New Series Z Warrant. Accordingly, a
holder of an
allowed Class 7 claim in the amount of $7,200 or greater would
be
entitled to
make the Cash Election.
c. Impaired Equity Interests.
There are four classes of impaired equity interests.
(1) Old Preferred Stock-Class 8. Holders of the equity
interests evidenced by
JWP's issued and outstanding shares of Series A Convertible
Exchangeable
Preferred Stock ($1 par value) are impaired and are entitled to
vote on the
Plan. The Plan provides that if each of Classes 4C, 6, 7 and 8
accepts the
Plan, 29,297 New Series Z Warrants will be issued to the holders
of interests
in Class 8, each of which will entitle the holder to purchase
one
share of New
Common Stock at an exercise price of $50.00. In the event,
however, that any of
Classes 4C, 6, 7 or 8 does not accept the Plan, Class 8 will not
retain or
receive any property under the Plan.
After deduction of the 1,388 New Series Z Warrants allocable
to
Class 7,
which, pursuant to the Bankruptcy Code, has priority in
distribution to
interest holders, there will be a remaining balance of 248,612
New Series Z
Warrants available for distribution. Since the Old Preferred
stock represented
11.784% of JWP's Equity Value, the Old Preferred Stock will
receive 11.784% of
the available 248,612 Warrants, or 29,297 New Series Z Warrants.
The amount of Old Preferred Stock necessary to receive one
whole warrant is
15 shares. Accordingly, in order to make the Cash Election, 150
shares or more
of Old Preferred Stock would be necessary.
(2) Old Common Stock and Certain Related Interests-Class 9.
Holders of:
i) JWP's issued and outstanding shares of common stock ($.10
par value) ("Old
Common Stock"),
ii) options granted under JWP's 1986 Incentive Stock Option
and
Appreciation
Plan, JWP's 1991 Stock Option Plan, and JWP's 1992 Stock Option
Plan ("Employee
Stock Options"), and
iii) Other Rights including equity interests under the
Businessland, Inc.
51/2% Convertible Subordinated Debentures, due 2007
("Businessland
Debentures"), and the related Share Issuance Agreement, dated
August 6, 1993
between JWP and ENTEX Information Services, Inc.17
are impaired and are entitled to vote on the Plan. The Plan
provides if that
each of Classes 4C, 6, 7, 8, 9, 10 and 11 accepts the Plan,
195,667 New Series
Z Warrants will be issued, subject to reservation in the case of
the
Businessland Debentures (as set forth below) to the holders of
interests in
Class 9, each of which will entitle the holder to purchase one
share of New
Common Stock at the exercise price of $50.00. If any of Classes
4C, 6, 7, 8, 9,
10 and 11 does not accept the Plan, Class 9 will not retain or
receive any
property under the Plan. However, notwithstanding the failure of
any of Classes
9, 10 or 11 to accept the Plan, Reorganized JWP may elect to
make
distributions
of the New Series Z Warrants to all such Classes.
Both Class 7 and 8 have priority in distribution to Classes 9,
10 and 11.
After deducting the New Series Z Warrants allocable to Classes 7
and 8, there
will be a remaining balance of 219,315 New Series Z Warrants
available for
distribution. These Warrants will be issued as follows:
- ------
17 Parties to the Share Issuance Agreement have filed
contingent,
unliquidated claims against the Debtor arising from the Share
Issuance Agreement. The Debtor is advised that such parties may
object to the Debtor's classification of such claims as being
properly included as Class 9 claims. The Debtor intends to seek
a
determination by the Bankruptcy Court that the treatment of
Class
9 interests related to the Businessland Debentures affords the
holders of Businessland Debentures the same rights under the
Plan
as such holders have under the recapitalization provisions of
such Debentures, i.e., the contractual right to receive the same
consideration received by holders of Old Common Stock and,
accordingly, that Reorganized JWP will have fulfilled JWP's
obligations under the Share Issuance Agreement by performance in
accordance with the Plan. In the event that it is ultimately
determined by the Bankruptcy Court that some or all of such
claims are properly included as Class 4C claims, such claims
will
be allowed as creditors of that class, as if they were
originally
included in that class, and will be entitled to receive the
distributions afforded members of that Class under the Plan.
<PAGE>
(a) Common Stockholders-Holders of Old Common Stock as of
sixty
days following the Effective Date of the Plan will receive all
remaining Warrants after the distribution and reserve for other
members of Classes 9, 10 and 11, as set forth below. Class 9
interest holders will be entitled to receive up to 78.267% of
the
250,000 Warrants, or 195,667 New Series Z Warrants.
(b) Businessland Debentures-660 New Series Z Warrants will be
reserved. The exercise price under the Share Issuance Agreement
with respect to the Businessland acquisition is $314 for each
share of Old Common Stock. It is, therefore, improbable and
unrealistic to expect that any of the conversion rights will be
exercised. Nonetheless, since the Subordinated Debentures could
be converted to 138,000 shares of Old Common stock, the amount
of
Warrants
equivalent to these shares is 660 New Series Z Warrants.
Therefore, of the
195,667 New Series Z Warrants allocated to Class 9, 660 New
Series Z Warrants
will be reserved in the event that the conversion rights are
later exercised.
(c) Employee Stock Options-Holders of options pursuant to
Employee Stock
Option Plans must exercise their options within 60 days
following
the Effective
Date of the Plan. It is unlikely and unrealistic to expect that
any of the
Employee Stock Options will be exercised, since the exercise
price exceeds the
market value of the Old Common Stock. Nonetheless, in the event
any such
options are timely exercised, they can be converted to New
Series
Z Warrants.
Any of the Employee Stock Options not exercised within 60 days
of
the Effective
Date will be canceled.
The amount of Old Common Stock necessary to receive one whole
warrant is 209
shares. Accordingly, in order to make the Cash Election, 2,090
or
more shares
of Old Common Stock would be necessary.
(3) Members of the Plaintiff Class Certified in In re JWP Inc.
Securities
Litigation-Class 10. Holders of any other claim with respect to
a
security
classified in Class 8 or 9 which would be subordinated pursuant
to Section
510(b) of the Bankruptcy Code, including, but not limited to,
the
claims
asserted in In re JWP INC. Securities Litigation, 92 Civ. 5815
(CLB) (S.D.N.Y.)
(the "Shareholder Litigation") and any indemnification,
reimbursement or
contribution claims by current or former officers or directors
of
JWP or other
parties in connection with such subordinated claims. Holders of
equity
interests in Class 10 are impaired and are entitled to vote on
the Plan. The
Plan provides that if each of Classes 4C, 6, 7, 8, 9, 10 and 11
accepts the
Plan, 22,059 New Series Z Warrants will be reserved for holders
of interests in
Class 10, each of which will entitle the holder to purchase one
share of New
Common Stock at the exercise price of $50.00. If any of Classes
4C, 6, 7, 8, 9,
10 and 11 does not accept the Plan, Class 10 will not retain or
receive any
property under the Plan. However, notwithstanding the failure of
any of Classes
9, 10 or 11 to accept the Plan, Reorganized JWP may elect to
make
distribution
of the New Series Z Warrants to all such classes.
The Debtor, the Creditors' Committee and the Junior Committee
believe that
even if JWP's bankruptcy case had not been commenced, the
Shareholder
Litigation would settle for payment directly from the insurers
of
JWP's
directors and officers and from other third parties, and that no
significant
payment would have been made by JWP. Nonetheless, for purposes
of
the Plan
only, and without constituting any admission of liability, it is
assumed that
the claims against JWP in connection with the Shareholder
Litigation are $15
million. This amount has been estimated as follows. Although,
based upon
information provided to the Junior Committee, no expert report
of
damages has
been prepared in the Shareholder Litigation, the representatives
or the
plaintiffs have indicated that the damages are approximately
$300-350 million.
However, the Junior Committee and its financial advisor have
calculated
approximately $65 million of potential damages, based upon a
comparison of the
market price of Old Common Stock prior to October 2, 1992 and
thereafter. Since
it is assumed that at least $50 million of that claim can be
recovered from the
insurers of the directors and officers and other third party
sources, JWP's
potential liability for purposes of the Plan is assumed to be
$15
million.
That amount represents 9.430% of the $159,074,597 total value
of the Old
Common Stock and Warrants of Participation as of the close of
business on
October 2, 1992 (the "Common Value"). Accordingly, 9.430% of the
219,315 New
Series Z Warrants allocated to Classes 9 through 11, or 20,680
Warrants, will
be reserved for the Class Action Plaintiffs.
Any distribution under the Plan will not affect the rights of
the plaintiffs
in the Shareholder Litigation to pursue their claims against
other defendants,
and the Class Action Plaintiffs who continue to hold JWP Old
Common Stock will
also receive a distribution in their capacity as Class 9 holders
of Old Common
Stock.
In addition, although the Debtor, the Creditors' Committee and
the Junior
Committee do not believe that there will be any payment or
expense incurred by
JWP's officers or directors individually, since all costs and
expenses will be
paid by their insurers, the Debtor has reserved New Series Z
Warrants
equivalent to a $1 million dollar interest. This equates to
1,379
New Series Z
Warrants. These warrants will be issued in the proportion that
any such
interest holder's payments or expenses bear to the aggregate $1
million. A
holder of an allowed Class 10 indemnification claim in the
amount
of $725 would
be entitled to one whole New Series Z Warrant. Accordingly, a
holder of an
allowed Class 10 indemnification claim in the amount of $7,250
or
greater would
be entitled to make a Cash Election.
Notwithstanding the foregoing, each claim in Class 10, whether
filed on
behalf of an individual holder or on behalf of a class of such
holders, is
deemed disputed. Since all Class 10 claims are disputed, the
Debtor intends to
seek estimation of each Class 10 claim in the amount of $100,
solely for the
purpose of voting to accept or reject the Plan and for no other
purpose.
Recognition of the existence of such disputed claims in the Plan
shall not be
deemed an admission by JWP or its Board of Directors of any
liability to such
holders. No distribution will be made to the holder of a claim
in
Class 10
unless and until the claim becomes an allowed claim. Holders of
timely filed
claims in Class 10 who do not opt out of the Shareholder
Litigation shall have
their claims allowed or disallowed exclusively by the Court with
jurisdiction
over the Class Action. Holders of timely filed claims in Class
10
who opt out
of the Class Action shall have their claims allowed or
disallowed
exclusively
by the Bankruptcy Court, provided that no proceeding to allow or
disallow such
a claim shall be commenced in the Bankruptcy Court until after
disposition of
the Class Action by Final Order. Neither the Plan nor the
Disclosure Statement
shall be admissible as evidence in the Class Action.
The Ratable Share of New Series Z Warrants of a holder of an
allowed Class 10
claim in respect of claims asserted in the Shareholder
Litigation
cannot be
determined until the members of the class in the Class Action,
as
well as those
who opt out, are identified.
(4) Warrants of Participation-Class 11. Holders of JWP's
outstanding Warrants
of Participation18 are impaired and are entitled to vote on the
Plan. The Plan
provides that if each of Classes 4C, 6, 7, 8, 9, 10 and
- ------
18 Certain holders of Warrants of Participation ("Warrant
Holders") have asserted that the Warrants of Participation are
improperly classified as equity interests in JWP on the grounds,
inter alia, that such Warrants (i) entitle the Warrant Holders
to
"a substantial portion" of the value of Jamaica Water Supply
Company ("JWS") upon its sale, (ii) that such sale was "delayed
by action and inaction of the Debtor," (iii) that the shares of
JWS were improperly transferred to Jamaica Water Securities
Corp.
("JWSC"), a new, wholly-owned direct subsidiary of the Debtor,
and, therefore, the Warrant Holders are entitled to receive
shares of JWSC or cash. The Debtor disputes all of the
foregoing,
as well as other assertions and legal conclusions of the Warrant
Holders (including violation of the Warrant Holders'
constitutional rights and lack of subject matter jurisdiction in
the Bankruptcy Court), and asserts that the Warrants of
Participation by their terms entitle Warrant Holders to shares
of
Old Common Stock upon the sale or other disposition of JWS or
its
assets only if such sale or other disposition occurs prior to
December 31, 1994 and then only to the extent
there is "Excess Value," a defined term in the Warrant Agreement
governing the Warrants of Participation. Based on the valuations
of the Water Companies by each of the investment advisers, the
likelihood of "Excess Value" upon the disposition of JWS is
remote enough to cause a calculation of Excess Value at zero.
Certain Warrant Holders have filed proofs of claim, to which the
Debtor will object. If such Warrant Holders prevail over the
Debtor's objection to their claims, the values ascribed to the
distributions to Classes 2, 3, 4B and 4C may change
significantly
enough to require either a resolicitation of votes for and/or a
renegotiation of the Plan. See "Legal Proceedings-Jamaica Water
Supply Company" for the status of JWS.
<PAGE>
11 accepts the Plan, 1,589 New Series Z Warrants will be issued
to holders of
interests in Class 11, each of which will entitle the holder to
purchase one
share of New Common Stock at the exercise price of $50.00. If
any
of Classes
4C, 6, 7, 8, 9, 10 or 11 does not accept the Plan, Class 11 will
not receive or
retain any property under the Plan. However, notwithstanding the
failure of any
of Classes 9, 10 or 11 to accept the Plan, Reorganized JWP may
elect to make
distributions of the New Series Z Warrants to all such Classes.
The Debtor, the Creditors' Committee and the Junior Committee
believe that
the Warrants of Participation do not have any present value. The
Warrants of
Participation provide that the Warrant holders are entitled to
receive shares
of Old Common Stock only if a sale or other disposition of all
or
part of
Jamaica Water Supply Company occurs prior to December 31, 1994,
and then only
to the extent that "excess value" exists, as defined in the
warrant agreement.
Although the Debtor has determined that it will cause Jamaica
Water Supply
Company to be sold, and although a condemnation proceeding by
the
City of New
York may continue (see "Legal Proceedings-New York City
Condemnation
Proceeding"), it is highly unlikely that any such sale or
disposition will
occur prior to December 31, 1994, when the Warrants of
Participation expire.
Moreover, based upon the valuation of Jamaica Water Supply
Company by both
Lazard and Rothschild, it does not appear that the Jamaica Water
Supply Company
can be sold in the near future for an amount that will yield
"excess value",
and thereby provide any distribution of stock to the warrant
holders. In any
event, even if "excess value" should be realized, such value
would be converted
to Old Common Stock which, under the Plan, will be canceled and
replaced by New
Series Z Warrants.
The market value of the Warrants of Participation represented
0.725% of the
Common Value. Accordingly, the holders of the Warrants of
Participation will be
issued 0.725% of the 219,315 available Warrants for Class 9
through 11, or
1,589 New Series Z Warrants. If and when it is determined that
excess value
exists upon a timely sale of JWS which would entitle holders of
Warrants of
Participation to New Series Z Warrants, it will be necessary to
hold 725
Warrants of Participation to receive one whole New Series Z
Warrant.
Accordingly, it would be necessary to hold 7,250 Warrants of
Participation to
make a Cash Election.
C. DISPUTED CLAIMS
Disputed claims include those filed claims to which JWP
objects
(i) either as
to nature or amount or (ii) by way of a request for estimation
pursuant to an
estimation procedure to be established by the Bankruptcy Court.
For purposes of calculating the initial distributions to be
made under the
Plan, JWP will make a good faith estimate of the amounts, if
any,
likely to be
allowed in respect of contingent or unliquidated claims and will
treat all
liquidated disputed claims as if allowed in full.
D. EXECUTORY CONTRACTS
As of the Effective Date, all executory contracts and
unexpired
leases to
which JWP is a party will be assumed, except for any executory
contracts and
unexpired leases which are specifically rejected by JWP with the
approval of
the Bankruptcy Court. All applications to the Bankruptcy Court
made by JWP to
reject executory contracts and unexpired leases must be either
determined by or
pending on the date of Plan confirmation. Entry of the order
confirming the
Plan by the Clerk of the Bankruptcy Court will constitute
approval of such
assumptions pursuant to subsection 365(a) of the Bankruptcy
Code.
Claims
created by the rejection of executory contracts must be filed
with the
Bankruptcy Court no later than twenty (20) days after the entry
of an order
authorizing such rejection. Any claims not filed within such
time
will be
forever barred from assertion against JWP, the estate of JWP and
Reorganized
JWP. Unless otherwise ordered by the Bankruptcy Court or arising
from claims or
interests in Classes 9 or 11, all such claims arising from the
rejection of
executory contracts shall be classified in Class 4C of the Plan.
JWP estimates that Class 4C claims arising from rejection of
material
executory contracts and unexpired leases will result in allowed
claims that
will not exceed $4,500,000. However, there can be no assurance
that
such additional claims will not exceed JWP's estimates. See
"Impaired
Claims-Class 4C" and the table therein. For the effects of JWP's
assumption of
executory contracts and unexpired leases, see "Financial
Information-Projections."
E. IMPLEMENTATION OF THE PLAN
1. Corporate Action. On or as soon as practicable after the
Effective Date
all corporate actions will occur which are necessary to effect
the business,
corporate and debt restructuring contemplated by the Plan.
An amended and restated certificate of incorporation will be
filed for
Reorganized JWP; a certificate of incorporation will be filed
for
MES;
transfers of the stock of Nondebtor Subsidiaries will be made,
as
appropriate,
to MES or SellCo; the new seven-member Board of Directors of
Reorganized JWP
will assume office and will, by voting the Reorganized JWP
stockholdings in MES
and SellCo, elect the Board of Directors of each such
corporation.
In addition, the New Securities will be deemed to have been
issued (but will
only be delivered when the Percentages for the initial
distribution, including
reserves for disputed claims, have been calculated), and the
pledge agreements
and other security interests related to the New Securities will
be executed and
delivered.
In addition, the Plan authorizes the issuance of additional
Series A Secured
Notes, Series B Secured Notes, Series C Notes, SellCo
Subordinated Contingent
Payment Notes, New Common Stock and New Warrants solely for the
purpose of
paying the Additional Interest Amount to Belmont, upon the terms
and conditions
of the DIP loan facility provided to JWP during the
Reorganization Case.
Reorganized JWP may, instead of delivering all or a portion of
the New
Securities to Belmont, elect to make a cash payment equal to the
amount of such
New Securities that would be due.
2. 1994 Management Stock Option Plan. Within one year but not
earlier than
the expiration of three months and twenty days after the
Effective Date, the
Compensation Committee of the Board of Directors of Reorganized
JWP shall
determine the recipients of options to purchase 500,000 shares
of
New Common
Stock of Reorganized JWP pursuant to the 1994 Management Stock
Option Plan and
shall issue such options to such recipients in the respective
amounts as
determined by the Compensation Committee of the Board of
Directors of
Reorganized JWP. The employment agreement between JWP and Frank
T. MacInnis,
its President and Chief Executive Officer requires that options
to purchase
200,000 shares of New Common Stock be issued to Mr. MacInnis.
The
exercise
price for such options shall be equal to the average market
price
of New Common
Stock over the 20 day trading period immediately preceding the
date of issuance
of the option; provided, however, that in no event shall such
options be issued
or the exercise price be determined prior to expiration of three
months plus
twenty days after the Effective Date; provided further, that if
the average
market price of New Common Stock for the applicable period
cannot
be
determined, the exercise price shall be determined by an
investment advisor
selected by the Board of Directors of Reorganized JWP.
Options may be exercised only after they have vested. Vesting
of options
generally shall occur over a three-year period with one-third
vesting each
year. All options granted under the 1994 Management Stock Option
Plan shall
expire no later than the tenth anniversary of their date of
grant. The
Compensation Committee of the Board of Directors of Reorganized
JWP is
authorized to issue additional options pursuant to the
Management
Stock Option
Plan to then current employees of Reorganized JWP or the
Nondebtor Subsidiaries
to purchase up to 500,000 shares of New Common Stock available
under The
Management Stock Option Plan. The 1994 Management Stock Option
Plan will be
substantially in the form annexed to the Plan as Exhibit L. See
"Management and
Management Stock Options-Description of the 1994 Management
Stock
Option Plan."
3. Listing of New Securities and Registration Rights.
Reorganized JWP or
Sellco, as the case may be, shall use its best efforts to (i)
cause, as
promptly as practicable after the Effective Date, the shares of
New Common Stock and the other securities issued hereunder to be
listed on a
national securities exchange or quoted in the national market
system of the
National Association of Securities Dealers', Automated Quotation
System, (ii)
file, as promptly as practicable after the Effective Date, and
be
declared
effective as soon as possible thereafter, a registration
statement or
registration statements under the Securities Act of 1933, as
amended (the
"Securities Act"), for the offering on a continuous or delayed
basis in the
future of each of the shares of New Common Stock, the Series A
Secured Notes,
the Series B Secured Notes, the Series C Notes, the SellCo
Subordinated
Contingent Payment Notes, the New Series X Warrants and the New
Series Y
Warrants (the "Shelf Registration"), (iii) keep the Shelf
Registration
effective for a two-year period, commencing on the date on which
the Shelf
Registration is declared effective, and (iv) supplement or make
amendments to
the Shelf Registration, if required under the Securities Act or
by the rules or
regulations promulgated thereunder or if requested by any holder
or underwriter
of any of the securities covered by the Shelf Registration, and
have such
supplements and amendments declared effective as soon as
practicable after
filing. See "Securities Laws Considerations."
F. CONDITIONS PRECEDENT TO PLAN EFFECTIVENESS
1. Confirmation Order. The order of the Bankruptcy Court
confirming the Plan
shall be satisfactory in form to the holders of a majority in
amount of the
claims in each of Class 2 and Class 3 and shall have become a
final order, no
longer subject to review or appeal.
2. Class 4B and 4C Claims. Unless waived by the holders of at
least
two-thirds in amount of the claims of each of Class 2 and Class
3
which voted
on the Plan, JWP shall have estimated that the aggregate allowed
claims of
Classes 4B and 4C will not exceed $100,000,000.
3. Working Capital Facility. Reorganized JWP or MES shall have
entered into
an agreement, subject only to confirmation of the Plan and the
occurrence of
the Effective Date, providing a working capital facility in an
amount at least
sufficient to repay and replace the DIP Loan provided to JWP
during the
Reorganization Case. JWP and its investment adviser have been
diligently
seeking such "exit financing" in order to fulfill this
condition.
In order to facilitate JWP's ability to obtain exit financing
and to meet the
anticipated needs of a working capital lender, the Plan provides
that such
lender may have a "Working Capital Lien" on the stock of Jamaica
Water
Securities Corp. and the right to receive net proceeds from the
sale thereof
equal to the balance by which the working capital loan exceeds
$25,000,000, up
to $15,000,000; provided, however, that the application of any
such proceeds to
repay all or a portion of the balance of such working capital
facility shall
permanently reduce the availability under such facility by the
amount applied.
Accordingly, the pledges of stock or assets of the Nondebtor
Subsidiaries which
constitute SellCo, to secure the Series A Secured Notes, the
Series B Secured
Notes and the SellCo Subordinated Contingent Payment Notes, are
subject to the
Working Capital Lien and the Series C Notes are subordinated and
junior to
repayment in full of any working capital facility obtained by
Reorganized JWP
or MES, up to $100,000,000, following confirmation of the Plan.
4. Indenture Qualification. Each of the indentures governing
the Series A
Secured Notes, Series B Secured Notes, SellCo Subordinated
Contingent Payment
Notes and the Series C Notes shall have been duly qualified
under
the Trust
Indenture Act of 1939.
5. Waiver. Any of the foregoing conditions, except that
condition in
Paragraph F.2 above which requires a two-thirds vote, may be
waived by a
writing signed by an authorized representative of JWP and the
holders of a
majority in amount of the claims of each of Class 2 and Class 3
which voted on
the Plan.
6. Failure of Conditions. If each of the conditions to
effectiveness and the
occurrence of the Effective Date has not been satisfied or duly
waived on or
before the first Business Day that is more than 179 days after
the date the
Bankruptcy Court enters an order confirming the Plan, or by such
later date as
is proposed and approved, after notice and a hearing, by the
Bankruptcy Court,
upon motion by JWP or any party in
interest made before the time that each of the conditions has
been satisfied or
duly waived, the order confirming the Plan may be vacated by the
Bankruptcy
Court; provided, however, that notwithstanding the filing of
such
a motion, the
order confirming the Plan shall not be vacated if each of the
conditions to
consummation is either satisfied or duly waived before the
Bankruptcy Court
enters an order granting the relief requested in such motion. If
the order
confirming the Plan is so vacated, the Plan shall be null and
void in all
respects, and nothing contained in the Plan shall (a) constitute
a waiver or
release of any claims against or equity interests in JWP or (b)
prejudice in
any manner the rights of the holder of any claim or equity
interest or JWP.
G. RELEASES, SETOFFS AND RECOUPMENTS, AND DISCHARGE
1. Releases. As of the Effective Date, JWP, Reorganized JWP,
and each
creditor of JWP, Reorganized JWP and/or any Nondebtor Subsidiary
will waive,
release and discharge the Seaboard Surety Company, each of the
holders of
claims in Classes 2, 3 and 6, the holders of claims in Classes
4B
and 4C to the
extent ordered by the Bankruptcy Court, and all officers,
directors, employees
or agents (including professionals retained by such holder) of
such holder,
from any and all claims arising prior to the Effective Date that
could be
brought by, through, or on behalf of JWP or its estate or any
Nondebtor
Subsidiary; provided, however, that claims which are waived,
released or
discharged shall not include the claims of any Nondebtor
Subsidiary for
services rendered or goods sold to the holder of a Class 2, 3,
4B, 4C or 6
claim or the officers, directors, employees or agents (including
professionals
retained by such holder) of such holder, if any, or defenses of
a
Nondebtor
Subsidiary to any claim asserted by the Seaboard Surety Company
(or other
bonding company) solely in respect of such Nondebtor
Subsidiary's
liability on
a bond; and provided, however, that the provisions of the Plan
described in
this paragraph shall not in any way affect the releases to
Seaboard Surety
Company provided for in the agreement attached to the Plan as
Exhibit K. Such
waiver, release and discharge shall also act as an injunction
against any
person or entity commencing or continuing any action, employment
of process, or
act to collect, offset, or recover any such waived, released and
discharged
claim. In accordance with Section 1123(b)(3) of the Bankruptcy
Code, all other
claims, rights and causes of action held by JWP shall be
retained
by
Reorganized JWP.
2. Setoffs and Recoupments. Reorganized JWP shall retain its
rights of setoff
against or recoupment from any claim that is not impaired by the
Plan and
against and from the holder of any Class 4B or 4C claim that is
not otherwise
released as set forth above. Such setoff or recoupment may be
taken in
conjunction with any payments to be made or consideration to be
distributed
under the Plan or reserved to Reorganized JWP in connection with
any reinstated
Class 5 claim.
3. Discharge and Injunction. Other than with respect to the
claims in Class
5, entry of the order confirming the Plan acts as a discharge of
all debts of,
claims against, liens on, and interests in each of JWP, its
assets, or
properties, which debts, claims, liens, and interests arose at
any time before
the entry of the order confirming the Plan. Other than with
respect to the
claims in Class 5, the discharge of JWP shall be effective as to
each claim,
regardless of whether a proof of claim therefor was filed,
whether the claim is
an allowed claim, or whether the holder thereof votes to accept
the Plan. On
the date the Court enters an order confirming the Plan, as to
every discharged
claim and equity interest, any holder of such claim or equity
interest shall be
precluded from asserting against JWP or against JWP's assets or
properties, or
any successors of JWP, any other or further claim or equity
interest based on
any document, instrument, act, omission, transaction, or other
activity of any
kind or nature that occurred before the date the Court enters
the
order
confirming the Plan.
In accordance with Section 524 of the Bankruptcy Code, the
discharge provided
by the Plan and Section 1141 of the Bankruptcy Code, inter alia,
acts as an
injunction against the commencement or continuation of any
action, employment
of process, or act to collect, offset, or recover the claims
discharged hereby.
H. RETENTION OF JURISDICTION BY THE BANKRUPTCY COURT
On and after confirmation of the Plan, the Bankruptcy Court
shall retain
jurisdiction of all matters arising out of and related to the
Reorganization
Case pursuant to, and for purposes of Sections 105(a) and 1142
of
the
Bankruptcy Code and including the following purposes:
1. To hear and determine pending applications for the
assumption or rejection
of executory contracts or unexpired leases, if any are pending,
and the
allowance of claims resulting therefrom;
2. To determine any and all pending adversary proceedings,
applications, and
contested matters;
3. To ensure that distributions, if any, to holders of allowed
claims are
accomplished as provided herein;
4. To resolve disputes as to the ownership of a claim;
5. To hear and determine any timely objections to claims for
administrative
expenses or to proofs of claims and equity interests filed, both
before and
after the date the Court enters an order confirming the Plan,
including any
objections to the classification of any claim or equity
interest,
and to allow
or disallow any disputed claims for administrative expenses,
disputed claim, or
disputed equity interest, in whole or in part;
6. To enter and implement such orders as may be appropriate in
the event the
order confirming the Plan is for any reason stayed, revoked,
modified, or
vacated;
7. To issue such orders in aid of execution of the Plan, to
the
extent
authorized by Section 1142 of the Bankruptcy Code;
8. To consider any modifications of the Plan, to cure any
defect or omission,
or reconcile any inconsistency in any order of the Court,
including, without
limitation, the order confirming the Plan;
9. To resolve disputes concerning nondebtor releases and
injunctions
contained herein;
10. To hear and determine all applications for compensation
and
reimbursement
of expenses of professionals under Sections 330, 331 and 503(b)
of the
Bankruptcy Code;
11. To hear and determine disputes arising in connection with
the
interpretation, implementation, or enforcement of the Plan;
12. To recover all assets of JWP and property of the estate,
wherever
located, including any causes of action under Sections 544
through 550 of the
Bankruptcy Code;
13. To hear and determine matters concerning state, local and
federal taxes
in accordance with Sections 346, 505 and 1146 of the Bankruptcy
Code;
14. To hear any other matter not inconsistent with the
Bankruptcy Code; and
15. To enter a final decree closing the Reorganization Case.
I. MISCELLANEOUS
1. Fractional Shares or Debt Instruments and Cash Option. No
fractional
shares of New Common Stock, New Series X Warrants, or New Series
Y Warrants, or
cash in lieu thereof, shall be distributed. No fractional shares
of New Series
Z Warrants shall be distributed; however, the New Series Z
Warrants not
distributed on account of such fractional shares shall be
divided
among Classes
7, 8, 9, 10 and 11 in proportion
to the number of New Series Z Warrants to be distributed to each
such class,
and each holder of a claim or interest in each such class shall
receive its
Ratable Share of such New Series Z Warrants attributable to its
class. At the
option of the holder of an allowed claim or interest in Classes
7, 8, 9, 10 or
11, such holder shall be entitled to receive from Reorganized
JWP
$0.10 for
each whole New Series Z Warrant such holder receives under the
Plan, provided,
however, that Reorganized JWP shall not be obligated to
distribute cash to such
holder on account of such whole New Series Z Warrants unless
such
holder is
entitled to receive, in the aggregate, at least $1.00 on account
of such whole
New Series Z Warrants.
The remaining New Securities, which are in the form of New
Debt
Securities,
shall be issued in multiples of $100. On the Effective Date, if
a
fraction of
New Debt Securities would otherwise be distributed to the holder
of a Class 2,
3 or 4B claim (i) the actual distribution of securities shall be
rounded down
to the next lower multiple of $100, and (ii) cash in an amount
equal to the
fraction of securities which would otherwise be so distributed
shall be
distributed to the holders of such claims. Interest on the New
Debt Securities
that is payable in kind shall be paid by issuance of additional
New Debt
Securities in multiples of $100, with any interest amount under
$100 payable in
cash.
2. Reservation of Warrants for the Businessland Debentures.
Reorganized JWP
shall reserve and keep available a number of New Series Z
Warrants on account
of the Old Common Stock reserved to satisfy the conversion
rights
under the
Businessland Debentures and the ENTEX Share Issuance Agreement.
Reorganized JWP
shall distribute such New Series Z Warrants only after all of
the
requirements
for conversion set forth in the Businessland Debentures and the
ENTEX Share
Issuance Agreement have been satisfied.
3. Business Days. Any payment or act required to be made or
performed under
the Plan on a day that is not a Business Day shall be made or
performed on the
next succeeding Business Day.
4. Revesting of Assets. On the Effective Date, the property of
JWP's estate
shall revest in Reorganized JWP, free and clear of all claims,
security
interests, liens and equity interests, except as provided in the
Plan.
Reorganized JWP may then operate its businesses and use, acquire
and dispose of
property free of the restrictions of the Bankruptcy Code and the
Bankruptcy
Rules.
J. TIMING OF DISTRIBUTIONS
The initial distributions of New Securities, other than New
Series Z
Warrants, under the Plan will be made on the Effective Date, or
as soon as
practicable thereafter. The Additional Interest Amount, Class 4B
and 4C Series
A Amount and the Class 2, Class 3 and Class 4B and 4C Residual
Percentages will
be calculated (including all liquidated Disputed claims in such
classes, for
purposes of such calculation, as if they were allowed in full
and
making a
good-faith estimate of the amount of the Disputed claims filed
in
an
unliquidated amount). Based on such calculations, and
establishing a reserve
for Disputed claims and interests in Classes 7, 8, 9, 10 and 11
as if such
claims or interests were allowed in full, a distribution of New
Securities, as
applicable, will be made to holders of allowed claims and
interests in Classes
2, 3, 4B, 4C, 6, 7, 8, 9, 10 and 11; provided, however, that New
Series Z
Warrants will not be distributed to holders of Class 9 interests
earlier than
60 days after the Effective Date. New Securities not distributed
in the initial
distribution will be held in reserve pending resolution of
Disputed claims or
interests.
Every six months following the Effective Date, there will be a
distribution
in respect of Disputed claims or interests that have been
allowed
in whole or
in part. New Securities held in reserve for Disputed claims or
interests that
have been disallowed, in whole or in part, shall be distributed
to holders of
allowed claims or interests based on a recalculation of the
relevant Ratable
Shares, taking into account the allowance or disallowance of
Disputed claims or
interests in the preceding six months, until all Disputed claims
or interests
have been determined.
The Debtor is unable, as of the date of this Disclosure
Statement, to
estimate the amount of New Securities that will be reserved on
the Effective
Date in respect of Disputed Claims in Classes 4B and 4C,
which will affect the distribution of Series C Notes, SellCo
Subordinated
Contingent Payment Notes and New Common Stock to Classes 2, 3,
4B
and 4C. The
Debtor cannot, at this time, estimate if or what amount of New
Series Z
Warrants may have to be reserved on the Effective Date in
respect
of Disputed
claims in Class 7 or Disputed interests in Classes 8, 9, 10 or
11.
V. CERTAIN RISK FACTORS
The securities to be issued pursuant to the Plan are subject
to
a number of
material risks, including those enumerated below. The risk
factors enumerated
below assume confirmation and the consummation of the Plan and
the transactions
contemplated by the Plan and do not include matters that could
prevent
confirmation. See "Summary of the Plan-Conditions Precedent to
Effectiveness of
the Plan" and "Confirmation of the Plan" for discussions of such
matters. Prior
to voting on the Plan, each holder of claims against JWP
entitled
to vote on
the Plan should carefully consider the risk factors enumerated
or
referred to
below as well as all of the information contained in this
Disclosure Statement,
including the exhibits hereto.
A. PAYMENT OF SENIOR NOTES
JWP intends that payment of the Series A Secured Notes and
Series B Secured
Notes, including the $10,000,000 mandatory redemption on the
second anniversary
of the Effective Date, will be made from the proceeds of asset
sales. If the
projected sales prices for the collateral underlying the
respective Notes are
not realized or if any of the proceeds of such sales are
required
to be held as
collateral under the Working Capital Liens, Reorganized JWP may
not have the
cash or the ability to borrow to make the mandatory redemption
or
to pay the
relevant Note at its maturity in three years.
B. WORKING CAPITAL FINANCING
It is a condition precedent to effectiveness of the Plan that,
upon emergence
from the Reorganization Case, Reorganized JWP shall have
obtained, subject only
to the occurrence of the Effective Date, a working capital
facility in an
amount at least sufficient to repay and replace the DIP Loan
("exit
financing"). The outstanding principal amount of the DIP Loan
is,
at the date
hereof, $25 million. There is no assurance that, despite JWP's
efforts,
adequate exit financing will be obtained. In addition, the terms
of any such
exit financing may be costly and may include the Working Capital
Lien referred
to in Section IV-F hereof.
C. LACK OF ESTABLISHED MARKET FOR THE NEW SECURITIES
There is no existing market for the New Securities and there
will be
relatively few holders of the New Securities. Under the Plan,
Reorganized JWP
has undertaken to use reasonable efforts to secure the listing
of
the New
Securities for trading on a national securities exchange or the
NASDAQ National
Market System. However, the historical financial statements of
JWP (see Exhibit
4 hereto) are unaudited and JWP has not filed all periodic
reports required to
be filed by it under the Securities Exchange Act of 1934, as
amended (the "1934
Act"). Accordingly, JWP believes it will be unable to secure a
listing of the
New Securities unless JWP obtains audited financial statements
and becomes
current in its filings of periodic reports under the 1934 Act.
There can be no
assurance as to whether or when such audited financial
statements
will become
available and JWP will become current in its periodic filings.
In
addition, the
New Securities will be issued pursuant to the Plan to
prepetition
creditors,
some of whom may prefer to liquidate their investment rather
than
to hold it on
a long-term basis. Accordingly, it is anticipated that, if a
market for New
Securities develops, such market will be uncertain, at least for
an initial
period of trading. In addition, there can be no assurance that
an
active market
therefor will develop or as to the degree of price volatility in
any such
particular market. Accordingly, no assurance can be given that a
holder of the
New Securities will be able to sell such securities in the
future
or as to the
price at which any such sale may occur.
Moreover, while the Plan was developed based upon an assumed
reorganization
value of $8.70 per share of New Common Stock (See "Pro Forma
Financial
Information" and "Valuation"), such valuation was not an
estimate
of the prices
at which New Common Stock may trade in the market, and JWP has
not attempted to
make any such estimate in connection with the development of the
Plan. If
markets with respect to the New Debt Securities were to exist,
such securities
could trade at prices higher or lower than the face amount
thereof, depending
upon many factors, including prevailing interest rates, markets
for similar
securities, industry conditions, and the performance of, and
investor
expectations, for Reorganized JWP. No assurance can be given as
to the market
prices, if any, that will prevail following the Effective Date.
For information regarding the current Securities and Exchange
Commission
investigation see "Legal Proceedings."
C. PROJECTIONS
The financial projections included in this Disclosure
Statement
are dependent
upon the successful implementation of JWP's business plan and
the
reliability
of the other assumptions contained therein. See "Projected
Financial
Information." These projections reflect numerous assumptions,
including
confirmation and consummation of the Plan in accordance with its
terms, the
anticipated future performance of Reorganized JWP, industry
performance,
general business and economic conditions and other matters, most
of which are
beyond the control of Reorganized JWP and some of which may not
materialize. In
addition, unanticipated events and circumstances occurring
subsequent to the
preparation of the projections may affect the actual financial
results of
Reorganized JWP. Therefore, the actual results achieved
throughout the periods
covered by the projections may vary significantly from the
projected results.
These variations may be material. See "Projected Financial
Information."
D. BUSINESS FACTORS AND COMPETITIVE CONDITIONS
The MES business in which Reorganized JWP will engage is
extremely
competitive. This business competes with national, regional and
local
companies. Reorganized JWP will have to regain customer
confidence in its
financial stability. In addition, Reorganized JWP's business
will
be directly
affected by general economic conditions, particularly the
cyclical nature of
new construction.
E. DIVIDENDS
Under the terms of the New Debt Securities, Reorganized JWP is
prohibited
from paying dividends on the New Common Stock. There is no
assurance that
Reorganized JWP will be able to declare and pay dividends on the
New Common
Stock if or when the New Debt Securities have been paid in full.
F. BONDING CAPACITY
As of May 31, 1994, JWP's business had a backlog of contracts
in the amount
of approximately $1 billion, of which approximately $600 million
is bonded. In
order to obtain a substantial portion of their new business,
Reorganized JWP
and the MES businesses will require bonding. There is no
assurance that
Reorganized JWP and the MES business will be able to obtain the
performance or
bid bonds necessary to achieve the projections contained in this
Disclosure
Statement. See "Events During the Reorganization Case-Surety
Bonds."
G. PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
An indirect subsidiary of the Debtor, University Cogeneration,
Inc., owns a
cogeneration facility which during calendar year 1993 narrowly
failed to
satisfy one of the necessary criteria under applicable federal
law for being a
"qualifying facility." The Securities and Exchange Commission
("SEC") has
informed the Debtor's counsel that it will issue a "no action"
letter so that
such failure will not cause such subsidiary's direct and
indirect
parents
(including the Debtor) to be considered "utility holding
companies" required to
be registered under the Public Utility Holding Company Act of
1935 ("PUHCA")
during 1993. In addition, the Debtor plans to apply for a waiver
from the
Federal Energy Regulatory Commission waiving compliance in 1993
with the one
criterion which such facility failed to meet.
The Debtor believes that it will be able to ensure that the
aforementioned
cogeneration facility meets all criteria for being a qualifying
facility during
calendar year 1994. However, because satisfaction of the key
criteria are
determined on a calendar-year basis, there can be no definitive
assurance that
such criteria will be met until the end of 1994.
VI. THE COMPANY
A. BUSINESS
1. Mechanical/Electrical Services. JWP's Mechanical/Electrical
Services Group
(the "MES Group") specializes in the design, distribution,
integration,
installation and maintenance of complex mechanical and
electrical
systems.
Services are provided to a broad range of commercial, industrial
and
institutional customers through approximately 40 offices located
in major
markets throughout the United States and more than 25 offices
located in
Canada, the United Kingdom and the Middle East. The business
units that are to
comprise the MES Group after completion of the restructuring
generated
approximately $1.8 billion of revenues in 1992 and $1.9 billion
in 1993.
The MES Group provides its mechanical and electrical services,
both directly,
by designing, selling, integrating, installing and maintaining
systems to and
for end-users (including corporations, municipalities and other
governmental
entities, owner/developers, and tenants of buildings), and
indirectly, by
acting as subcontractor for construction managers, general
contractors and
other subcontractors.
The MES Group is primarily involved in the design,
integration,
installation
and maintenance of (i) distribution systems for electrical power
(including
power cables, conduits, distribution panels, transformers and
generators), (ii)
lighting systems, and (iii) heating, ventilating, air
conditioning, plumbing,
process and high purity piping, and clean air systems. With
approximately
13,000 employees in the subsidiaries to be retained, JWP
believes
its
mechanical and electrical services business is the largest of
its
kind in the
United States and Canada and one of the largest in the United
Kingdom.
Historically, mechanical and electrical services have been
principally of
three types: (1) large installation projects, with contracts
generally in the
multi-million dollar range, in connection with construction of
industrial
facilities, institutional and public works projects, commercial
buildings, and
large blocks of space within commercial buildings, (2) smaller
system
installations involving renovation and retrofit work, and (3)
maintenance and
service.
JWP's largest installation projects have included those for
(i)
industrial
and institutional use (such as manufacturing, pharmaceutical and
chemical
plants, refineries, research facilities, water and wastewater
treatment
facilities, hospitals, correctional facilities, schools, trading
floors and
computer facilities, and mass transit systems), (ii) for
commercial use (such
as office buildings, convention centers, shopping malls, hotels
and destination
resorts), and (iii) for electric utilities. These can be
multi-year projects
ranging in size up to and, occasionally, in excess of, $50
million. The MES
Group also installs and maintains street, highway, bridge and
tunnel lighting,
traffic signals, computerized traffic signal control systems,
and
signal
control and communication systems for mass transit in several
metropolitan
areas.
Major projects are performed pursuant to contracts with
owners,
such as
corporations and municipalities and other governmental entities,
general
contractors, construction managers, as agents for owners of
construction
projects, owner-developers, and tenants of commercial
properties.
Institutional
and public works projects are frequently long-term, complicated
projects
requiring significant technical skills and financial strength to
obtain the
performance bonds that are often a condition to the award of
contracts for such
projects.
Smaller projects, which are generally completed in less than
one year,
involve the provision of conventional mechanical and electrical
contracting
services in industrial plants, office buildings and commercial
and retail space
in which The MES Group installs electrical fixtures, provides
electrical and
air conditioning systems for computer facilities, and installs
smaller heating,
air conditioning, and plumbing systems for office and renovation
projects. In
this area, The MES Group is not necessarily dependent upon new
construction;
demands for its services are frequently prompted by the
expiration of leases,
changes in technology and changes in the customer's plant or
office layout in
the normal course of business.
The MES Group's mechanical and electrical businesses also
perform maintenance
and service work, under multi-year contracts or on a short-term,
on-call basis,
for outside and interior lighting systems and for air
conditioning and heating
systems in plants and other large facilities, office buildings
and commercial
enterprises. The MES Group's service units also install
refrigeration systems
for restaurants, office cafeterias and supermarkets. Contracts
for maintenance
of mechanical and electrical systems range from one to several
years and are
billed on a time and materials basis or a fixed fee plus the
cost
of materials.
In many of the buildings in which The MES Group maintains
lighting systems, its
service units also install fixtures, move outlets, rewire and
perform other
routine electrical work. Service operations often require a
number of employees
to be permanently located at the building or facility served.
The MES Group also operates fully equipped sheet metal
fabrication facilities
in the United States, providing and installing sheet metal for
both its own
mechanical services businesses and unrelated mechanical
contractors; it also
maintains welding and piping fabrication shops for its own
mechanical
operations. Certain of these facilities will be sold.
The businesses in which JWP's MES Group engage are extremely
competitive.
These businesses compete with national, regional and local
companies. However,
JWP believes that, at present, it is the largest mechanical and
electrical
services company in the United States and Canada and one of the
largest in the
United Kingdom. JWP, through the MES Group, competes in these
businesses on the
basis of the quality of service, price, performance and
reliability. JWP's
competitive position has been adversely affected by its weakened
financial
condition, which has caused a decrease in backlog and a weak
negotiating
position with respect to new work and contract disputes, and has
adversely
affected margins. JWP has been able to obtain new work,
frequently only at
reduced margins.
2. Supply of Water. Jamaica Water Supply Company ("JWS")
(substantially all
the common stock of which is owned by JWP) and Sea Cliff Water
Company ("Sea
Cliff") (all the capital stock of which is owned by JWP)
(sometimes referred to
herein collectively as the "Water Companies") are regulated
public utilities
that own and operate water supply systems on portions of Long
Island, New York.
JWS, the largest investor-owned water utility in New York state,
supplies water
to a densely populated residential area of approximately 40
square miles in the
Borough of Queens in New York City and in adjacent southwestern
Nassau County,
Long Island, an area with an aggregate population of
approximately 650,000. Sea
Cliff supplies water to a four square mile area on the north
shore of western
Nassau County with a population of approximately 20,000. The
business of the
Water Companies consists of the purification, distribution and
sale of water
for residential, commercial and industrial purposes, providing
backup water for
commercial customers' fire sprinkler systems, and renting, as
lessor, fire
hydrants for municipal fire protection.
As of December 31, 1993, the Water Companies provided potable
water to
approximately 120,000 water service accounts, substantially all
of whom are
metered and billed for the amount of water actually used, and
approximately
1,000 private fire protection accounts for sprinkler connections
billed on a
flat rate basis. On December 22, 1993, JWS entered into a
settlement agreement
(the "Settlement Agreement") with New York State, local
government entities and
a public interest group resolving complex disputes as to JWS
rates and
operations. On February 2, 1994, the Public Service Commission
of
the State of
New York ("Public Service Commission") approved the Settlement
Agreement. See
"Legal Proceedings-Jamaica Water Supply Rate Related Proceeding
and Related
Litigation." The Settlement Agreement contemplates, among other
things, that
Jamaica Water Securities Corp. ("JWSC"), a subsidiary of JWP
which holds JWP's
interest in JWS, be separated from JWP. In the interim, within
the corporate
structure of Reorganized JWP, JWSC and Sea Cliff will become
subsidiaries of
SellCo. See "Reorganized JWP."
The Water Companies' primary sources of water are ground water
from wells
located in the New York counties of Queens and Nassau and
surface
water
obtained from the City of New York (the "City"). JWS has 93
wells
on 60 well
sites, of which 71 wells are currently operable, and Sea Cliff
has two wells on
two sites. Where appropriate, JWS has installed treatment
facilities at well
sites to remove volatile organic compounds prior to the water
entering the
distribution system.
In an effort to reduce the cost of water to City residents,
the
City provides
JWS with an exemption from real property taxes from the City and
makes direct
revenue support payments to JWS for water service. JWS also has
an agreement
with the City to purchase up to 50 million gallons of water
daily
from the City
(to the extent available) at a cost of $1 per million gallons.
JWS expects to
purchase approximately 30 million gallons daily. The $1 per
million gallons
rate is substantially less than both JWS' cost to pump and treat
water from its
wells and the New York City rate for commercial customers. The
agreement
expires June 30, 1998, although it is cancelable by either party
on two years
notice. The 30 million gallons of water JWS expects to purchase
daily from the
City constitutes approximately 60 percent of the average daily
amount of water
presently distributed by JWS to its customers in Queens County.
JWS customers
in Nassau County are served entirely from wells owned and
operated by JWS.
The Water Companies are subject to regulation by the Public
Service
Commission. Since the population of the areas served by the
Water
Companies has
been relatively stable, the amount of water consumed by their
customers has not
and is not expected to increase in any significant respect.
Consequently, cost
increases due to inflation or otherwise must be recovered
through
operating
efficiencies or increases in rates which are subject to approval
of the Public
Service Commission. Until recently, the Water Companies have
traditionally
filed for rate increases on an annual basis and have received
approvals of rate
increases from the Public Service Commission enabling them to
maintain
satisfactory operating results.
See "Legal Proceedings-Jamaica Water Supply Rate Related
Proceedings and
Related Litigation."
The Water Companies are also subject to regulation by various
federal, state
and local agencies, including the Department of Environmental
Conservation of
the State of New York, the New York State and New York City
Departments of
Health, the New York City Department of Environmental
Protection,
the Nassau
County Department of Health, and the United States Environmental
Protection
Agency. JWP believes that the Water Companies are in compliance
with all
applicable federal, state and local laws and regulations.
3. Information Services. JWP's Information Services Group,
which was
discontinued in 1993 and which reported revenues of $1.7 billion
for 1992,
principally engaged in providing computer and systems
integration
services. It
sold integrated multi-vendor personal computer related products
and services
for medium and large sized companies and other organizations. On
August 9,
1993, JWP sold all of the operating assets of JWP Information
Services, Inc.
("JWPIS"), its subsidiary which conducted this business in the
United States;
on April 19, 1993, JWP sold the Canadian operations of this
group; on August
17, 1993, JWP sold the United Kingdom operations of its
information services
group; on September 14, 1993, JWP sold its information services
business in
Japan; and on January 26, 1994, JWP sold the German information
services
business. JWP also carried on similar information services
businesses in
Belgium and France. In 1992, the Belgian operation filed a
petition seeking
relief from its creditors and is in the process of being
liquidated. On June
25, 1993 the IS unit in France filed a petition in the Paris
Commercial Court
seeking relief from its creditors and is also in the process of
being
liquidated.
On October 25, 1993, JWPIS filed a voluntary petition under
Chapter 7 of the
Bankruptcy Code in the United States Bankruptcy Court for the
Southern District
of New York (the "Chapter 7 Case"). A Chapter 7 trustee has been
appointed to
liquidate the remaining assets of JWPIS and to administer the
proceeds thereof
for the creditors of JWPIS. The Chapter 7 Case will provide
JWPIS's creditors a
single, orderly procedure for recovery. The remaining principal
assets of JWPIS
are a receivable in the amount of $24.9 million ("IS
Intercompany
Account")
owed to JWPIS by JWP (and included in the Class 4B claims) and
warrants, for
which JWP has not booked or estimated any value, for the
purchase
of ten (10%)
percent of the stock of Entex Holding, Inc., the parent
corporation of the
purchaser of JWPIS' assets. See "Summary of the Plan-Treatment
of
Classes-Class
4." The Chapter 7 Trustee of JWPIS has filed a proof of claim in
the
Reorganization Case in the amount of $50 million to which JWP
intends to object
and seek to have the Bankruptcy Court reduce and allow in the
amount of $24.9
million. The Creditors' Committee has propounded the view that
even further
reductions in the amount of this claim are warranted, as well as
the view that
this claim should be subordinated. The IS Intercompany Account
will be a Class
4B claim in the
Reorganization Case, unless grounds for subordinating such claim
are determined
by the Bankruptcy Court, in which case the IS Intercompany
Account will become
a Class 7 subordinated claim.
4. Other Business. In addition to the sale of certain
mechanical and
electrical service business units contemplated by the Business
Plan, beginning
in 1992, JWP began the sale of its non-core businesses and,
through February,
1994, has disposed of a number of non-core businesses. See
"Background
Information-Asset Disposition Program." The non-core business
units that
continue to be held for sale include JWP's telephone systems
business and its
remaining energy and environmental related businesses.
JWP's telephone systems service business is engaged in the
design, sale,
installation and servicing of telecommunication systems,
including LEXAR PBX
telephone systems, which JWP manufactures. JWP's telephone
switching systems
are used to interconnect business and institutional users with
telephone lines
of the regulated telephone companies.
JWP's principal remaining energy and environmental related
business
constructs, operates and maintains co-generation facilities for
use in steam
enhanced oil recovery processes, industrial plants, hotels,
universities,
hospitals and shopping centers. JWP, through its subsidiaries,
has built
sixteen co-generation facilities, operates six of them, and
owns,
in whole or
in part, three of them. Where a JWP subsidiary owns a
co-generation facility,
it supplies utility services to its customer under a long-term
contract. The
other two environmental related business units include one which
manufactures
fluidized bed combustion and gasification systems for the
waste-to-energy
market to process solid wastes of various types and one which
collects methane
gas at a landfill for conversion into electrical energy which is
sold to a
utility.
VII. REORGANIZED JWP
A. BUSINESS
After completing the asset sales which are an integral part of
the
restructuring of JWP's business (see "Background Information"),
Reorganized JWP
will be a smaller company, remaining international in scope,
engaged
principally in the MES business. Reorganized JWP's corporate
headquarters will
be located in Rye Brook, New York. The Rye Brook corporate
headquarters will
focus on corporate direction and strategy, handling the legal
and
financial
requirements for Reorganized JWP, providing for financial
reporting, risk
management, treasury, tax, human resources policy and compliance
functions and
financial and operating controls. The Rye Brook office will also
oversee the
management and sale of the non-MES units until they are sold.
B. CORPORATE STRUCTURE
The corporate structure of Reorganized JWP will reflect the
purposes of the
restructuring. Reorganized JWP will continue to be a holding
company, the
direct subsidiaries of which will be (i) MES, a holding company
for all MES
operating subsidiaries, (ii) SellCo, a holding company for
substantially all
businesses to be offered for sale, (iii) the five Nondebtor
Subsidiaries listed
on Schedule 4 to the Plan which constitute the substitute
Software House
collateral and (iv) the "Dynalectric Companies,"* consisting of
DYN Specialty
Contracting, Inc. and its subsidiaries B&B Contracting and
Supply
Company,
Dynalectric Company, Dynalectric Company of Nevada, Inc., Contra
Costa
Electric, Inc. and JWP Systems/Kirkwood Electric Company, Inc.
The North
American MES business will continue to operate on a
decentralized
basis, with
day-to-day operations managed by the business units. Reorganized
JWP's European
operations are managed by Drake & Scull, which has its corporate
office in
London.
1. MES. The following table lists the names, principal markets
and principal business of the principal MES units which are to
be
retained by Reorganized JWP, through its ownership of MES
Corporation.
- ------
* Reflected in the Disclosure Statement, dated February 14,
1994,
as a SellCo subsidiary. It has since been determined that these
companies will be retained.
<PAGE>
MES CORPORATION
PRINCIPAL RETAINED MES UNITS
<TABLE>
Principal Company Business
- ------------------------------------------------------------------- - --------------------
<S> <C> <C>
JWP/JC Higgins Corp. ............................... Boston Mechanical
JWP Forest Electric Corp. .......................... New York Electrical
JWP Penguin Air Conditioning Corp. ................. New York Mechanical
JWP Welsbach Electric Corp. ........................ New York Electrical
Gibson Electric Company, Inc. ......................Chicago/MidWest Electrical
JWP/Hyre Electric Co. of Indiana, Inc. ............. Mid-West Electrical
Los Angeles/
San Diego/
Phoenix/
JWP West (d/b/a University Mechanical Contractors).. National Mechanical
JWP Trautman & Shreve, Inc. ........................ Denver Mechanical
Hansen Mechanical Contractors, Inc. ................ Las Vegas Mechanical
JWP Zack Inc. ...................................... Power Systems Boiler/Mechanical
*JWP Gowan, Inc. ................................... Southwest Mechanical
UnitedKingdom/
The Drake & Scull Companies......................... Middle East Mechanical/Electrical
Comstock Canada..................................... Canada Mechanical/Electrical
*Heritage Air Systems, Inc. ........................ New York Mechanical
- ------
</TABLE>
* Reflected in the Disclosure Statement, dated February 14,
1994,
as a SellCo subsidiary. It has since been determined that these
companies will be retained.
2. SellCo. The following table lists the principal business
units which will be direct or indirect subsidiaries of SellCo.
SELLCO CORPORATION
NON-MES BUSINESSES
*University Cogeneration, Inc.
General Energy Development Inc.
Water Companies
MES BUSINESSES
Wachtel Duklauer & Fein, Incorporated
Superior Engineering Corporation
University Mechanical Contractors, Inc. (Washington)
JWP Brandt Engineering Co., Inc.
- ------
* Negotiations for the sale of this company, together with
University Energy Services of California, Inc., a Nondebtor
Subsidiary listed on Schedule 4 to the Plan, are in progress.
<PAGE>
VIII. MANAGEMENT AND MANAGEMENT STOCK OPTIONS
A. CHANGES IN MANAGEMENT
There have been a number of changes in the management of JWP
during 1992, 1993 and 1994. David L. Sokol was President from
January 1992 until he resigned such position in October 1992.
Andrew Dwyer, who, from 1987 to 1993, was Chairman of the Board
of Directors, and Chief Executive Officer of JWP and, from 1985
until January 1992, President, resumed the office of President
upon Mr. Sokol's resignation. Mr. Dwyer subsequently resigned as
President and Chief Executive Officer in April 1993 and was
succeeded in such positions by Edward F. Kosnik. Mr. Kosnik
became Chairman on July 1, 1993. Prior to becoming President and
Chief Executive Officer, Mr. Kosnik served from December 1992 as
Executive Vice-President and Chief Financial Officer. In January
1994, Mr. Kosnik announced his intention to resign from the
positions he held, and the JWP Board of Directors commenced a
search for a new Chief Executive Officer. In April 1994, the
search was concluded and Mr. Frank T. MacInnis was elected as
Chairman of the Board of Directors, Chief Executive Officer and
President of JWP. Mr. MacInnis was previously Chairman of the
Board of Directors and Chief Executive Officer and President of
Comstock Group, Inc., a nationwide electrical contracting
company.
Susan B. Garelli, formerly Senior Vice President-Human
Resources of JWP, resigned as of June 1, 1993. Stephen H.
Kornfeld, formerly Senior Vice President of JWP and Chairman of
the Board and Chief Executive Officer of JWP
International Inc., a subsidiary of JWP, resigned all such
positions effective as of August 31, 1993.
Since August 1992, there has been significant turnover among
JWP's senior management with financial and accounting
responsibilities. In August 1992, Ernest W. Grendi resigned as
Chief Financial Officer. Mr. Grendi had also served as JWP's
principal accounting officer. Following Mr. Grendi's
resignation, Mr. Richard F. Zannino, a Vice President of JWP,
became Acting Chief Financial Officer, and Mr. Philip M. McGinn,
who had been Controller of JWP, was also elected a Vice
President
of JWP and designated principal accounting officer of JWP.
In the Fall of 1992, Mr. Zannino resigned from JWP's employ
and, as indicated above, Mr. Edward F. Kosnik, in December 1992,
became Executive Vice President and Chief Financial Officer of
JWP. Following Mr. Kosnik's election as President and Chief
Executive Officer of JWP in April 1993, Mr. Stephen H.
Meyers and Mr. Joseph A. Gallo took on much of Mr. Kosnik's
responsibilities in the financial area. Mr. Meyers joined JWP in
January 1993 as Senior Vice President-Finance and continues in
that position. Mr. Gallo, who had been a Vice President and
Treasurer of JWP, was promoted to the position of Senior Vice
President in April 1993. He also continues as Treasurer of JWP.
In May 1994, Mr. Leicle Chesser became an Executive
Vice-President and the Chief Financial Officer of JWP.
In January 1994, Mr. Jeffrey M. Levy was elected Senior Vice
President of JWP and in February 1993 Mr. Levy was named Chief
Operating Officer of JWP. Formerly, Mr. Levy had been President
and Chief Executive Officer of JWP Electrical Mechanical
Services
(East) Inc.
B. BOARD OF DIRECTORS OF REORGANIZED JWP
Reorganized JWP will remain a Delaware corporation and will
have a Board of
Directors that will initially consist of seven members, who will
serve until
the next annual meeting of shareholders. Four Directors will be
designated by
the Old Note Holders; two Directors will be designated by the
Old
Credit
Agreement Holders; and one Director will be JWP's current
Chairman. The names
and description of the principal occupations and employments of
the foregoing
designees will be available at or prior to the hearing on
confirmation of the
Plan.
C. MANAGEMENT OF REORGANIZED JWP
The current officers of JWP, will continue in their positions
as officers of
Reorganized JWP, subject to review by the Board of Directors of
Reorganized
JWP:
Frank T. MacInnis, age 47, Chairman of the Board of Directors,
President and
Chief Executive Officer.
Sheldon I. Cammaker, age 54, Executive Vice President and
General Counsel.
Leicle Chesser, age 47, Executive Vice President and Chief
Financial Officer.
Joseph A. Gallo, age 42, Senior Vice President and Treasurer.
Jeffrey Levy, age 41, Senior Vice-President and Chief
Operating
Officer.
Stephen H. Meyers, age 52, Senior Vice President-Finance.
Joseph G. Barnett, age 56, Vice President-Real Estate and
Corporate
Secretary.
Sidney Bernstein, age 58, Vice President-Taxation.
D. DESCRIPTION OF THE 1994 MANAGEMENT STOCK OPTION PLAN
During the restructuring process and the Plan negotiations,
all
parties
concluded that it would be in the best interests of the
Reorganized JWP, its
creditors and equity holders that there be both continuity of
key
management
and a performance incentive for maintaining such continuity.
Accordingly,
Reorganized JWP will adopt a Management Stock Option Plan (the
"1994 Plan").
The 1994 Plan will be conditioned on approval by the
stockholders
of
Reorganized JWP following its adoption.
A copy of the 1994 Plan is annexed hereto as Exhibit L. The
following summary
of its principal provisions is subject to the full text of the
1994 Plan.
The 1994 Plan will be administered by the Compensation
Committee of the Board
of Directors (the "Compensation Committee"), comprised of two or
more directors
of Reorganized JWP, each of whom are disinterested within the
meaning of Rule
16b-3(c)(2) under the Securities Exchange Act of 1934 (the
"Exchange Act") and
considered outside directors within the meaning of Section
162(m)
of the
Internal Revenue Code of 1986, as amended (the "Code") and the
regulations
promulgated thereunder. Such key employees as may be determined
by the
Compensation Committee from time to time will be eligible to
participate in the
1994 Plan.
The aggregate number of shares of New Common Stock that may be
issued
pursuant to options under the 1994 Plan may not exceed
1,000,000.
The maximum
number of shares which may be the subject of options granted to
any individual
in any calendar year shall not exceed 500,000 shares.
Within one year after the Effective Date, the Compensation
Committee shall
determine the recipients of options to purchase 500,000 shares
of
New Common
Stock of Reorganized JWP pursuant to the 1994 Plan and shall
issue such options
to such recipients in the respective amounts as determined by
the
Compensation
Committee; provided, however, that in no event shall such
options
be issued
prior to the expiration of three months plus 20 days after the
Effective Date.
The employment agreement between JWP and Frank T. MacInnis
requires that Mr.
MacInnis shall receive options to purchase 200,000 shares of New
Common Stock
three months and twenty days following the Effective Date.
Options may be granted by the Compensation Committee to
eligible employees as
"incentive stock options" (as defined under Section 422 of the
Code) or as
non-qualified stock options.
The exercise price of an incentive stock option and a
non-qualified stock option must be at least equal to the fair
market value of the New Common Stock on the date of grant;
provided, however, that the purchase price for the
initial grant of options with respect to 500,000 shares shall be
equal to the average market price of New Common Stock over the
20
day trading period immediately preceding the date of issuance of
the option; and provided, further, that if the average market
price of New Common Stock for the applicable period cannot be
determined, the exercise price shall be determined
by an investment advisor selected by the Compensation Committee
of the Board of
Directors of Reorganized JWP. Notwithstanding the preceding, the
exercise price
of any such option which is an incentive stock option shall not
be less than
the fair market value of the New Common Stock on the date of
grant of the
option.
Options may not be exercised more than ten years after the
date
of grant.
Options shall be exercisable at such rate and times as may be
fixed by the
Committee on the date of grant; however, the rate at which the
option first
becomes exercisable may not be more rapid than 331/3% on and
after each of the
first, second and third anniversaries of the date of grant. The
aggregate fair
market value (determined at the time the option is granted) of
the New Common
Stock with respect to which incentive stock options are
exercisable for the
first time by a participant during any calendar year (under all
stock option
plans of Reorganized JWP and its subsidiaries) shall not exceed
$100,000; to
the extent that this limitation is exceeded, such excess options
shall be
treated as non-qualified stock options for purposes of the 1994
Plan and the
Code.
At the time an option is granted, the Compensation Committee
may, in its sole
discretion, designate whether the option is to be considered an
incentive stock
option or non-qualified stock option. Options with no such
designation shall be
deemed an incentive stock option to the extent that the $100,000
limit
described above is met.
Payment of the purchase price for shares acquired upon the
exercise of
options may be made by any one or more of the following methods:
in cash, by
check, by delivery to Reorganized JWP of shares of New Common
Stock already
owned by the option holder, by a "cashless" exercise method with
a designated
broker, or by such other method as the Compensation Committee
may
permit from
time to time. However, a holder may not use previously owned
shares of New
Common Stock that were acquired pursuant to the 1994 Plan, or
any
other stock
plan that may be maintained by Reorganized JWP or its
subsidiaries, to pay the
purchase price under an option, unless the holder has
beneficially owned such
shares for at least six months.
Options become immediately exercisable in full upon the
retirement of the
holder after reaching the age of 65, upon the disability or
death
of the holder
while in the employ of Reorganized JWP, or upon the occurrence
of
such special
circumstances as in the opinion of the Compensation Committee
merit special
consideration. However, no options or rights may be exercised
earlier than six
months following the later of the date of grant or of the
stockholder approval
of the 1994 Plan (except that the estate of a deceased holder of
an option may
exercise it prior to the expiration of such six-month period).
Options terminate at the end of the three-month period
following the holder's
termination of employment. This period is extended to six months
in the case of
the death of the holder, in which case the option is exercisable
by the
holder's estate.
Each option contains anti-dilution provisions which will
automatically adjust
the number of shares subject to options in the event of a stock
dividend,
split-up, conversion, exchange, reclassification or
substitution.
In addition,
upon the dissolution or liquidation of Reorganized JWP, or the
occurrence of a
merger or consolidation in which Reorganized JWP is not the
surviving
corporation, or in which Reorganized JWP becomes a subsidiary of
another
corporation or in which the voting securities of Reorganized JWP
which are
outstanding immediately prior thereto do not continue to
represent (either by
remaining outstanding or by being converted into voting
securities of the
surviving entity) more than 50% of the combined voting
securities
of
Reorganized JWP or such surviving entity immediately after such
merger or
consolidation, or upon the sale of all or substantially all of
the assets of
Reorganized JWP, the 1994 Plan and the options granted
thereunder
shall
terminate unless provision is made by Reorganized JWP in
connection
with such transaction for the assumption of options theretofore
granted, or the
substitution for such options of new options of the successor
corporation or a
parent or subsidiary thereof, with appropriate adjustments as to
the number and
kinds of shares and the per share exercise prices. If options
terminate as a
result of any such transaction, the holder will be entitled to
the excess of
(i) the fair market value (determined on the basis of the amount
received by
stockholders in connection with such transaction) of the shares
subject to the
portion of the option not theretofore exercised (whether or not
the option is
then exercisable pursuant to its terms or otherwise), over (ii)
the aggregate
purchase price that would be payable for such shares upon the
exercise of the
option. In the event of any other change in the corporate
structure or
outstanding shares of New Common Stock, the Compensation
Committee may make
such equitable adjustments to the number of shares and the class
of shares
available under the 1994 Plan or to any outstanding options as
it
shall deem
appropriate to prevent dilution or enlargement of rights.
Reorganized JWP shall obtain such consideration for granting
options under
the 1994 Plan as the Compensation Committee in its discretion
may
request.
Each option may be subject to provisions to assure that any
exercise or
disposition of New Common Stock will not violate the securities
laws.
No options may be granted under the 1994 Plan after ten years
following the
date of its adoption.
The Board of Directors or the Compensation Committee may at
any
time withdraw
or amend the 1994 Plan and may, with the consent of the affected
holder of an
outstanding option at any time withdraw or amend the terms and
conditions of
outstanding options. Any amendment which would increase the
number of shares
issuable pursuant to options or to any individual employee, or
change the class
of employees to whom options may be granted shall be subject to
the approval of
the stockholders of Reorganized JWP within one year of such
amendment.
The Federal income tax consequences to an employee who
receives
incentive
stock options generally will, under current law, be as follows:
An employee will not realize any income upon the grant or
exercise of an
incentive stock option. If the employee disposes of the shares
of
New Common
Stock acquired upon the exercise of an incentive stock option at
least two
years after the date the option is granted and at least one year
after the New
Common Stock is transferred to him or her, the employee will
realize long-term
capital gain in an amount equal to the excess, if any, of his or
her selling
price for the shares over the option exercise price. In such
case, Reorganized
JWP will not be entitled to any tax deduction resulting from the
issuance or
sale of the shares. If the employee disposes of the shares of
New
Common Stock
acquired upon the exercise of an incentive stock option prior to
the expiration
of two years from the date the option is granted, or one year
from the date the
New Common Stock is transferred to him or her, any gain realized
will be
taxable at such time as follows (a) as ordinary income to the
extent of the
difference between the option exercise price and the lesser of
the fair market
value of the shares on the date the option was exercised or the
amount realized
from such disposition, and (b) as capital gain to the extent of
any excess,
which gain shall be treated as short-term or long-term capital
gain depending
upon the holding period of the New Common Stock. In such case,
Reorganized JWP
may claim an income tax deduction (as compensation) for the
amount taxable to
the employee as ordinary income.
In general, the difference between the fair market value of
the
New Common
Stock at the time the incentive stock option is exercised and
the
option
exercise price will constitute an item of adjustment, for
purposes of
determining alternative minimum taxable income, and under
certain
circumstances
may be subject, in the year in which the option is exercised, to
the
alternative minimum tax.
If an employee uses shares of New Common Stock which he or she
owns to pay,
in whole or in part, the exercise price for shares acquired
pursuant to an
incentive stock option, (a) the holding period for the newly
issued shares of
New Common Stock equal in value to the old shares which were
surrendered upon
the
exercise shall include the period during which the old shares
were held, (b)
the employee's basis in such newly issued shares will be the
same
as his or her
basis in the old shares surrendered and (c) no gain or loss will
be recognized
by the employee on the old shares surrendered. However, if any
employee uses
shares previously acquired pursuant to the exercise of an
incentive stock
option to pay all or part of the exercise price under an
incentive stock
option, such tender will constitute a disposition of such
previously acquired
shares for purposes of the one-year (or two-year) holding period
requirement
applicable to such incentive stock option and such tender may be
treated as a
taxable exchange.
The Federal income tax consequences to an employee who
receives
non-qualified
stock options generally will, under current law, be as follows:
An employee will not realize any income at the time the option
is granted.
Generally, an employee will realize ordinary income, at the time
the option is
exercised in a total amount equal to the excess of the then fair
market value
of the New Common Stock acquired over the exercise price.
However, Section 83
of the Code provides that, if a director, officer or principal
stockholder
(i.e., an owner of more than 10 percent of the outstanding
shares
of New Common
Stock) receives shares pursuant to the exercise of a
non-qualified stock
option, he or she is not required to recognize any income until
the date on
which such shares can be sold at a profit without liability
under
Section 16(b)
of the Exchange Act. At such time, the director, officer or
principal
stockholder will realize income equal to the amount by which the
then fair
market value of the shares acquired pursuant to the exercise of
such option
exceeds the price paid for such shares. Alternatively, a
director, officer or
principal stockholder who would not otherwise be taxed at the
time the shares
are transferred may file a written election within 30 days with
the Internal
Revenue Service, to be taxed as of the date of transfer, on the
difference
between the then fair market value of the shares and the price
paid for such
shares.
All income realized upon the exercise of a non-qualified stock
option will be
taxed as ordinary income. Reorganized JWP will be entitled to a
tax deduction
(as compensation) for the amount taxable to an employee
(including a director,
officer and principal stockholder) upon the exercise of a
non-qualified stock
option, as described above, in the same year as those amounts
are
taxable to
the employee.
Shares of New Common Stock issued pursuant to the exercise of
a
non-qualified
stock option generally will constitute a capital asset in the
hands of an
employee (including a director, officer or principal
stockholder)
and will be
eligible for capital gain or loss treatment upon any subsequent
disposition.
The holding period of an employee (including a director, officer
or principal
stockholder) will commence upon the date he or she recognizes
income with
respect to the issuance of such shares, as described above. The
employee's
basis in the shares will be equal to the greater of their fair
market value as
of that date or the amount paid for such shares. If, however, an
employee uses
shares of New Common Stock which he or she owns to pay, in whole
or in part,
the exercise price for shares acquired pursuant to the exercise
of a
non-qualified stock option, (a) the holding period for the newly
issued shares
of New Common Stock equal in value to the old shares which were
surrendered
upon the exercise shall include the period during which the old
shares were
held, (b) the employee's basis in such newly issued shares will
be the same as
his or her basis in the surrendered shares, (c) no gain or loss
will be
realized by the employee on the old shares surrendered, and (d)
the employee
will realize ordinary income in an amount equal to the fair
market value of the
additional number of shares received over and above the number
of
old shares
surrendered (the "Additional Shares") and the employee's basis
in
the
Additional Shares will be equal to such fair market value.
In addition to the Federal income tax consequences discussed
above, Section
280G of the Code provides that if an officer, stockholder or
highly compensated
individual receives a payment which is in the nature of
compensation and which
is contingent upon a change in control of the employer, and such
payment equals
or exceeds three times his or her "base salary" (as hereinafter
defined), then
any amount received in excess of base salary shall be considered
an "excess
parachute payment." An individual's "base salary" is equal to
his
or her
average annual compensation over the five-year period (or period
of employment,
if shorter) ending with the close of the individual's taxable
year immediately
preceding the taxable year in which the change in
control occurs. If the taxpayer establishes, by clear and
convincing evidence,
that an amount received is reasonable compensation for past or
future services,
all or a portion of such amount may be deemed not to be an
excess
parachute
payment. If any payments made under the 1994 Plan in connection
with a change
in control of Reorganized JWP constitute excess parachute
payments with respect
to any employee, then in addition to any income tax which would
otherwise be
owed on such payment, the individual will be subject to an
excise
tax equal to
20% of such excess parachute payment and Reorganized JWP will
not
be entitled
to any tax deduction to which it otherwise would have been
entitled with
respect to such excess parachute payment.
Section 280G provides that payments made pursuant to a
contract
entered into
within one year of the change in control are presumed to be
parachute payments
unless the individual establishes, by clear and convincing
evidence, that such
contract was not entered into in contemplation of a change in
control. In
addition, the General Explanation of the Tax Reform Act of 1984
prepared by the
Staff of the Joint Committee on Taxation indicates that the
grant
of an option
within one year of the change in control or the acceleration of
an option
because of a change in control may be considered a parachute
payment, in an
amount equal to the value of the option or the value of the
accelerated portion
of the option as the case may be. Pursuant to proposed
regulations issued by
the Treasury Department under Section 280G, the acceleration of
a
non-qualified
stock option because of a change in control is considered a
parachute payment
in an amount equal to the value of the accelerated portion of
the
option. Even
if the grant of an option within one year of the change in
control or the
acceleration of an option is not a parachute payment for
purposes
of Section
280G, the exercise of an option within one year of the change in
control or the
exercise of the accelerated portion of an option may result in a
parachute
payment, in an amount equal to the excess of the fair market
value of the
shares received upon exercise of the option over the exercise
price. Payments
received for the cancellation of an option because of a change
in
control may
also result in parachute payments.
The foregoing summary with respect to Federal income taxation
does not
purport to be complete and reference is made to the applicable
provisions of
the Code.
IX. LEGAL PROCEEDINGS
A. SHAREHOLDER LITIGATION
Since August 1992, nineteen class action lawsuits have been
filed against JWP
arising out of the restatements of earnings, write-offs and
losses announced by
JWP on August 4, 1992 and October 2, 1992. The lawsuits named as
defendants,
among others, JWP and certain of its current and former officers
and directors
and alleged federal securities law and state law violations. On
November 2,
1992, all of those actions were consolidated for pre-trial
purposes before
Judge Charles L. Brieant in the White Plains division of the
United States
District Court for the Southern District of New York.
Pursuant to Stipulation and Court Order, on January 15, 1993,
a
single
consolidated amended class action complaint (the "Complaint")
was
filed against
JWP and Andrew T. Dwyer, a director of JWP and former Chairman
of
the Board,
President and Chief Executive Officer of JWP, Ernest W. Grendi,
JWP's former
Chief Financial Officer, Joseph E. Grendi, former Chief
Financial
Officer of
JWP's Mechanical/Electrical Services Group, and three other
current directors
of JWP-Innis O'Rourke, Jr., Craig C. Perry, and Edmund S.
Twining, Jr.-and
George M. Duff, Jr., a former director, each of whom were
members
of JWP's
Audit Committee for all or part of 1991, and Ernst & Young,
which
served as
JWP's auditor for 1992 and 1991 and several prior years.
The Complaint alleges violations of Section 10(b) of the
Securities and
Exchange Act of 1934, Rule 10b-5 promulgated thereunder and
common law fraud
and deceit on the part of JWP and the other named defendants.
Among other
things, JWP is alleged to have intentionally and materially
overstated its
inventory, accounts receivable and earnings in various public
disseminations
during the purported class period, May 1,
1991 through October 1, 1992. The Complaint seeks an unspecified
amount of
damages. On March 30, 1993, JWP filed an answer which denies the
material
allegations in the Complaint. In June 1994, the Bankruptcy Court
modified the
automatic stay provided by the Bankruptcy Code with respect to
the Shareholder
Litigation in order to allow discovery of the non-debtor
defendants and limited
discovery of JWP. The parties are now engaged in discovery
proceedings.
For a description of the treatment of the Shareholder
Litigation under the
Plan, see "Summary of the Plan-Class 10."
B. SECURITIES AND EXCHANGE COMMISSION INVESTIGATION
JWP has been informed by the Securities and Exchange
Commission
(the "SEC")
that it is conducting a private investigation to determine
whether there have
been violations of certain provisions of the federal securities
laws and/or the
rules and regulations of the SEC in connection with JWP's
financial records,
reports, and public disclosures. JWP has been cooperating with
the SEC's staff
and has voluntarily produced documents and information as
requested by the
staff. On April 12, 1994, the SEC staff informed JWP of its
intention to
recommend that the SEC file a civil injunction action against
the
JWP. JWP is
currently engaged in discussions with the SEC staff concerning a
possible
consensual resolution of the matter.
C. NEW YORK COUNTY DISTRICT ATTORNEY INVESTIGATION
In connection with an investigation of the plumbing industry
being conducted
by the New York County District Attorney's Office, two related
subsidiaries of
JWP engaged in the plumbing business in New York City have
received subpoenas
for certain of their books and records. The subsidiaries have
complied with
those subpoenas. Additionally, certain employees of the two
subsidiaries have
been subpoenaed to testify as witnesses before a grand jury, and
the employees
have complied with the subpoenas.
D. JAMAICA WATER SUPPLY COMPANY
1. Rate Related Proceedings and Related Litigation. Effective
March 1991, JWS
was authorized by the Public Service Commission of the State of
New York (the
"Public Service Commission") to increase its rates charged to
customers by
amounts designed to increase annual revenues by $3,992,000. At
that time the
Public Service Commission made $2,000,000 of that increase
temporary and
subject to refund pending a further review by the Public Service
Commission.
Upon completion of its review, in July 1992, the Public Service
Commission
ordered JWS to refund to its customers all of the amounts
collected under the
temporary portion of the rate increase during the period from
March 1991
through June 1992. In addition, the Public Service Commission
ordered JWS to
reduce the rates charged customers, as initially authorized
effective March
1991, by amounts designed to reduce annual revenues by
$1,400,000
effective
July 1, 1992. During the third quarter of 1992, JWS, which had
not recorded as
revenue any of the amounts collected under the temporary portion
of the rate
increase, made the required refund, aggregating $2,900,000
including interest,
by way of credits to customers' bills.
In January 1992, the Public Service Commission ordered its
Staff to perform
an audit covering all aspects of JWS's operations. The report on
that audit
alleged that mismanagement and imprudence on the part of JWS may
have resulted
in excess charges to the customers of up to $10,600,000. As a
result of the
audit report, in June 1992, the Public Service Commission
instituted a
proceeding requiring JWS to demonstrate that its rates charged
customers are
not excessive and providing for an investigation of JWS's
management practices.
As part of this proceeding, and citing the audit report's
assertions without
receiving the audit report in evidence, the Public Service
Commission ordered
that $10,600,000 of JWS's annual revenues be made temporary and
subject to
refund, effective August 6, 1992, pending the completion of the
investigation.
Between December 1992 and May 1993, each of JWS, the Public
Service
Commission Staff, the New York State Consumer Protection Board,
Waterbill
Watchdogs, Inc., the County of Nassau, the Town of
Hempstead, the New York City Department of Environmental
Protection and the New
York City Water Board appeared and submitted testimony in the
Public Service
Commission proceedings. On June 3, 1993, the Public Service
Commission issued
an order suspending hearings and appointing two administrative
law judges for
the purpose of effecting a settlement. Negotiations among the
parties and
through the settlement judges were ongoing from that time.
In addition, in February 1993, the County of Nassau commenced
an action
alleging violation of the Racketeer Influenced and Corrupt
Organizations Act
("RICO") and common law fraud based on allegations that JWS
intentionally filed
false rate applications and, as a result, had earnings that
exceeded
projections by $8,653,000. The complaint demanded treble damages
and punitive
damages.
As a result of the negotiations ordered by the Public Service
Commission, all
of the foregoing parties entered into a settlement agreement
dated December 22,
1993 ("Settlement Agreement"), which, following approval by the
Public Service
Commission on February 2, 1994, settled all issues outstanding
before the
Public Service Commission, various state courts, and in the RICO
action. The
Settlement Agreement provides, among other things, (i) that JWS
will use its
best efforts to bring about the separation of Jamaica Water
Securities Corp.
("JWSC"), a subsidiary of JWP, which holds substantially all of
the common
stock of JWS, from JWP and that JWSC will submit a plan to the
Public Service
Commission on or before December 31, 1994 for its separation
from
JWP and the
formation of a separate waterworks corporation to be
incorporated
under the New
York Transportation Corporations Law to provide water utility
service to the
Nassau County customers served by JWS, (ii) a commitment by JWS
that, subject
to limited specified exceptions, it will not seek to have a
general rate
increase become effective prior to January 1, 1997, thus
providing rate
stability for three years, (iii) for refunds and other payments
to customers
estimated to aggregate approximately $11.7 million over the
1994-1997 period,
and (iv) a cap on earnings above which JWS will share with its
customers its
return on equity. The JWS Settlement Agreement also recognizes
the positive
steps taken by JWS to comply with the Public Service
Commission's
audit
recommendations.
2. New York City Condemnation Proceeding. From time to time
representatives
of New York City (the "City") and JWP met to discuss a possible
purchase by the
City of that portion of JWS's water distribution system, which
is
located in
the City. That system constitutes approximately 75% of JWS's
water plant.
In September 1986, the State of New York enacted a law that
requires the City
to acquire by condemnation all of the property of JWS
"constituting or relating
to [its] water distribution system located in the City of New
York" only in the
event of a decision by the Supreme Court of the State of New
York
that the
amount of compensation to be paid JWS for the water distribution
system "shall
be determined solely by the income capitalization method of
valuation, based on
the actual net income as allowed (to JWS) by the [New York
State]
public
service commission." In addition, the law provides that if any
court determines
"that a method of compensation other than the income
capitalization method be
utilized, or if the proposed award is more than the [JWS] rate
base of the
[condemned] assets . . . as utilized by the public service
commission in
setting rates," the City may withdraw the condemnation
proceeding
without
prejudice or costs. As of December 31, 1987, the rate base of
those assets
located in the City was approximately $53,084,000 exclusive of
water meters
currently under lease which may be required to be purchased in
the event of
condemnation.
In April 1988, the City instituted a proceeding in the Supreme
Court of the
State of New York pursuant to the 1986 statute. The City sought,
in the first
instance, an order providing that the income capitalization
method of valuation
would be the sole method used to determine compensation for
JWS's
property,
and, on that basis, asked the Court to determine the value of
the
JWS property
to be condemned. Pursuant to the 1986 law, if the Court were to
determine
compensation that exceeds the rate base or were to determine
compensation by a
method other than the income capitalization method, the City
could withdraw the
condemnation proceeding. JWS argued, at trial and in its
post-trial memorandum,
that the judicially recognized method of valuing public utility
property is by
the Reproduction Cost New Less Depreciation
("RCNLD")19 of tangible and intangible assets in order to
determine just
compensation for the JWS property in the City. JWS also sought
consequential
and severance damages that would result from separating the JWS
Nassau County
water supply system from that in the City. The aggregate
compensation sought by
JWS as of December 31, 1987 was $923,966,341, consisting of
$846,625,285 RCNLD,
$49,670,056 consequential and severance damages and $27,671,000
as the fair
market value of the land owned by JWS. The City submitted its
income
capitalization valuation, as of December 31, 1987, at
$62,500,000. The
evidentiary hearings in the proceedings were concluded and JWS
reserved its
right to contest the constitutionality of the statute.
Subsequent to the trial, the Court requested that the parties
address the
constitutionality of the statute. After a joint post-hearing
submission from
JWS and the City contending that the statute was constitutional,
the Supreme
Court sua sponte, by decision dated June 21, 1993, dismissed the
City's
petition and held, inter alia, that "insofar as the legislature
has directed
this Court to make . . . a decision [on valuation only prior to
any taking]
through General City Law 20(2), that statute is
unconstitutional"
because such
a decision would be advisory.20 Aware that a constitutional
challenge to a
nearly identical condemnation statute21 involving Saratoga
County, was pending
in the appellate courts, neither JWS nor the City served a
notice
of entry of
the dismissal order that would commence the period within which
an appeal could
be taken.
On February 24, 1994, the New York Court of Appeals held the
nearly-identical
statute to be constitutional.22 On April 6, 1994, a conference
was held with
the Supreme Court pursuant to the City's request to reconsider
its JWS decision
in light of the Court of Appeals February 24, 1994 decision.
At the April 6, 1994 conference, the Court stated it would, as
requested by
the City, reconsider its June 21, 1993 decision. The Court
further stated that
in the event it decided to withdraw its June 21, 1993 decision
that it would
then take the proceedings under further consideration.
JWP cannot predict when or if the Supreme Court will conduct
further
proceedings under the statute nor is it possible to predict what
the decision
of the Supreme Court might be if it decides to value the JWS
property or the
effect of the pending litigation on the ability to sell or the
timing of the
sale of JWS.
X. FEASIBILITY OF THE PLAN
Assuming JWP has met the conditions precedent to confirmation
of the Plan
(See "Summary of the Plan-Conditions Precedent") with respect to
a working
capital credit facility:
A. PAYMENTS ON THE EFFECTIVE DATE
JWP expects to have cash on hand on the Effective Date in the
amount of
approximately $8,000,000 to fund expected immediate
disbursements
under the
Plan for administrative expense, priority and Class 4A claims
and
still leave
Reorganized JWP with the cash or available credit necessary for
continuing its
business.
- ------
19 RCNLD, as a standard of just compensation in a condemnation
proceeding, reflects, essentially, what it would cost to
reproduce a comparable new water system at current costs less
depreciation to reflect its current condition. It is the
Debtor's
position that RCNLD has no relationship or relevance to the
reorganization value of a debtor in a Chapter 11 case under the
Bankruptcy Code. Certain representatives of Class 10 disagree
with this position.
20 600 N.Y.S.2d 914 (Sup. 1993).
21 New York Public Authorities Law (S) 1199.eee(5).
22 Saratoga Water Services, Inc. v. Saratoga County Water
Authority, 83 N.Y.2d 205, 608 N.Y.S.2d 952 (1994).
<PAGE>
Other than payment of administrative expense, priority and
Class 4A claims,
the only cash payments that JWP expects will be payable under
the
Plan on or
shortly after the Effective Date are (i) a mandatory prepayment
of the Series B
Secured Notes if there are proceeds constituting Series B Cash
Collateral from
assets sales consummated prior to the Effective Date and (ii),
if
Reorganized
JWP so elects, a cash payment to Belmont in an amount equal to
the face amount
of Series B Secured Notes Belmont would otherwise receive as
Additional
Interest.
B. FUTURE PAYMENTS UNDER THE PLAN
Confirmation of the Plan will result in discharge of
indebtedness in the
amount of approximately $630 million23 Reorganized JWP will have
indebtedness
under the Plan in the amount of approximately $136 million24
consisting of the
1. approximately $59.4 million23 principal amount (plus the
Additional
Interest amount if not paid in cash) of the 3-year 7% Series A
Senior Secured
Notes, with interest payable only in kind;
2. $11.357 million principal amount (plus the Additional
Interest amount if
not paid in cash) of the 3-year 7% Series B Senior Secured
Notes,
with interest
payable only in kind; and
3. $60 million principal amount (plus the Additional Interest
amount if not
paid in cash) of the 7-year 11% Series C Notes with interest
payable only in
kind for the first eighteen months and payable in cash quarterly
thereafter.
4. Reorganized JWP Supplemental SellCo Note issued to SellCo
in
the estimated
principal amount of $5,000,000; interest to accrue at 8% per
annum, payable at
maturity, which is the earlier of ten years from the Effective
Date and one day
prior to the date on which the SellCo Subordinated Contingent
Payment Note is
deemed canceled by reason of the sale of substantially all of
SellCo's assets
other than this note, but not earlier than five years from the
Effective Date.
Additionally, SellCo will have indebtedness under the Plan
consisting of
$46,000,000 principal amount, plus the Additional Interest
amount
if not paid
in cash, of the 10-year 12% SellCo Subordinated Contingent
Payment Notes, with
interest compounded semi-annually and payable at the earlier of
maturity or
payment in full of principal; provided that if all the assets of
SellCo have
been sold and the proceeds distributed or if the SellCo assets
(other than the
JWP Supplemental SellCo Note) are valued at less than $250,000,
the SellCo
Subordinated Contingent Payment Notes shall be canceled. The
SellCo
Subordinated Contingent Payment Notes are recourse to
Reorganized
JWP to the
extent of the JWP Supplemental SellCo Note.
Other than the $10 million mandatory redemption under of
Series
A Secured
Notes (less optional prepayments and asset sales proceeds) on
the
second
anniversary of the Effective Date and mandatory redemptions
based
on net
proceeds of assets sales or debt or equity offerings or
"Available Cash,"
Reorganized JWP will not be required to make any cash debt
service payments for
the first eighteen months following the Effective Date. After
that time, cash
interest payments, of approximately $8 million per year25, will
be payable and
only in respect of the Series C Notes.
Based on the projections set forth in this Disclosure
Statement, JWP believes
that the Plan is feasible.
- ------
23 Assumes allowed Class 4B and 4C claims of $85 million.
24 Not including the Additional Interest Amount, which could
amount to
additional indebtedness of up to $4.9 million.
25 Not including interest on the Additional Interest Amount.
<PAGE>
XI. CONFIRMATION OF THE PLAN
A. HEARING
To confirm the Plan, the Bankruptcy Court will be required to
hold, after
notice, a confirmation hearing. The Plan will only be confirmed
if the
Bankruptcy Court determines at such hearing that the Plan
satisfies all of the
requirements set forth in Section 1129 of the Bankruptcy Code.
Section 1129
requires, among other things, that the Plan (1) has been
accepted
by each
impaired class of claims or interests or, if rejected by any
impaired classes,
that it satisfies the requirements for "cramdown" set forth in
Section 1129(b)
with respect to such rejecting classes, (2) is feasible and (3)
is in the "best
interests" of nonaccepting creditors and equity holders that are
impaired under
the Plan.
B. ACCEPTANCE
Classes 2, 3, 4B, 4C, 6, 7, 8, 9, 10 and 11 are impaired under
the Plan.
Classes 2,3 and 4B constitute "Senior Indebtedness" with respect
to the claims
of Class 6. If Classes 2, 3 and 4B, voting as a single class, do
not accept the
Plan, the Plan cannot be confirmed. Each of the remaining
Classes
must accept
the Plan;26 however, the Plan can be confirmed notwithstanding
the rejection of
the Plan by any of Classes 4C, 6, 7, 8, 9, 10 or 11 if the
Bankruptcy Court
finds that the treatment accorded to each non-accepting class of
claims or
interests satisfies the "cramdown" provisions of Section
1129(b).
See
"Confirmation of the Plan-Confirmation Without Acceptance by all
Impaired
Classes."
C. FEASIBILITY
The Bankruptcy Code requires the Bankruptcy Court to find that
confirmation
of the Plan is not likely to be followed by the liquidation, or
the need for
further financial reorganization, of the Debtor. For purposes of
determining
whether the Plan meets this requirement, JWP has analyzed its
ability to meet
its obligations under the Plan. As part of this analysis,
management has
prepared projections of Reorganized JWP's financial performance
for the period
from 1994 through 1997. See "Projected Financial Information."
Although these
projections do not reflect all possible effects of the Plan or
of
significant
unanticipated adverse changes in economic conditions generally,
JWP is
confident that the Plan provides a feasible means of
reorganization and
operation, through which it can be reasonably expected that,
subject to the
risks disclosed herein, Reorganized JWP will be able to satisfy
its obligations
on and after the Effective Date. For a description of the
assumptions
underlying the projections, as well as the related
qualifications, see
"Financial Projections" and "Certain Risk Factors."
D. BEST INTERESTS TEST
The Bankruptcy Code requires that each creditor or equity
holder in an
impaired class either (a) has accepted the Plan or (b) will
receive or retain
under the Plan property of a value, as of the Effective Date,
that is not less
than the value such creditor or equity holder would receive or
retain if the
Debtor were liquidated under Chapter 7 of the Bankruptcy Code on
such date.
To determine what the holders of claims and interests in each
impaired class
would receive if JWP were liquidated, the dollar amount that
would be generated
from a liquidation of the assets and properties of JWP in the
context of a
hypothetical liquidation case under Chapter 7 must be
calculated.
Such
determination must take into account the fact that costs and
expenses of the
liquidation case, including the creation of additional claims
that would not
have been impaired in the Reorganization Case, and any costs and
expenses
resulting from the original reorganization case would be paid in
full from the
liquidation proceeds before the
- ------
26 The requisite majority for acceptance of a plan by a class of
creditors that
is entitled to vote is acceptance by the holders of at least
two-thirds in
dollar amount and more than one-half in number of the allowed
claims of
those voting, excluding any vote that was not made or
solicited or procured
in good faith. The requisite majority for acceptance of a
plan
by a class of
interests that is entitled to vote is acceptance by the
holders of at least
two-thirds in amount of the allowed interests of those
voting,
excluding any vote that was not made or solicited or provided in
good faith.
balance of those proceeds were made available to pay the
pre-petition unsecured
claims and interests. See the consolidated Liquidation Analysis
attached as
Exhibit 5 hereto.
To determine if the Plan is in the best interests of each
holder of a claim
or interest in each impaired class, the present value of the
distributions from
the proceeds of the hypothetical liquidation of the assets and
properties of
JWP (after subtracting the amounts attributable to costs and
expenses of the
bankruptcy cases) must be compared with the present value of the
consideration
offered to such classes under the Plan.
After considering the effect that a Chapter 7 liquidation
would
have on the
ultimate proceeds available for distribution to creditors and
equity holders of
JWP, including (1) increased cost and expenses of liquidation
under Chapter 7
arising from fees payable to a bankruptcy trustee and attorneys
and other
professional advisors to such trustee, (2) additional expenses
and claims, some
of which would be entitled to priority, that would be generated
during the
liquidation from, for example the rejection of unexpired leases
and executory
contracts in connection with the cessation of the operations of
JWP and from
the creation of liquidated claims, such as guarantee and other
claims, which
would be unimpaired in the Reorganization Case, or, if impaired,
would remain
contingent and unliquidated so long as JWP and its Nondebtor
Subsidiaries are
going concerns, (3) the erosion of the value of JWP's assets in
the context of
an expedited liquidation required under Chapter 7 and the "fire
sale"
atmosphere that would prevail, (4) the adverse effects on the
saleability of
portions of the business that could result from the possible
departure of key
employees and the loss of major customers, (5) the cost
attributable to the
time value of money resulting from what is likely to be a more
protracted
proceeding, and (6) the application of the rule of absolute
priority to
distributions in a Chapter 7 liquidation, JWP has determined
that
confirmation
of the Plan will provide each holder of a claim or interest in
an
impaired
class with a greater recovery than such holder would receive
pursuant to a
Chapter 7 liquidation of JWP and its Nondebtor Subsidiaries.
The consolidated Liquidation Analysis for JWP is attached as
Exhibit 5
hereto. The analysis set forth in the Liquidation Analysis of
the
estimated
recoveries in a liquidation of JWP's operating businesses was
prepared by JWP
with the assistance of its financial advisors, Lazard Freres &
Co. A
description of procedures followed and the assumptions and
qualifications made
by JWP in connection with such analysis is set forth in the
consolidated
Liquidation Analysis contained in Exhibit 5 hereto. The
Liquidation Analysis
was completed using December 1993 data and, as of the date
hereof, JWP is not
aware of any events subsequent to such date that would
materially
impact the
Liquidation Analysis.
E. CONFIRMATION WITHOUT ACCEPTANCE BY ALL IMPAIRED CLASSES
In the event that one or more of Classes 4C, 6, 7, 8, 9, 10
and
11 does not
accept the Plan, the Debtor will seek to confirm the Plan
notwithstanding the
non-acceptance by such classes under the "cramdown" provisions
set forth in
Section 1129(b) of the Bankruptcy Code. To obtain confirmation
under the
"cramdown" provisions, it must be demonstrated to the Bankruptcy
Court that the
Plan does not "discriminate unfairly" and is "fair and
equitable"
with respect
to any dissenting class.
1. Unfair Discrimination. The "unfair discrimination" test
requires, among
other things, that the Plan recognize the relative priorities
among unsecured
creditors and equity holders and that classes of equal rank
receive equal
treatment. JWP believes that it can demonstrate to the
Bankruptcy
Court that
the Plan does not discriminate at all among Classes 2, 3, 4B and
4C and that
this test is met for each of Classes 2, 3, 4B and 4C, based on
the
Intercreditor Agreement, which, in effect, provides for a
partial
subordination
of claims in Class 3 to the claims in Class 2. The Intercreditor
Agreement has
no discriminatory effect on the claims in Classes 4B and 4C.
Such
discrimination as may exist in favor of Class 5 is fair and
justified because
it is essential to enable JWP's businesses to reorganize and to
continue as
going concerns. The claims of Class 6 are contractually
subordinated to the
claims of Classes 2, 3 and 4B and are separately classified and
treated in
order to recognize the terms of such subordination. If Classes
2,
3 and 4B,
voting as a single class, accept the Plan, and the Plan is
confirmed, the New
Series X Warrants and New Series Y Warrants will be issued to
Class 6 by reason
of the negotiated settlement among such classes. The claims of
Class 7 are
certain claims that are subordinated to the claims of Classes 2,
3, 4, 5 or 6,
and are separately classified and treated in accordance with
such
subordination.
The interests in classes 8, 9, 10 and 11 are appropriately
treated in
accordance with their relative priorities. The interests in
Class
8, which are
based upon ownership of Old Preferred Stock, are senior to the
interests in
Classes 9, 10 and 11. The interests in Classes 9, 10 and 11,
which are based
upon the ownership of, or claims of right to, the Old Common
Stock, or
interests that are pari passu with such interests, are
separately
classified
and treated under the Plan in order to effect a fair and
rational
allocation of
New Series Z Warrants among such interests. The Plan provides
that,
notwithstanding the failure of any of Classes 9, 10 or 11 to
accept the Plan,
Reorganized JWP may, in its discretion, issue New Series Z
Warrants to all such
classes.
2. Fair and Equitable Standard. The Bankruptcy Code
establishes
different
"fair and equitable" tests for secured creditors, unsecured
creditors and
equity holders. The respective tests, in part, are as follows:
a. 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 claims of the dissenting class do not
receive or retain
any property under the Plan. To the extent that any of Classes
4B, 6 and 7,
which are classes of unsecured creditors, do not accept the
Plan,
the Plan
provides that no class junior to such classes shall receive or
retain any
property under the Plan.
b. Equity Holders. Either (i) each equity holder of the
rejecting class
receives or retains under the Plan property of a value equal to
the value of
such holder's equity interest or (ii) the holders of interests
that are junior
to the interests of such rejecting class do not receive or
retain
any property
under the Plan. To the extent that Class 8, which is a class of
equity
interests, does not accept the Plan, the Plan provides that no
class junior to
such classes shall receive or retain any property under the
Plan.
To the extent
that any of Classes 9, 10 and 11, which are classes of equity
interests, do not
accept the Plan, the Plan provides that no class junior to such
classes shall
receive any property under the Plan.
If all of the applicable requirements for confirmation of the
Plan set forth
in Section 1129(a) of the Bankruptcy Code, except that any
impaired classes
reject the Plan, have been satisfied, JWP will request the
Bankruptcy Court to
confirm the Plan pursuant to the "cramdown" provisions of
Section
1129(b) of
the Bankruptcy Code, on the basis that the Plan is fair and
equitable and does
not discriminate unfairly with respect to such rejecting
classes.
XII. ALTERNATIVES TO THE PLAN
A. ALTERNATIVE PLAN OF REORGANIZATION
If the Plan is not confirmed, JWP or any other party in
interest could
attempt to formulate a different plan. Such a plan might involve
either a
reorganization and continuation of all or a part of JWP's
businesses or it
might propose an orderly liquidation of all of JWP's assets. JWP
has explored
various alternative plans in consultation with its advisors and
in the lengthy
negotiations underlying the formulation and development of the
Plan. JWP
believes that the Plan in its present form enables the greatest
recovery for
creditors. The Plan contemplates the orderly disposition of
certain of JWP's
assets and preserves that part of JWP's business deemed to be
profitable and
capable of generating sufficient cash flow to service operations
and debt
service. While a liquidation by JWP of all of JWP's assets under
Chapter 11
would likely result in greater proceeds than a liquidation under
Chapter 7 by a
trustee, it is JWP's belief that the aggregate net proceeds of
such a Chapter
11 liquidation would not equal the present value of the
estimated
recovery for
creditors, over time, from JWP's continuing business, as
proposed
in the Plan.
In addition, creditors' recoveries from a Chapter 11 liquidation
would likely
be further and substantially reduced by the creation and
assertion of claims of
a currently undetermined amount in connection with liabilities
of
JWP that are
unimpaired under the Plan
and that would not be assumed by any purchaser of purchasers of
assets. These
are claims, such as guarantee or indemnity obligations of JWP,
that, subject to
certain conditions, remain unimpaired under the Plan because the
likelihood
that such claims would become fixed instead of contingent is
remote so long as
JWP's operating subsidiaries continue to meet their obligations,
as
anticipated.
B. LIQUIDATION UNDER CHAPTER 7.
If no plan can be confirmed, the Reorganization Case may be
converted to a
case under Chapter 7, in which a trustee would be appointed to
liquidate the
assets of JWP for distribution to creditors in accordance with
priorities
established by the Bankruptcy Code. A discussion of the effect
that a Chapter 7
liquidation would have on the recovery of the holders of claims
and interests
is set forth under "Confirmation of the Plan-Best Interests
Test." JWP believes
that liquidation under Chapter 7 would result in smaller
distributions to
claimants than those provided for in the Plan because of (a)
increased costs
and expenses arising from fees payable to a bankruptcy trustee
and attorney and
other professional advisors to such trustee, (b) additional
expenses and
claims, some of which would be entitled to priority, which would
be generated
during the liquidation from, for example, the rejection of
unexpired leases and
executory contracts in connection with the cessation of the
operations of JWP
and from the creation of liquidated claims, such as guarantee
and
other claims
that will likely be unimpaired in the Reorganization Case, or,
if
impaired,
will remain contingent and unliquidated so long as JWP and its
Nondebtor
Subsidiaries are going concerns, (c) the erosion of the value of
JWP's assets
in the context of an expedited liquidation required by Chapter 7
and the "fire
sale" atmosphere that would prevail, (d) the adverse effect on
the salability
of portions of the business that could result from the possible
departure of
key employees and the loss of major customers, and (e) the cost
attributable to
be a more protracted proceeding. For more details, see the
consolidated
Liquidation Analysis attached as Exhibit 5 hereto.
XIII. SECURITIES LAWS CONSIDERATIONS
A. ISSUANCE OF REORGANIZATION SECURITIES
Section 1145 of the Bankruptcy Code exempts the original
issuance of
securities under a plan of reorganization from registration
under
the
Securities Act of 1993 (the "Securities Act") and state law.
Under Section
1145, the issuance of the New Securities is exempt from
registration if three
principal requirements are satisfied: (1) the securities must be
issued by a
debtor, its successor, or an affiliate participating in a joint
plan with the
debtor, under a plan of reorganization; (2) the recipients of
the
securities
must hold a claim against the debtor or such affiliate, an
interest in the
debtor or such affiliate, or a claim for an administrative
expense against the
debtor or such affiliate; and (3) the securities must be issued
entirely in
exchange for the recipient's claim against or interest in the
debtor or such
affiliate, or "principally" in such exchange and "partly" for
cash or property.
JWP believes that the issuance to holders of Claims in Classes
2,
3, 4B and 4C
of the New Securities under the Plan will satisfy all three
conditions because:
(a) the issuances are expressly contemplated under the Plan, the
joint
proponents of which are JWP and SellCo, an affiliate of the
Debtor; (b) the
recipients are holders of "claims" against JWP, the Debtor; and
(c) the
recipients would obtain the New Securities in exchange for their
prepetition
Claims.
B. SUBSEQUENT TRANSFERS OF REORGANIZATION SECURITIES
The New Securities to be issued pursuant to the Plan may
generally be resold
by the holders thereof without registration under the Securities
Act or other
federal securities laws pursuant to the exemption provided by
Section 4(1) of
the Securities Act, unless the holder is an "underwriter" (as
defined in
Section 1145(b) of the Bankruptcy Code) with respect to such
securities. In
addition, such securities may generally be resold without
registration or
qualification under state securities laws pursuant to various
exemptions
provided by such laws.
Section 1145(b) of the Bankruptcy Code defines four types of
"underwriters:"
(1) persons who purchase a claim against, an interest in, or a
claim for an
administrative expense against the debtor with a view to
distributing any
security received in exchange for such a claim or interest;
(2) persons who offer to sell securities offered under a plan
for the holders
of such securities;
(3) persons who offer to buy such securities from the holders
of such
securities, if the offer to buy is: (A) with a view to
distributing such
securities; or (B) made under a distribution agreement; and
(4) a person who is an "issuer" with respect to the securities
as the term
"issuer" is defined 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. Under
Rule 405 of
Regulation C under the Securities Act, the term "control" 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 a debtor's (or
affiliate's or
successor's) voting securities.
To the extent that a person is deemed to be an "underwriter,"
except as
described below, such person may make public offers and sales of
New Securities
only in accordance with the registration requirements of the
Securities Act or
exemptions therefrom, such as (i) the exemption for sales by
persons in control
relationships with the issuer provided by Rule 144 under the
Securities Act, as
described hereinafter, and (ii) the exemption for "ordinary
trading
transactions" (within the meaning of Bankruptcy Code section
1145(b)(1)), as
described hereinafter.
As to the exemption for sales by persons in control
relationships with the
issuer, the staff of the SEC has taken the position in no-action
letters that a
person deemed to be an "underwriter" solely because he is an
affiliate or a
person in a control relationship with the issuer may, pursuant
to
Rule 144
under the Securities Act, resell securities issued under a plan
of
reorganization without registration, subject to the availability
to the public
of current information regarding the issuer and to certain
volume
limitations
and certain other conditions (but not the holding period
requirement of Rule
144(d)). "Underwriters" may also be able to sell their
securities
without
registration pursuant to Rule 144A under the Securities Act,
which provides an
exemption from the registration requirements for resales to
"qualified
institutional buyers." Rule 144A under the Securities Act
generally defines
"qualified institutional buyers" as institutional buyers who own
and invest, on
a discretionary basis, at least $100,000,000 in the aggregate,
in
the
securities of unaffiliated issuers. A minimum net worth
requirement is also
imposed for banks and savings and loan institutions.
As to the exemption for "ordinary trading transactions," the
Bankruptcy Code
does not define "ordinary trading transactions," and the SEC has
not given
definitive guidance with respect to the proper construction of
that term.
However, in a no-action letter, the staff of the SEC has
concurred in the view
that a transaction will be an "ordinary trading transaction" if
it is carried
out on an exchange or in the over-the-counter market at a time
when the issuer
of the traded securities is a reporting company under the
Securities Exchange
Act of 1934, as amended (the "Exchange Act") and does not
involve
any of the
following factors:
(i) (x) concerted action by two or more recipients of
securities issued under
a plan of reorganization in connection with the sales of those
securities, or
(y) concerted action by distributors on behalf of one or more
such recipients
in connection with sales;
(ii) the preparation or use of informational documents
concerning the
offering of the securities to assist in the resale of the
securities, other
than the disclosure statement approved in connection with the
plan (and any supplement thereto) and documents filed with the
SEC by the
debtors or the reorganized company pursuant to the Exchange Act;
or
(iii) special compensation to brokers or dealers in connection
with the sale
of the securities designed as a special incentive to resell the
securities,
other than compensation that would be paid pursuant to
arm's-length
negotiations between a seller and a broker or dealer, each
acting
unilaterally,
that is not greater than the compensation that would be paid for
routine
similar-sized sale of similar securities of a similar issuer.
Although JWP's Old Common Stock is registered under the
Exchange Act and JWP
is, therefore, currently subject to the periodic reporting
requirements of the
Exchange Act, JWP has not filed all of the periodic reports
required to be
filed by it under the Exchange Act during the preceding 12
months
and its
financial statements for its three most recent fiscal years are
unaudited.
Accordingly, Rule 144 and Rule 144A may not be currently
available and may not
be available for resales of the New Securities unless and until
JWP obtains
audited financial statements and becomes current in its filings
of periodic
reports thereunder or JWP otherwise makes publicly available
certain financial
and other information specified in Rule 144.
Under the Plan, Reorganized JWP will be obligated to use its
best efforts to,
among other things, file the Shelf Registration under the
Securities Act
covering all of the New Securities and cause it to be declared
effective and
remain effective for a two-year period. See "Summary of the
Plan-Implementation
of the Plan-Listing of New Securities and Registration Rights".
However, JWP
believes that Reorganized JWP will be unable to file the Shelf
Registration
unless and until it obtains audited financial statements for its
three most
recent fiscal years. Accordingly, there can be no assurance as
to
whether or
when holders of New Securities who are deemed to be
"underwriters" of JWP may
be able to sell their securities pursuant to the Shelf
Registration. To the
extent that Rule 144 and Rule 144A and the Shelf Registration
are
unavailable,
holders who are deemed to be "underwriters" of JWP may, under
certain
circumstances, be able to sell their securities in private
transactions
pursuant to the so-called Section 4(11/2) exemption from the
registration
requirements of the Securities Act.
Whether or not any particular person would be deemed to be an
"underwriter"
with respect to any New Security to be issued pursuant to the
Plan would depend
upon various facts and circumstances applicable to that person.
Accordingly,
JWP expresses no view as to whether any particular person
receiving
distributions under the Plan would be an "underwriter" with
respect to any New
Security or other security to be issued pursuant to the Plan.
Given the complex and subjective nature of the question
whether
a particular
holder may be an underwriter, JWP makes no representation
concerning the right
of any person to trade in the New Securities. JWP recommends
that
potential
recipients of a large amount of New Securities consult their own
counsel
concerning whether they may freely trade such New Securities
without compliance
with the Securities Act.
XIV. CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of (1) certain material
federal income
tax consequences of the exchanges contemplated under the Plan to
holders of Old
Credit Agreement Debt, Old Notes, Class 4B and 4C Claims, and
Class 6 Claims
(collectively, the "Old Debt"), and holders of claims in Class
7,
Class 8,
Class 9, Class 10 and Class 11, (2) certain material federal
income tax
consequences of the ownership and disposition of the Series A 7%
Senior Secured
Notes (the "Series A Notes"), the Series B 7% Senior Secured
Notes (the "Series
B Notes"), the 11% Series C Notes (the "Series C Notes"), the
12%
SellCo
Subordinated Contingent Payment Notes (the "SellCo
Notes")(collectively, the
"New Debt Securities"), New Series X Warrants, New Series Y
Warrants, New
Series Z Warrants and the New Common Stock, and (3) certain
material federal
income tax consequences of the Plan to Reorganized JWP.
This discussion is based on the provisions of the Internal
Revenue Code of
1986, as amended (the "Code"), final, temporary and proposed
Treasury
regulations 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 (possibly on a retroactive
basis). No ruling
from the Internal Revenue Service (the "Service") has been or
will be sought on
any of the issues discussed below, and there can be no assurance
that the
Service will not take a contrary view as to the federal income
tax consequences
discussed below. There is substantial uncertainty as to many of
the federal
income tax consequences discussed below. Uncertainty is created,
in part, by
recent changes to the Code, certain provisions of which call for
the
promulgation of Treasury Regulations that have not yet been
promulgated or have
not yet become final.
This discussion provides general information only and does not
address all of
the federal income tax consequences that may be applicable to
any
particular
holder subject to special treatment under United States Federal
income tax law
or to any particular holder in light of such holder's particular
facts and
circumstances. Certain holders, including broker-dealers,
tax-exempt entities,
banks, insurance companies, foreign persons, and persons to whom
property was
or is transferred in connection with the performance of
services,
may be
subject to special and/or different rules not discussed below.
This summary
does not discuss any aspect of state, local or foreign taxation.
This
discussion also assumes that the holders compute income under
the
accrual
method of accounting and that they hold the Old Debt, and will
hold the New
Debt Securities and the New Common Stock, as capital assets
within the meaning
of Code Section 1221.
This discussion also assumes that the Old Debt and the New
Debt
Securities
constitute debt rather than equity. Whether an interest in a
corporation is to
be treated as stock or debt is primarily a question of fact.
Some
of the
primary factors considered in answering this question include:
(1) whether
there is a written unconditional promise to pay, on demand or on
a specified
date, a fixed amount in money in return for an adequate
consideration and to
pay a fixed rate of interest, (2) whether there is subordination
to, or
preference over, other debt and (3) the ratio of debt to equity.
This issue is
of concern in the case of the SellCo Notes because interest and
principal on
the SellCo Notes will not be paid in the event that insufficient
funds are
available after the sale of substantially all of the assets of
SellCo and its
direct and indirect subsidiaries.
THE FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN AND OF THE
OWNERSHIP AND
DISPOSITION OF THE NEW DEBT SECURITIES AND THE NEW COMMON STOCK
ARE COMPLEX.
ALL HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS 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.
Federal Income Tax Consequences of the Plan to Holders of Old
Debt
Certain Assumptions
The federal income tax consequences of the exchange of Old
Notes, Old Credit
Agreement Debt and Class 4B and 4C Claims for New Debt
Securities
and New
Common Stock depend in part on whether each such exchange would
constitute a
"recapitalization" under the Code. The determination of whether
each exchange
would constitute a recapitalization depends, in part, upon
whether the Old
Notes, Bank Debt, Class 4B and 4C Claims, and New Debt
Securities
are
"securities" for federal income tax purposes.
The term "security" is not defined in the Code or the
regulations issued
thereunder, and has not been clearly defined by court decisions.
In general, a
debt instrument constitutes a "security" if it represents a
participating,
continuing interest in the issuer, rather than merely the right
to a cash
payment. Thus, the term of the debt instrument is usually
regarded as a
significant factor in determining whether it is a security. The
Service has
ruled that a debt instrument with a maturity of ten years or
more
is treated as
a security. However, under the case law, debt instruments with
maturities
ranging between five and ten years are often held to be
securities. For
purposes of this discussion, it is assumed that the Old Notes
and
Series C
Notes constitute "securities" within the meaning of the
provisions of the Code
governing reorganizations, but that the Old Credit Agreement
Debt, Class 4B and
4C Claims, Series A Notes and Series B Notes do not constitute
"securities."
(a) Exchange of Old Notes. The exchange of the Old Notes for
New Debt
Securities and New Common Stock should be treated as a
recapitalization within
the meaning of Code Section 368(a)(1)(E). If the exchange is
treated in that
manner, the federal income tax consequences to the holders of
the
Old Notes
would be as follows:
(1) Subject to the discussion below as to accrued but unpaid
interest, a
holder would not recognize loss on the exchange, but would
recognize gain to
the extent of the lesser of the amount of gain realized from the
exchange or
the sum of the aggregate issue price, determined as discussed
below, of the
Series A Notes, Series B Notes and SellCo Notes received (the
"Boot Notes").
The amount of gain realized, if any, would be equal to the
excess
of (1) the
sum of the aggregate issue price of the New Debt Securities
received and the
fair market value of the New Common Stock received, over (2)
such
holder's
adjusted tax basis in the Old Notes.
(2) Subject to the discussion below as to accrued market
discount, any such
gain recognized on the exchange would be capital gain, and such
capital gain
would be long-term capital gain if such holder held the Old
Notes
for more than
one year as of the Effective Date. Each holder should discuss
with its tax
advisor the possible application of the installment sale rules
of
the Code to
such gain.
(3) Except for the New Common Stock treated as received in
exchange for
accrued but unpaid interest as discussed below, a holder should
have an
aggregate tax basis in the New Debt Securities and New Common
Stock equal to
such holder's adjusted tax basis in the Old Notes, reduced by
the
aggregate
amount of the issue price of the Boot Notes received and
increased by any gain
recognized on the exchange. The Boot Notes should have a tax
basis equal to
their issue price.
(4) Except for the New Common Stock treated as received in
exchange for
accrued but unpaid interest as discussed below, the holding
period of the New
Debt Securities and New Common Stock should include the holding
period of the
Old Notes. The holding period for the Boot Notes should commence
on the day
immediately following the Effective Date.
(b) Exchange of Old Credit Agreement Debt and Class 4 Claims.
The exchange by
the holders of the Old Credit Agreement Debt and the Class 4B
and
4C Claims for
their respective shares of the New Debt Securities and New
Common
Stock should
be treated as a taxable exchange under Code Section 1001. If the
exchange were
treated in that manner, then the federal income tax consequences
to the holders
of such claims would be as follows:
(1) Subject to the discussion below as to accrued but unpaid
interest, a
holder would recognize gain or loss on the exchange in an amount
equal to the
difference between (i) the sum of the fair market value of the
New Common Stock
received as of the Effective Date and the aggregate issue price
of the New Debt
Securities received, and (ii) such holder's adjusted tax basis
in
its Old
Credit Agreement Debt or Class 4B and 4C Claims, as the case may
be.
(2) Subject to the discussion below as to accrued market
discount, any such
gain or loss should be capital gain or loss, and such capital
gain or loss
should be long-term capital gain or loss if such holder held the
Old Credit
Agreement Debt or the Class 4B and 4C Claims for more than one
year as of the
Effective Date. Each holder should discuss with its tax advisor
the possible
application of the installment sale rules of the Code to any
such
gain.
(3) A holder's tax basis in the New Common Stock would be
equal
to the fair
market value of the New Common Stock as of the Effective Date.
The holder's tax
basis in the New Debt Securities should be equal to the issue
price of such New
Debt Securities.
(4) The holding period of the New Common Stock and New Debt
Securities would
begin on the day immediately following the Effective Date.
(c) Exchange of Class 6 Claims. The exchange by the holders of
the Claims in
Classes 6, 7, 8, 9, 10 and 11 for New Warrants and/or cash
should
be treated as
a taxable exchange under Code Section 1001. If the exchange were
treated in
that manner, then the federal income tax consequences to the
holders of such
claims would be as follows:
(1) Subject to the discussion below as to accrued but unpaid
interest, a
holder would recognize gain or loss on the exchange in an amount
equal to the
difference between (i) the amount of cash and fair market value
of the New
Warrants received as of the Effective Date, and (ii) such
holder's adjusted tax
basis, if any, in its claim, Old Preferred Stock, Old Common
Stock or New
Warrants of Participation, as the case may be.
(2) Subject to the discussion below as to accrued market
discount, any such
gain or loss should be capital gain or loss, and such capital
gain or loss
should be long-term capital gain or loss if such holder held its
claim, Old
Preferred Stock, Old Common Stock or New Warrants of
Participation, as the case
may be, for more than one year as of the Effective Date. The
character of any
gain (capital versus ordinary and long-term versus short-term)
recognized by
the holder of a Class Action claim should be determined by
reference to the
transaction which gave rise to such claim. Accordingly, holders
of such claims
are urged to consult with their own tax advisors.
(3) A holder's tax basis in the New Warrants would be equal to
the fair
market value of the New Warrants as of the Effective Date.
(4) The holding period of the New Warrants would begin on the
day immediately
following the Effective Date.
(5) A holder of New Warrants should not recognize gain or loss
upon the
exercise of the New Warrants. If a holder exercises a New
Warrant, the basis in
the New Common Stock acquired would equal the sum of the amount
paid for the
New Common Stock and the tax basis of the New Warrants
exercised.
The holding
period for such New Common Stock would commence on the date the
New Warrants
are exercised. If a holder does not exercise a New Warrant, but
allows it to
lapse, the holder would recognize a loss (which should be
capital
loss) in an
amount equal to the holder's tax basis in the New Warrant. Such
loss would be
long term capital loss if the New Warrants have been held for
more than one
year, and otherwise would be short term capital loss.
(d) Accrued But Unpaid Interest. The Plan provides, and JWP
intends to take
the position for federal income tax purposes, that the New Debt
Securities are
being issued solely in exchange for an identical principal
amount
of Old Debt.
The New Common Stock will be treated as having been issued in
exchange for the
remaining principal amount of the Old Debt and any accrued but
unpaid interest
on the Old Debt, and allocated among such remaining principal
and
interest
based upon the relative amounts of each. The Service, however,
could challenge
such allocations and contend that some other allocation is
required. All
holders of the Old Debt should consult their own tax advisors
regarding the
allocation of consideration to accrued interest and make their
own independent
determination whether any portion of the consideration received
should be
treated as received in exchange for accrued but unpaid interest.
A holder that has previously included in income accrued but
unpaid interest
during the period that the holder held the Old Debt should
recognize an
ordinary loss as a result of the exchange if and to the extent
the amount of
such accrued but unpaid interest previously included in income
exceeds the fair
market value of the New Common Stock and New Warrants deemed
received in
payment of the accrued but unpaid interest. A holder should
recognize interest
income as a result of the exchange if and to the extent the fair
market value
of the New Common Stock and New Warrants deemed received in
payment of the
accrued but unpaid interest exceeds the amount the holder had
included in
income as accrued but unpaid interest during the period that the
holder held
such Old Debt.
A holder's tax basis in the New Common Stock and New Warrants
treated as
received in exchange for accrued but unpaid interest, if any,
will be equal to
the fair market value of such New Common Stock and
New Warrants as of the Effective Date. The holding period for
such New Common
Stock and New Warrants will begin on the day immediately
following the
Effective Date.
(e) Accrued Market Discount. A holder that acquired the Old
Debt subsequent
to its original issuance with more than a "de minimis" amount of
market
discount (as defined below) would be subject to the market
discount rules of
Code Sections 1276 through 1278. Under those rules, assuming
that
no election
to include market discount in income on a current basis has been
made by the
holder with respect to any market discount instrument, any gain
recognized on
the exchange of the Old Debt would be characterized as ordinary
income to the
extent of the accrued market discount as of the Effective Date.
In the case of
the exchange of the Old Notes, any market discount remaining
thereon which has
not been recognized as ordinary income as described in the
previous sentence
would be carried over and be treated as accrued market discount
on the Series C
Notes and New Common Stock received in exchange therefor.
Because
Treasury
Regulations with respect to the market discount rules have not
yet been issued,
all holders of Old Debt should consult their own tax advisors
concerning
developments in this area.
Federal Income Tax Consequences of Ownership and Disposition of
New Debt
Securities and New Common Stock
Treatment of New Debt Securities
The following discussion of certain of the anticipated federal
income tax
consequences of the ownership and disposition of the New Debt
Securities is
based in part on Treasury Regulations relating to the original
issue discount
provisions of the Code (the "Regulations"). The Regulations were
released in
final form on January 27, 1994, and will become effective on
April 4, 1994. The
Regulations are ambiguous and uncertain in many respects, and
there is little
authority interpreting the Regulations. Also, as discussed
below,
the treatment
of the SellCo Notes is subject to more uncertainty because of
the
issuance and
withdrawal of certain proposed Treasury Regulations.
Accordingly,
the ultimate
federal income tax treatment of the New Debt Securities may
differ from that
described below and holders are urged to consult their own tax
advisors
concerning these rules.
(a) Original Issue Discount. The New Debt Securities will be
issued with
original issue discount ("OID") within the meaning of Code
Section 1273(a). As
a result, a holder of the New Debt Securities generally must
include OID in
gross income for federal income tax purposes as it accrues,
under
a method that
takes into account the compounding of interest on a constant
yield to maturity
basis. Any amount included in income as OID will increase a
holder's tax basis
in the New Debt Security. Generally, each payment under a New
Debt Security is
treated first as a payment of OID to the extent of the OID that
has accrued as
of the date of payment and has not been allocated to prior
payments, and second
as a payment of principal. However, a pro rata prepayment (such
as any
mandatory prepayment on the New Debt Securities) is treated as a
payment in
retirement of a portion of a debt instrument, which may result
in
gain or loss
to the holder. Generally, the gain or loss is calculated by
assuming that the
original debt instrument consists of two instruments, one that
is
retired and
one that remains outstanding. The adjusted issue price, adjusted
basis, and
accrued but unpaid OID of the original debt instrument,
determined immediately
before the pro rata prepayment, are allocated between these two
instruments
based on the portion of the instrument that is treated as
retired
by the pro
rata prepayment.
The amount of OID on a New Debt Security will be equal to the
excess of its
"stated redemption price" at maturity over its "issue price." In
general, the
"stated redemption price at maturity" of a New Debt Security
will
be equal to
all amounts payable under the New Debt Security, other than the
amounts payable
as qualified stated interest. "Qualified stated interest" is
stated interest
that is unconditionally payable in cash or in property (other
than debt
instruments of the issuer, e.g., pay-in-kind interest) at least
annually and,
except for certain variable rate debt instruments, at a single
fixed rate. It
is not anticipated that the New Debt Securities will pay any
qualified stated
interest, and therefore each New Debt Security will be issued
with OID.
The determination of the "issue price" of a New Debt Security
depends, in
part, on whether the New Debt Securities or the Old Debt are
publicly traded.
In general, either the New Debt Securities or the Old Debt would
be treated as
publicly traded if, at any time during the 60-day period ending
30 days after
the issue date of the New Debt Securities (the "60-Day Period"),
the New Debt
Securities or the Old Debt are traded on an established market.
Subject to
certain exceptions, the New Debt Securities or Old Debt would be
treated as
traded on an established market if (1) either is listed on
certain securities
exchanges, interdealer quotation systems, or designated foreign
exchanges or
boards of trade, (2) either is traded either on certain boards
of
trade that
are designated as a contract market or on an interbank market,
(3) either
appears on a system of general circulation that provides a
reasonable basis to
determine fair market value by disseminating either recent price
quotations of
identified brokers, dealers or traders, or actual prices of
recent sales
transactions; or (4) price quotations are readily available from
brokers,
dealers or traders.
The issue price of a debt instrument that is traded on an
established market
or that is issued for another debt instrument so traded would be
the fair
market value of such debt instrument or such other debt
instrument, as the case
may be, on the issue date as determined by such trading. The
issue price of a
debt instrument that is neither so traded nor issued for another
debt
instrument so traded would be its stated principal amount, if
the
stated
interest rate on the debt instrument exceeds the "applicable
federal rate"
published monthly by the Service. The applicable federal rate is
reported for
three categories of debt instruments: short term (3 years or
less), mid-term
(over 3 years but less than 9 years), and long-term (over 9
years). The
applicable federal rate for each category is determined by the
Service based
upon the average market yield (during any one month period
ending
in the
calendar month in which the determination is made) on
outstanding
marketable
obligations of the United States in such categories. In the case
of a debt
instrument issued in connection with a sale or exchange, the
applicable federal
rate is the lowest such rate in effect for any month in the
three
calendar
month period ending with the calendar month in which there is a
binding
contract in writing for the sale or exchange (presumably, the
Confirmation Date
of the Plan). The stated interest rate of each New Debt Security
would exceed
the applicable federal rate in effect for June 1993.
It is anticipated that neither the Old Debt nor the New Debt
Securities will
be listed or traded on a securities exchange, interdealer
quotation system,
board of trade, or interbank market within the relevant 60-Day
Period. To the
best of its knowledge, JWP does not believe that within the
relevant 60-Day
Period (i) the Old Debt or the New Debt Securities will appear
on
a system of
general circulation that disseminates recent price quotations or
actual prices
of recent sales, or (ii) price quotations from traders, dealers
and brokers
will be readily available for the Old Debt or New Debt
Securities. Accordingly,
JWP intends to take the position that the Old Debt was not, and
the New Debt
Securities will not, be traded on an established market for
purposes of the
Regulations. Thus if the interest rates on the New Debt
Securities continue to
exceed the applicable federal rates as of their issue date, then
the issue
price of such notes would be their respective stated principal
amounts.
However, holders should note that the fair market value of the
Old Debt or the
New Debt Securities as of the Effective Date may be less than
the
stated
principal amount of the New Debt Securities. Thus, if either the
Old Debt or
the New Debt Securities are ultimately determined to be traded
on
an
established market, (i) the New Debt Securities would have a
larger amount of
OID, and (ii) the New Debt Securities (other than the Series A
Notes and Series
B Notes) could become subject to the applicable high yield
discount obligation
provisions of Code Section 163(e)(5) resulting in adverse tax
consequences to
JWP with respect to, among other things, the timing and amount
of
interest
deductions. If the New Debt Securities already are subject to
those provisions,
the adverse tax consequences of those provisions would be
worsened.
To the extent that the issue price of a New Debt Security is
equal to its
stated principal amount, the OID on the New Debt Security would
be reduced, but
not eliminated. Because no "qualified stated interest" will be
payable on the
New Debt Securities, in each case the stated redemption price of
a New Debt
Security will exceed its issue price, and therefore such New
Debt
Security will
be issued with OID. Thus, a holder of a New Debt Security will
be
required to
include amounts in gross income for federal income tax purposes
in advance of
the receipt of cash payments in respect of such income. The
amount of OID to be
included in
income in any tax period would be determined using a constant
yield to maturity
method, under which a holder would have to include in income
increasingly
greater amounts of OID in successive accrual periods.
The amount of OID allocable to any accrual period is an amount
equal to the
excess, if any, of (a) the product of the New Debt Security's
"adjusted issue
price" at the beginning of such accrual period and its yield to
maturity
(determined on the basis of compounding at the close of each
accrual period and
properly adjusted for the length of the accrual period) over (b)
the sum of any
qualified stated interest payments on the New Debt Security
allocable to the
accrual period. The "adjusted issue price" of the Note at the
start of any
accrual period is equal to its issue price increased by the
accrued OID for
each prior accrual period and reduced by any prior payments with
respect to
such New Debt Security that were not qualified stated interest
payments.
Under the Regulations, the issuance of additional New Debt
Securities (the
"PIK Notes") in lieu of cash interest payments does not
constitute the payment
of interest for purposes of calculating OID. Instead, all cash
payments with
respect to each New Debt Security and any cash payments with
respect to any
related PIK Note should be treated as payments in respect of a
single debt
instrument for purposes of applying the OID rules. The stated
redemption price
at maturity of a New Debt Security should be equal to the sum of
all cash
payments due pursuant to the terms of such Note and any related
PIK Note. When
a PIK Note is issued in lieu of payment of cash interest on a
New
Debt
Security, the adjusted issue price of the New Debt Security
should be allocated
between the New Debt Security and the PIK Note in proportion to
their
respective stated principal amounts, and these allocated amounts
thereafter
would be used in accruing OID on the New Debt Security and the
PIK Note.
Similarly, the tax basis of a New Debt Security should be
allocated between the
New Debt Security and the PIK Note in proportion to their
respective stated
principal amounts.
If a holder's tax basis in a New Debt Security immediately
after the holder's
acquisition of the New Debt Security exceeds the sum of all
amounts payable
thereafter on the New Debt Security other than payments of
qualified stated
interest, then such holder would generally be treated as having
acquired such
New Debt Security at a "premium" under Code Section 1272(c)(1).
In such event,
such holder would not be required to include original issue
discount in income
with respect to such New Debt Security.
If a holder does not acquire a New Debt Security at a premium
as described
above, but the holder's tax basis in the New Debt Security
immediately after
the holder's acquisition of the New Debt Security exceeds the
adjusted issue
price of the New Debt Security as of the date of the holder's
acquisition, then
such holder would be treated as having acquired such New Debt
Security at an
"acquisition premium" equal to such excess under Code Section
1272(a)(7). For
this purpose, the adjusted issue price of a New Debt Security is
its issue
price, increased by the amount of original issue discount on the
New Debt
Security previously includible in the gross income of any holder
without regard
to whether the acquisition premium exception applied to any such
holder, and
reduced by the aggregate amount of all payments previously made
on the New Debt
Security other than qualified stated interest payments, as
discussed above. In
such event, such holder would generally be permitted to reduce
the amount of
original issue discount includible in income by a portion of the
acquisition
premium. That portion is equal to a constant percentage (equal
to
the amount of
such acquisition premium divided by the excess of the sum of all
amounts
payable on the debt instrument after the acquisition date, other
than payments
of qualified stated interest, over the New Debt Security's
adjusted issue
price) of the original issue discount otherwise allocable to
each
day that the
holder holds such New Debt Security. Rather than apply this
acquisition premium
fraction, a holder of a New Debt Security purchased at an
acquisition premium
may elect to compute OID accruals by treating the acquisition as
a purchase at
original issuance and applying the mechanics of the constant
yield method.
Although Code Section 1272(a)(7) is applicable on its face only
to a holder who
purchases a debt instrument after its original issue, the
Regulations indicate
that these rules also apply to an original purchaser of a debt
instrument.
Accordingly, an initial holder of a New Debt Security should be
entitled to
treat the excess, if any, of its tax basis in the New Debt
Security (determined
as discussed above) over the issue price of the New Debt
Security
as
acquisition premium that will reduce the amount of OID otherwise
includible in
income.
Notwithstanding the foregoing two paragraphs, if a holder's
tax
basis in a
New Debt Security is determined in whole or in part by reference
to the
adjusted tax basis in such New Debt Security in the hands of the
person from
which the holder acquired the New Debt Security, then such
holder
can be
treated as having acquired the New Debt Security at a premium or
at an
acquisition premium only if such person acquired the New Debt
Security at a
premium or at an acquisition premium, as the case may be.
It should be noted that, for purposes of applying the OID
rules
described
above, the SellCo Notes should be treated as originally-issued
with OID to JWP,
and not to the holders of Old Debt. Each such holder should be
treated as
having acquired SellCo Notes from JWP in exchange for Old Debt
(and interest
thereon) in an amount equal to the issue price of such SellCo
Notes.
(b) Market Discount. Under the market discount provisions of
Code Sections
1276 through 1278, a holder (other than a holder that makes an
election to
include market discount in income on a current basis, as
described below) that
acquires a debt instrument with market discount that is not "de
minimis" would
be required to treat any gain realized on a sale or certain
other
dispositions
of, or partial principal payments on, such debt instrument as
ordinary income
to the extent of the market discount that accrues during the
period the holder
holds such debt instrument. Further, a disposition of such a
debt
instrument by
gift (and in certain other circumstances) could result in the
recognition of
market discount income, computed as if such debt instrument had
been sold for
its fair market value. A holder of a debt instrument with market
discount also
would be required to defer the deduction of a portion of the
interest on any
indebtedness incurred or continued to purchase or carry such
debt
instrument
until such debt instrument is sold or otherwise disposed of, or
until all such
market discount has been otherwise included as ordinary income.
In the case of
an exchange of an old debt instrument for a new debt instrument,
any accrued
market discount will carry over to the new debt instrument. In
the case of an
exchange of an old debt instrument for stock in a transaction in
which the gain
realized is not recognized for federal income tax purposes,
ordinary income
would be recognized on the disposition of such stock to the
extent of the
accrued market discount on the old debt instrument.
Generally, the term "market discount" means the excess, if
any,
of the stated
redemption price at maturity of a debt instrument over the
holder's tax basis
in the debt instrument immediately after its acquisition. In the
case of a debt
instrument originally issued with more than a "de minimis"
amount
of OID,
"market discount" is generally the amount by which the holder's
tax basis in
such debt instrument (immediately after its acquisition) is less
than the
adjusted issue price of such debt instrument. Under a "de
minimis" exception,
if the market discount is less than one-fourth of 1% of the
stated redemption
price at maturity multiplied by the number of complete years
from
the holder's
acquisition date to the maturity date of the debt instrument,
market discount
is deemed to be zero.
A holder of a New Debt Security with market discount may elect
to include
market discount in income as the market discount accrues. Once
made, the
current inclusion election will apply to all market discount
obligations
acquired in the year of the election and in all subsequent
years,
and would be
revocable only with the consent of the Service. If a holder of a
New Debt
Security elects to include market discount in income as it
accrues, the
foregoing rules with respect to the recognition of ordinary
income on a sale or
certain other dispositions of, or partial principal payments on,
the New Debt
Security and the deferral of interest deductions on indebtedness
related to the
New Debt Security would not apply.
The New Debt Securities may be redeemed, in whole or in part,
before
maturity. In general, if the principal of a debt instrument is
paid in more
than one installment, the holder is required to include accrued
market discount
(as determined by Treasury Regulations to be provided) in income
with respect
to each principal payment up to the amount of the payment (which
could be in
advance of the time otherwise required). This provision could
apply to a holder
of a New Debt Security with market discount that will be
redeemed
in part.
No Treasury Regulations with respect to the market discount
rules have been
issued or proposed, and, therefore, all holders should consult
their own tax
advisors concerning developments in this area.
(c) Amortizable Bond Premium. If a holder's tax basis in a New
Debt Security
exceeds the amount payable at maturity of such New Debt
Security,
then such
excess may be deductible by the holder as "amortizable bond
premium" under Code
Section 171 on a constant yield to maturity basis over the
period
from the
holder's acquisition date to the maturity date of the New Debt
Security. Under
the Regulations, it appears the "amount payable at maturity"
equals the sum of
all amounts payable on the New Debt Security after the purchase
date other than
payments of qualified stated interest.
The deduction would be treated as a reduction of interest
income. Such
deduction would be available only if the holder makes (or has
made) a timely
election under Code Section 171. The election, if made, would
apply to all debt
instruments held or subsequently acquired by the electing holder
and could not
be revoked without permission from the Service.
(d) Disposition. On a sale, redemption or other taxable
disposition of a New
Debt Security, a holder generally would recognize gain or loss
in
an amount
equal to the difference between (i) the amount realized on the
disposition and
(ii) the holder's adjusted tax basis in such New Debt Security.
Any amount
received that is attributable to accrued but unpaid interest
that
has not
previously been included in the holder's income would be treated
as interest
income and would not be treated as an amount realized upon the
sale, redemption
or other taxable disposition of the New Debt Security. The
holder's adjusted
tax basis in a New Debt Security generally would equal the
holder's original
tax basis in the New Debt Security, increased by any OID and
market discount
previously included in the holder's gross income with respect to
such New Debt
Security pursuant to the rules described above, and reduced by
any amortizable
bond premium deducted as a reduction of interest income as
described above, and
further reduced (but not below zero) by all payments on such New
Debt Security
(other than payments of qualified stated interest) received by
the holder.
Subject to the market discount rules described above, any such
gain or loss
would generally be capital gain or loss, and would be long-term
capital gain or
loss if the holder's holding period for such New Debt Security
is
more than one
year at the time of the disposition.
(e) Backup Withholding. All payments made under the Plan are
subject to
applicable withholding (including employment tax withholding).
Under the Code,
interest, dividends and other "reportable payments" may, under
certain
circumstances, be subject to "backup withholding" at a 31% rate.
Backup
withholding generally applies if the holder (a) fails to furnish
his social
security number or other taxpayer identification number ("TIN"),
(b) furnishes
an incorrect TIN, (c) fails properly to report interest or
dividends or (d)
under certain circumstances, fails to provide a certified
statement, signed
under penalty or perjury, that the TIN provided is his correct
number and that
he is not subject to backup withholding. Backup withholding is
not an
additional tax but merely an advance payment, which may be
refunded to the
extent it results in an overpayment of tax. Certain persons are
exempt from
backup withholding, including corporations and financial
institutions.
(f) Information Reporting. Pursuant to the provisions of Code
Section 6049,
information reporting will be made to the Service, and to
holders
of record
that are not exempted from the reporting requirements, annually
or as otherwise
required with respect to interest paid and original issue
discount accrued on
the New Debt Securities.
Treatment of New Common Stock
Dividends, if any, paid on the New Common Stock will be taxed
as ordinary
income to the extent paid from current or accumulated earnings
and profits. A
dividends received deduction (generally at a 70% rate) may be
available with
respect to such dividends to holders that are corporations,
subject to
limitations such as those relating to holding periods or
indebtedness used to
acquire or carry such stock. To the extent that a distribution
exceeds current
and accumulated earnings and profits, it is treated as a
nontaxable recovery of
the holder's adjusted tax basis to the extent thereof, and any
remaining amount
is treated as gain from a taxable disposition. Subject to the
discussion above
as to accrued market discount, a holder will generally recognize
capital gain
or loss upon a sale or other taxable disposition of the New
Common Stock. The
rules
discussed above regarding backup withholding and information
reporting on the
New Debt Securities will also apply to the New Common Stock.
Treatment of the SellCo Notes
There is some degree of uncertainty as to whether the SellCo
Notes would be
treated as debt or as equity of SellCo for federal income tax
purposes.
Moreover, assuming the SellCo Notes are treated as debt, there
is
some doubt as
to whether the debt would be treated as a "contingent debt
instrument" for OID
purposes. Because of the paucity of authority on whether a debt
instrument is
treated as "contingent" for OID purposes, and the uncertainty of
whether the
SellCo Notes are properly characterized as debt or as equity for
federal income
tax purposes, each holder should consult with its own tax
advisors regarding
the appropriate tax characterization of the SellCo Notes. JWP,
on
behalf of
SellCo (its wholly-owned subsidiary), intends to take the
position (and the
discussion below assumes) that the SellCo Notes will be
respected
as debt for
federal income tax purposes, however, no assurance can be made
that the Service
will concur with such treatment.
(a) Exchange of Old Debt. Irrespective of whether the SellCo
Notes are
treated as debt or as equity for federal income tax purposes and
subject to the
discussion above as to accrued but unpaid interest, any SellCo
Notes received
by a holder would be treated as Boot Notes. If the SellCo Notes
are debt, the
amount realized with respect to them would be their issue price
for OID
purposes, otherwise it would be their fair market value.
(b) Original Issue Discount. The following discussion
concerning contingent
debt instruments is based on proposed Treasury Regulations
originally issued in
1986 (the "1986 Regulations"). Other proposed regulations
relating to
contingent debt instruments were issued in 1993, but were
subsequently
withdrawn. Holders are urged to consult their own tax advisors
as
to the
possibility of whether the proposed, but withdrawn regulations
might be
reissued with retroactive effect.
Assuming the SellCo Notes are treated as debt for federal
income tax
purposes, the SellCo Notes would be issued with OID. However, it
is not clear
whether the SellCo Notes would be treated as "contingent debt
instruments"
within the meaning of the 1986 Regulations. If the SellCo Notes
are not treated
as "contingent," then the discussion above under the caption,
"Federal Income
Tax Consequences Of Ownership and Disposition Of New Debt
Securities and New
Common Stock; Treatment of New Debt Securities" would apply to
the SellCo
Notes. However, since principal and interest on the SellCo Notes
are payable
only out of the net proceeds of the sale of certain assets of
SellCo, under the
1986 Regulations, the SellCo Notes may be treated as "contingent
debt
instruments" of SellCo.
Assuming the SellCo Notes are so treated and assuming that
neither they nor
the Old Debt are traded on an established market, as discussed
above, the 1986
Regulations would require that each payment on the SellCo Notes
be treated as
consisting of (i) a payment of principal in an amount equal to
the present
value of the payment determined by discounting the payment by
the
"applicable
federal rate" from the date that the amount of the payment
becomes fixed to the
issue date, and (ii) a payment of interest in an amount equal to
the excess of
the total amount of the payment over the amount treated as
principal.
Notwithstanding the preceding sentence, the total amount treated
as principal
may not exceed the stated maximum principal amount on the SellCo
Note. Once the
portion of the contingent payments treated as principal exceeds
the stated
maximum principal amount of the SellCo Notes, any additional
payments would be
treated entirely as interest.
If either the SellCo Notes or Old Debt is deemed to be traded
on an
established market, as discussed above, the 1986 Regulations
provide that the
amount of interest deemed to accrue on the SellCo Notes during
an
accrual
period would be equal to the product of (x) the adjusted issue
price of the
note at the beginning of the accrual period, and (y) the
"applicable federal
rate" based upon the due date of the final payment under the
debt
instrument.
Payments on the SellCo Note would be treated as consisting of
(i)
a payment of
interest to the extent of interest deemed accrued for the
current
and all prior
accrual periods and not allocated to
prior payments, and (ii) a payment of principal to the extent of
the excess of
such payment over the portion treated as interest. If at the
time
of maturity
of the SellCo Notes, the outstanding principal balance (issue
price less the
sum of all prior payments treated as principal) exceeds the
total
amount of the
final payment, the entire amount of the final payment would be
treated as
principal and the SellCo Notes would be treated as retired for
such amount. If,
conversely, at that time, the total amount of the final payment
exceeds the
outstanding principal balance, the SellCo Notes would be treated
as retired for
an amount equal to such outstanding principal balance, and the
final payment
would be treated as interest to the extent of such excess.
In the event that the SellCo Notes are treated as equity for
federal income
tax purposes, the federal income tax treatment to holders with
respect to
payments on the SellCo Notes should follow the contingent debt
rules described
above (with the exception that corporate holders may be entitled
to a dividends
received deduction (generally at a 70% rate) with respect to any
payments under
the SellCo Notes characterized as dividends). However, because
there is no
authority confirming that this would be the proper treatment,
each holder
should consult with its own tax advisors as to the federal
income
tax
consequences of payments on the SellCo Notes in the event that
they are
properly characterized as equity for federal income tax
purposes.
Certain Federal Income Tax Consequences of the Plan to JWP
Cancellation of Indebtedness ("COD") Income. Upon
implementation of the Plan,
the amount of the JWP's aggregate outstanding indebtedness will
be
substantially reduced. In general, the Code provides that a
debtor in a case
under the Bankruptcy Code must reduce its tax attributes by any
COD, i.e., the
amount by which the debt discharged exceeds any consideration
paid in exchange
therefor. Although a debtor's net operating loss carryforwards
("NOLS") are
generally reduced before any other tax attributes, a debtor may
elect to first
reduce the tax basis in its depreciable property (determined as
of the first
day of the taxable year succeeding the taxable year of
discharge).
However, JWP will not incur COD and will not be required to
reduce its tax
attributes to the extent the so-called "stock-for-debt
exception"
applies.
Under the stock-for-debt exception, COD generally will not be
realized with
respect to a given claim if, in exchange for such claim pursuant
to a plan
confirmed by the Bankruptcy Court, the holder receives a
sufficient equity
interest in the debtor which satisfies certain rules.
Whether an exchange by a particular holder qualifies for the
stock-for-debt
exception depends, in part, upon whether (i) the New Common
Stock
issued in
exchange for the holder's Old Debt (including accrued but unpaid
interest
thereon, but reduced by the aggregate issue price of New Debt
Securities issued
in partial exchange therefor) is not nominal or token within the
meaning of
Code Section 108(e)(8)(A) (the "nominal or token test"), (ii)
the
ratio of the
value of the New Common Stock received by such holder to the
amount of such
holder's Old Debt exchanged for the New Common Stock is not less
than 50% of a
similar ratio computed for all holders of the Old Debt (the
"Proportionality
Test") and (iii) the New Common Stock is stock eligible for the
stock-for-debt
exception.
JWP intends to take the position that the stock-for-debt
exception will apply
to the exchange of New Stock for the Old Debt (excluding the
Class 6 Claims)
and the interest on such Old Debt outstanding after the issuance
of the New
Debt Securities with respect thereto. However, there can be no
assurance that
the Service will agree. If a Service challenge were successful,
Reorganized JWP
could be required to significantly reduce its tax attributes,
including its
NOLs. In addition, JWP will recognize COD and corresponding
attribute reduction
in an amount equal to the sum of (i) the excess of the face
amount of the Class
6 Claims (including accrued interest) over the fair market value
of the New
Warrants issued in exchange therefor.
The stock-for-debt exception discussed above was repealed,
albeit on a
delayed basis, by the Reconciliation Act of 1993 (the "1993
Act")
with respect
to stock transfers occurring after December 31, 1994. However,
under a
grandfathering provision contained in the 1993 Act, since a
bankruptcy case was
filed on behalf of JWP before December 31, 1993, the
stock-for-debt exception
will continue to apply even with respect to transfers of stock
occurring after
December 31, 1994, provided that the case is not dismissed
and such transfers are made pursuant to the Plan. If, on the
other hand, the
present case is dismissed and JWP files its own bankruptcy case,
the exchange
of Old Debt for New Debt Securities and New Common Stock
pursuant
to the Plan
must occur on or before December 31, 1994 in order for the
stock-for-debt
exception to apply.
Limitation on Net Operating Losses. JWP estimates that, as of
December 31,
1993, it will have consolidated NOLs for federal income tax
purposes totalling
approximately $553 million, of which approximately $23 million
will be subject
to limitation and therefore usable only by certain subsidiaries
of JWP, all of
which amounts are subject to reduction on audit. JWP believes
that the
implementation of the Plan will cause an "ownership change" as
of
the Effective
Date for federal income tax purposes. As a result, to the extent
not reduced or
eliminated because of the realization of COD, as discussed
above,
the use of
any remaining NOLs will be governed by Code Section 382, as
discussed below.
Generally, under Code Section 382, a corporation's annual
taxable income for
periods after an "ownership change" may be offset by NOLs
attributable to
periods prior to such an "ownership change" only to the extent
of
the product
of (A) the fair market value of the corporation's stock
immediately before such
"ownership change" and (B) the long-term tax-exempt rate
prescribed by the IRS
(for June 1994, 6.01%). For this purpose, the fair market value
of stock is
generally determined without regard to capital contributions
made
during the
two-year period ending on the date of the "ownership change."
If a corporation that undergoes an "ownership change" has a
"net unrealized
built-in gain," its general Section 382 limitation, as described
in the
preceding paragraph, is increased, subject to certain
limitations, by any
"built-in gain" recognized during the five-year period beginning
with the date
of the "ownership change." If a corporation that undergoes an
"ownership
change" has a "net unrealized built-in loss," subject to certain
limitations,
any "built-in loss" recognized during the five-year period
beginning with the
date of the "ownership change" is treated as a pre-change loss
and is subject
to the general Section 382 limitation described above.
Reorganized JWP would be
treated as having a "net unrealized built-in loss" if at the
time
of the
ownership change it has "built-in losses" in excess of "built-in
gains." When
such "built-in gains" are recognized, they might be subject to
federal income
taxation because the availability of pre-ownership change NOLs
and recognized
"built-in losses" to offset such gains would be subject to the
limitations of
Code Section 382.
However, when an "ownership change" occurs pursuant to the
implementation of
a bankruptcy plan of reorganization, the general Section 382
limitation does
not apply. Instead, one of two other "Section 382 regimes" is
available to a
debtor.
(A) Section 382(1)(6) Regime. If JWP elects to utilize its
NOLs
under Code
Section 382(1)(6) (and recently finalized Regulations
thereunder), the
applicable limitation under Section 382 of the Code on annual
use
of the NOLs
would generally be the same as the general Section 382
limitation
(discussed
above), except that such applicable limitation would reflect the
increase (if
any) in the value of Reorganized JWP resulting from any
surrender
or
cancellation of Claims in exchange for New Common Stock.
Assuming a projected aggregate value of the New Common Stock
immediately
after the exchanges on the Effective Date of approximately
$106,000,000 (i.e.,
net book value), and using the June 1994 long-term tax-exempt
rate prescribed
by the IRS of 6.01%, under Section 382(1)(6) of the Tax Code,
Reorganized JWP
could annually utilize $6,370,600 of its net operating loss
carryforwards. It
should be noted that Lazard estimates that the enterprise value
of Reorganized
JWP and its subsidiaries as of January 1, 1994 would be in a
range between $225
million and $250 million.
(B) Section 382(1)(5) Regime. Section 382(1)(5) of the Code
provides that the
general Section 382 limitation does not apply to an "ownership
change"
resulting from transactions that are pursuant to a plan of
reorganization of a
corporation in a chapter 11 case if the shareholders and
creditors of such
corporation immediately before an "ownership change" own
immediately after such
change (as a result of being
shareholders or creditors immediately before such change) at
least 50 percent
of the stock of the corporation by vote and value after the
"ownership change."
For purposes of this rule, stock transferred to a creditor shall
be taken into
account only to the extent that such stock is transferred in
satisfaction of
indebtedness and only if such indebtedness either (1) was held
by
the creditor
at least 18 months before the filing of the chapter 11 case, or
(2) arose in
the ordinary course of the trade or business of the old loss
corporation and is
held by the person who at all times held the beneficial interest
in such
indebtedness. JWP believes that a claim for unpaid interest
accrued after the
filing of a chapter 11 case or interest accrued within 18 months
before the
filing of a chapter 11 case with respect to indebtedness which
was held for the
requisite period would be considered qualifying indebtedness for
these
purposes, but there is no specific authority with respect to
this
issue.
Pursuant to Regulations under Code Section 382(1)(5), options or
warrants to
acquire stock that are outstanding at the time of an "ownership
change"
(including options or warrants created pursuant to a plan of
reorganization in
a chapter 11 case) are generally deemed exercised upon such
"ownership change"
if such deemed exercise would cause the shareholders and
creditors immediately
before such "ownership change" to fail to meet the 50 percent
threshold
requirement of Code Section 382(1)(5).
Under recently finalized Regulations, for purposes of applying
the 50 percent
threshold requirement of Section 382(1)(5) of the Code as
described above, a
debtor is entitled to treat a portion of its debt as always
having been owned
by the person who beneficially owned it immediately before the
ownership change
if that person is not, immediately after the ownership change,
either (1) a
5-percent shareholder or (2) an entity through which a
five-percent shareholder
owns an indirect interest in the debtor. However, this
safeharbor
is not
available in certain cases that may be relevant here, including
cases where (a)
the debt is beneficially owned by a person whose participation
in
formulating
the bankruptcy plan makes evident to the debtor corporation that
the person has
not owned the debt for the requisite period or (b) the debtor
has
actual
knowledge of a coordinated acquisition of debt by a group,
through a formal or
informal understanding among themselves, in which case the debt
(and any stock
received for it) is treated as owned by one entity.
Based upon the provisions of the Plan and JWP's understanding
of the current
status and ownership of claims, JWP currently anticipates that
the 50 percent
threshold requirement of Section 382(1)(5) of the Code as
described above could
be met. However, there can be no certainty that this threshold
requirement will
be met as of the Effective Date. In particular, JWP's ability to
meet the 50
percent threshold requirement could be adversely affected if
there are
subsequent significant shifts in the ownership of claims. In
addition, JWP's
ability to meet the 50 percent threshold requirement could be
affected by the
adverse resolution of certain technical uncertainties under
Section 382(1)(5)
of the Code as described above and possible difficulties in
proving the
beneficial ownership of claims on the relevant dates.
Under Section 382(1)(5) of the Code, JWP could avoid entirely
the application
of the general Section 382 limitation to the NOLs and built-in
losses, if any,
but would, however, be required to reduce its NOLs and possibly
other tax
attributes by: (1) any deduction for interest claimed by JWP
with
respect to
any indebtedness converted in New Common Stock for (a) the
three-year period
preceding the taxable year of the "ownership change" and (b) the
portion of the
year of the "ownership change" prior to the Effective Date of
the
Plan, and (2)
50 percent of the excess of discharged debt over the value of
New
Common Stock
issued in exchange therefor in a transaction that qualifies for
the
stock-for-debt exception, discussed above. The amounts described
in (1) and (2)
above are contingent upon the value of the New Common Stock
distributed to
creditors on the Effective Date as well as other factors, which
cannot be
predicted currently with certainty. Accordingly, the precise
amount of NOL and
other tax attribute reduction that would be required under
Section 382(1)(5) of
the Code cannot currently be determined. Nevertheless, JWP
estimates that the
amount of NOLs available immediately after the Effective Date
under Code
Section 382(l)(5) would be approximately $300 million, and that,
in any event,
the amount of NOLs available under Code Section 382(l)(5) would
be materially
greater than the amount of NOLs available under Code Section
382(l)(6).
Under Section 382(1)(5)(D) of the Tax Code, if a second
"ownership change"
with respect to Reorganized JWP occurs within the two-year
period
following the
Effective Date, the Section 382(1)(5)
exception would not apply with respect to the second ownership
change and any
NOLs remaining after the second ownership change would be
eliminated. Thus, if
Reorganized JWP is governed by Code Section 382(1)(5), a risk
exists that most
(if not all) of the utility of the NOLs could be lost as a
result
of a second
ownership change within the two-year period following the
Effective Date. If,
on the other hand, Reorganized JWP were to elect to be governed
by Code Section
382(l)(6), a second ownership change within two years of the
Effective Date
would not necessarily result in an elimination of Reorganized
JWP's NOLs.
Instead, the general Section 382 limitations (discussed above)
would apply to
such a second ownership change.
(C) Code Section 269. Under Code Section 269, the IRS is
authorized to
disallow any deduction, credit or other allowance (e.g., the
utilization of
NOLs) if control of a corporation (i.e., 50% of the vote or
value) was acquired
by one or more persons principally for the purpose of evading or
avoiding
federal income taxes by securing the benefit of such deduction,
credit or
allowance to which the corporation would not otherwise be
entitled. While the
existence of a principal tax avoidance purpose is primarily a
question of fact,
JWP does not believe that Code Section 269 should apply to the
change in
control occurring pursuant to the Plan because such change in
control was not
motivated by tax considerations. Nevertheless, there can be no
assurance that
the IRS will not challenge the utilization of JWP's tax
attributes subsequent
to such change in control on the basis of Code Section 269, or
that such a
challenge, if asserted, would not be sustained.
Under Treasury Regulation Section 1.269-3(d), absent strong
evidence to the
contrary, an ownership change to which Code Section 382(l)(5)
(and not
382(l)(6)) applies is considered to be made for the principal
purpose of
evasion or avoidance of federal income tax, and therefore
subject
to the
provisions of Code Section 269 discussed above, unless the
corporation carries
on more than an insignificant amount of an active trade or
business during and
subsequent to the bankruptcy proceeding. The determination of
whether the
corporation carries on more than an insignificant amount of an
active trade or
business is based on all the facts and circumstances, including
the amount of
business assets that continue to be used and the number of
employees in the
work force who continue to be employed. It is anticipated that
JWP and its
subsidiaries will, throughout the bankruptcy proceedings and
after the
Effective Date, have substantial assets and a substantial number
of employees.
Accordingly, JWP believes that it will have more than an
insignificant amount
of trade or business activity, and Treasury Regulation Section
1.269-3(d)
should be inapplicable.
(D) Effect of the Plan. The Plan affords JWP the flexibility
to
be governed
by either Code Section 382(1)(5) or 382(1)(6). Under existing
Regulations, JWP
need not file the election to be governed by Code Section
382(1)(6) (and not
Section 382(1)(5)) until the due date (including applicable
extensions) of its
federal income tax return for the year in which the Effective
Date occurs. JWP
will make such election if the facts and circumstances known to
it at that time
indicate that the election is in its best interests, taking into
account, among
other things, any risk that the 50 percent threshold requirement
under Code
Section 382(1)(5), discussed above, will not be met, and the
likelihood of a
second "ownership change" within two years of the Effective
Date.
Applicable High Yield Discount Obligation Rules. The Series C
Notes and
SellCo Notes (the "Long Term Notes") may constitute "applicable
high yield
discount obligations". In general, an applicable high yield
discount obligation
is any debt instrument with "significant original issue
discount," a maturity
date more than five years from the issue date and a yield to
maturity at least
five percentage points higher than the applicable federal rate.
A
Long Term
Note would have significant original issue discount if the
aggregate amount of
interest and original issue discount includible in gross income
with respect to
such note for periods before the close of an accrual period
ending more than
five years after the issue date of the note exceeds the sum of
(a) the
aggregate amount of interest required to be paid on such note
before the close
of such accrual period and (b) the product of the issue price of
the note and
its yield to maturity. If the Series C Notes and SellCo Notes
constitute
applicable high yield discount obligations, Reorganized JWP and
SellCo will be
denied an interest deduction for a certain portion of the
original issue
discount on their respective notes and may claim an interest
deduction as to
the remainder of the original issue discount only when the cash
with respect to
such original issue discount is paid. To the extent Reorganized
JWP and SellCo
are denied an interest deduction for a portion of the original
issue discount, the denied
portion may be treated as a dividend and certain corporate
holders may be
entitled to a dividends received deduction. The treatment of the
Long Term
Notes as applicable high yield discount obligations will depend
upon, among
other things, applicable federal rates as of the Effective Date.
Accordingly,
holders of Long Term Notes are urged to consult their tax
advisors regarding
the treatment of the Long Term Notes as applicable high yield
discount
obligations, and the tax consequences of such treatment to the
holder.
XV. CONCLUSION
JWP believes that the Plan, which was initially negotiated
with
its senior
creditors holding the most substantial portion of its
pre-petition indebtedness
and amended after further negotiations among JWP and the
Official
Committees,
is fair and equitable and in the best interests of Reorganized
JWP and its
creditors and interest holders. JWP and the Official Committees
urge acceptance
of the Plan by all impaired creditors and interest holders
entitled to vote.
August 9, 1994
JWP Inc.
Debtor and Debtor-in-Possession
/s/ Frank T. MacInnis
By:
Chairman of the Board of Directors,
President and Chief Executive Officer
<PAGE>
EXHIBIT 1
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- ----------------------------
X
In re
:
CHAPTER 11
JWP INC.,
:
No. 93-B-46404 (JHG)
Debtor.
:
- ----------------------------
X
THIRD AMENDED
JOINT PLAN OF REORGANIZATION OF
THE DEBTOR AND SELLCO CORPORATION
UNDER CHAPTER 11 OF THE BANKRUPTCY CODE
JWP INC., as debtor in possession, and SellCo Corporation, its
wholly owned
nondebtor subsidiary, propose the following chapter 11 plan
pursuant to
subsection 1121(a) of title 11 of the United States Code:
I.
Introduction
A. Plan Defined Terms. Unless the context otherwise requires,
the terms
specified below have the following meanings (such meanings to be
equally
applicable to both the singular and plural):
1. Additional Interest Amount, when used in connection with
the
Series A
Secured Notes, the Series B Secured Notes, the Series C Notes,
the SellCo
Subordinated Contingent Payment Notes, the New Common Stock, the
New Series X
Warrants, the New Series Y Warrants, or the New Series Z
Warrants, means the
principal amount of such notes, the number of shares of such
stock or the
number of shares represented by such warrants, as the context
requires, to
which Belmont Capital Partners II, L.P. shall be entitled,
pursuant to that
certain Credit Agreement, dated as of February 14, 1994, between
JWP, certain
guarantors, and Belmont Capital Partners II, L.P.
2. Allowed claim, allowed equity interest, or allowed
administrative expense
refer to a claim, equity interest, or administrative expense, as
the case may
be, that is allowed or deemed allowed pursuant to sections 502
or
503 of the
Bankruptcy Code.
3. Asset Sale means the sale, lease, conveyance, or other
disposition of any
assets (including capital stock) other than (i) the sale or
disposition of
inventory, motor vehicles, or equipment sold in the ordinary
course of
business, and (ii) the sale or disposition of equipment or motor
vehicles which
have become obsolete or are replaced in the ordinary course of
business.
4. Bankruptcy Code means title 11 of the United States Code,
as
amended from
time to time, as applicable to the Reorganization Case.
5. Bankruptcy Rules means the Federal Rules of Bankruptcy
Procedure, as
amended from time to time, as applicable to the Reorganization
Case, including
the Local Rules of the Court.
6. Business Day means any day except a Saturday, Sunday, or
"legal holiday"
as such term is defined in Bankruptcy Rule 9006(a).
7. Bylaws means the amended and restated bylaws of Reorganized
JWP in the
form set forth in Exhibit E to the Plan.
1-1
8. Certificate of Incorporation means the Amended and Restated
Certificate of
Incorporation of Reorganized JWP in the form set forth in
Exhibit
F to the
Plan.
9. Class Action means that certain consolidated class action
captioned In re
JWP INC. Securities Litigation, 92 Civ. 5815 (CLB) (S.D.N.Y.).
10. Class 2 Residual Percentage means (a) the aggregate amount
of allowed
claims in class 2 less the aggregate principal amount of Series
A
Secured Notes
and Series B Secured Notes to be distributed to the holders of
claims in class
2, divided by (b) the aggregate amount of allowed claims in
classes 2, 3, 4B,
and 4C less the aggregate principal amount of Series A Secured
Notes and Series
B Secured Notes to be distributed under the Plan to holders of
allowed claims
in classes 2, 3, 4B, and 4C.
11. Class 2 Series B Percentage means (a) the aggregate amount
of allowed
claims in class 2 less $51,000,000, divided by (b) the aggregate
amount of
allowed claims in classes 2 and 3, less $51,000,000.
12. Class 3 Residual Percentage means (a) the aggregate amount
of allowed
claims in class 3 less the aggregate principal amount of Series
B
Secured Notes
to be distributed to the holders of claims in class 3, divided
by
(b) the
aggregate amount of allowed claims in classes 2, 3, 4B, and 4C
less the
aggregate principal amount of Series A Secured Notes and Series
B
Secured Notes
to be distributed under the Plan to the holders of allowed
claims
in classes 2,
3, 4B, and 4C.
13. Class 3 Series B Percentage means (a) the aggregate amount
of allowed
claims in class 3, divided by (b) the aggregate amount of
allowed
claims in
classes 2 and 3, less $51,000,000.
14. Class 4B and 4C Residual Percentage means (a) the
aggregate
amount of
allowed claims in Classes 4B and 4C less the Class 4B and 4C
Series A Amount,
divided by (b) the aggregate amount of allowed claims in classes
2, 3, and 4B,
less the aggregate principal amount of Series A Secured Notes
and
Series B
Secured Notes to be distributed under the Plan to the holders of
allowed claims
in classes 2, 3, 4B, and 4C.
15. Class 4B and 4C Series A Amount means the amount which
bears the same
ratio to the aggregate amount of allowed claims in Classes 4B
and
4C as (a)
$51,000,000 bears to (b)(i) the aggregate amount of allowed
claims in class 2
and class 3, less (ii) the aggregate principal amount of Series
B
Secured Notes
to be distributed under the Plan to the holders of allowed
claims
in class 2
and class 3.
16. Collateral Intercreditor Agreement means that certain
Intercreditor
Agreement dated as of the Effective Date among Reorganized JWP,
MES, SellCo,
and each of the trustees for the indentures governing the Series
A Secured
Notes, the Series B Secured Notes, and the SellCo Subordinated
Contingent
Payment Notes, substantially in the form of Exhibit C to
Exhibits
A, B, and D
to the Plan.
17. Court means the United States District Court having
jurisdiction over the
Reorganization Case and, to the extent of any reference made
pursuant to
section 157 of title 28 of the United States Code, the unit of
such District
Court pursuant to section 151 of title 28 of the United States
Code.
18. Disbursing Agent means the person or entity identified as
the disbursing
agent in the Disbursement Agreement.
19. Disbursement Agreement means that certain Disbursement
Agreement, dated
as of the Effective Date, substantially in the form of Exhibit N
to the Plan.
20. Disputed means, with respect to a claim or interest which
has been or
hereafter is listed on the schedules of liabilities filed by JWP
as
unliquidated, disputed, or contingent and proof of which was
filed, or a proof
of claim or interest filed in an amount greater than the
liquidated amount for
which it was scheduled, and (i) in either case, (ii) in respect
of any proof of
claim, or (iii) in the case of a claim for administrative
expenses, any such
claim or interest as to which JWP or any other party in interest
has interposed
a timely
1-2
objection or request for estimation in accordance with the
Bankruptcy Code and
the Bankruptcy Rules, which objection or request for estimation
has not been
withdrawn or finally determined.
21. Effective Date means (a) if no stay of the order
confirming
the Plan is
in effect, 11:00 a.m., New York time (when a specific time is
contemplated), on
a Business Day selected by JWP, which date is not more than 10
calendar days
after the date each of the conditions set forth in Article V
hereof has been
satisfied or waived as set forth herein or (b) if a stay of the
order
confirming the Plan is in effect, on a Business Day selected by
JWP that is not
more than 10 calendar days after the later of (i) the date such
stay is vacated
or any appeal, rehearing, remand, or petition for certiorari is
resolved in a
manner that does not reverse or materially modify the order
confirming the Plan
or (ii) the date each condition set forth in Article V hereof
has
been
satisfied or waived as set forth in such Article.
22. Generally Accepted Accounting Principles means generally
accepted
accounting principles in the United States of America as in
effect from time to
time set forth in the opinions and pronouncements of the
Accounting Principles
Board and the American Institute of Certified Public Accountants
and the
statements and pronouncements of the Financial Accounting
Standards Board, or
in such other statements by such other entity as may be in
general use by
significant segments of the accounting profession, which are
applicable to the
circumstances as of the date of determination.
23. JWP means JWP INC., a Delaware corporation, the debtor or
debtor in
possession, as the context requires, in the Reorganization Case.
24. JWP Supplemental SellCo Note means JWP's promissory note,
as described in
Article IV, Q of the Plan. The JWP Supplemental SellCo Note
shall
be
substantially in the Form of Exhibit Q to the Plan.
25. Management Stock Option Plan means the 1994 Management
Stock Plan of JWP
Inc., dated as of the date hereof, substantially in the form
attached as
Exhibit L hereto.
26. MES means MES Corporation, a Delaware corporation and
wholly owned
subsidiary of Reorganized JWP.
27. Net Cash Proceeds means, when used with reference to any
Asset Sale or
series of related Asset Sales, the aggregate amount of the cash
portion of the
purchase price, and all other cash consideration (including,
without
limitation, any cash payments received by way of deferred
payment
of principal
pursuant to a note and any interest thereon, receivable,
contingent payment
arrangement, or otherwise, but only as and when received) in
respect of an
Asset Sale, in a net amount equal to or in excess of $250,000 in
respect of
such Asset Sale or series of related Asset Sales, after
deducting, without
duplication (i) sales, transfer, and similar taxes and
reasonable
out-of-pocket
expenses and fees (including reasonable legal, accounting, and
brokerage fees
and expenses) incurred (which taxes, expenses, and fees are
classified as such
in accordance with Generally Accepted Accounting Principles) in
connection with
such Asset Sale, (ii) employee severance costs incurred in
connection with the
sale of any business constituting an Asset Sale, (iii) fixed,
determined
liabilities in accordance with Generally Accepted Accounting
Principles
retained in connection with such Asset Sale including amounts
payable in
respect of any insurance matters or employee benefit matters,
(iv) reserves
established in respect of contingent liabilities in accordance
with Generally
Accepted Accounting Principles retained in connection with such
Asset Sale, and
(v) customary costs incurred in connection with the closing of a
business
constituting or arising in connection with such Asset Sale.
28. New Common Stock means all the shares of common stock of
Reorganized JWP
authorized pursuant to Article IV.A. of the Plan.
29. New Series X Warrants, New Series Y Warrants, and New
Series Z Warrants
mean the warrants to purchase New Common Stock, as described in
Article II of
the Plan.
30. Nondebtor Subsidiary means any of the wholly owned, direct
or indirect
subsidiaries of JWP, set forth on Exhibit M to the Plan.
1-3
31. Old Common Stock means the authorized common stock, par
value $0.10 per
share, issued by JWP.
32. Old Credit Agreement means the Amended and Restated Credit
Agreement,
dated as of September 11, 1992, among JWP; the banking
institutions named as
Lenders therein; Fleet Bank, as Agent and Issuing Bank; and
Chemical Bank,
Credit Suisse, and Bank of America National Trust and Savings
Association, as
Co-lead Managers; as the same may have been amended from time to
time.
33. Old Note Agreements means the agreements listed on
Schedule
2 hereto.
34. Old Notes means the notes issued by JWP in accordance with
the Old Note
Agreements.
35. Petition Date means December 21, 1993.
36. Plan means this chapter 11 plan of reorganization, either
in its present
form or as it may be altered, amended, or modified from time to
time.
37. Ratable Share means a number (expressed as a percentage)
equal to the
proportion that an allowed claim or interest in a particular
class (or group of
classes, as the context requires) bears to the aggregate amount
of allowed
claims or interests in such class (or group) as of the date of
determination.
38. Reorganization Case means the above-captioned chapter 11
case.
39. Reorganized JWP means JWP, or any successor thereto by
merger,
consolidation, or otherwise, on and after the Effective Date.
40. Schedules means the schedules of assets and liabilities
and
the statement
of financial affairs filed by JWP as required by section 521 of
the Bankruptcy
Code and the Official Bankruptcy Forms of the Bankruptcy Rules,
as amended from
time to time.
41. Sea Cliff means Sea Cliff Water Company, a New York
corporation and
wholly owned subsidiary of Reorganized JWP.
42. SellCo means SellCo Corporation, a Delaware corporation
and
wholly owned
subsidiary of Reorganized JWP.
43. SellCo Subordinated Contingent Payment Notes means
SellCo's
12%
Subordinated Contingent Payment Notes, due 2004, described in
Article II of the
Plan. Each SellCo Subordinated Contingent Payment Note shall be
substantially
in the form of Exhibit A to the indenture governing the SellCo
Subordinated
Contingent Payment Notes.
44. Series A Secured Notes means Reorganized JWP's 7% Senior
Secured Notes,
Series A, due 1997, described in Article II of the Plan. Each
Series A Secured
Note shall be substantially in the form of Exhibit A to the
indenture governing
the Series A Secured Notes.
45. Series A Substitute Collateral means any property of any
kind (other than
cash) received by JWP or any Nondebtor Subsidiary on or after
December 1, 1993
and prior to the Effective Date and which has not been
liquidated
prior to the
Effective Date, in connection with an Asset Sale or Asset Sales
on or after
December 1, 1993 and prior to the Effective Date of any of the
assets of JWP or
any of the assets of the Nondebtor Subsidiaries (other than the
Nondebtor
Subsidiaries listed on Schedule 4 hereto) or the sale of the
capital stock of
any of the Nondebtor Subsidiaries (other than the Nondebtor
Subsidiaries listed
on Schedule 4 hereto).
46. Series B Cash Collateral means all Net Cash Proceeds
received by JWP or
any Nondebtor Subsidiary prior to the Effective Date in
connection with an
Asset Sale or Asset Sales of the Nondebtor Subsidiaries listed
on
Schedule 4
hereto or their assets; provided, however, that the Series B
Cash
Collateral
shall not exceed $11,357,000.
1-4
47. Series B Secured Notes means Reorganized JWP's 7% Senior
Secured Notes,
Series B, due 1997, described in Article II of the Plan. Each
Series B Secured
Note shall be substantially in the form of Exhibit A to the
indenture governing
the Series B Secured Notes.
48. Series B Substitute Collateral means any property of any
kind (other than
cash) received by JWP or any Nondebtor Subsidiary prior to the
Effective Date
in connection with (a) an Asset Sale or Asset Sales of any of
the
Nondebtor
Subsidiaries listed on Schedule 4 hereto or any of their assets
and (b) the
sale of the capital stock of any of the Nondebtor Subsidiaries
listed on
Schedule 4 hereto.
49. Series C Notes means Reorganized JWP's 11% Series C Notes,
due 2001,
described in Article II of the Plan. Each Series C Note shall be
substantially
in the form of Exhibit A to the indenture governing the Series C
Notes.
50. Working Capital Lien means a lien on the stock of Jamaica
Water
Securities Corp., which entitles the lenders providing a working
capital
facility to Reorganized JWP or MES to receive proceeds from the
sale of such
stock equal to the amount by which the balance under such
working
capital
facility exceeds $25,000,000; provided, however, that (i) the
maximum amount of
such proceeds to be received by such lenders shall not exceed
$15,000,000 and
(ii) the application of any such proceeds to repay all or a
portion of the
balance of such working capital facility shall permanently
reduce
the
availability under such facility by the amount applied.
B. Bankruptcy Code Terms. "Allowed," "case," "claims,"
"confirm,"
"confirmation," "debtor," "debtor in possession," "governmental
unit,"
"impaired," and other uncapitalized terms defined (either
explicitly or
implicitly) in the Bankruptcy Code are used herein with such
defined meanings.
C. Other Terms. The words "herein," "hereof," "hereto,"
"hereunder," and
others of similar import refer to the Plan as a whole and not to
any particular
section, subsection, or clause contained in the Plan.
D. Exhibits. All Exhibits to the Plan are incorporated into
and
are a part of
the Plan as if set forth in full herein.
II.
Property Distributions
Reorganized JWP shall distribute (or cause the distribution
of)
the following
property to the holders of allowed claims (as set forth herein):
A. Series A Secured Notes. The Series A Secured Notes shall
(a)
be in an
initial aggregate principal amount of $51,000,000 plus (i) the
Class 4B and 4C
Series A Amount and (ii) the Additional Interest Amount, (b)
accrue interest
commencing on the Effective Date at a rate of 7% per annum,
compounded
semiannually, which shall be payable in additional Series A
Secured Notes, (c)
be senior indebtedness of Reorganized JWP, (d) be guaranteed by
SellCo, which
guarantee shall be secured by a pledge of the capital stock of
each of the
Nondebtor Subsidiaries listed on Schedule 5 hereto, subject only
to the Working
Capital Lien, (e) be guaranteed by MES, (f) be secured by a
first
priority
pledge of the capital stock of MES and a first priority pledge
of
the capital
stock of SellCo, and a first priority security interest in the
Series A
Substitute Collateral, (g) be secured by a second priority
pledge
of the
capital stock of the Nondebtor Subsidiaries identified on
Schedule 4 hereto,
and a second priority security interest in the Series B
Substitute Collateral,
(h) have a mandatory scheduled redemption on the second
anniversary of the
Effective Date of $10,000,000 or such lesser amounts as provided
in the
indenture governing the Series A Secured Notes, (i) be subject
to
mandatory
prepayment in certain events, and (j) mature on the third
anniversary of the
Effective Date. The Series A Secured Notes will be governed by
an
indenture,
dated as of the Effective Date, between Reorganized JWP and an
independent
trustee. Such indenture shall be substantially in the form
attached as Exhibit
A to the Plan. As specified in Article III of the Plan, the
Series A Secured
Notes are to be distributed to the holders of allowed claims in
classes 2, 4B,
4C, and Belmont Capital Partners II, L.P.
B. Series B Secured Notes. The Series B Secured Notes shall
(a)
be in an
initial aggregate principal amount of (i) $11,357,000 plus (ii)
the Additional
Interest Amount in the event JWP determines to distribute Series
B Secured
Notes to Belmont Capital Partners II, L.P. rather than cash on
account of the
Series B
1-5
Secured Note Additional Interest Amount, (b) accrue interest
commencing on the
Effective Date at a rate of 7% per annum, compounded
semiannually, which shall
be payable in additional Series B Secured Notes, (c) be senior
indebtedness of
Reorganized JWP, (d) subject to the repayment in full of the
Series A Secured
Notes, be guaranteed by SellCo, which guarantee shall be secured
by a pledge of
the capital stock of each of the Nondebtor Subsidiaries listed
on
Schedule 5
hereto, subject only to the Working Capital Lien and the lien in
favor of the
Series A Secured Notes, (e) subject to the repayment in full of
the Series A
Secured Notes, be guaranteed by MES, (f) be secured by a first
priority pledge
of the capital stock of the Nondebtor Subsidiaries identified on
Schedule 4
hereto, and a first priority security interest in the Series B
Substitute
Collateral, (g) be secured by a second priority security
interest
in the Series
A Substitute Collateral, and a second priority pledge of the
capital stock of
MES and a second priority pledge of the capital stock of SellCo,
(h) be subject
to mandatory prepayment in certain events, and (i) mature on the
third
anniversary of the Effective Date. The Series B Secured Notes
will be governed
by an indenture, dated as of the Effective Date, between
Reorganized JWP and an
independent trustee. Such indenture shall be substantially in
the
form attached
as Exhibit B to the Plan. As specified in Article III of the
Plan, the Series B
Secured Notes are to be distributed to the holders of allowed
claims in classes
2 and 3.
C. Series C Notes. The Series C Notes shall (a) be in an
initial aggregate
principal amount of $60,000,000 plus the Additional Interest
Amount, (b) accrue
interest commencing on the Effective Date at a rate of 11% per
annum, which
shall be payable semiannually in additional Series C Notes for
the first 18
months after the Effective Date, and thereafter interest shall
be
paid
quarterly in cash, (c) be senior indebtedness of Reorganized
JWP,
provided that
the Series C Notes shall be (i) junior and subordinate to the
payment in full
of Series A Secured Notes and the Series B Secured Notes and
(ii)
junior and
subordinate to the payment in full of any working capital or
revolving credit
financing obtained by JWP or MES after the confirmation of the
Plan up to
$100,000,000; (d) be guaranteed by MES subject to the repayment
in full of any
such working capital or revolving credit financing obtained by
JWP or MES, the
Series A Secured Notes and the Series B Secured Notes, and (e)
mature on the
seventh anniversary of the Effective Date. The Series C Notes
will be governed
by an indenture, dated as of the Effective Date, between
Reorganized JWP and an
independent trustee. Such indenture shall be substantially in
the
form attached
as Exhibit C to the Plan. As specified in Article III of the
Plan, the Series C
Notes are to be distributed to the holders of allowed claims in
classes 2, 3,
4B, 4C, and Belmont Capital Partners II, L.P.
D. SellCo Subordinated Contingent Payment Notes. The SellCo
Subordinated
Contingent Payment Notes shall (a) be in an initial aggregate
contingent
principal amount of $46,000,000 plus the Additional Interest
Amount, (b) accrue
interest commencing on the Effective Date at a rate of 12% per
annum,
compounded semiannually, which shall be payable in additional
SellCo
Subordinated Contingent Payment Notes until the earlier to occur
of maturity or
payment in full of the original principal amount of the SellCo
Subordinated
Contingent Payment Notes, (c) be junior and subordinated
indebtedness of SellCo
so long as all or any portion of the indebtedness on account of
the Series A
Secured Notes or Series B Secured Notes or the guarantees of
SellCo in respect
thereof remain outstanding, (d) be secured by a pledge of all
the
capital stock
of each of the Nondebtor Subsidiaries listed on Schedule 5
hereto, subject only
to the Working Capital Lien and the lien in favor of the Series
A
Secured Notes
and the Series B Secured Notes, (e) be secured by a first
priority pledge of
the JWP Supplemental SellCo Note, (f) be subject to the
establishment of a cash
reserve for the payment of capital gains taxes arising from the
sale of
Nondebtor Subsidiaries and (g) mature on the tenth anniversary
of
the Effective
Date. If, at any time after the fifth anniversary of the
Effective Date and
prior to the maturity date, the value, as determined by an
independent
appraiser selected by Reorganized JWP, of the consolidated
assets
of SellCo
(excluding the JWP Supplemental SellCo Note) and the Nondebtor
Subsidiaries
listed on Schedule 5 hereto is less than $250,000, then the
SellCo Subordinated
Contingent Payment Notes which are outstanding, if any, at such
time shall be
deemed cancelled and no longer an obligation of SellCo. The
SellCo Subordinated
Contingent Payment Notes will be governed by an indenture, dated
as of the
Effective Date, between SellCo and an independent trustee. Such
indenture shall
be substantially in the form attached as Exhibit D to the Plan.
As specified in
Article III of the Plan, the SellCo Subordinated Contingent
Payment Notes are
to be distributed to the holders of allowed claims in classes 2,
3, 4B, 4C, and
to Belmont Capital Partners II, L.P.
1-6
E. New Common Stock. The New Common Stock shall consist of
13,700,000 shares
of new common stock of Reorganized JWP par value $0.10 per
share.
As specified
in (i) Article III of the Plan, 9,000,000 shares are to be
distributed to the
holders of allowed claims in classes 2, 3, 4B, and 4C (ii) the
Management Stock
Option Plan, 1,000,000 shares are to be held to satisfy the
obligations of
Reorganized JWP thereunder, (iii) that certain Credit Agreement,
dated as of
February 24, 1994, between JWP, certain guarantors, and Belmont
Capital
Partners II, L.P., the Additional Interest Amount of New Common
Stock, up to
523,810 shares, is to be distributed to Belmont Capital Partners
II, L.P. and
up to 84,392 shares of New Common Stock are to be held to
satisfy
the
obligations of Reorganized JWP in respect of the Additional
Interest Amount of
New Warrants issued to Belmont Capital Partners II, L.P., and
(iv) Articles II
and III of the Plan, 1,464,796 shares are to be held to satisfy
the obligations
of Reorganized JWP under the New Series X Warrants, the New
Series Y Warrants,
and the New Series Z Warrants.
F. New Series X Warrants and New Series Y Warrants. The New
Series X Warrants
shall consist of warrants to purchase 600,000 shares of New
Common Stock, plus
the Additional Interest Amount, at a price equal to $12.55 for
each share of
New Common Stock. The New Series Y Warrants shall consist of
warrants to
purchase 600,000 shares of New Common Stock, plus the Additional
Interest
Amount, at a price equal to $17.55 for each share of New Common
Stock. The New
Series X Warrants and the New Series Y Warrants shall (1) expire
on the fifth
anniversary of the Effective Date, (2) be issued pursuant to
warrant agreements
substantially in the form of Exhibits O and P to the Plan
containing
antidilution and other provisions, (3) be subject to early
expiration when the
market price for New Common Stock reaches a certain level, as
set
forth in the
applicable warrant agreement and (4) be distributed to the
holders of allowed
claims in class 6 and to Belmont Capital Partners II, L.P.
G. New Series Z Warrants. The New Series Z Warrants shall
consist of warrants
to purchase 250,000 shares of New Common Stock, plus the
Additional Interest
Amount, at a price equal to $50.00 for each share of New Common
Stock. The New
Series Z Warrants shall (1) expire on the second anniversary of
the Effective
Date, (2) be issued pursuant to a warrant agreement
substantially
in the form
of Exhibit R to the Plan containing antidilution and other
provisions, and (3)
be distributed to, or reserved for, the holders of claims or
interests in
classes 7, 8, 9, 10, and 11, as the case may be, and Belmont
Capital Partners
II, L.P.
III.
Classification and Treatment of
Claims and Equity Interests
A. Summary. The categories of claims and equity interests
listed below
classify allowed claims and allowed equity interests for all
purposes,
including voting, confirmation, and distribution pursuant to the
Plan.
<TABLE>
<S> <C>
CLASS
STATUS
Class 1: Priority Claims.................................. Unimpaired-not entitled to vote
Class 2: Old Note Claims.................................. Impaired-entitled to vote
Class 3: Old Credit Agreement Claims...................... Impaired-entitled to vote
Class 4A: Convenience Claims.............................. Unimpaired-not entitled to vote
Class 4B: Other Borrowed Money Claims..................... Impaired-entitled to vote
Class 4C: General Unsecured Claims........................ Impaired-entitled to vote
Class 5: Unimpaired Contingent Claims..................... Unimpaired-not entitled to vote
Class 6: Subordinated Debt Claims......................... Impaired-entitled to vote
Class 7: Contingent and Statutory Subordinated Claims..... Impaired-entitled to vote
Class 8: Old Preferred Stock.............................. Impaired-entitled to vote
Class 9: Old Common Stock................................. Impaired-entitled to vote
Class 10: Equity Interest Claims-Class Action Plaintiffs.. Impaired-entitled to vote
Class 11: Equity Interests-Warrants of Participation...... Impaired-entitled to vote
</TABLE>
B. Claims for Administrative Expenses. JWP shall pay each
allowed claim for
administrative expenses in full, in cash, on the Effective Date
(or as soon
thereafter as is practicable), except to the extent that the
holder of an allowed claim for administrative expenses agrees to
a different
treatment; provided, however, that allowed claims for
administrative expenses
representing obligations incurred in the ordinary course of
business or assumed
by JWP shall be paid in full or performed by Reorganized JWP in
the ordinary
course of business. Notwithstanding the foregoing, professionals
employed at
the expense of JWP, whose compensation is subject to the
approval of the Court,
shall be paid in cash in the amounts awarded to such
professionals by order of
the Court as soon as practicable after such order is entered,
but no later than
the Effective Date for all orders entered prior thereto. The
claims of Seaboard
Surety Company arising during the Reorganization Case, and on
and after
February 14, 1994, shall be treated as set forth in paragraph 9
of the Final
Order Under 11 U.S.C. (S) 364(c)(1) and Bankruptcy Rule 4001(c)
Authorizing
Debtor To Execute, Deliver And Perform General Agreement Of
Indemnity In Favor
Of Seaboard Surety Company, dated February 24, 1994.
C. Tax Claims. Each holder of an allowed claim of a
governmental unit of the
kind specified in subsection 507(a)(7) of the Bankruptcy Code
shall receive, in
the sole discretion of JWP, either cash or deferred cash
payments as specified
in subsection 1129(a)(9)(C) of the Bankruptcy Code.
D. Classification, Treatment, and Voting. The allowed claims
against JWP
shall be classified and receive the treatment specified below.
(1) Class 1. Priority Claims.
1. Classification: Class 1 consists of claims entitled to
priority pursuant
to subsection 507(a) of the Bankruptcy Code, other than a claim
for
administrative expenses or a claim of a governmental unit under
section 507(a)(7) of the Bankruptcy Code.
2. Treatment: Each holder of an allowed claim in class 1 shall
receive cash
in an amount equal to the amount of its allowed claim, except to
the extent
that the holder of such claim agrees to a different treatment.
3. Voting: Class 1 is not impaired, and the holders of claims
in class 1 are not entitled to vote to accept or reject the Plan.
(2) Class 2: Old Note Claims.
1. Classification: Class 2 consists of the claims evidenced by
the Old Notes
and the Old Note Agreements and is denominated as a separate
class solely for
purposes of effectuating the terms of the Intercreditor
Agreement as it relates
to the holders of claims in classes 2 and 3 without affecting
the distributions
to class 4B. For all other purposes under the Plan, including,
without
limitation, voting as to acceptance or rejection of the Plan,
the claims in
classes 2, 3, and 4B shall be treated as a single class of
senior indebtedness claims against JWP.
2. Treatment: Each holder of an allowed claim in class 2 shall
receive, in
full satisfaction of such claim, its Ratable Share of (i)
$51,000,000 in
principal amount of the Series A Secured Notes, (ii) the Class 2
Series B
Percentage of the aggregate principal amount of the Series B
Secured Notes
(excluding the Additional Interest Amount of the Series B
Secured Notes, if
any), and (iii) the Class 2 Residual Percentage of (a)
$60,000,000 principal
amount of the Series C Notes, (b) $46,000,000 principal amount
of the SellCo
Subordinated Contingent Payment Notes, and (c) 9,000,000 shares
of the New Common Stock.
3. Voting: Class 2 is impaired and the holders of claims in
class 2 are
entitled to vote, together with the holders of claims in classes
3 and 4B, to accept or reject the Plan.
(3) Class 3: Old Credit Agreement Claims.
1. Classification: Class 3 consists of the claims evidenced by
the Old Credit
Agreement and is denominated as a separate class solely for
purposes of
effectuating the terms of the Intercreditor Agreement as it
relates to the
holders of claims in classes 2 and 3 without affecting the
distributions to
class 4B. For all other purposes under the Plan, including,
without limitation,
voting as to acceptance or rejection of the Plan, the claims in
classes 2, 3,
and 4B shall be treated as a single class of senior indebtedness
claims against JWP.
2. Treatment: Each holder of an allowed claim in class 3 shall
receive, in
full satisfaction of such claim, its Ratable Share of (i) the
Class 3 Series B
Percentage of the aggregate principal amount of the Series B
Secured Notes
(excluding the Additional Interest Amount of the Series B
Secured Notes, if
any) and (ii) the Class 3 Residual Percentage of (a) $60,000,000
principal
amount of the Series C Notes, (b) $46,000,000 principal amount
of the SellCo
Subordinated Contingent Payment Notes, and (c) 9,000,000 shares
of the New Common Stock.
3. Voting: Class 3 is impaired and the holders of claims in
class 3 are
entitled to vote, together with the holders of claims in classes
2 and 4B, to accept or reject the Plan.
(4) Class 4: General Unsecured Claims.
1. Classification: Class 4 consists of all unsecured claims
against JWP that
are not claims for administrative expenses or priority tax
claims or otherwise
classified in class 1, 2, 3, 5, 6, or 7.
(a) Convenience Class-Class 4A. Class 4A consists of all
claims in class 4
that, with respect to each holder, are in the aggregate $10,000
or less or, at
the election of the holder of a class 4 claim, reduced to
$10,000 in the aggregate.
(b) Other Borrowed Money Class 4 Claims-Class 4B. Class 4B
consists of all
class 4 claims which constitute "Senior Indebtedness" with
respect to the
claims in class 6 and is denominated as a separate class solely
for purposes of
effectuating the terms of the Intercreditor Agreement as it
relates to the
holders of claims in classes 2 and 3 without affecting the
distributions to
Class 4B. For all other purposes under the Plan, including,
without limitation,
voting as to acceptance or rejection of the Plan, the claims in
classes 2, 3,
and 4B shall be treated as a single class of senior indebtedness
claims against
JWP.
(c) All Other Class 4 Claims-Class 4C. Class 4C consists of
all
class 4
claims not included in classes 4A and 4B.
2. Treatment:
(a) Class 4A. Each holder of an allowed claim in class 4A
shall
be paid in
full, in cash, on the Effective Date or as soon as practicable
thereafter.
(b) Classes 4B and 4C. Each holder of an allowed claim in
classes 4B or 4C
shall receive, in full satisfaction of such claim, its Ratable
Share
(calculated as to all allowed claims in classes 4B and 4C) of
(i)
a principal
amount of the Series A Secured Notes equal to the Class 4B and
4C
Series A
Amount and (ii) the Class 4B and 4C Residual Percentage of (a)
$60,000,000
principal amount of the Series C Notes, (b) $46,000,000
principal
amount of the
SellCo Subordinated Contingent Payment Notes, and (c) 9,000,000
shares of the
New Common Stock.
3. Voting:
(a) Class 4A. Class 4A is not impaired and is not entitled to
vote on the
Plan. Any holder of a class 4 claim or claims greater than
$10,000, in the
aggregate, who elects to reduce his claim or claims to $10,000,
in the
aggregate, accepts payment under the Plan as payment in full of
such claim.
(b) Class 4B. Class 4B is impaired and the holders of claims
in
class 4B are
entitled to vote, together with the holders of claims in classes
2 and 3, to
accept or reject the Plan.
(c) Class 4C. Class 4C is impaired and the holders of claims
in
class 4C are
entitled to vote to accept or reject the Plan.
(5) Class 5: Unimpaired Contingent Claims.
1. Classification: Class 5 consists of all unsecured claims
against JWP
specified on Schedule 1 to the Plan, except as and to the extent
denoted on
Schedule 1 to the Plan and as otherwise provided in subsection H
of Article III
to the Plan.
1-9
2. Treatment: Class 5 is not impaired and the allowed claims
in
class 5,
including the claims of those certain bonding companies which
satisfy the
requirements of subsection H of Article III of the Plan (which
claims shall be
deemed allowed as filed), shall be reinstated in accordance with
subsection
1124(1) or (2) of the Bankruptcy Code.
3. Voting: The holders of claims in class 5 are not entitled
to
vote to
accept or reject the Plan.
(6) Class 6: Subordinated Debt Claims.
1. Classification: Class 6 consists of the claims against JWP
(i) evidenced
by the Indenture dated as of September 1, 1987, between Neeco
Inc. and State
Street Bank and Trust Co., as Trustee, and the 73/4% Convertible
Subordinated
Debentures due 2012, and (ii) evidenced by JWP's 12%
Subordinated
Notes due
1996.
2. Treatment: Each holder of an allowed claim in class 6 shall
receive, in
full satisfaction of such claim, its Ratable Share of the New
Series X Warrants
and the New Series Y Warrants; provided, however, that no holder
of an allowed
claim in class 6 shall receive any distribution of property
under
the Plan
unless (i) class 6 votes to accept the Plan in accordance with
the requirements
of section 1126(c) of the Bankruptcy Code, (ii) such holder
shall
have
delivered to Reorganized JWP for cancellation the instrument or
instruments and
all related documents on which its claim is based on or before
the first
anniversary of the Effective Date, and (iii) those claims in
classes 2, 3, and
4B which constitute "Senior Indebtedness" with respect to the
claims in class 6
vote to accept the Plan in accordance with section 1126(c) of
the
Bankruptcy
Code (counting all such claims in classes 2, 3, and 4B as a
single class for
purposes of this clause). In addition, in the event class 6 does
not vote to
accept the Plan in accordance with the requirements of section
1126(c) of the
Bankruptcy Code, the holders of claims or interests in classes
8,
9, 10, and 11
shall receive no distribution of property under the Plan. Any
New
Series X
Warrants and New Series Y Warrants not distributed on or prior
to
the first
anniversary of the Effective Date as a result of the failure by
a
holder of a
claim in class 6 to deliver its respective debt instruments to
Reorganized JWP
shall be cancelled.
3. Voting: Class 6 is impaired and the holders of claims in
class 6 are
entitled to vote to accept or reject the Plan.
(7) Class 7: Contingent and Statutory Subordinated Claims.
1. Classification: Class 7 consists of (i) the indemnification
or
contribution claims, if any, by current or former officers and
directors of JWP
or by other parties in connection with the claims asserted or
assertable in
AUSA Life Insurance Company, et al. v. Andrew T. Dwyer et al.,
93
Civ. 6830
(CLB) (S.D.N.Y.), and (ii) any intercompany claims that the
Court
determines
should be subordinated to general unsecured claims.
2. Treatment: Each holder of an allowed claim in class 7 shall
receive, in
full satisfaction of such claim, its Ratable Share of 1,388 New
Series Z
Warrants; provided, however, that in the event any of classes 4C
or 7 does not
vote to accept the Plan in accordance with the requirements of
section 1126(c)
of the Bankruptcy Code, the holders of claims or interests in
class 7 shall
receive no distribution of property under the Plan. Holders of
allowed claims
in class 7 shall have the option to receive cash from
Reorganized
JWP in lieu
of New Series Z Warrants as provided in Article IV., section J.,
6. of the
Plan.
3. Voting: Class 7 is impaired and the holders of claims in
class 7 are
entitled to vote to accept or reject the Plan.
(8) Class 8: Equity Interests - Old Preferred Stock.
1. Classification: Class 8 consists of the equity interests
evidenced by all
the issued and outstanding 4.25% Convertible Exchangeable
Preferred Stock of
JWP, par value $1.00.
1-10
2. Treatment: Each holder of an allowed equity interest in
class 8 shall
receive, in full satisfaction of such interest, its Ratable
Share
of 29,297 New
Series Z Warrants; provided, however, that the holders of
interests in class 8
shall receive no distribution of property under the Plan if
either (i) any of
classes 4C, 6, and 8 does not vote to accept the Plan in
accordance with the
requirements of section 1126(c) of the Bankruptcy Code, or (ii)
class 7 does
not vote to accept the Plan in accordance with the requirements
of section
1126(c) of the Bankruptcy Code and until such time as all claims
in class 7
have been disallowed or expunged. Holders of allowed interests
in
class 8 shall
have the option to receive cash from Reorganized JWP in lieu of
New Series Z
Warrants as provided in Article IV., section J., 6. of the Plan.
3. Voting: Class 8 is impaired and the holders of equity
interests in class 8
are entitled to vote to accept or reject the Plan.
(9) Class 9: Equity Interests - Old Common Stock.
1. Classification: Class 9 consists of (i) the equity
interests
evidenced by
all the issued and outstanding shares of common stock of JWP,
$.10 par value,
as of the Petition Date, and any options, warrants, or rights,
contractual or
otherwise, to acquire such shares of common stock which are
exercised within
sixty (60) days of the Effective Date, and (ii) equity interests
that may be
asserted in respect of the $43,000,000 principal amount of
Businessland, Inc.
51/2% Convertible Subordinated Debentures, due 2007, and the
Share Issuance
Agreement, dated August 6, 1993, between JWP and ENTEX
Information Services,
Inc. The options in this class include, but are not limited to,
the incentive
stock options, non-qualified stock options, and stock
appreciation rights to
acquire 1,125,000 shares of Old Common Stock pursuant to JWP's
1986 Incentive
Stock Option Plan and the options for key personnel to acquire
2,500,000 and
1,000,000 shares of Old Common Stock respectively pursuant to
JWP's 1991 and
1992 Stock Option Plans.
2. Treatment: Each holder of an allowed equity interest in
class 9 shall
receive, in full satisfaction of such interest, its Ratable
Share
of 195,667
New Series Z Warrants; provided, however, that the holders of
interests in
class 9 shall receive no distribution of property under the Plan
if either (i)
any of classes 4C, 6, or 8 does not vote to accept the Plan in
accordance with
the requirements of section 1126(c) of the Bankruptcy Code, (ii)
any of classes
9, 10, or 11 does not vote to accept the Plan in accordance with
the
requirements of section 1126(c) of the Bankruptcy Code (unless
Reorganized JWP
determines, at its option, to make the distributions specified
herein to all
such classes), or (iii) class 7 does not vote to accept the Plan
in accordance
with the requirements of section 1126(c) of the Bankruptcy Code
and until such
time as all claims in class 7 have been disallowed or expunged.
Holders of
allowed interests in class 9 shall have the option to receive
cash from
Reorganized JWP in lieu of New Series Z Warrants as provided in
Article IV,
section J., 6. of the Plan.
3. Voting: Class 9 is impaired and the holders of equity
interests in class 9
are entitled to vote to accept or reject the Plan.
(10) Class 10: Equity Interest Claims - Class Action Plaintiffs.
1. Classification: Class 10 consists of any claim with respect
to a security
classified in class 8 or class 9 which would be subordinated
pursuant to
section 510(b) of the Bankruptcy Code, including, but not
limited
to, those
claims asserted in the Class Action.
2. Treatment: Each holder of an allowed claim in class 10
shall
receive, in
full satisfaction of such interest, its Ratable Share of 22,059
New Series Z
Warrants; provided, however, that the holders of claims in class
10 shall
receive no distribution of property under the Plan if either (i)
any of classes
4C, 6, or 8 does not vote to accept the Plan in accordance with
the
requirements of section 1126(c) of the Bankruptcy Code, (ii) any
of classes 9,
10, or 11 does not vote to accept the Plan in accordance with
the
requirements
of section 1126(c) of the Bankruptcy Code (unless Reorganized
JWP
determines,
at its option, to make the distributions specified herein to all
such classes),
or (iii) class 7 does not vote to accept the Plan in accordance
with the
1-11
requirements of section 1126(c) of the Bankruptcy Code and until
such time as
all claims in class 7 have been disallowed or expunged. Holders
of allowed
claims in class 10 shall have the option to receive cash from
Reorganized JWP
in lieu of New Series Z Warrants as provided in Article IV,
section J., 6. of
the Plan.
3. Liquidation of Claims: Each claim in class 10, whether
filed
on behalf of
an individual holder or behalf of a class of such holders, is
deemed a Disputed
claim. Recognition of the existence of such Disputed claims in
the Plan shall
not be deemed an admission by JWP or its Board of Directors of
any liability to
such holders. No distribution will be made to the holder of a
claim in class 10
unless and until the claim becomes an allowed claim. Holders of
timely filed
claims in class 10 who do not opt out of the Class Action shall
have their
claims allowed or disallowed exclusively by the Court with
jurisdiction over
the Class Action. Holders of timely filed claims in class 10 who
opt out of the
Class Action shall have their claims allowed or disallowed
exclusively by the
Bankruptcy Court, provided, however, that no proceeding to allow
or disallow
such a claim shall be commenced in the Bankruptcy Court until
after disposition
of the Class Action by a final order. Neither the Plan nor the
Disclosure
Statement shall be admissible as evidence in the Class Action.
4. Voting: Class 10 is impaired and the holders of allowed
claims in class 10
are entitled to vote to accept or reject the Plan.
(11) Class 11: Equity Interests - Warrants of Participation.
1. Classification: Class 11 consists of equity interests
represented by the
1,152,649 warrants of participation issued to the holders of Old
Common Stock
in 1969 pursuant to that certain Warrant Agreement, dated as of
June 15, 1969,
between Jamaica Water and Utilities, Inc. and First National
City
Bank, as
agent.
2. Treatment: Each holder of an allowed interest in class 11
shall receive,
in full satisfaction of such interest, its Ratable Share of
1,580
New Series Z
Warrants; provided, however, that the holders of interests in
class 11 shall
receive no distribution of property under the Plan if either (i)
any of classes
4C, 6, or 8 does not vote to accept the Plan in accordance with
the
requirements of section 1126(c) of the Bankruptcy Code, (ii) any
of classes 9,
10, or 11 does not vote to accept the Plan in accordance with
the
requirements
of section 1126(c) of the Bankruptcy Code (unless Reorganized
JWP
determines,
at its option, to make the distributions specified herein to all
such classes),
or (iii) class 7 does not vote to accept the Plan in accordance
with the
requirements of section 1126(c) of the Bankruptcy Code and until
such time as
all claims in class 7 have been disallowed or expunged. Holders
of allowed
interests in class 11 shall have the option to receive cash from
Reorganized
JWP in lieu of New Series Z Warrants as provided in Article IV,
section J., 6.
of the Plan.
3. Voting: Class 11 is impaired and the holders of allowed
interests in class
11 are entitled to vote to accept or reject the Plan.
E. Distributions of Cash Proceeds from Sales of Assets Prior
to
Effective
Date.
1. Series B Secured Notes. On the Effective Date or as soon
thereafter as is
practicable, the Series B Cash Collateral shall be distributed
to
the
Disbursing Agent. Immediately thereafter, the Disbursing Agent
shall
distribute, to the trustee for the indenture governing the
Series
B Secured
Notes, the fraction of the Series B Cash Collateral allocable to
Series B
Secured Notes distributed on the Effective Date on account of
allowed claims to
be applied as mandatory prepayments of the Series B Secured
Notes
in accordance
with the terms of such indenture.
2. Reserve for Holders of Disputed Claims Entitled to Series B
Secured Notes.
The remainder of the Series B Cash Collateral held by the
Disbursing Agent on
account of Disputed claims after the distributions provided in
subsection 1. of
this section E. shall be held by the Disbursing Agent in an
interest-bearing
account and used to make prepayments on account of Series B
Secured Notes
reserved for Disputed claims that become allowed claims. As soon
as practicable
after the allowance of all or any portion of a claim that was a
Disputed claim,
the holder of such claim shall receive that portion of the cash
held by the
Disbursing
1-12
Agent allocable to the allowed portion of such claim plus
interest actually
earned thereon from the Effective Date to the date such claim is
allowed. As
soon as practicable after the disallowance of all or any portion
of a claim
which was a Disputed claim, that portion of the cash held by the
Disbursing
Agent allocable to such disallowed amount shall be allocated pro
rata among (x)
the holders of Series B Secured Notes to be applied as mandatory
prepayments of
such notes, and (y) the remaining holders of Disputed claims in
classes 2 or 3
to be held in trust by the Disbursing Agent in an
interest-bearing account and
used to make additional prepayments as Disputed claims in
classes
2 or 3 are
allowed or disallowed. Solely for purposes of calculating the
amount of Series
B Cash Collateral to be held by the Disbursing Agent on account
of Disputed
claims pursuant to this subsection 3., all Disputed claims in
classes 2 and 3
shall be treated as allowed claims and JWP shall make a
good-faith estimate of
the amount of any such Disputed claim that has been filed in an
unliquidated
amount.
F. Timing of Distributions and Reserve for Disputed Claims.
1. Administrative Expenses and Classes Not Impaired. On the
Effective Date or
as soon thereafter as is practicable, Reorganized JWP shall make
the
distributions required by the treatment provisions of this
Article to each
holder whose allowed claim is not impaired by the Plan and to
each holder of a
claim for an allowed administrative expense, except to the
extent
such holder
agrees to receive its distribution at another time. No
distributions shall be
made and no reserves shall be kept with respect to claims in
unimpaired classes
or claims for administrative expenses which are Disputed.
2. Initial Distribution. Solely for purposes of calculating
the
Class 2
Residual Percentage, the Class 3 Residual Percentage, the Class
4B and 4C
Residual Percentage, and the Class 4B, and 4C Series A Amount
for
the initial
distribution, JWP shall (i) treat all Disputed claims in classes
2, 3, 4B, and
4C as allowed claims, and (ii) make a good-faith estimate of the
amount of any
such Disputed claim that has been filed in an unliquidated
amount. JWP shall
also make a good faith estimate of the Disputed claims or
interests in classes
6, 7, 8, 9, and 11. Based on such calculations and estimates,
JWP
shall make an
initial distribution of securities to the holders of allowed
claims in classes
2, 3, 4B, 4C, and 6 on the Effective Date or as soon thereafter
as is
practicable and to the holders of allowed claims or interests in
classes 7, 8,
9, and 11 sixty (60) days after the Effective Date or as soon
thereafter as is
practicable. JWP shall make an initial distribution of
securities
to Belmont
Capital Partners II, L.P. on the Effective Date or as soon
thereafter as is
practicable. No distributions shall be made with respect to
Disputed claims or
interests. JWP shall hold all securities that are not
distributed
as part of
the initial distribution in reserve for the benefit of the
holders of claims or
interests in classes 2, 3, 4B, 4C, 6, 7, 8, 9, 10, and 11.
3. Subsequent Distributions. Every six months after the
Effective Date JWP
shall (i) distribute, or cause to be distributed, to each holder
of a claim
that has been allowed in the Reorganization Case subsequent to
all previous
distributions and to Belmont Capital Partners II, L.P., the
amount of
securities that would have been distributed to such holder if
its
claim had
been allowed prior to the Effective Date, (ii) recalculate the
Additional
Interest Amount, the Class 2 Residual Percentage, the Class 3
Residual
Percentage, the Class 4B and 4C Residual Percentage, and the
Class 4B and 4C
Series A Amount to take into account any Disputed claims that
have been
disallowed, expunged, or withdrawn since the last distribution,
(iii)
distribute, or cause to be distributed, to each holder of an
allowed claim or
equity interest and to Belmont Capital Partners II, L.P. on such
distribution
date such additional securities, if any, held in reserve in
respect of Disputed
claims or equity interests which are disallowed or expunged so
as
to fulfill
the treatment provisions of Article III, and (iv) cancel the
Series A Secured
Notes, if any, held in reserve in respect of Disputed claims
which are
disallowed or expunged. Except for the distribution that occurs
after the
resolution of all Disputed claims, JWP may determine not to make
an interim
distribution if the aggregate change in the Disputed claims
since
the last
interim distribution is less than $1,000,000. JWP shall continue
to make
distributions every six months until no further Disputed claims
or equity
interests remain outstanding. At such time, JWP shall cancel any
Series A
Secured Notes remaining in the reserve at that time, ratably
distribute all
securities, cash, or other proceeds, if any, to the holders of
allowed claims
in classes 2, 3, 4B, and 4C and eliminate the reserve.
1-13
4. Record Keeping. JWP shall keep a record of (i) each
calculation of the
Class 2 Series B Percentage, the Class 3 Series B Percentage,
the
Class 2
Residual Percentage, the Class 3 Residual Percentage, the Class
4B and 4C
Residual Percentage, and the Class 4B and 4C Series A Amount,
(ii) the amount
of securities distributed on each distribution date, and (iii)
the amount of
securities in the reserve.
5. Subsequent Cash Distributions on Account of Disputed
Claims.
After the
Effective Date, any distributions of cash on account of Series A
Secured Notes
or Series B Secured Notes, as the case may be, held in reserve
by
JWP in
accordance with subsection F of Article III of the Plan shall be
transferred to
the Disbursing Agent. Upon the allowance of any portion or all
of
a Disputed
claim and the distribution of Series A Secured Notes or Series B
Secured Notes,
as the case may be, by JWP to the holder of such allowed claim,
the Disbursing
Agent shall distribute to the holder of such claim the cash
distributable on
account of such Series A Secured Notes or Series B Secured
Notes,
plus any
interest actually earned thereon from the Effective Date to the
date such claim
is allowed, as the case may be, in accordance with the
Disbursement Agreement.
The cash held by the Disbursing Agent on account of the Series A
Secured Notes
or Series B Secured Notes held by JWP on account of the
disallowed portion of
such Disputed claim, plus any interest actually earned thereon,
shall be
transferred to the trustee for the indenture governing the
Series
A Secured
Notes or Series B Secured Notes, as the case may be, in
accordance with the
Disbursement Agreement.
G. Allowance of Claims in Class 2 and 3. The aggregate allowed
claims in
class 2 shall be $167,577,088. The aggregate allowed claims in
class 3 shall be
$358,165,112.
H. Claims of Bonding Companies. Regardless of whether
Reorganized JWP, MES
and certain Nondebtor Subsidiaries have executed an agreement
substantially in
the form attached to the Plan as Exhibit K or other form
acceptable to JWP and
the statutory committee of unsecured creditors appointed in the
Reorganization
Case (a "Claims Reduction Agreement"), (A) the claims of each
entity (a
"Bonding Company"), other than Wellington Guarantee and Reliance
Insurance
Corp., that has (i) provided performance bonds to any of the
Nondebtor
Subsidiaries immediately prior to the Petition Date, and (ii) on
or prior to
the Effective Date, executed such a Claims Reduction Agreement,
shall be (w)
included in class 5, (x) allowed (whether contingent or fixed,
liquidated or
unliquidated), (y) assumed by MES as a primary obligation of MES
and (z)
treated as unimpaired and reinstated as against Reorganized JWP,
(B) all
contractors' general agreements of indemnity or similar
instruments pursuant to
which bonds have been executed or procured prior to the
Effective
Date shall
remain in full force and effect, and (C) the terms of section 4
of the
agreement attached to the Plan as Exhibit K shall be effective
as
against
Reorganized JWP, MES and those certain Nondebtor Subsidiaries
and
shall be
deemed incorporated into the Plan by reference. In the event
that
Reorganized
JWP, MES, and certain Nondebtor Subsidiaries fail to enter into
a
Claims
Reduction Agreement with any such Bonding Company because of
such
Bonding
Company's refusal to execute such an agreement, then the claims
of such company
or companies shall be classified and treated as class 4 claims
and JWP reserves
the right to object to such claims. The contingent claims of
Wellington
Guarantee and Reliance Insurance Corp. shall be treated in class
5. In the
event that a Bonding Company executes and delivers a Claims
Reduction Agreement
and, subsequently, consents to an amendment of such agreement
which amendment
is materially adverse to Reorganized JWP or MES, the claims of
such Bonding
Company arising out of or in connection with bonds executed or
procured prior
to the Petition Date, shall, by operation of the Claims
Reduction
Agreement,
immediately prior to the effectiveness of such amendment and
without
requirement of any further action, be permanently reduced to
zero
as against
JWP, Reorganized JWP and MES. The immediately foregoing sentence
shall not be
construed to modify or limit the provisions of a Claims
Reduction
Agreement
pertaining to the reduction to zero of such claims under other
circumstances
explicitly set forth herein.
1-14
IV.
Implementation of the Plan
A. Issuance of New Securities. SellCo is a co-proponent of the
Plan. The
issuance of the securities described in Article II of the Plan
is
hereby
authorized. The issuance of additional Series A Secured Notes,
Series B Secured
Notes, if any, Series C Notes, SellCo Subordinated Contingent
Payment Notes,
New Series X Warrants, New Series Y Warrants, New Series Z
Warrants, and shares
of New Common Stock is authorized solely for the purpose of
paying the
Additional Interest Amount to Belmont Capital Partners II, L.P.
Any such
securities which are not used to pay such Additional Interest
Amount shall be
cancelled.
B. Pledge Agreements. On the Effective Date the following
pledge agreements
shall be executed in respect of the Series A Secured Notes: (i)
a
pledge
agreement substantially in the form of Exhibit B-1 to Exhibit A
to the Plan
executed by JWP which secures the repayment of the Series A
Secured Notes with
a first priority lien on the Series A Substitute Collateral, the
capital stock
of MES and on the capital stock of SellCo, (ii) a pledge
agreement
substantially in the form of Exhibit B-2 to Exhibit A to the
Plan
executed by
JWP which secures the repayment of the Series A Secured Notes
with a second
priority lien on the Series B Substitute Collateral and the
capital stock of
the Nondebtor Subsidiaries listed on Schedule 4 hereto, and
(iii)
a pledge
agreement substantially in the form of Exhibit B-3 to Exhibit A
to the Plan
executed by SellCo which secures SellCo's guarantee of the
Series
A Secured
Notes with a lien on the capital stock of the Nondebtor
Subsidiaries listed on
Schedule 5 hereto, subject only to the Working Capital Lien. On
the Effective
Date the following pledge agreements shall be executed in
respect
of the Series
B Secured Notes: (i) a pledge agreement substantially in the
form
of Exhibit
B-2 to Exhibit B to the Plan executed by JWP which secures the
repayment of the
Series B Secured Notes with a second priority lien on the Series
A Substitute
Collateral, the capital stock of MES and on the capital stock of
SellCo, (ii) a
pledge agreement substantially in the form of Exhibit B-1 to
Exhibit B to the
Plan executed by JWP which secures the repayment of the Series B
Secured Notes
with a first priority lien on the Series B Substitute Collateral
and the
capital stock of the Nondebtor Subsidiaries listed on Schedule 4
hereto, and
(iii) a pledge agreement substantially in the form of Exhibit
B-3
to Exhibit B
to the Plan executed by SellCo which secures SellCo's guarantee
of the Series B
Secured Notes with a lien on the capital stock of the Nondebtor
Subsidiaries
listed on Schedule 5 hereto, subject only to the Working Capital
Lien and the
lien in favor of the Series A Secured Notes. On the Effective
Date SellCo shall
execute a pledge agreement substantially in the form of Exhibit
B
to Exhibit D
to the Plan to secure the repayment of the SellCo Subordinated
Contingent
Payment Notes with a lien on the stock of each of the Nondebtor
Subsidiaries
listed on Schedule 5 hereto, subject only to the Working Capital
Lien and the
liens in favor of the Series A Secured Notes and the Series B
Secured Notes,
and a first priority lien on the JWP Supplemental SellCo Note.
The repayment of
the Series A Secured Notes, Series B Secured Notes, and SellCo
Subordinated
Contingent Payment Notes and all of the foregoing pledge
agreements in respect
thereof shall be subject to the terms and conditions set forth
in
the
Collateral Intercreditor Agreement. On the Effective Date, JWP
shall deliver
the pledged properties to the appropriate indenture trustees and
Fleet Bank, as
agent under the Old Credit Agreement, shall deliver any property
held by it for
the benefit of the holders of claims under the Old Credit
Agreement and the Old
Note Agreements to the trustee under the indenture for the
Series
B Secured
Notes. On the Effective Date, Reorganized JWP shall execute
warrant agreements
substantially in the form of Exhibits O, P, and R to the Plan in
respect of the
New Series X Warrants, the New Series Y Warrants and the New
Series Z Warrants.
C. Guarantees. On the Effective Date, JWP shall cause SellCo
and MES to
execute guarantees of Reorganized JWP's obligations under the
Series A Secured
Notes. On the Effective Date, JWP shall cause MES and SellCo to
execute
guarantees of Reorganized JWP's obligations under the Series B
Secured Notes
subject to the discharge of all of Reorganized JWP's obligations
under the
Series A Secured Notes. On the Effective Date, JWP shall cause
MES to execute a
guarantee of Reorganized JWP's obligations under the Series C
Notes subject to
the discharge of all of Reorganized JWP's obligations under the
Series A
Secured Notes and the Series B Secured Notes.
1-15
D. Cancellation of Existing Securities and Agreements. On the
Effective Date
the Old Notes, the Old Note Agreement, the Old Credit Agreement,
the pledge
agreements, if any, executed prior to the Petition Date by JWP
in
respect of
the stock of any of the Nondebtor Subsidiaries listed on
Schedule
4 hereto, the
pledge agreements, if any, executed prior to the Petition Date
by
JWP in
respect of any portion of the Series B Substitute Collateral,
the
subordinated
notes and debentures governed by the agreements identified in
class 6, all
agreements or instruments evidencing claims in classes 2, 3, 4,
and 6, the Old
Common Stock, any options, warrants, or rights, contractual or
otherwise, to
acquire such shares of Old Common Stock (including, but not
limited to, the
incentive stock options, non-qualified stock options, and stock
appreciation
rights to acquire 1,125,000 shares of Old Common Stock pursuant
to the 1986
Incentive Stock Option Plan and the options for key personnel to
acquire
2,500,000 and 1,000,000 shares of Old Common Stock,
respectively,
pursuant to
the 1991 and 1992 Stock Option Plans of JWP), any interest
represented by the
1,152,649 warrants of participation issued to the holders of Old
Common Stock
in 1969 which may entitle such holders to receive shares of Old
Common Stock on
certain events with respect to the Jamaica Water Supply Company,
and all the
shares of preferred stock of JWP issued or authorized on or
prior
to the
Petition Date shall be canceled.
E. Corporate Action. On the Effective Date, the issuance of
securities
pursuant to Article III hereof, the election or appointment, as
the case may
be, of directors and officers pursuant to Article IV hereof, and
the other
matters provided under the Plan involving the corporate
structure
of JWP or
Reorganized JWP, or corporate action by JWP or Reorganized JWP,
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
without any
requirement of further action by the stockholders or directors
of
JWP or
Reorganized JWP.
F. JWP Corporate Action.
1. New Charter and Bylaws. On the Effective Date or as soon
thereafter as is
practicable, Reorganized JWP shall file with the Secretary of
State of the
State of Delaware, in accordance with sections 103 and 303 of
the
Delaware
General Corporation Law, the Certificate of Incorporation and
such certificate
shall be the new Certificate of Incorporation for Reorganized
JWP. The
Certificate of Incorporation, provides, among other things, for
(i) the
issuance of the New Common Stock, (ii) seven members on the
Board
of Directors
of Reorganized JWP, and (iii) a prohibition on the issuance of
nonvoting equity
securities. On the Effective Date, the Bylaws shall become the
new bylaws of
Reorganized JWP.
2. Board of Directors of JWP. On the Effective Date, the
operation of
Reorganized JWP shall become the general responsibility of its
new Board of
Directors, subject to, and in accordance with, the Certificate
of
Incorporation
and the Bylaws. The initial directors of Reorganized JWP shall
be
selected as
follows: (i) four directors by the holders of a majority in
amount of claims in
class 2; (ii) two directors by the holders of a majority in
amount of claims in
class 3; and (iii) one director selected by the Chairman of the
Board of
Directors and Chief Executive Officer of JWP. Such directors
shall be deemed
elected or appointed, as the case may be, pursuant to the order
confirming the
Plan, but shall not take office until the Effective Date. Those
directors and
officers not continuing in office shall be deemed removed
therefrom as of the
Effective Date pursuant to the order confirming the Plan.
G. MES and SellCo Corporate Action.
1. Charter and Bylaws. JWP and Reorganized JWP shall take all
necessary
action to assure that the certificates of incorporation and
bylaws of MES and
SellCo are substantially in the form of Exhibits G, H, I, and J
to the Plan,
respectively.
2. Board of Directors. The board of directors of Reorganized
JWP shall select
the officers and directors of MES and SellCo.
3. Transfer of Nondebtor Subsidiaries. As of the Effective
Date, JWP shall
transfer or cause its Nondebtor Subsidiaries, as appropriate, to
transfer (i)
the Nondebtor Subsidiaries listed on Schedule 5 to the
1-16
Plan to SellCo, and (iii) all other Nondebtor Subsidiaries to
MES
(other than
the Nondebtor Subsidiaries listed on Schedule 4 hereto, DYN
Specialty
Contracting, Inc. (and its subsidiaries B&B Contracting & Supply
Company,
Dynalectric Company, Dynalectric Company of Nevada, Inc., Contra
Costa
Electric, Inc. and JWP Systems/Kirkwood Electric Company, Inc.)
and Sea Cliff
which shall be owned directly by Reorganized JWP). JWP or
Reorganized JWP, as
the case may be, shall transfer Sea Cliff to Jamaica Water
Securities Corp. as
soon as practicable after the Effective Date, if not done prior
to such time.
H. Operations and Sales of Assets.
1. Except as specified in this Article, Reorganized JWP, shall
continue in
the operation of JWP's businesses and in the ownership of the
Nondebtor
Subsidiaries. JWP shall obtain for Reorganized JWP or MES a
working capital
line of credit of up to $50 million which may be secured by a
first priority
lien on the assets of MES and/or any MES subsidiary.
2. Reorganized JWP shall implement a program to sell the
assets
of SellCo.
Subject to the provisions of the indenture governing the Series
A
Secured Notes
and the indenture governing the Series B Secured Notes, approval
by a majority
of the Board of Directors of Reorganized JWP shall be required
for the sale of
any of the assets of JWP or Reorganized JWP, or the assets or
capital stock of
any Nondebtor Subsidiaries, the net proceeds of which would
exceed $3,000,000
for any individual asset or stock sale or series of related
asset
or stock
sales.
I. Releases and Retention of Claims. As of the Effective Date,
JWP,
Reorganized JWP, and each creditor of JWP, Reorganized JWP,
and/or any
Nondebtor Subsidiary hereby waive, release, and discharge the
Seaboard Surety
Company, each of the holders of claims in the classes 2, 3, and
6, the holders
of claims in class 4 to the extent ordered by the Bankruptcy
Court and all
officers, directors, employees, or agents (including
professionals retained by
such holder) of such holder, from any and all claims arising
prior to the
Effective Date that could be brought by, through, or on behalf
of
JWP or its
estate or any Nondebtor Subsidiary; provided, however, that
claims which are
waived, released, or discharged shall not include the claims of
any Nondebtor
Subsidiary for services rendered or goods sold to the holder of
a
class 2, 3,
4, or 6 claim or the officers, directors, employees, or agents
(including
professionals retained by such holder) of such holder, if any,
or
defenses of a
Nondebtor Subsidiary to any claim asserted by the Seaboard
Surety
Company (or
other bonding company) solely in respect of such Nondebtor
Subsidiary's
liabilities or obligations on a bond; and provided, further,
that
nothing
contained in this section I. shall affect the releases to
Seaboard Surety
Company provided for in the agreement attached hereto as Exhibit
K. Such
waiver, release, and discharge shall also act as an injunction
against any
person or entity commencing or continuing any action, employment
of process, or
act to collect, offset, or recover any such waived, released,
and
discharged
claim. In accordance with section 1123(b)(3) of the Bankruptcy
Code, all other
claims, rights, and causes of action held by JWP shall be
retained by
Reorganized JWP.
J. Method of Distribution Under the Plan.
1. In General. Any distribution under the Plan shall be made
by
Reorganized
JWP or its designee to the holders of claims or equity interests
in classes 1,
2, 3, 4, 6, 7, 8, 9, 10, and 11 as such holders are identified
on
the books and
records of JWP. In the event such a claim has been properly
transferred, such
distribution shall be made to the transferee of such claim after
receipt by
Reorganized JWP of evidence reasonably satisfactory to it that
such transfer
has taken place. Transfer of a claim pursuant to Bankruptcy Rule
3001(e) shall
be binding on Reorganized JWP.
2. Setoffs and Recoupments. JWP may, but shall not be required
to, set off
against or recoup from any claim that is not impaired by the
Plan
(other than
the claims of the Bonding Companies) or from any class 4 claim
that is not
otherwise released by the effect of section I of Article IV of
the Plan, and
the payments to be made pursuant to the Plan in respect of such
claim, any
claims of any nature whatsoever JWP may have against the
claimant, but neither
the failure to do so nor the allowance of any claim hereunder
shall constitute
a waiver or release by JWP of any such claim JWP may have
against
such
claimant.
1-17
3. Distribution of Unclaimed Property. Any distribution of
property (cash or
otherwise) under the Plan which is unclaimed after one year
following the
Effective Date shall be transferred to Reorganized JWP,
notwithstanding state
or other escheat or similar laws to the contrary. In the event
that any
securities are returned to Reorganized JWP as unclaimed
property,
then such
securities shall be canceled.
4. Saturday, Sunday, or Legal Holiday. If any payment or act
under the Plan
is required to be made or performed on a date that is not a
Business Day, then
the making of such payment or the performance of such act may be
completed on
the next succeeding Business Day, but shall be deemed to have
been completed as
of the required date.
5. Fractional Debt Instruments. Series A Secured Notes, Series
B Secured
Notes, Series C Notes, and SellCo Subordinated Contingent
Payment
Notes shall
be issued in multiples of $100. On the Effective Date, if a
fraction of Series
A Secured Notes, Series B Secured Notes, Series C Notes, or
SellCo Subordinated
Contingent Payment Notes would otherwise be distributed to the
holder of a
class 2, 3, 4B, or 4C claim (i) the actual distribution of
securities shall be
rounded down to the next lower multiple of $100, and (ii) cash
in
an amount
equal to the fraction of securities which would otherwise be so
distributed
shall be distributed to the holders of such claims.
6. Fractional Shares and Cash in Lieu of New Series Z
Warrants.
No fractional
shares of New Common Stock, New Series X Warrants, or New Series
Y Warrants, or
cash in lieu thereof, shall be distributed. No fractional shares
of New Series
Z Warrants shall be distributed, however, the New Series Z
Warrants not
distributed on account of such fractional shares shall be
divided
among classes
7, 8, 9, 10, and 11 in proportion to the number of New Series Z
Warrants to be
distributed to each such class, and each holder of a claim or
interest in each
such class shall receive its Ratable Share of such New Series Z
Warrants
attributable to its class. At the option of the holder of an
allowed claim or
interest in classes 7, 8, 9, 10, or 11, such holder shall be
entitled to
receive from Reorganized JWP $0.10 for each whole New Series Z
Warrant such
holder receives under the Plan, provided, however, that
Reorganized JWP shall
not be obligated to distribute cash to such holder on account of
such whole New
Series Z Warrants unless such holder is entitled to receive, in
the aggregate,
at least $1.00 on account of such whole New Series Z Warrants.
7. Provisions Concerning the Businessland, Inc. 51/2%
Convertible
Subordinated Debentures and the ENTEX Share Issuance Agreement.
Reorganized JWP
shall reserve and keep available a number of New Series Z
Warrants sufficient
to satisfy the distribution of New Series Z Warrants on account
of the Old
Common Stock reserved to satisfy the conversion rights under the
Businessland,
Inc. 51/2% Convertible Subordinated Debentures and the ENTEX
Share Issuance
Agreement. Reorganized JWP shall distribute such New Series Z
Warrants only
after all of the requirements for conversion set forth in the
Businessland,
Inc. 51/2% Convertible Subordinated Debentures and the ENTEX
Share Issuance
Agreement have been satisfied.
K. Revesting of Assets. On the Effective Date, the estate of
JWP shall revest
in Reorganized JWP. After the Effective Date, Reorganized JWP
may
operate its
businesses, and may use, acquire, and dispose of property free
of
any
restrictions of the Bankruptcy Code or the Bankruptcy Rules. As
of the
Effective Date, the estate of JWP shall be free and clear of all
claims,
security interests, liens, and equity interests, except as
provided herein.
L. Allocation of Consideration. The aggregate consideration to
be distributed
to the holders of allowed claims in each class under the Plan
shall be treated
as first satisfying an amount equal to the stated principal
amount of the
allowed claim for such holders and any remaining consideration
as
satisfying
accrued, but unpaid, interest, if any.
M. Executory Contracts and Unexpired Leases. As of the
Effective Date, all
executory contracts and unexpired leases that exist between JWP
and any person
are hereby specifically assumed, except for any executory
contracts or
unexpired leases which are the subject of a motion to reject on
or before the
confirmation date. Entry of the order confirming the Plan by the
Clerk of the
Court shall constitute approval
1-18
of such assumptions pursuant to subsection 365(a) of the
Bankruptcy Code.
Claims created by the rejection of executory contracts or
unexpired leases must
be filed with the Court no later than twenty (20) days after the
entry of an
order authorizing such rejection. Any claims not filed within
such time will be
forever barred from assertion against JWP and the estate of JWP.
Unless arising
from claims or interests in classes 6, 7, 9, or 11 or otherwise
ordered by the
Court, all such claims arising from the rejection of executory
contracts or
unexpired leases shall be classified in class 4 of the Plan.
N. JWP Management Stock Options. Within one year after the
Effective Date,
the Board of Directors of Reorganized JWP shall determine the
recipients of
options to purchase 500,000 shares of New Common Stock of
Reorganized JWP
pursuant to the Management Stock Option Plan and shall issue
such
options to
such recipients in the respective amounts as determined by the
Board of
Directors of Reorganized JWP. The exercise price for such
options
shall be
equal to the average market price of New Common Stock over the
20-day trading
period immediately preceding the date of issuance of the option;
provided,
however, that in no event shall such options be issued or the
exercise price be
determined prior to expiration of three months plus 20 days
after
the Effective
Date; provided further, that if the average market price of New
Common Stock
for the applicable period cannot be determined, the exercise
price shall be
determined by an investment advisor selected by the Compensation
Committee of
the Board of Directors of Reorganized JWP. Such options may be
exercised only
after they have vested. Vesting shall occur over a three-year
period, with
one-third vesting each year. The Board of Directors of
Reorganized JWP is
authorized to issue additional options pursuant to the
Management
Stock Option
Plan to then-current employees of Reorganized JWP or the
Nondebtor Subsidiaries
to purchase up to 500,000 shares of New Common Stock available
under the
Management Stock Option Plan. All options issued under the
Management Stock
Option Plan shall expire on the tenth anniversary of their
issuance.
O. Hart-Scott-Rodino Compliance. Any shares of New Common
Stock
to be
distributed under the Plan to any entity required to file a
Premerger
Notification and Report Form under the Hart-Scott-Rodino
Antitrust Improvement
Act of 1976, as amended, shall not be distributed until the
notification and
waiting periods applicable under such act to such entity shall
have expired or
been terminated.
P. Listing of New Common Stock; Registration of Securities.
Reorganized JWP
or SellCo, as the case may be, shall use its best efforts to (i)
cause, as
promptly as practicable after the Effective Date, the shares of
New Common
Stock and the other securities issued hereunder to be listed on
a
national
securities exchange or quoted in the national market system of
the National
Association of Securities Dealers' Automated Quotation System,
(ii) file, as
promptly as practicable after the Effective Date, and be
declared
effective as
soon as possible thereafter, a registration statement or
registration
statements under the Securities Act of 1933, as amended (the
"Securities Act"),
for the offering on a continuous or delayed basis in the future
of each of the
shares of New Common Stock, the Series A Secured Notes, the
Series B Secured
Notes, the Series C Notes, the SellCo Subordinated Contingent
Payment Notes,
the New Series X Warrants, the New Series Y Warrants, and the
New
Series Z
Warrants (the "Shelf Registration"), (iii) keep the Shelf
Registration
effective for a two-year period, commencing on the date on which
the Shelf
Registration is declared effective, and (iv) supplement or make
amendments to
the Shelf Registration, if required under the Securities Act or
by the rules or
regulations promulgated thereunder or if requested by any holder
or underwriter
of any of the securities covered by the Shelf Registration, and
have such
supplements and amendments declared effective as soon as
practicable after
filing.
Q. JWP Supplemental SellCo Note. On the Effective Date,
Reorganized JWP shall
deliver to SellCo the JWP Supplemental SellCo Note. The JWP
Supplemental SellCo
Note shall (a) be in an aggregate principal amount equal to the
amount of all
the Net Cash Proceeds received directly or indirectly by JWP or
any of the
Nondebtor Subsidiaries on or after December 1, 1993, and prior
to
the Effective
Date in connection with any Asset Sale or Asset Sales of (i) the
Nondebtor
Subsidiaries listed on Schedule 4 to the Plan or their assets in
excess of
$11,357,000 and (ii) any of JWP's other assets or the assets of
Nondebtor
Subsidiaries, less $1,000,000, (b) be senior indebtedness of
Reorganized JWP,
(c) accrue interest commencing on the Effective Date at a rate
of
8% per annum,
compounded semiannually, which shall be payable upon maturity,
and (d)
1-19
mature on the earlier of (i) the tenth anniversary of the
Effective Date or
(ii) one day prior to the date on which the SellCo Subordinated
Contingent
Payment Notes are deemed cancelled pursuant to section D of
Article II hereof.
R. Intercreditor Agreement. Upon the Effective Date, the
Intercreditor
Agreement shall be cancelled and the terms and conditions
thereof
shall be
rendered null and void. The distributions under the Plan to the
holders of
claims in classes 2 and 3 are in lieu of and in complete
satisfaction of any
rights such holders may have under the Intercreditor Agreement.
V.
Effectiveness of the Plan
A. Conditions Precedent. The Plan shall not become effective
unless and until
the following conditions shall have been satisfied in full or
waived in
accordance with the provisions specified below:
1. The order confirming the Plan (i) shall be satisfactory in
form to the
holders of a majority in amount of the claims in each of class 2
and class 3
and (ii) shall have been entered and not been reversed, stayed,
modified, or
amended, and either (a) the time to appeal, seek review or
rehearing, or
petition for certiorari has expired and no timely filed appeal
or
petition for
review, rehearing, remand, or certiorari is pending or (b) any
appeal taken or
petition for certiorari filed has been resolved by the highest
court to which
such order was appealed or from which certiorari was sought;
2. Unless waived by the holders of two-thirds in amount of the
claims in each
of classes 2 and 3 who voted on the Plan, the filing with the
Court of a
statement by JWP providing that JWP believes, after conducting
an
analysis of
the claims in class 4B, that the allowed amount of such claims
will not exceed
$100,000,000;
3. Reorganized JWP or MES shall have executed an agreement,
subject only to
the occurrence of the Effective Date, for a working capital
facility in an
amount at least sufficient to repay and replace any financing
provided to JWP
pursuant to section 364 of the Bankruptcy Code; and
4. Each of the indentures governing the Series A Secured
Notes,
Series B
Secured Notes, SellCo Subordinated Contingent Payment Notes, and
the Series C
Notes shall be duly qualified under the Trust Indenture Act of
1939.
B. Waiver of Conditions. Each of the conditions specified
above
(other than
the conditions specified in subsection A.2 of Article V) may be
waived by a
writing signed by the authorized representatives of JWP and a
majority in
amount of those holders of claims in each of class 2 and class 3
which voted on
the Plan.
C. Effect of Failure of Conditions. If each of the conditions
to
effectiveness and the occurrence of the Effective Date has not
been satisfied
or duly waived on or before the first Business Day that is more
than 179 days
after the date the Court enters an order confirming the Plan, or
by such later
date as is proposed and approved, after notice and a hearing, by
the Court,
upon motion by JWP or any party in interest made before the time
that each of
the conditions has been satisfied or duly waived, the order
confirming the Plan
may be vacated by the Court; provided, however, that
notwithstanding the filing
of such a motion, the order confirming the Plan shall not be
vacated if each of
the conditions to consummation is either satisfied or duly
waived
before the
Court enters an order granting the relief requested in such
motion. If the
order confirming the Plan is vacated pursuant to this section,
the Plan shall
be null and void in all respects, and nothing contained in the
Plan shall (a)
constitute a waiver or release of any claims against or equity
interests in JWP
or (b) prejudice in any manner the rights of the holder of any
claim or equity
interest or JWP.
1-20
VI.
Administrative Provisions
A. Discharge.
1. Scope. Other than with respect to the claims in class 5,
entry of the
order confirming the Plan acts as a discharge of all debts of,
claims against,
liens on, and interests in each of JWP, its assets, or
properties, which debts,
claims, liens, and interests arose at any time before the entry
of the order
confirming the Plan. Other than with respect to the claims in
class 5, the
discharge of JWP shall be effective as to each claim, regardless
of whether a
proof of claim therefore was filed, whether the claim is an
allowed claim, or
whether the holder thereof votes to accept the Plan. On the date
the Court
enters an order confirming the Plan, as to every discharged
claim
and equity
interest, any holder of such claim or equity interest shall be
precluded from
asserting against JWP or against JWP's assets or properties, or
any successors
of JWP, any other or further claim or equity interest based on
any document,
instrument, act, omission, transaction, or other activity of any
kind or nature
that occurred before the date the Court enters the order
confirming the Plan.
2. Injunction. In accordance with section 524 of the
Bankruptcy
Code, the
discharge provided by this section and section 1141 of the
Bankruptcy Code,
inter alia, acts as an injunction against the commencement or
continuation of
any action, employment of process, or act to collect, offset, or
recover the
claims discharged hereby.
B. Claims and Equity Interests Objections. Unless otherwise
ordered by the
Court, all claims objections shall be filed and served on the
applicable
claimant by 120 days after the Effective Date or 120 days after
a
claim is
filed, whichever is later. After the date the Court enters an
order confirming
the Plan, only JWP or Reorganized JWP shall have the authority
to
file, settle,
compromise, withdraw, or litigate to judgment objections to
claims. After the
date the Court enters an order confirming the Plan, JWP or
Reorganized JWP may
settle or compromise any Disputed claim in accordance with
Bankruptcy Rule
9019.
C. Claims Incurred After the Confirmation Date. Claims against
JWP or
Reorganized JWP incurred after the date and time of the entry of
the order
confirming the Plan, including (without limitation) claims for
professionals'
fees and expenses, shall not be subject to application or proof
of claim and
may be paid by JWP or Reorganized JWP, as the case may be, in
the
ordinary
course of business and without further Court approval.
D. Retention of Jurisdiction. The Court shall have exclusive
jurisdiction of
all matters arising out of, and related to, the Reorganization
Case and the
Plan pursuant to, and for the purposes of, sections 105(a) and
1142 of the
Bankruptcy Code and for, among other things, the following
purposes:
1. To hear and determine pending applications for the
assumption or rejection
of executory contracts or unexpired leases, if any are pending,
and the
allowance of claims resulting therefrom;
2. To determine any and all pending adversary proceedings,
applications, and
contested matters;
3. To ensure that distributions, if any, to holders of allowed
claims are
accomplished as provided herein;
4. To resolve disputes as to the ownership of a claim;
5. To hear and determine any timely objections to claims for
administrative
expenses or to proofs of claims and equity interests filed, both
before and
after the date the Court enters an order confirming the Plan,
including any
objections to the classification of any claim or equity
interest,
and to allow
or disallow any Disputed claims for administrative expenses,
Disputed claim, or
Disputed equity interest, in whole or in part;
6. To enter and implement such orders as may be appropriate in
the event the
order confirming the Plan is for any reason stayed, revoked,
modified, or
vacated;
1-21
7. To issue such orders in aid of execution of the Plan, to
the
extent
authorized by section 1142 of the Bankruptcy Code;
8. To consider any modifications of the Plan, to cure any
defect or omission,
or reconcile any inconsistency in any order of the Court,
including, without
limitation, the order confirming the Plan;
9. To resolve disputes concerning nondebtor releases and
injunctions
contained herein;
10 To hear and determine all applications for compensation
and
reimbursement
of expenses of professionals under sections 330, 331, and 503(b)
of the
Bankruptcy Code;
11 To hear and determine disputes arising in connection with
the
interpretation, implementation, or enforcement of the Plan;
12 To hear and determine matters concerning state, local, and
federal taxes
in accordance with sections 346, 505, and 1146 of the Bankruptcy
Code;
13 To hear any other matter not inconsistent with the
Bankruptcy Code; and
14 To enter a final decree closing the Reorganization Case.
E. Exemption from Transfer Taxes. Pursuant to section 1146(c)
of the
Bankruptcy Code, the issuance, transfer, or exchange of notes or
equity
securities under the Plan, the creation of any mortgage, deed of
trust, or
other security interest, the making or assignment of any lease
or
sublease, or
the making or delivery of any deed or other instrument of
transfer under, in
furtherance of, or in connection with the Plan, including any
deeds, bills of
sale, or assignments executed in connection with any of the
transactions
contemplated under the Plan shall not be subject to any stamp,
real estate
transfer, mortgage recording, or other similar tax.
F. Payment of Statutory Fees. All fees payable pursuant to
section 1930 of
title 28 of the United States Code, as determined by the Court
at
the hearing
pursuant to section 1128 of the Bankruptcy Code, shall be paid
on
or before the
Effective Date.
G. Exculpation. Reorganized JWP, the holders of claims in
classes 2, 3, and
6, the statutory committee of unsecured creditors, the official
committee of
junior creditors and interest holders, the Seaboard Surety
Company, and their
respective members, officers, directors, employees, or agents
(including any
professionals retained by such persons) shall have no liability
to any holder
of a claim or equity interest for any act or omission in
connection with, or
arising out of, the pursuit of approval of the disclosure
statement for the
Plan or the solicitation of votes for or confirmation of the
Plan, the
consummation of the Plan, or the administration of the Plan or
the property to
be distributed under the Plan, except for willful misconduct or
gross
negligence, and in all respects, shall be entitled to rely upon
the advice of
counsel with respect to their duties and responsibilities under
the Plan.
H. Headings. Headings are used in the Plan for convenience and
reference
only, and shall not constitute a part of the Plan for any other
purpose.
I. Binding Effect. The Plan shall be binding upon and inure to
the benefit of
JWP, its creditors, the holders of equity interests, and their
respective
successors and assigns.
J. Notices. Any notice required or permitted to be provided
under the Plan
shall be in writing and served by either (a) certified mail,
return receipt
requested, postage prepaid, (b) hand delivery, or (c) reputable
overnight
delivery service, freight prepaid, to be addressed as follows:
To JWP, Debtor in Possession, or Reorganized JWP:
JWP INC.
Six International Drive
Rye Brook, New York 10573-1058
Attn: Sheldon I. Cammaker, Esq.
1-22
with a copy to:
Stroock & Stroock & Lavan
7 Hanover Square
New York, New York 10004
Attention: Lewis Kruger, Esq.
Lawrence M. Handelsman, Esq.
K. Governing Law. Unless a rule of law or procedure is
supplied
by federal
law (including the Bankruptcy Code and Bankruptcy Rules) or the
Delaware
General Corporation Law, the laws of the State of New York shall
govern the
construction and implementation of the Plan and any agreements,
documents, and
instruments executed in connection with the Plan.
L. Filing or Execution of Additional Documents. On or before
substantial
consummation of the Plan, JWP shall file with the Court or
execute, as
appropriate, such agreements and other documents as may be
necessary or
appropriate to effectuate and further evidence the terms and
conditions of the
Plan.
M. Withholding and Reporting Requirements. In connection with
the Plan and
all instruments issued in connection therewith and distributions
thereon, JWP
shall comply with all withholding and reporting requirements
imposed by any
federal, state, local, or foreign taxing authority and all
distributions
hereunder shall be subject to any such withholding and reporting
requirements.
Dated New York, New York
August 9, 1994
Respectfully submitted,
JWP Inc.
Debtor and Debtor in Possession
/s/ Frank T. MacInnis
By:
Chairman of the Board of Directors,
President and Chief Executive Officer
SELLCO Corporation
/s/ Frank T. MacInnis
By:
President
1-23
Exhibits to the Plan
Exhibit A: Series A Secured Note Indenture
Exhibit B: Series B Secured Note Indenture
Exhibit C: Series C Note Indenture
Exhibit D: SellCo Subordinated Contingent Payment Note Indenture
Exhibit E: Bylaws of Reorganized JWP
Exhibit F: Certificate of Incorporation of Reorganized JWP
Exhibit G: Certificate of Incorporation of MES
Exhibit H: Certificate of Incorporation of SellCo
Exhibit I: Bylaws of MES
Exhibit J: Bylaws of SellCo
Exhibit K: Claims Reduction Agreement
Exhibit L: JWP Management Incentive Stock Option Plan
Exhibit M: Nondebtor Subsidiaries
Exhibit N: Disbursement Agreement
Exhibit O: New Series X Warrant Agreement
Exhibit P: New Series Y Warrant Agreement
Exhibit Q: JWP Supplemental SellCo Note
Exhibit R: New Series Z Warrant Agreement
Schedules to the Plan
Schedule 1: Class 5 claims-(Unimpaired)
Schedule 2: Old Note Agreements
Schedule 3: Intentionally Omitted
Schedule 4: Nondebtor Subsidiaries constituting the Collateral
for the Series B Secured Notes
Schedule 5: Subsidiaries comprising SellCo
<PAGE>
1-24
AMENDED SCHEDULE 1
CREDITORS TO BE UNIMPAIRED
<TABLE>
<CAPTION>
Creditor Basis for Claim
<S> <C>
- --------------------------------------------------------- ---------------------------
1. U.S.A. General Services Administration...............Guarantee
2. Foster Wheeler Energy Corp...........................Guarantee
3. George Hyman Company.................................Guarantee
4. Virginia Dept. of Transportation.....................Guarantees
5. PCL Construction Group Inc...........................Guarantee
6. NY City Health and Hospitals Corp....................Guarantees
7. State of Utah........................................Guarantee
8. Sundt Corp...........................................Guarantee
9. PACCO Ltd. of Guam...................................Guarantee
10. PCL Construction Group Inc...........................Guarantee
11. Lehrer, McGovern, Bovis..............................Guarantee
12. Mannesmann Demag Corporation.........................Agreement
13. Costain Construction Limited.........................Guarantee
14. Fleetway House Construction Management Limited.......Guarantee
15. Limeback.............................................Guarantee
16. ERSB Sellafield......................................Guarantee
17. John Mowlen & Co. PLC................................Guarantee
18. Olympia & York Limited...............................Guarantees
19. Olympia & York Canary Wharf Ltd......................Guarantees
20. British Rail.........................................Guarantee
21. Try Construction Ltd.................................Guarantee
22. Amec Design & Management Ltd.........................Guarantee
23. Thames Water Utilities Ltd. .........................Guarantee
24. John Lang Construction Ltd. .........................Guarantee
25. British Airways......................................Guarantee
26. Property Services Agency.............................Comfort Letter/Guarantee
27. Wessex Regional Health Authority.....................Guarantee
28. Herbert Construction (U.K.) Ltd......................Guarantees
29. United Dominions Trust...............................Guarantee
30. Lombard Water North Central PLC......................Guarantee
31. NatWest Securities Limited...........................Guarantee
32. IBOS Finance Ltd.....................................Guarantee
33. Seaboard Surety Company*.............................Indemnification
34. CIGNA*...............................................Indemnification
35. Reliance Insurance Corp..............................Indemnification
36. Wellington Guarantee.................................Indemnification
37. State of Nevada......................................Indemnification
38. State of Florida ....................................Contingent Liability
39. State of Maryland EPA................................Contingent Liability
40. State of Illinois EPA................................Contingent Liability
41. JWP 401K Plan........................................ ERISA Plan
42. JWP Defined Compensation Pension Plan................ ERISA Plan
43. Connecticut General Life Insurance Company
(medical/dental policy)..............................Indemnification
44. Prudential (Erlanger)................................Guarantee
45. London Underground Limited...........................Guarantees
46. Bank of Montreal.....................................Guarantee
- ----------------------------------------------------------------
* Inclusion of creditor on Schedule 1 is expressly contingent
upon the satisfaction by such creditor of the conditions set
forth in section H of Article III of the Plan.
</TABLE>
<PAGE>
SCHEDULE 2
OLD NOTE AGREEMENTS
The Old Note Agreements are those respective agreements pursuant
to which the
following notes were issued:
1. $10,714,500 9.25% senior note payable to the order of
Principal Mutual
Life Insurance Company.
2. $1,428,600 9.25% senior note payable to the order of
Principal Mutual Life
Insurance Company.
3. $2,500,050 9.25% senior note payable to the order of
Equitable Variable
Life Insurance Company.
4. $2,500,050 9.25% senior note payable to the order of
National Integrity
Life Insurance Company.
5. $2,142,900 9.25% senior note payable to the order of
Merrill
Lynch Life
Insurance Company of New York.
6. $3,571,500 9.25% senior note payable to the order of The
Life Insurance
Company of Virginia (LICOVA & Co.).
7. $2,142,900 9.25% senior note payable to the order of
Northwestern National
Life Insurance Company.
8. $1,428,600 9.25% senior note payable to the order of
Northern National
Life Insurance Company.
9. $714,300 9.25% senior note payable to the order of Pan
American Assurance
Company.
10. $1,428,600 9.25% senior note payable to the order of Pan
American Life
Insurance Company.
11. $20,000,000 10.95% senior note payable to the order of
Northwestern
Mutual Life Insurance Company.
12. $10,000,000 10.95% senior note payable to the order of
Principal Mutual
Life Insurance Company.
13. $6,000,000 10.25% senior note payable to the order of The
Mutual Life
Insurance Company of New York.
14. $6,000,000 10.25% senior note payable to the order of
Principal Mutual
Life Insurance Company.
15. $5,000,000 10.25% senior note payable to the order of
Crown
Life
Insurance Company.
16. $500,000 10.25% senior note payable to the order of The
Minnesota Mutual
Life Insurance Company.
17. $500,000 10.25% senior note payable to the order of Mutual
Service Life
Insurance Company.
18. $4,000,000 10.25% senior note payable to the order of
Provident Life and
Accident Insurance Company.
19. $2,000,000 10.25% senior note payable to the order of
Century Life of
America.
20. $1,000,000 10.25% senior note payable to the order of
Century Life
Insurance Company.
21. $3,000,000 10.25% senior note payable to the order of The
Union Central
Life Insurance Company.
22. $2,000,000 10.25% senior note payable to the order of
Guarantee Mutual
Life Insurance Company.
23. $4,000,000 10.25% senior note payable to the order of The
Mutual Life
Insurance Company of New York.
24. $3,000,000 10.25% senior note payable to the order of Life
Investor
Insurance Company of America.
1-26
25. $2,000,000 10.25% senior note payable to the order of Ausa
U.S. Life
Insurance Company.
26. $4,000,000 10.25% senior note payable to the order of
Bankers United Life
Assurance Company.
27. $1,000,000 10.25% senior note payable to the order of
General Services
Life Insurance Company.
28. $1,000,000 10.25% senior note payable to the order of
Principal Mutual
Life Insurance Company.
29. $4,000,000 10.25% senior note payable to the order of The
Minnesota
Mutual Life Insurance Company.
30. $1,000,000 10.25% senior note payable to the order of
Provident Life and
Accident Insurance Company.
31. $25,000,000 9.95% senior note payable to The Prudential
Insurance Company
of America.
32. $12,750,000 9.95% senior note payable to Massachusetts
Mutual Life
Insurance Co.
33. $1,250,000 9.95% senior note payable to MML Pension
Insurance Co.
34. $1,000,000 9.95% senior note payable to The Massmutual
Participation
Investor Fund.
35. $10,000,000 9.95% senior note payable to The Mutual Life
Insurance
Company of New York.
36. $6,000,000 9.95% senior note payable to Principal Mutual
Life Insurance
Company.
37. $4,000,000 9.95% senior note payable to Crown Life
Insurance Co.
38. $50,000,000 10.35% senior note payable to The Prudential
Insurance
Company of America due 11/30/2005.
39. $15,000,000 10.27% senior note payable to The Variable
Annuity Life
Insurance Co. due 11/30/2005.
40. $3,000,000 10.27% senior note payable to Ausa Life
Insurance Company due
11/30/2005.
41. $2,000,000 10.27% senior note payable to Monumental Life
Insurance
Company due 11/30/2005.
42. $5,000,000 9.56% senior note payable to Provident National
Assurance
Company due 11/30/97.
43. $5,000,000 9.51% senior note payable to New York Life
Insurance Company
due March 31, 1996.
44. $5,000,000 9.65% senior note payable to New York Life
Insurance Company
due March 31, 1997.
45. $5,000,000 9.83% senior note payable to New York Life
Insurance Company
due March 31, 1998.
46. $5,000,000 9.10% senior note payable to New York Life
Insurance and
Annuity Corp. due March 31, 1994.
47. $5,000,000 9.33% senior note payable to New York Life
Insurance and
Annuity Corp. due March 31, 1995.
48. $25,000,000 9.10% senior note payable to the order of The
Prudential
Insurance Company of America due March 6, 2002.
49. $10,000,000 9.10% senior note payable to the order of
American General
Life and Accident Insurance Company due March 6, 2002.
50. $5,000,000 9.10% senior note payable to the order of Ohio
National Life
Insurance Company due March 6, 2002.
1-27
51. $5,000,000 9.10% senior note payable to the order of
Modern
Woodmen of
America due March 6, 2002.
52. $4,250,000 9.10% senior note payable to the order of The
Paul Revere Life
Insurance Company due March 6, 2002.
53. $3,750,000 9.10% senior note payable to the order of The
Paul Revere
Protective Life Insurance Company due March 6, 2002.
54. $3,000,000 9.10% senior note payable to the order of The
Union Central
Life Insurance Company due March 6, 2002.
55. $2,000,000 9.10% senior note payable to the order of The
Paul Revere
Variable Annuity Insurance Company due March 6, 2002.
56. $2,000,000 9.10% senior note payable to the order of The
Manhattan Life
Insurance Company due March 6, 2002.
1-28
SCHEDULE 3
INTENTIONALLY OMITTED
1-29
SCHEDULE 4
Non-debtor Subsidiaries Constituting The
Collateral For The Series B Senior Secured Notes
Maris Equipment Company
JWP Pacific International, Inc.
University Energy Services of California Inc.
JWP Energy Products, Inc.
JWP Telecom, Inc.
Subsidiaries of the Above-named Companies
Jamaica Technical Trading Company
JWP Technical Services (C.N.M.I.) Inc.
JWP Technical Services Hong Kong Limited
JWP Technical Services (Singapore) PTE Ltd.
JWP Thailand
JWP Telecommunication Services Inc.
JWP Telephone Services Inc.
Standard Telecommunications, Inc.
Standard Telecommunications Equipment Inc.
1-30
SCHEDULE 5
Principal Subsidiaries Comprising SellCo.
University Cogeneration, Inc.
General Energy Development, Inc.
Water Companies
Wachtel Duklauer & Fein, Incorporated
Superior Engineering Corporation
University Mechanical Contractors, Inc. (Washington)
JWP Brandt Engineering Co., Inc.
Other Subsidiaries of SellCo.
A to Z Equipment Corp.
Afgo Engineering Corporation
Afgo Engineering Corp. of Washington
American Cable Products, Inc.
Antwerp Education Center N.V.
AZCO Inc.
Brandt Engineering Company of Arkansas, Inc.
Brandt Service Company
Businessland Canada Ltd.
Businessland (Hong Kong) Limited
Case/Acme Systems, Inc.
Communications Management Inc.
Computer Maintenance Corporation
Drake & Scull France SARL
E.M.A. International, Inc.
Fort Corp.
Gone Inc.
Guzovsky/JWP Electrical Inc.
G/M Tech Inc.
Intec Business Phones Inc.
ISYS Security Systems, Inc.
Jamaica Water Securities Corp.
Jamaica Water Supply Company
JWP Voc I
JWP Voc II
JWP Asset Management Inc.
JWP Communications Inc.
JWP Controls Inc.
JWP Controls Holding, Inc.
JWP Credit Corp.
JWP E.C. Corp.
JWP Environmental Services Company
JWP Environmental Services III Inc.
JWP Environmental Composting Technologies, Inc.
JWP Equipment Services Inc.
JWP Espana SA
JWP France SARL
JWP Guzovsky Electrical Corp.
1-31
Other Subsidiaries of SellCo.
JWP/HCCII Corp.
JWP of Hartford, Inc.
JWP Information Services, Inc.
JWP Information Services SARL
JWP/IS Network Integration Services, Inc.
JWP Mechanical Services of New York, Inc.
JWP Merger Sub Inc.
JWP New England Inc.
JWP/SHI Corp.
JWP Technical Services Corp.
Kerby Saunders, Inc.
Kerby Saunders-Warkol, Inc.
Marlon of Texas, Inc.
Metalair Industries, Inc.
Micro Avenue
MicroCom
North Am. Heating & Air Conditioning Company
Photo-Scan Management Systems, Inc.
Sea Cliff Water Company
Sivea Benelux
SLR Constructors Inc.
Sutter Hill Industries, Inc.
Teletime Limited
University Nuclear Systems, Inc.
Wachtel, Duklauer & Fein Incorporated, a New Jersey corporation
Walker Engineering, Inc.
Worldwide Communications, Inc.
JWP Unrestricted Sub 3 Inc.
JWP Unrestricted Sub 9 Inc.
JWP Unrestricted Sub 12 Inc.
1-32
Exhibit 2
CREDITORS' COMMITTEE
TCW Asset Management Company
865 South Figueroa Street
Los Angeles, CA 90017
Attn: Mr. Richard Masson, Managing Director
Bear Stearns Securities Corp.
245 Park Avenue, 4th Floor
New York, NY 10167
Attn: Mr. Steven Gidumal
Morgens, Waterfall, Vintaidis & Co., Inc.
610 Fifth Avenue, 7th Floor
New York, NY 10153
Attn: Mr. Jooko Tamminen
Baker Nye Advisors
767 Fifth Avenue
New York, NY 10153
Attn: Mr. George Konomos
Credit Suisse
12 East 49th Street
New York, NY 10017
Attn: Mr. Jan Kofol
Bank of America
335 Madison Avenue
New York, NY 10017
Attn: Ms. Faith R. Larsen
Mr. Mark P. Woods
UBS Securities, Inc.
299 Park Avenue
New York, NY 10171
Attn: Mr. Kevin Toner
2-1
Exhibit 3
JUNIOR COMMITTEE
Norman Wechsler
c/o Wechsler & Company
105 S. Bedford Road
Mt. Kisco, NY 10549
Grazia Pontoni
P.O. Box 195
225 E. Mill Street
Athens, MI 49011
c/o Mr. Raymond Pontoni
348 E. Mill Street, Box 98
Athens, MI 49011
Mr. Edward Sievers
207 E. Mich Avenue
Paw Paw, MI 49079
Richard R. Taylor
626 Jennings Lane
Battle Creek, MI 49015
Milton Klein
84 Tardy Lane
Wantagh, NY 11793
Exhibit 4
<TABLE>
<CAPTION>
JWP INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
<S> <C>
Page No.
--------
Management's Discussion and Analysis of Financial Condition and
Results of Operations for the
three years ended December 31, 1992 (unaudited)............. 4-1
Consolidated Financial Statements and Notes as of December 31,
1992 and 1991 and for the three years ended December 31, 1992
(unaudited):
Consolidated Balance Sheets......................... 4-11
Consolidated Statements of Operations........... 4-12
Consolidated Statements of Cash Flows..................... 4-13
Consolidated Statements of Shareholders' (Deficit)
Equity.................................... 4-14
Notes to Consolidated Financial Statements............ 4-15
Management's Discussion and Analysis of JWP Inc. and
Subsidiaries Financial Condition and
Results of Operations for the two years ended December 31, 1993
(unaudited).................. 4-37
Condensed Consolidated Financial Statements and Notes as of
December 31, 1993 and 1992 and for the two years ended December
31, 1993 (unaudited):
Condensed Consolidated Balance Sheets................. 4-46
Condensed Consolidated Statements of Operations....... 4-47
Condensed Consolidated Statements of Cash Flows.......... 4-48
Condensed Consolidated Statements of Shareholders' (Deficit)
Equity.......................... 4-49
Notes to Condensed Consolidated Financial Statements.... 4-50
Condensed Consolidated Financial Statements and Notes as of
March 31, 1994 and for the three
months ended March 31, 1994 (unaudited):
Condensed Consolidated Balance Sheet............... 4-59
Condensed Consolidated Statement of Operations...... 4-60
Condensed Consolidated Statement of Cash Flows.......... 4-61
Condensed Consolidated Statement of Shareholders'
(Deficit).................................. 4-62
Notes to Condensed Consolidated Financial Statements..... 4-63
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF JWP INC. AND
SUBSIDIARIES
FINANCIAL
CONDITION AND RESULTS OF OPERATIONS FOR THE THREE YEARS ENDED
DECEMBER 31, 1992
(Unaudited)
Results of Operations
In 1992, JWP INC. (the "Company") incurred a net loss of
$612.4
million or
$15.13 per share, had negative cash flow from operations of
$49.6
million and
was in violation of certain financial and other covenants
contained in its loan
agreements. The net loss includes losses of $363.5 million or
$9.00 per share
from continuing operations and $253.2 million or $6.24 per share
from
discontinued operations. As of December 31, 1992, the Company
had
negative net
worth of $176.0 million and a working capital deficit of $364.9
million after
the reclassification of debt in default aggregating $501.0
million. For the
year ended December 31, 1993, the Company continued to
experience
losses. Cash
flow from operations continues to be inadequate to fund its
operations and
service its debt and other obligations. From September 1992 to
February 1994,
when the Company obtained debtor-in-possession financing, the
Company did not
have available credit facilities and, consequently, funded its
operations from
working capital and proceeds from the sale of businesses and
other assets. The
Company's surety companies are reviewing bid and performance
bonding requests
on a case-by-case basis for large construction projects and
those
with a
duration of more than two years. In addition, a surety company
that had been
the primary source of surety bonds for certain subsidiaries,
which together
comprised approximately 20% of the Company's 1993 revenues of
those mechanical/
electrical companies which the Company currently plans to
retain,
is no longer
engaged in the business of issuing such bonds. As a result,
these
subsidiaries
are currently not receiving such bonds. However, the absence of
available
bonding for these subsidiaries has not resulted in a material
reduction in
their backlog. The Company and these subsidiaries are actively
engaged in
discussions with another surety company which has undertaken due
diligence for
the purpose of entering into a new surety bonding arrangement.
However, there
can be no assurance that such a new surety bonding arrangement
can be obtained.
On December 21, 1993, three holders of the Company's 73/4%
Convertible
Subordinated Debentures filed an involuntary petition under
Chapter 11 of the
U.S. Bankruptcy Code against the Company. The Company on
February
14, 1994
consented to the entry of an order for relief under Chapter 11
of
the
Bankruptcy Code. At that time the Company adopted a proposed
plan
of
reorganization which, as modified, has the support of the
Official Unsecured
Creditors Committee and the Official Unsecured Junior Creditors
and Interest
Holders Committee. The proposed plan of reorganization
contemplates the
exchange of substantially all of the Company's indebtedness for
new notes of
the reorganized Company, all of its common stock and warrants to
purchase
common stock of the reorganized Company. Holders of the
Company's
common and
preferred stock and warrants of participation will receive
warrants to purchase
common stock of the reorganized Company in exchange for their
equity interests.
The proposed plan also contemplates a business restructuring
plan
which the
Company initially developed in the third quarter of 1992 to
divest certain of
its non-core businesses. However, there can be no assurance that
the proposed
plan of reorganization will be consummated or, if so, its
timing.
See
"Liquidity and Capital Resources" for additional discussion with
respect to the
Company's restructuring plan.
The accompanying financial statements have been prepared on a
going concern
basis and do not include any adjustments relating to the
recoverability and
classification of assets or the amounts and classification of
liabilities that
might be necessary should the Company be unable to continue as a
going concern.
The Company's continuation as a going concern is dependent upon
its ability to
restructure its indebtedness in connection with its
reorganization under
Chapter 11 of the U.S. Bankruptcy Code, obtain sufficient
bonding
to guarantee
its performance on construction contracts, return to
profitability, obtain
credit facilities and otherwise generate sufficient cash flow to
meet its
restructured and other obligations on a timely basis. See
"Liquidity and
Capital Resources".
The Company has restated its financial statements for the
years
and quarters
ended December 31, 1991 and 1990 as well as for each of the
quarters in the
nine month period ended September 30, 1992 based primarily upon
a
revaluation
of certain adjustments originally recorded in 1992. As a result,
net income for
4-1
the year ended December 31, 1991 has been reduced from the
previously reported
amount of $60.3 million to $29.0 million and earnings per share
has been
reduced from the previously reported $1.54 per share to $0.73
per
share. The
1991 restatement reflects pre-tax charges of $47.9 million, of
which $36.7
million relates to continuing operations and $11.2 million
relates to
discontinued operations. The 1991 restatement of continuing
operations reflects
a $4.5 million increase to insurance reserves, a $6.6 million
loss from the
sale of a business which the Company had decided to sell in 1991
and a $25.6
million reduction in the carrying value of certain assets,
principally
receivables. Substantially all of the restated charges in 1991
applicable to
discontinued operations relate to the Company's information
services business
and include $9.9 million of costs and expenses relating to the
acquisition of
Businessland, Inc. which was acquired by the Company in August
1991. These
costs and expenses were previously charged to reserves
established as part of
that acquisition.
Net income for the year ended December 31, 1990 has been
reduced from the
previously reported amount of $59.3 million to $50.2 million and
earnings per
share has been reduced from $1.56 per share to $1.32 per share.
The restatement
of the 1990 operating results reflects pre-tax charges of $9.6
million
consisting of $8.3 million related to continuing operations and
$1.3 million to
discontinued operations. The restatement of continuing
operations
in 1990
reflects $4.8 million of adjustments to correct the accounting
for goodwill and
a net $3.5 million reduction in the carrying value of certain
assets, primarily
long-term investments. See Notes 1 and 16 to the Consolidated
Financial
Statements with respect to the restatement of the 1990 and 1991
financial
statements and the restatement of each of the quarters in the
nine month period
ended September 30, 1992 and the fourth quarter of 1990 and
1991,
respectively.
As a result of the restatements of the Company's first and
second quarter
earnings of 1992 and write-offs and losses announced by the
Company on August
4, 1992 and on October 2, 1992, class action lawsuits were filed
on behalf of
shareholders against the Company and certain other defendants.
The class action
lawsuits have been consolidated and the single consolidated
amended class
action complaint alleges, among other things, that the Company
intentionally
and materially overstated assets and earnings in various public
disseminations
in violation of Section 10(b) of the Securities and Exchange Act
of 1934 and
Rule 10b-5 promulgated thereunder. The complaint seeks an
unspecified amount of
damages. The Company has denied the material allegations
contained in the
complaint. The parties are now engaged in discovery proceedings.
However, under
the terms of the Company's proposed plan of reorganization, no
damages will be
recoverable from the Company by the claimants in the class
action
litigation,
although they will receive warrants to purchase the common stock
of the
reorganized Company. See Note 17 to the Consolidated Financial
Statements for
additional discussion with respect to the shareholder
litigation.
The Company has been informed by the Securities and Exchange
Commission (the
"SEC") that it is conducting a private investigation to
determine
whether there
have been violations of certain provisions of the federal
securities laws
and/or the rules and regulations of the SEC in connection with
the Company's
financial records, reports and public disclosures. The Company
has been
cooperating with the SEC's staff and has voluntarily produced
requested
documents and information. On April 12, 1994, the SEC's staff
informed the
Company of its intention to recommend that the SEC file a civil
injunction
action against the Company. The Company is currently engaged in
discussions
with the SEC's staff concerning a possible consensual resolution
of the matter.
The net loss in 1992 reflects (i) a continuing slump in the
Company's
mechanical and electrical services business, principally
attributable to a
downturn in commercial construction; (ii) intense competition in
the Company's
information services business; (iii) restructuring charges
related to the
planned disposition and downsizing of (a) the information
services business,
(b) other non-core businesses and (c) certain
mechanical/electrical operations;
(iv) significant provisions for losses on accounts receivable
and
inventories;
(v) a provision for losses on net assets held for sale; and (vi)
expenses
associated with the shareholder litigation, the Company's
efforts
to
restructure its debt through a consensual arrangement and the
restatement of
the Company's financial statements.
4-2
A significant portion of the net loss in 1992, particularly
with respect to
the losses on accounts receivable and to the write down of
inventories, arose
as a result of management's review conducted in connection with
the preparation
of the Company's financial statements for the year ended
December
31, 1992. As
a result of such review, the Company recorded write-offs and
losses in 1992 for
impairment of goodwill and other intangibles, for the
establishment of asset
valuation and restructuring reserves associated with net assets
held for sale
under a debt restructuring and recapitalization plan it had then
developed and
as a result of the decision to discontinue its information
services business.
The Company is focused on returning to profitability and
restructuring its
operations around a smaller international mechanical/electrical
services
business. In this regard, in March 1993, the Company's Board of
Directors
approved the disposition of the Company's U.S. information
services business.
The Board of Directors had previously decided to sell the
Company's overseas
information services business. Accordingly, operating results
reflect the
information services business as discontinued operations. See
Notes 10 and 11
to the Consolidated Financial Statements. Revenues of the
information services
business were $1.7 billion, $1.2 billion and $0.7 billion in
1992, 1991 and
1990, respectively. The information services business incurred a
net loss from
operations of $201.1 million in 1992 compared to net income of
$18.4 million
and $15.4 million in 1991 and 1990, respectively. The loss in
the
information
services business includes charges of $67.3 million which
consist
of the
write-off of goodwill and other intangible assets related to the
U.S.
information services business and costs attributable to employee
severance and
facilities consolidation. The loss also reflects intense
competition among
personal computer resellers, decreases in the prices of personal
computers and
the rapid introduction of new technology. The difficulties
encountered by the
Company in successfully integrating the back office operations
and accounting
systems of Businessland Inc., which was acquired in August 1991,
with the
Company's preexisting information services back office
operations
resulted in
additional losses. In August 1993, the Company sold
substantially
all the
assets of its U.S. information services subsidiary. The
transaction did not
result in a material gain or loss to the Company. See "Liquidity
and Capital
Resources" for additional information with respect to the
disposition of such
subsidiary.
In connection with the plan to dispose of the Company's
overseas information
services business and certain other of its U.S. information
services
businesses, the Company provided for losses aggregating $49.5
million in 1992.
These charges primarily represent the estimated losses to be
realized upon the
disposition of such business units. Such amount is in addition
to
the
aforementioned net loss from operations of $201.1 million and is
included in
the accompanying Consolidated Statement of Operations under the
caption "Loss
from disposal of businesses" in Discontinued Operations.
In April 1992, the Company announced its intention to sell its
water supply
business. However, in July 1993, the Company's Board of
Directors
decided not
to proceed with the divestiture due to uncertainties created by
then pending
rate-related proceedings and litigation. As described below, in
December 1993,
the Company's subsidiary, Jamaica Water Supply Company ("JWS"),
entered into an
agreement that became effective February 2, 1994 with respect to
the rate
proceedings and litigation (See Note 17) thereby eliminating
significant
uncertainties relating to the water supply business.
Accordingly,
the Company
reinstated its plan of divestiture in the first quarter of 1994.
The
Consolidated Financial Statements for all periods presented
reflect the water
supply business as a discontinued operation. See Note 17
regarding the status
of a proceeding initiated in 1988 by the City of New York with
respect to the
possible condemnation of the water distribution system of JWS
that is located
in New York City.
Revenues from continuing operations were $2.4 billion, $2.3
billion and $2.1
billion in 1992, 1991 and 1990, respectively. Operating loss
from
continuing
operations was $235.6 million in 1992 compared to operating
income of $57.7
million and $82.8 million in 1991 and 1990, respectively. The
operating loss in
1992 includes restructuring charges of $38.7 million relating to
the downsizing
and consolidation of the North American mechanical/electrical
services
operations described under "Mechanical/Electrical Services".
4-3
Restructuring charges related to continuing operations consist
of $10.8
million applicable to permanent impairment of goodwill and $27.9
million for
severance payments, facilities consolidation costs, provisions
for contract
losses and the write-down of certain assets to net realizable
value.
In connection with the Company's proposed plan of
reorganization, certain
mechanical/electrical services business units and non-core
businesses have been
identified for sale or downsizing. The operating results of such
businesses are
included in continuing operations. In 1992, 1991 and 1990 such
business units
had revenues of $526.9 million, $501.7 million and $444.2
million,
respectively, and an operating loss of $41.2 million in 1992
compared to
operating income of $15.3 million and $12.6 million in 1991 and
1990,
respectively.
Selling, general and administrative expenses ("SG&A") were
$440.7 million,
$286.9 million and $248.6 million in 1992, 1991 and 1990,
respectively. The
significant increase in SG&A in 1992 includes a provision of
$100.4 million for
losses on accounts and other receivables and an increase in
general corporate
expenses of $29.2 million and $13.6 million applicable to the
write-off of
goodwill. See "Mechanical/Electrical Services" below for a
discussion regarding
the provision for losses on accounts receivable. General
corporate expenses
were $48.4 million in 1992 compared to $19.2 million in 1991 and
$12.2 million
in 1990. The increase in such expenses in 1992 was primarily
attributable to
(a) fees paid to lenders for extensions of, amendments to and
waivers of
provisions of the Company's revolving credit agreement ($4.5
million), (b) the
write-off of deferred debt expense in connection with the
Company's planned
restructuring of its debt ($2.9 million), (c) legal, consulting
and other
professional fees arising out of the shareholder litigation,
defaults of
covenants contained in loan agreements and associated debt
restructuring
activities and the restatement of the Company's financial
statements ($9.6
million), (d) employee termination costs ($1.8 million), (e)
relocation of the
Company's corporate headquarters, primarily the write-off of
leasehold
improvements and costs related to an abandoned lease ($4.2
million), and (f)
the accelerated vesting of deferred compensation as a result of
the termination
of employment of certain officers and employees in accordance
with the terms of
a deferred compensation plan ($5.6 million). SG&A as a
percentage
of revenues
was 12.4% in 1991 compared to 12.1% in 1990. The increase in
SG&A
expenses in
1991 was primarily related to the Company's growth and
expansion.
Net interest expense applicable to continuing operations was
$44.2 million in
1992 compared to $43.9 million in 1991 and $36.6 million in
1990.
In 1992, the Company sold certain energy and environmental
related
businesses and a division of its equipment rental business from
which it
realized a net gain of $12.0 million and a net loss of $4.5
million,
respectively. In 1992, the Company also recorded net losses on
businesses sold
or held for sale in the amount of $83.6 million. In 1991, the
Company incurred
a loss of $6.6 million from disposition of a certain subsidiary.
See Note 11 to
the Consolidated Financial Statements.
Effective January 1, 1992, the Company adopted the Statement
of
Financial
Accounting Standards No. 109 "Accounting for Income Taxes" (SFAS
109). The
cumulative effect of adopting SFAS 109 was to record an income
tax benefit of
$4.3 million or $0.11 per share as of January 1, 1992.
Mechanical/Electrical Services
The mechanical/electrical services business revenues were $2.4
billion, $2.3
billion and $2.1 billion for the years ended December 31, 1992,
1991 and 1990,
respectively. In 1992, this business incurred an operating loss
of $187.2
million compared to operating income of $76.9 million and $95.0
million in 1991
and 1990, respectively. As discussed above, the Company has
restated its
financial statements for the years ended December 31, 1991 and
1990. The
restatement had the effect of decreasing the operating income of
this segment
in 1991 and 1990 by $32.4 million and $6.7 million,
respectively,
from the
amounts previously reported. The operating loss in 1992
reflects,
among other
things, the negative impact of the recession and oversupply in
the commercial
real estate market which caused a sharp reduction in new
commercial
4-4
construction. This reduction of commercial work caused many of
the Company's
mechanical/electrical services business units to pursue
noncommercial projects,
primarily governmental and municipal facilities, at lower
margins
than
historically available in the commercial market place. Certain
of
the business
units were not experienced in performing noncommercial projects
and as a result
incurred significant losses. The operating loss in 1992 includes
a provision
for losses on accounts and other receivables of $100.4 million
due in part to
the impact of the recession on the financial condition of
customers of the
Company's mechanical/electrical services business. Additionally,
the Company's
financial condition and negative cash flow has impacted its
ability to settle
claims and unapproved change orders on a favorable basis. The
operating loss in
1992 includes restructuring charges of $38.7 million for the
downsizing of the
Company's North American mechanical/electrical services
operations (see Note 12
to the Consolidated Financial Statements), $13.6 million
applicable to the
write-off of goodwill and a net charge of $15.6 million relating
to the
write-off of the small tool inventory. Small tools are located
at
numerous
construction sites and generally have short lives. The Company
made the
decision to write-off its small tool inventory because of the
difficulty and
expense associated with taking periodic physical inventories
required to
maintain the tools as an asset.
The increase in revenues of 12% in 1991 was attributable to
the
acquisition
of Comstock Canada in February 1991 and internal growth within
the European
mechanical/electrical services operations. Operating margins in
1991 declined
to 3.3% from 4.6% in 1990. Revenues and operating margins in the
U.S. for 1991
were adversely affected by the recession which created
competitive pressure for
small contracts, a slowdown in retrofit and service activities
and delays in
the start-up of certain projects in the Company's energy and
environmental
related operations. In 1991, the Company focused its attention
on
large
industrial, utility and governmental projects to offset the
effects of the
continuing weakness in the U.S. commercial office building
construction
marketplace.
At December 31, 1992, the mechanical/electrical services
business backlog was
$1.6 billion compared to $1.0 billion at December 31, 1993. Such
backlog
included $1,263 million at December 31, 1992 and $954.2 million
at December 31,
1993 relating to subsidiaries which the Company currently
intends
to retain.
The Company's overall backlog in its North American regions and
in the United
Kingdom has stabilized at approximately $1.0 billion through May
1994. The
initial decline was attributable to a downsizing in the
Company's
operations,
the Company's weakened financial condition which continues to
adversely affect
its ability to obtain new contracts and the continuing recession
in the U.S.
and overseas construction markets. The Company's surety
companies
have become
more selective in issuing new bonds, especially on larger
projects and those
with a duration of more than two years. Additionally, the surety
companies will
generally not bond new projects for certain non-core businesses
which the
Company has identified for sale. Surety bonds are frequently a
precondition to
the award of a mechanical or electrical contract. Prospects for
a
recovery in
the commercial office building market in both North America and
the United
Kingdom remain poor for the immediate future.
Included in the accompanying Consolidated Balance Sheet at
December 31, 1992
under the caption "Excess of cost of acquired businesses over
net
assets, less
amortization" is $61.5 million of goodwill. Such goodwill
relates
to
mechanical/electrical services business units which the Company
intends to
retain. Management believes that such goodwill has not been
permanently
impaired. However, if the Company were to decide to divest
certain of these
units, goodwill and other write-offs might be required depending
upon the then
existing market conditions and their future business prospects.
Supply of Water (included in discontinued operations)
Revenues from the Company's water supply business were $59.8
million, $63.1
million and $59.2 million for the years ended December 31, 1992,
1991 and 1990,
respectively. Operating income was $4.8 million, $14.6 million
and $13.3
million in 1992, 1991 and 1990, respectively. The decrease in
revenues of 5.2%
in 1992 compared to 1991 was primarily due to reduced customer
consumption as a
result of cool and wet weather conditions in the New York City
area in the
summer of 1992. The increase in revenues of 6.6% in
4-5
1991 as compared to 1990 was the result of a rate increase
effective March 1991
and an increase in customer consumption as a result of
abnormally
dry and hot
weather during the summer of 1991.
On December 22, 1993, JWS, the New York State Consumer
Protection Board,
Nassau County, certain other governmental bodies and a consumer
advocate group
executed an agreement that ended several regulatory and legal
proceedings
against JWS. The agreement was approved by the New York State
Public Service
Commission (the "PSC") on February 2, 1994. The agreement
provides for, among
other things, a three year general moratorium on rates charged
by
JWS,
resolution of the economic issues raised by the PSC arising from
its 1992
operational audit of JWS, settlement of related litigation and
the dismissal of
an action brought against JWS by Nassau County of the State of
New York
alleging violations of the Racketeer Influenced and Corrupt
Organizations Act
and common law fraud. JWS also agreed, in consideration of
avoided litigation
and other costs associated with the proceedings, to make
payments
over the next
three years totalling $11.7 million to customers in Nassau and
Queens Counties
of the State of New York. In connection with this settlement,
the
Company
provided a charge of $7.0 million in 1992. See Note 17 to the
Company's
Consolidated Financial Statements. Additionally, the agreement
provides that
JWS will use its best efforts to bring about the separation of
Jamaica Water
Securities Corp., a subsidiary of the Company which holds
substantially all the
common stock of JWS, from the Company.
Liquidity and Capital Resources
For the year ended December 31, 1992, the Company's operations
used $49.6
million in cash primarily to fund operating losses and working
capital
requirements. From September 1992 to February 1994, the Company
had no
available lines of credit and experienced significant cash
outflow as a result
of adverse publicity associated with the restatements of its
first and second
quarter 1992 financial statements, defaults under its loan
agreements, senior
management changes and from operating losses. In February 1994,
the Company
obtained a $35 million debtor-in-possession credit facility
("DIP
Loan") from
Belmont Capital Partners II, L.P., an affiliate of Fidelity
Investments
("Belmont"), which is described in greater detail below.
Despite aggressive cash management measures that have been
implemented on a
worldwide basis throughout the Company, operating cash flow
continued to
deteriorate throughout 1993 with approximately $44.5 million of
cash used to
fund operations through December 31, 1993. The Company's
consolidated cash
balance decreased from $86.8 million at December 31, 1992 to
$39.5 million at
December 31, 1993. The December 31, 1993 cash balance included
$3.0 million in
foreign bank accounts. Such bank accounts are not available to
support the
Company's domestic mechanical/electrical services business or to
pay corporate
expenses. The negative operating cash flow reflects continued
pressure on
accounts payable and other increases in working capital
requirements caused by
the Company's weakened financial condition, restructuring costs,
professional
fees resulting from debt restructuring negotiations and
shareholder litigation
and cash deposits made to secure insurance obligations.
As a consequence of the Company's financial difficulties, an
asset
disposition program was initiated in the third quarter of 1992
with respect to
the Company's non-core businesses and certain other assets in
order to raise
cash to reduce operating cash outflow and to reduce debt. A
total
of $139.0
million of net cash proceeds was realized from such program in
1992 including:
$84.1 million from the sale of five energy and environmental
related
businesses, $21.1 million from the sale of the Company's
computer
lease
portfolio, $18.4 million from the sale of the Company's interest
in a
hospital's central utility plant and $8.8 million from the sale
of a rental
equipment business. The cash proceeds from these asset
dispositions in 1992
were used to reduce debt and for working capital requirements.
From January 1,
1993 to December 31, 1993, the Company received net cash
proceeds
of $43.4
million from the sale of certain overseas information services
business units,
other non-core businesses and other assets. Such proceeds were
used primarily
for working capital requirements.
In February 1994, the Company and substantially all of its
subsidiaries
entered into an agreement with Belmont with respect to a DIP
Loan. The
agreement provides a credit facility to the Company of up to $35
4-6
million at an interest rate of 12% per annum during the period
of
the
reorganization proceeding. Also, Belmont will receive, as
additional interest,
a percentage of the securities to be issued under the Company's
plan of
reorganization. The DIP Loan is secured by a first lien on
substantially all of
the assets of the Company and most of its subsidiaries. As of
June 1994, the
Company had drawn down $20 million under the DIP Loan.
The Company is in default of certain covenants of the DIP
Loan.
Pursuant to
written waivers of default, dated April 27, 1994 and May 6,
1994,
the Company
has been permitted by Belmont to draw on its line of credit.
Under the
circumstances, any additional borrowings under the DIP Loan will
require
further waivers of default.
The DIP Loan is intended to be repaid upon the effective date
of the proposed
plan of reorganization. The Company is actively seeking a
working
capital
facility of approximately $40 million. The proceeds of this new
facility will
be used to refinance the Company's borrowings under the DIP Loan
and to provide
working capital to the reorganized Company. However, there can
be
no assurance
that the Company will be able to obtain a new working capital
facility or, if
so, the amount of any such facility. Obtaining such a facility
is
a condition
of the confirmation of the Company's plan of reorganization.
In August 1993, the Company sold substantially all the assets
of its U.S.
information services subsidiary to ENTEX Information Services,
Inc. ("ENTEX"),
a newly organized company owned by a private investor and the
management of the
U.S. information services subsidiary. As part of the
consideration for its
sale, the Company received warrants to buy up to 10% of the
purchaser's common
stock for a nominal amount. The Company has ascribed no value to
these
warrants. Additionally, ENTEX assumed substantially all the debt
and other
liabilities and obligations relating to the ongoing operations
of
the U.S.
information services subsidiary; that subsidiary retained
certain
lease
obligations and certain tax liabilities. The Company was also
released from
approximately $210 million of its guarantees of indebtedness and
similar
obligations of the subsidiary. In October 1993, this subsidiary
filed a
voluntary petition under Chapter 7 of the U.S. Bankruptcy Code.
As described in Notes 1 and 3 to the Company's Consolidated
Financial
Statements, the Company is in default of covenants contained in
its loan
agreements under which approximately $501.0 million was
outstanding at December
31, 1992, including $484.4 million owed to senior lenders and
$16.6 million
owed to subordinated note holders. With respect to the defaulted
senior loan
agreements, "standstill arrangements" were negotiated which
covered the period
from mid-December of 1992 through April 30, 1993. Under the
standstill
arrangements, the senior lenders agreed, in principle, to
forebear the receipt
of principal and to accept payment of interest during such
periods at reduced
rates ranging from 4% to 6.75%. Since April 30, 1993, no
standstill arrangement
has been in place and the Company ceased making principal and
interest
payments. However, interest continued to accrue under the terms
of the
respective loan agreements which in certain circumstances
included default rate
premiums of an additional 2% and in one case 4%. Interest ceased
to accrue on
December 21, 1993, the date on which an involuntary bankruptcy
petition was
filed against the Company. At December 31, 1993 and 1992,
accrued
interest on
defaulted debt was $43.3 million and $5.8 million, respectively.
The Company
has pledged to the holders of its senior notes and bank
indebtedness the common
stock of certain subsidiaries held for sale and certain proceeds
from the sale
of one of these subsidiaries. The combined net book value of
these subsidiaries
was $23.3 million at December 31,1992.
The Company has not made scheduled semiannual interest
payments
since
September 1, 1993 with respect to its 73/4% Convertible
Subordinated
Debentures. All interest payments on such debt were previously
made when due.
The outstanding principal balance of the debentures at December
31, 1992, in
the amount of approximately $7.0 million, has been included in
"Debt in
default" in the accompanying Consolidated Balance Sheet.
4-7
In June 1993, the Company's management developed a business
restructuring
plan. The plan contemplates the sale of a number of domestic
mechanical and
electrical services business units and the reorganization of the
Company
principally around a smaller international mechanical/electrical
services
business which had revenues of approximately $1.9 billion in
both
1992 and
1993. As described above and in Notes 10 and 11 to the Company's
Consolidated
Financial Statements, the Company's business restructuring plan
contemplated
the sale of its information services business, certain of its
mechanical/electrical business units, its water supply business
and certain
non-core businesses. As a result, the net assets of businesses
to
be sold have
been classified in the accompanying Consolidated Balance Sheet
as
of December
31, 1992 as "Net assets held for sale" and carried as either
current or
long-term assets on the basis of their actual or expected
disposition dates.
The Company's proposed plan of reorganization contemplates
that
the creditors
of JWP INC. will exchange approximately $623 million of holding
company debt
and other liabilities for approximately $139 million of recourse
debt,
approximately $48 million of nonrecourse debt, 100% of the
equity
of the
Company and warrants to purchase common stock of the reorganized
Company. All
of the new debt, except for approximately $67 million, is
expected to be paid
from the proceeds of asset sales. As previously indicated, under
the proposed
plan of reorganization, holders of the Company's common and
preferred stock and
warrants of participation will receive warrants to purchase
common stock of the
reorganized Company in exchange for their equity interests.
Only JWP INC., the holding company, is the subject of the
proceeding under
Chapter 11. The Company's mechanical/electrical, water supply
and
other
operating subsidiaries are not parties to this proceeding. All
operating
subsidiary payments have been made in the ordinary course of
business.
See "Results of Operations" with respect to the Company's
ability to continue
as a going concern.
The Company's Canadian subsidiary, Comstock Canada, is
negotiating with a
Canadian bank to obtain a Canadian $7.5 million (approximately
U.S. $5.6
million) secured demand loan credit facility with interest at
the
Canadian
prime rate (8% as of June 1994) plus 1.0%. The new credit
facility would be
secured by all the assets of Comstock Canada and would be
guaranteed by the
Company.
In June 1994, a number of the Company's U.K. subsidiaries
entered into a
demand credit facility from a U.K. bank with an aggregate credit
limit of
Pounds14.1 million (approximately U.S.$21.7 million). The credit
facility
consists of the following components with the individual credit
limits as
indicated: an overdraft line of up to Pounds7.0 million
(approximately
U.S.$10.7 million), a facility for the issuance of guarantees,
bonds and
indemnities of up to Pounds7.4 million (approximately U.S.$11.4
million) and
other credit facilities of up to Pounds0.75 million
(approximately U.S.$1.2
million). The overdraft facility is secured by substantially all
of the assets
of the Company's principal U.K. subsidiaries. The overdraft
facility provides
for interest at the U.K. bank reference rate (51/2% as of June
1994) plus 3%.
JWS, a subsidiary of the Company carried in "Net assets held
for sale" in the
Consolidated Balance Sheet as of December 31, 1992, had two
revolving credit
agreements each of which permitted unsecured borrowings of up to
$10.0 million
with interest rates equal to the prime rate (71/4% at June
1994).
Both
agreements expired on April 30, 1994 and the borrowings
thereunder have been
permitted by the lenders to remain outstanding. JWS is currently
negotiating
new revolving credit agreements. As of December 31, 1992, JWS
had
equal
borrowings under each agreement aggregating $4.8 million.
For the years ended December 31, 1992, 1991 and 1990, capital
expenditures
including those financed were $70.1 million, $58.8 million and
$44.2 million,
respectively. Capital expenditures for the year ended December
31, 1992 include
$32.0 million for environmental related projects which were
included in the
businesses sold in the fourth quarter of 1992. The Company's
mechanical/electrical services business does not require
significant
commitments for capital expenditures. The Company's water supply
business
4-8
anticipates making capital expenditures approximating $57.0
million for the
utility plant over the five years ending December 31, 1997 which
includes $7.5
million expended in 1993. These capital expenditures are
expected
to be
financed by internally generated funds from the water supply
business with any
remaining long-term financing requirements during that period
obtained from the
proceeds of newly issued first mortgage bonds and from bank
loans. However, the
Company's financial difficulties are making it difficult for the
water supply
business to finance its capital programs.
At December 31, 1992, the Company and a wholly-owned captive
insurance
subsidiary ("Defender") had letters of credit outstanding
totalling $38.2
million which in effect secure their workers' compensation,
automobile and
general liability insurance obligations. The letters of credit
were intended to
serve as collateral for the obligations of Defender to reimburse
the Company's
unrelated insurance carriers for claims paid in respect of
certain years'
insurance programs. In December 1993, these letters of credit
were reduced to
$36.4 million. $34.9 million of such letters of credit expire in
December 1994
and $1.5 million expire in February 1995. Since October 1992,
neither the
Company nor Defender have been able to obtain additional letters
of credit to
secure their insurance obligations and, as a result, have been
required to make
cash collateral deposits to a third party insurance company to
secure those
type obligations. The deposits totalled $7.7 million as of
December 31, 1992
and are included in Other Assets under the caption
"Miscellaneous" in the
accompanying Consolidated Balance Sheet. Such deposits have
increased to $29.7
million as of June 30, 1994. They expect to be required to post
additional cash
collateral insurance deposits until the Company completes its
reorganization
under the Chapter 11 proceedings. The need to provide cash
collateral has
adversely affected the Company's cash flow.
The Company's proposed plan of reorganization contemplates
that
the letters
of credit described above will be drawn upon by the unrelated
insurance
carriers and that the Company's obligations to Defender which
were pledged as
collateral to the banks issuing such letters of credit, will be
impaired under
the Chapter 11 proceeding as well as any related Company
obligations to those
banks. Beginning in February 1994, Defender ceased making
payments for amounts
owed to the unrelated insurance carriers, which obligations are
in effect
secured by the letters of credit, and the Company's unrelated
insurance
carriers have commenced partial draw downs against certain of
the
letters of
credit. Approximately $5 million has been drawn against the
letters of credit
through June 1994.
In 1993, the Company's French and Belgian information services
subsidiaries
filed petitions in their respective countries seeking relief
from
their
creditors. The French and Belgian subsidiaries have outstanding
unsecured
credit facilities guaranteed by the Company which aggregate
approximately $5.9
million. Such amount has been provided for as a loss in the
accompanying
Consolidated Statements of Operations for the year ended
December
31, 1992.
The Company has not paid dividends on its preferred stock
since
September
1992. Cumulative unpaid dividends through December 31, 1993
aggregate $2.3
million.
At December 31, 1992, the Company had net operating loss
carryforwards
("NOL") for U.S. Federal income tax purposes of approximately
$220 million.
Because of significant tax losses in 1993, the NOL is estimated
to have
increased to over $500 million as of December 31, 1993. If the
Company
exchanges its existing indebtedness for newly issued equity and
debt as
contemplated by the proposed plan of reorganization (See Notes 1
and 3 to the
Consolidated Financial Statements), a significant portion of the
NOL may not be
available to reduce future U.S. taxable income. Additionally,
due
to recent
changes in U.S. Federal income tax laws, the timing of any such
reorganization
could further impact and reduce the amount of the NOL.
See "Supply of Water" with respect to pending payments by JWS
to its
customers in 1994 to 1996 totalling $11.7 million. The payments
are expected to
be funded by JWS through cash on hand, cash flow from operations
and additional
borrowings, if necessary.
4-9
In September 1992, the PSC issued an order that resulted in
the
suspension of
dividend payments to the Company by JWS for the last two
quarters
of 1992 and
for the year ended December 31, 1993. Dividends paid by JWS in
1992 and 1991
amounted to $1.2 million and $2.0 million, respectively. As a
result of the
settlement agreement described in "Supply of Water", JWS
recommenced the
payment of dividends in 1994.
Impact of New Accounting Pronouncements
As discussed in Note 7 to the Consolidated Financial
Statements, effective
January 1, 1993, the Company adopted Statement of Financial
Accounting
Standards No. 106 "Employers' Accounting for Postretirement
Benefits Other than
Pensions". The adoption of this standard did not have a material
impact upon
the Company's consolidated financial position or its results of
operations.
The Financial Accounting Standards Board issued Statement of
Financial
Accounting Standards No. 112 "Employers' Accounting for
Postemployment
Benefits" which will be effective beginning in 1994. This
standard will not
have a material impact upon the Company's consolidated financial
position or its results of operations.
JWP INC. and Subsidiaries Consolidated Balance Sheets
(unaudited)
(In thousands)
<TABLE>
<CAPTION>
<S> <C> <C>
December 31,
----------------------
1992 1991
- --------------------------------------------- ---------- -----------
As Restated
ASSETS
Current Assets
Cash and cash
equivalents.......................... $86,836 $76,593
Accounts receivable, less allowance for doubtful accounts
of $42,630 and $29,541............... 458,273 1,038,723
Costs and estimated earnings in excess of billings on
uncompleted contracts... 67,817 132,644
Inventories.......................... 6,618 359,033
Prepaid expenses and other......... 9,746 45,287
Net assets held for sale.......... 32,894 -
-------- -----------
Total Current Assets............... 662,184 1,652,280
--------- -----------
Net assets held for sale.......... 85,611 -
Investments, notes and other long-term
receivables............................ 22,440 44,605
Property, plant and equipment, net.. 51,087 323,439
Other Assets
Excess of cost of acquired businesses over net assets, less
amortization...... 61,542 149,496
Miscellaneous....................... 24,720 64,007
--------- -----------
86,262 213,503
---------- -----------
Total Assets....................... $907,584 $2,233,827
========== ===========
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
Current Liabilities
Notes payable........................... $6,452 $110,600
Current maturities of long-term debt and capital lease
obligations............ 2,634 44,012
Debt in default................... 501,007 -
Accounts payable.................. 224,840 808,596
Billings in excess of costs and estimated earnings on
uncompleted contracts... 125,764 140,700
Accrued payroll and benefits..... 45,665 67,710
Other accrued expenses and liabilities. 120,733 112,525
--------- -----------
Total Current Liabilities......... 1,027,095 1,284,143
--------- -----------
Long-term debt.................. 4,111 425,080
Other long-term obligations and deferred
credits................................ 52,357 68,468
Shareholders' (Deficit) Equity
Preferred Stock, $1 par value, 25,000,000 shares authorized,
425,000 shares of Series A issued and outstanding 21,250 21,250
Common Stock, $.10 par value, 75,000,000 shares authorized,
40,754,051 and
40,178,907 outstanding, excluding 591,775 and 225,749 treasury
shares in 1992 and 1991........ .... 4,075 4,018
Warrants of Participation...... . 576 576
Capital surplus............ ..... 203,505 212,703
Cumulative translation adjustments (3,930) 4,807
Retained (deficit) earnings (401,455) 212,782
--------- -----------
Total Shareholders' (Deficit) Equity (175,979) 456,136
---------- -----------
Total Liabilities and Shareholders' (Deficit)
Equity............................ $ 907,584 $2,233,827
========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are
an integral part of these statements.
<TABLE>
<CAPTION>
JWP INC. and Subsidiaries Consolidated Statements of Operations
(unaudited) (In
thousands, except per share data)
<S> <C> <C> <C>
Year Ended December 31,
- ------------------------------------
1992 1991 1990
- ----------------------------------------------------------------- ------------ ------------
As Restated As Restated Revenues............$2,404,577 $2,318,112 $2,057,607
----------- ------------ ------------
Costs and Expenses
Cost of sales........................ 2,160,723 1,973,561 1,726,207
Selling, general and administrative..... 440,725 286,900 248,649
Restructuring charges.................... 38,741 - -
----------- ------------ ------------
2,640,189 2,260,461 1,974,856
----------- ------------ ------------
Operating (Loss) Income.................... (235,612) 57,651 82,751
Interest expense............................. (45,894) (46,240) (39,340)
Interest income............................... 1,713 2,348 2,713
Net (loss) on businesses sold or held for sale.(76,078) (6,628) -
--------- ------------ ------------
(Loss) Income From Continuing Operations Before Income
Taxes and Cumulative Effect of Accounting Change..(355,871) 7,131 46,124
Provision for income taxes........................ 7,644 2,419 17,475
----------- ------------ ------------
(Loss) Income From Continuing Operations Before
Cumulative Effect of Accounting Change.......... (363,515) 4,712 28,649
Discontinued Operations
(Loss) income from operations, net of income taxes. (203,739) 24,263 21,600
(Loss) from disposal of businesses.................. (49,491) - -
---------- ------------ ------------
(Loss) income from discontinued operations...........(253,230) 24,263 21,600
---------- ------------ ------------
Cumulative Effect of Change in Method of Accounting
for Income Taxes.....................................4,315 - -
----------- ------------ ------------
Net (Loss) Income............................ $(612,430) $28,975 $50,249
=========== ============ ============
(Loss) Earnings Per Share
Continuing operations............. $(9.00) $0.10 $0.75
Discontinued operations
(Loss) income from operations........ (5.02) 0.63 0.57
(Loss) from disposal of businesses..... (1.22) - -
---------- ------------ ------------
(Loss) income from discontinued operations.. (6.24) 0.63 0.57
---------- ------------ ------------
Cumulative effect of change in method of accounting
for income taxes......................... 0.11 - -
---------- ------------ ------------
Net (loss) income...........................$(15.13) $0.73 $1.32
=========== ============ ============
</TABLE>
The accompanying notes to consolidated financial statements are
an integral part of these statements.
<TABLE>
<CAPTION>
JWP INC. and Subsidiaries Consolidated Statements of Cash Flows
(unaudited) (In thousands)
<S> <C> <C> <C>
Year Ended December 31,
---------------------------------
1992 1991 1990
- ------------------------------------------------------- ----------- -----------
As Restated As Restated
- ------------------------------------
Net (Loss) Income................... $(612,430) $28,975 $50,249
Adjustments to Reconcile Net (Loss)
Income to Net Cash
(Used in) Provided by Operating Activities
Depreciation and amortization........... 68,993 49,072 33,930
Restructuring charges applicable to
continuing operations..... 38,741 - -
Restructuring charges applicable to
discontinued operations... 25,950 - -
Net loss from businesses sold or held
for sale................ 76,078 6,628 -
Provision for losses on accounts and
other receivables........ 113,903 16,241 6,425
Inventory valuation adjustments......... 59,787 5,300 -
Write-off of deferred debt issuance cost 2,876 - -
Write-off of fixed assets and
miscellaneous assets............ 11,167 8,200 -
Write-off of goodwill and other
intangibles................... 54,873 - -
Stock compensation....................... 9,518 3,808 4,713
Deferred income taxes.................. 7,137 13,418 13,359
Loss from disposal of discontinued
operations................. 49,491 - -
Equity and other losses in unconsolidated
subsidiary............ 5,690 - -
Cumulative effect of accounting change
for income taxes....... (4,315) - -
Other, net............................. 21,112 10,829 (4,137)
---------- ----------- -----------
(71,429) 142,471 104,539
Change in Operating Assets and Liabilities Excluding Effect
of Businesses Disposed of and Acquired
Decrease (increase) in accounts receivable.. 73,379 (119,774) (35,592)
Decrease (increase) in inventories and
contracts in progress.. 123,884 (41,309) (35,293)
(Decrease) increase in accounts payable
and accrued expenses.. (190,752) 114,595 75,686
Changes in other assets and liabilities... 15,335 6,490 (23,568)
--------- ----------- -----------
Net Cash (Used in) Provided by Operations... (49,583) 102,473 85,772
--------- ----------- -----------
Cash Flows from Financing Activities
Proceeds from long-term debt.............. 85,302 47,660 78,300
Payments of long-term debt and capital
lease obligations...... (68,514) (78,710) (39,055)
Payment of Businessland 101/4% Senior
Notes................... - (18,750) -
Proceeds from issuance of common stock
and exercise of stock options...... 1,911 2,169 4,827
Payment of preferred dividends..... (1,354) (711) -
Purchase of Company warrants........ - - (4,000)
Acquisition of common stock for the treasury (8,130) (7,877) (4,424)
Increase (decrease) in notes payable, net... 30,258 89,544 (21,245)
----- ----------- -----------
Net Cash Provided by Financing Activities...... 39,473 33,325 14,403
---------- ----------- -----------
Cash Flows from Investment Activities
Proceeds from sale of businesses and other assets 138,971 10,066 -
Acquisition of businesses, net of cash acquired (15,899) (62,600) (31,682)
Purchase of property, plant and equipment...... (36,411) (56,000) (34,232)
Purchase of environmental facilities........... (32,044) - -
Net disbursements for other investments........ (9,695) (4,779) (15,134)
Cash balance of businesses held for sale or sold (26,241) - -
Other, net...................................... 1,672 (2,619) (7,532)
---------- ----------- -----------
Net Cash Provided by (Used in) Investment Activities 20,353 (115,932) (88,580)
----------- ----------- -----------
Increase in Cash and Cash Equivalents............... 10,243 19,866 11,595
Cash and Cash Equivalents at Beginning of Year...... 76,593 56,727 45,132
---- ----------- -----------
Cash and Cash Equivalents at End of Year............ $86,836 $76,593 $56,727
=========== =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are
an integral part of these statements.
<TABLE>
<CAPTION>
JWP INC. and Subsidiaries Consolidated Statements of
Shareholders' Equity
(Deficit) (unaudited) (In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Cumulative Retained Preferred Common Warrants of
Capital Translation Earnings Shareholders' Stock Stock Participation
Surplus Adjustments (Deficit) Equity (Deficit)
--------- ------- ---------------------- ----------- ----------- ----------------
Balance December 31, 1989... $- $3,731 $576 $173,363 $- $134,269 $311,939
Common stock offering....... - 10 - 1,794 - - 1,804
Common stock issued
in connection with
acquisitions................ - 6 - 1,903 - - 1,909
Purchase of Company
warrants.................... - - - (4,000) - - (4,000)
Exercise of stock options... - 28 - 2,995 - - 3,023
Foreign currency translation
adjustment.................. - - - - 2,836 - 2,836
Other, net.................. - 22 - 2,731 - - 2,753
Net income, as restated..... - - - - - 50,249 50,249
--------- ------- ---------------------- ----------- ----------- ----------------
Balance December 31, 1990
(As Restated)............... - 3,797 576 178,786 2,836 184,518 370,513
Common stock issued
in connection with
acquisitions................ - 190 - 29,048 - - 29,238
Preferred stock issued
in exchange for
Businessland's 101/4%
Senior Notes................ 21,250 - - - - - 21,250
Foreign currency translation
adjustment.................. - - - - 1,971 - 1,971
Preferred stock dividends... - - - - - (711) (711)
Other, net.................. - 31 - 4,869 - - 4,900
Net income, as restated..... - - - - - 28,975 28,975
--------- ------- ------------- --------- ----------- ----------- ----------------
Balance December 31, 1991
(As Restated)............... 21,250 4,018 576 212,703 4,807 212,782 456,136
Common stock issued
in connection with
acquisitions................ - 10 - 739 - - 749
Exercise of stock options... - 14 - 1,897 - - 1,911
Acquisition of common stock
for the treasury............ - (57) - (8,073) - - (8,130)
Guaranteed future value of
stock issued to acquire
businesses.................. - - - (12,308) - - (12,308)
Deferred compensation and
officer bonus............... - 55 - 9,463 - - 9,518
Foreign currency translation
adjustment.................. - - - - (8,737) - (8,737)
Preferred stock dividends... - - - - - (1,807) (1,807)
Other, net.................. - 35 - (916) - - (881)
Net loss.................... - - - - - (612,430) (612,430)
--------- ------- ------------- --------- ----------- ----------- ----------------
Balance December 31, 1992... $21,250 $4,075 $576 $203,505 $(3,930) $(401,455) $(175,979)
========= ======= ============= ========= =========== =========== ================
</TABLE>
The accompanying notes to consolidated financial statements are
an integral part of these statements.
JWP INC. and
Subsidiaries Notes to Consolidated Financial Statements
(unaudited)
(1) Basis of Presentation
The accompanying financial statements have been prepared
assuming that JWP
INC. (the "Company") will continue as a going concern. The
matters discussed
below raise substantial doubt about the Company's ability to
continue as a
going concern. The financial statements do not include any
adjustments relating
to the recoverability and classification of assets or the
amounts
and
classification of liabilities that might be necessary should the
Company be
unable to continue as a going concern. The Company's
continuation
as a going
concern is dependent upon its ability to restructure its
indebtedness in
connection with its proceeding under Chapter 11 of the U.S.
Bankruptcy Code,
obtain sufficient bonding to guarantee its performance on
construction
contracts, return to profitability, obtain new credit facilities
and otherwise
generate sufficient cash flow to meet its restructured and other
obligations on
a timely basis.
The Company incurred a net loss of $612.4 million for the year
ended December
31, 1992, has a working capital deficit of $364.9 million after
the
reclassification of long-term debt in default (See Note 3) and
has a
shareholders' deficit at December 31, 1992 of $176.0 million.
Many of the
Company's mechanical/electrical services contracts require
surety
bonds to
guarantee the performance of such contracts. In light of the
Company's
financial condition, the Company's surety companies are issuing
new bonds but
are reviewing bonding requests on a case-by-case basis for large
construction
projects and those with durations of more than two years. In
addition, a surety
company that had been the primary source of surety bonds for
certain
subsidiaries, which together comprised approximately 20% of the
Company's 1993
revenues of those mechanical/electrical companies which the
Company currently
plans to retain, is no longer engaged in the business of issuing
such bonds. As
a result, these subsidiaries are currently not receiving such
bonds. However,
the absence of available bonding for these subsidiaries has not
resulted in a
material reduction in their backlog. The Company and these
subsidiaries are
actively engaged in discussions with another surety company
which
has
undertaken due diligence for the purpose of entering into a new
surety bonding
arrangement. However, there can be no assurance that such a new
surety bonding
arrangement can be obtained.
The Company is focused on returning to profitability and
restructuring its
operations primarily around a smaller international
mechanical/electrical
services business. The Company has formulated a business
restructuring plan
which includes the sale of its information services business,
water supply
business, several non-core businesses and certain
mechanical/electrical
services operations and the closing or downsizing of
unprofitable
operations
(See Notes 10 and 11). The proceeds from the sale of those
businesses and other
assets to date have been used for working capital and to reduce
debt. There is
no assurance that the Company will be able to consummate the
remaining sales
and, if consummated, whether the Company will realize the
proceeds contemplated
by the plan.
As described in Note 3, the Company is in default of covenants
contained in
its senior note agreements, bank credit agreement, 12%
subordinated note
agreements and its 73/4% Convertible Subordinated Debentures and
is presently
in a Chapter 11 proceeding. The outstanding amount of such debt
in default at
December 31, 1992 is $501.0 million.
On December 21, 1993, three holders of the Company's 73/4%
Convertible
Subordinated Debentures filed an involuntary petition under
Chapter 11 of the
U.S. Bankruptcy Code against the Company. The Company on
February
14, 1994
consented to the entry of an order for relief under Chapter 11
of
the
Bankruptcy Code. At that time the Company adopted a proposed
plan
of
reorganization and its subsidiaries continue to operate in the
normal course.
The proposed plan of reorganization which, as modified, has the
support of the
Official Unsecured Creditors Committee and the Official
Unsecured
Junior
Creditors and Interest Holders Committee. The proposed plan of
reorganization
contemplates that the Company's creditors will exchange
approximately $623
million of holding company debt and other liabilities for
approximately $139
million of recourse debt, approximately $48 million of
nonrecourse debt, 100%
of the equity of the
4-15
Company and warrants to purchase common stock of the reorganized
Company. All
of the new debt, except for approximately $67 million, is
expected to be paid
from the proceeds of asset sales. Additionally, the holders of
the Company's
common and preferred stock and warrants of participation will
receive warrants
to purchase common stock of the reorganized Company in exchange
for their
equity interests.
The Company's mechanical/electrical services, water supply and
other
operating subsidiaries are not parties to the Chapter 11
proceeding. All
operating subsidiary payments continue to be made in the
ordinary
course of
business. There can be no assurance, however, that the proposed
plan of
reorganization will be consummated or, if so, its timing.
The Company has restated its financial statements for the
years
and quarters
ended December 31, 1991 and 1990 as well as for each of the
quarters in the
nine month period ended September 30, 1992 based principally
upon
the review of
certain adjustments originally recorded in 1992. As a result,
net
income for
the year ended December 31, 1991 has been reduced from the
previously reported
amount of $60.3 million to $29.0 million and earnings per share
has been
reduced from $1.54 per share to $.73 per share. The 1991
restatement reflects
pre-tax charges of $47.9 million consisting of $36.7 million
applicable to
continuing operations and $11.2 million related to discontinued
operations. The
1991 restatement of continuing operations reflects a $4.5
million
increase in
insurance reserves, a $6.6 million loss from the sale of a
business which the
Company had decided to sell in 1991 and a $25.6 million
reduction
in the
carrying value of certain assets, principally receivables.
Substantially all of
the restated charges in 1991 applicable to discontinued
operations relate to
the Company's information services business and include $9.9
million of costs
and expenses relating to the acquisition of Businessland, Inc.
which was
acquired by the Company in August 1991. These costs and expenses
were
previously charged to reserves established as part of that
acquisition.
Net income for the year ended December 31, 1990 has been
reduced from the
previously reported amount of $59.3 million to $50.2 million and
earnings per
share has been reduced from $1.56 per share to $1.32 per share.
The restatement
of the 1990 operating results reflects pre-tax charges of $9.6
million,
consisting of $8.3 million related to continuing operations and
$1.3 million
related to discontinued operations. The restatement of
continuing
operations in
1990 includes $4.8 million of adjustments to correct accounting
for goodwill
and a net $3.5 million reduction in the carrying value of
certain
assets,
primarily long-term investments.
The restatement of the 1991 and 1990 operating results had the
effect of
decreasing retained earnings at December 31, 1991 and 1990 by
$40.4 million and
$9.1 million, respectively.
In April 1992, the Company announced its intention to sell its
water supply
business. However, in July 1993, the Company's Board of
Directors
decided not
to proceed with the divestiture due to uncertainties created by
the then
pending rate-related matters and litigation which are described
in Note 17. In
December 1993, the Company's subsidiary, Jamaica Water Supply
Company ("JWS"),
entered into an agreement with respect to the rate related
proceedings and
litigation thereby eliminating significant uncertainties
relating
to the water
supply business. Subsequently, this agreement was approved by
the
New York
State Public Service Commission on February 2, 1994.
Accordingly,
the Company
reinstated its plan of divestiture in the first quarter of 1994.
In March 1993,
the Company's Board of Directors approved the disposition of the
Company's U.S.
information services subsidiary. The Board of Directors had
previously decided
to sell the Company's overseas information services
subsidiaries.
Accordingly,
operating results for all periods presented have been
reclassified to reflect
the Company's information services business and water supply
business as
discontinued operations (See Notes 10 and 11).
As described above and in Notes 10 and 11, the Company has
developed a
business restructuring plan which contemplates the sale of its
information
services business, certain of its mechanical/electrical services
business
units, its water supply business and certain other non-core
businesses. As a
result, the net assets of
4-16
businesses to be sold have been classified in the Consolidated
Balance Sheet as
of December 31, 1992 as "Net assets held for sale" and carried
as
either
current or long-term assets on the basis of their actual or
expected
disposition dates.
As described in Note 17, a consolidated class action lawsuit
for unspecified
damages was filed against the Company, certain former officers
and directors,
four current directors, a former subsidiary officer and the
Company's then
auditors, Ernst & Young. The complaint alleges violations of
Section 10(b) of
the Securities and Exchange Act of 1934, Rule 10b-5 promulgated
thereunder and
common law fraud and deceit on the part of the Company and other
named
defendants. The Company has denied the material allegations
contained in the
complaint. The parties are now engaged in discovery proceedings.
However, the
Company expects that under the terms of its proposed plan of
reorganization, no
damages will be recoverable from the Company by claimants in the
class action
litigation, although they will receive warrants to purchase the
common stock of
the reorganized Company.
(2) Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of
the Company and
its wholly-owned subsidiaries. Significant intercompany accounts
and
transactions have been eliminated.
Certain reclassifications have been made to conform prior
years' data to the
current presentation.
Revenue Recognition
Revenues on long-term contracts are recognized on the
percentage-of-completion method. Percentage-of-completion for
the
mechanical
contracting business is measured principally by the percentage
of
costs
incurred and accrued to date for each contract to estimated
total
costs for
each contract ("cost to cost"). Certain of the Company's
electrical contracting
business units measure percentage of completion by the
percentage
of labor
costs incurred and accrued to date for each contract to the
estimated total
labor costs for such contract, while others are on the cost to
cost method.
Provisions for estimated losses on uncompleted contracts are
made
in the period
in which such losses are determined. Changes in contract
performance and
estimated profitability, including those arising from contract
penalty
provisions and final contract settlements, may result in
revisions to costs and
income and are recognized in the period in which the revisions
are determined.
Profit incentives are included in revenue when their realization
is reasonably
assured.
Accounts receivable at December 31, 1992 includes $85.2
million
billed under
retainage provisions included in contracts. In accordance with
industry
practice, certain of these receivables relate to contracts
having
production
cycles longer than one year and, therefore, a portion will not
be
realized
within one year. Disputes involving customers often arise in the
normal course
of the Company's business, primarily on projects where the
Company is a
subcontractor and is contesting with general contractors, owners
or both, for
additional funds because of events such as delays or changes in
contract
specifications. Such disputes, whether for claims or for
unapproved change
orders in process of negotiation, are recorded at their
estimated
net
realizable value only when realization is probable and can be
reliably
estimated. Claims against the Company are recognized when the
loss is
considered probable and amounts are reasonably determinable.
Accounts
receivable and costs and estimated earnings in excess of
billings
on
uncompleted contracts at December 31, 1992 include claims and
change orders in
the process of negotiation which aggregate approximately $46.6
million net of
valuation allowances. A portion of these receivables were not
realized in one year.
<TABLE>
<CAPTION>
Costs and estimated earnings on uncompleted contracts and
related amounts billed are as follows:
<S> <C> <C>
1992 1991
------------- -------------
(In thousands)
Costs incurred on uncompleted contracts....... $2,796,376 $3,410,854
Estimated earnings........................... 259,393 411,201
----------- -------------
3,055,769 3,822,055
Less billings to date............................. (3,113,716) (3,830,111)
-------------------------
$(57,947) $(8,056)
============= =============
</TABLE>
Such amounts are included in the accompanying Consolidated
Balance Sheets under the following captions:
<TABLE>
<CAPTION>
<S> <C> <C>
1992 1991
------------- -------------
(In thousands)
Costs and estimated earnings in excess of billings
on uncompleted contracts......................... $ 67,817 $132,644
Billings in excess of costs and estimated earnings
on uncompleted contracts........................ (125,764) (140,700)
------------- -------------
$(57,947) $(8,056)
============= =============
</TABLE>
Property, Plant and Equipment
Property, plant and equipment is stated at cost. Utility plant
and equipment,
which is classified as net assets held for sale as of December
31, 1992,
includes, in addition to direct labor and materials, such costs
as related
employee benefits, taxes, interest and other costs attributable
to the
construction activity. The water supply business provides for
depreciation on
the straight-line basis at amounts equivalent to a composite
rate of
approximately 2% of the average depreciable plant. All other
subsidiaries
provide for depreciation by principally using the straight-line
method over estimated useful lives.
Property, plant and equipment consists of:
1992 1991
------- --------
(In thousands)
Utility plant and equipment................. $- $164,160
Machinery and equipment..................... 51,530 118,512
Furniture and fixtures...................... 25,344 45,633
Rental equipment............................ - 28,485
Land, buildings and leasehold improvements.. 23,396 63,780
Energy and environmental facilities......... - 37,113
------- --------
100,270 457,683
Accumulated depreciation and amortization... 49,183 134,244
------- --------
$51,087 $323,439
======= ========
Inventories
Inventories are stated at the lower of cost or market. The
finished goods and
service spare parts inventories relate to discontinued
operations
and other
businesses held for sale and are included in net assets held for
sale as of
December 31, 1992 (See Notes 10 and 11). Cost is determined by
principally
using average costs. The following are the major classes of
inventories as of December 31:
1992 1991
------ --------
(In thousands)
Finished goods.................... $- $274,831
Service spare parts............... - 42,604
Construction materials and other.. 6,618 41,598
------ --------
$6,618 $359,033
====== ========
Net Assets Held for Sale
Net assets held for sale are stated at the lower of cost or
estimated net realizable value.
Cost in Excess of Net Assets Acquired
Cost in excess of net assets acquired (goodwill) is amortized
on a straight
line basis over 40 years. The amounts included in the
accompanying Consolidated
Balance Sheets are net of cumulative amortization at December
31, 1992 and 1991
of $6.9 million and $16.5 million, respectively. The Company
periodically
reviews whether new events and circumstances warrant the
write-off of goodwill
or a revision to the estimated useful life.
The Company's Board of Directors have approved a plan to
downsize the
Company's North American mechanical/electrical services business
and to sell
non-core businesses and certain mechanical/electrical business
units. In 1992,
the Company wrote-off goodwill of $48.5 million related to such
businesses to
reflect the net realizable value of businesses held for sale and
the permanent impairment of goodwill.
Net (Loss) Earnings Per Common Share
Net (loss) earnings per common share has been calculated based
on the
weighted average number of common shares outstanding and common
share
equivalents relating to warrants and stock options outstanding
when the effect
of such equivalents are dilutive (40,583,185, 38,800,000 and
38,100,000 shares
in 1992, 1991 and 1990, respectively). Per share amounts of
(loss) income from
continuing operations and net (loss) income reflect amounts of
dividends paid
and accrued on the Company's preferred stock. References to
number of shares of
common stock and per share amounts have been adjusted to give
effect to the
acquisition of Neeco, Inc. (see Note 9) and to reflect a 3-for-2
common stock
split, effected on July 16, 1990.
Statements of Cash Flows
For purposes of the Consolidated Statements of Cash Flows, the
Company
considers all highly liquid instruments with original maturities
of three
months or less to be cash equivalents.
Income Taxes
Effective January 1, 1992, the Company adopted the provisions
of Statement of
Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (SFAS
109). The adoption of SFAS 109 changed the Company's method of
accounting for
income taxes from the deferred method as discussed in the
Accounting Principles
Board Opinion No. 11, "Accounting for Income Taxes," to an asset
and liability
approach. Previously, the Company deferred the tax effects of
timing
differences between financial reporting and taxable income. The
asset and
liability approach requires the recognition of deferred tax
liabilities and
assets for the
4-19
expected future tax consequences of temporary differences
between
the carrying
amounts and the tax bases of assets and liabilities. Valuation
allowances are
established when necessary to reduce deferred tax assets to the
amount expected
to be realized. Income tax expense is the tax payable for the
period and the
change during the period in deferred tax assets and liabilities.
Prior years'
financial statements have not been restated for such accounting
change (See
Note 5).
At December 31, 1992 and January 1, 1992 (after having given
effect to the
adoption of SFAS No. 109), the valuation allowances recorded
against deferred
tax assets were $138.3 million and $0, respectively. These
amounts relate to
certain deferred tax assets for which realization requires
taxable income in
the subsidiary which gave rise to the deferred tax asset.
(3) Debt In Default
<TABLE>
<CAPTION>
<S> <C>
Debt in default at December 31, 1992 consists of (in
thousands):
Notes payable to banks under revolving credit facility at prime
plus 3/4%$155,795 Senior notes payable to insurance companies, 9.1% to
10.95%............. 328,572
--------
Total senior debt.......................... 484,367
Subordinated notes payable to insurance companies, 12%..... 9,600
73/4% Convertible Subordinated Debentures................. 7,040
--------
$501,007
========
</TABLE>
The Company failed to make principal and interest payments and
is in default
of various financial covenants contained in its senior notes and
12%
subordinated notes including minimum tangible net worth and
minimum current
ratio. The revolving credit facility contains certain financial
and other
covenants, including minimum tangible net worth and minimum
current ratio,
under which the Company was also in default at December 31,
1992. As a result,
the entire amount of such notes and bank indebtedness has been
classified in
the accompanying Consolidated Balance Sheet as "Debt in
default". Additionally,
the Company has not made scheduled semiannual interest payments
since September
1, 1993 with respect to its 73/4% Convertible Subordinated
Debentures and,
accordingly, such debentures have been classified as "Debt in
default" in the
accompanying Consolidated Balance Sheet.
Effective April 1993, the Company ceased making payments of
principal and
interest under its revolving credit facility and its senior and
subordinated
notes. Interest continued to accrue in accordance with the
provisions of these
loan documents which in certain circumstances included default
rates of an
additional 2% and in one case 4%. Interest ceased to accrue on
December 21,
1993, the date on which an involuntary bankruptcy petition was
filed against
the Company. The Company has pledged to the holders of its
senior
notes and
bank indebtedness the common stock of five subsidiaries held for
sale and
certain proceeds of the sale of one of those subsidiaries which
had a combined
net book value of $23.2 million as of December 31, 1992.
Certain of the Company's loan agreements contain covenants
which restrict its
ability to pay dividends on its common stock. The Company does
not meet the
financial ratio requirements under such covenants and
consequently is
restricted from paying dividends on its common stock.
The Company's 73/4% Convertible Subordinated Debentures are
convertible into
common stock at any time on or prior to September 1, 2012 at
$30.11 per share
which is subject to change as defined in the indenture agreement
pursuant to
which the debentures were issued. The debentures are redeemable,
at the
Company's option, on any date prior to maturity at redemption
prices (expressed
as percentages of principal amount) ranging from 102.325% in
1994
to 100% in
1997 and thereafter, plus accrued interest. In 1992, 1991 and
1990, the Company
purchased $8.7 million, $7.6 million and $10.5 million of its
73/4% debentures,
respectively. In 1991, the Company also retired its $10.0
million
11% senior
notes prior to maturity. The Company realized a net gain of $1.8
million, $0.6
million and $l.5 million in 1992, 1991 and 1990, respectively,
from early
retirement of such debt.
See Note 1 with respect to the contemplated exchange of the
debt in default
for new debt and equity securities under the Company's proposed
plan of
reorganization.
4-20
As of June 1994, the estimated fair value of the Company's
obligations under
its revolving credit facility approximates $50 million or
approximately 30% of
the amount of its pre-bankruptcy petition date principal and
accrued interest.
The estimated fair value of the senior notes approximates $122
million or
approximately 34% of the amount of its pre-bankruptcy petition
date principal
and accrued interest. Such valuations were based upon recent
private
transactions involving the purchase and sale of a limited number
of such debt
instruments. However, the estimated values described above are
not necessarily
indicative of their fair market value because these debt
instruments are not
actively traded or exchanged. The estimated fair value of the
defaulted 12%
subordinated notes and 73/4% Convertible Subordinated Debentures
is nominal.
Such valuations were based upon comparison with similarly rated
securities and
are not necessarily indicative of the current market value.
(4) Long-Term Debt
The following is a summary of the Company's long-term debt,
excluding current
maturities of $1.9 million and $38.0 million in 1992 and 1991,
respectively:
<TABLE>
<CAPTION>
<S> <C> <C>
1992 1991
--- ---------
(In thousands)
9.1% to 12% Senior Notes, due 1992 to 2005 (See Note 3).... $- $ 330,119
7--% to 11% First Mortgage Bonds, due 1995 to 2029... - 34,500
7--% Convertible Subordinated Debentures, due 2012 (See Note 3)..- 15,764
5.5% Convertible Subordinated Debentures, due 2007............. - 19,262
Bank loans under revolving credit agreements................... - 4,300
Other long-term debt........................................... 4,111 21,135
----- ---------
$4,111 $425,080
====== =========
</TABLE>
The aggregate amount of long-term debt maturing during the
next five years
is: $1.0 million, $1.9 million, $0.3 million, $0.3 million and
$0.3 million.
The debt of JWS, described below, is carried as an element of
"Net assets
held for sale" in the Company's Consolidated Balance Sheet as of
December 31,
1992 (See Note 11).
A series of first mortgage bonds issued by JWS requires annual
redemption
payments of $2.0 million beginning April 1, 2020 and two other
series require
annual redemption payments of $0.5 million each, commencing
August 1, 1994 and
December 1, 2005, respectively. A fourth series aggregating $4.5
million is due
May 1, 1995. The utility plant and equipment of JWS, which has a
net book value
of $131.9 million at December 31, 1992, is subject to a lien
pursuant to the
Indenture under which the first mortgage bonds were issued. The
fair value of
the first mortgage bonds approximates $41.6 million. There is no
active quoted
market for the bonds. The fair value was determined primarily
based upon sales
prices, or bid and asked quotes for similar debt securities.
JWS has two revolving credit agreements each of which
permitted
unsecured
borrowings of up to $10 million with interest at rates equal to
the prime rate
(6% at December 31, 1992). Both of the agreements expired on
April 30, 1994 and
borrowings thereunder have been permitted by the lenders to
remain outstanding.
JWS is currently negotiating new credit agreements. Borrowings
under the
revolving credit agreements are classified as long-term as it
was
the intent of
JWS to extend the agreements as they expire, refinance the
borrowings under an
expiring agreement with funds borrowed under the other
agreement,
or refinance
borrowings under both agreements through the issuance of
long-term securities.
As of December 31, 1992, JWS had equal borrowings outstanding
under the
agreements aggregating $4.8 million. The fair value of these
borrowings
approximates the carrying amounts.
(5) Income Taxes
Effective January 1, 1992, the Company adopted the Statement
of
Financial
Accounting Standards No. 109, "Accounting for Income Taxes"
(SFAS
109). The
cumulative effect of adopting SFAS 109 was to record an income
tax benefit of
$4.3 million or $0.11 per share as of January 1, 1992. Such
amount has been
reflected
4-21
in the Consolidated Statements of Operations under the caption
"Cumulative
Effect of Change in Method of Accounting for Income Taxes."
The Company files a consolidated federal income tax return
including all U.S.
subsidiaries. At December 31, 1992, the Company had a net
operating loss
carry-forward ("NOL") for U.S. income tax purposes of
approximately $220
million expiring in years through 2007. As described in Notes 1
and 3, under
the Company's proposed plan of reorganization, newly issued
equity and debt
securities will be exchanged for existing debt of the Company.
If
the Company
effectuates its proposed plan of reorganization, a substantial
portion of the
NOL may not be available to reduce future U.S. taxable income.
Additionally,
due to recent changes in the U.S. Federal income tax laws, the
timing of any
such plan of reorganization could further impact and reduce the
amount of the
NOL. The Company also has an alternative minimum tax credit
carry-forward of
approximately $2 million available to offset future regular
income taxes
payable to the extent such regular taxes exceed alternative
minimum taxes
payable.
U.S. income and foreign withholding taxes have not been
provided on
undistributed earnings of certain foreign subsidiaries. Such
undistributed
earnings aggregated $16.2 million at December 31, 1992. The
Company considers
these earnings to be permanently invested in the business and,
under the tax
laws, not subject to such taxes until distributed as dividends.
The provision (benefit) for income taxes relating to
continuing
operations
consists of:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1992 1991 1990
--------- --------- -------
(In thousands)
Current
Federal.......... $- $663 $ 4,025
State and local.. 1,248 1,092 2,339
Foreign.......... 1,106 2,834 467
--------- --------- -------
2,354 4,589 6,831
--------- --------- -------
Deferred
Federal.......... 4,487 (5,440) 5,790
State and local.. (56) (156) 784
Foreign.......... 859 3,426 4,070
--------- --------- -------
5,290 (2,170) 10,644
--------- --------- -------
$7,644 $2,419 $17,475
========= ========= =======
</TABLE>
The provision (benefit) for income taxes relating to
discontinued operations
consists of:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1992 1991 1990
------- -------- -------
(In thousands)
Current
Federal.......... $(237) $(525) $ 9,984
State and local.. 7 (218) 2,633
------- -------- -------
(230) (743) 12,617
------- -------- -------
Deferred
Federal.......... 983 13,287 2,417
State and local.. 864 2,301 298
------- -------- -------
1,847 15,588 2,715
------- -------- -------
$1,617 $14,845 $15,332
======= ======== =======
</TABLE>
Factors accounting for the variation from U.S.
statutory income tax rates
relating to continuing operations are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1992 1991 1990
----------- ------- --------
(In thousands)
Federal income taxes at the statutory rate........ $(120,996) $2,425 $15,682
State and local income taxes, net of federal tax.. 787 618 2,061
Amortization and write-off of intangibles......... 29,791 (488) 637
Valuation allowance against deferred tax asset.... 96,849 - -
Other............................................. 1,213 (136) (905)
----------- ------- --------
$7,644 $2,419 $17,475
=========== ======= ========
</TABLE>
Factors accounting for the variation from U.S. statutory
income tax rates
relating to discontinued operations are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1992 1991 1990
---------- --------- -------
(In thousands)
Federal income taxes at the statutory rate........ $(85,548) $13,296 $12,557
State and local income taxes, net of federal tax.. 575 1,375 1,935
Amortization and write-off of intangibles......... 28,289 - 327
Valuation allowance against deferred tax asset.... 58,409 - -
Other............................................. (108) 174 513
---------- --------- -------
$1,617 $14,845 $15,332
========== ========= =======
</TABLE>
The sources of significant timing differences for 1991 and
1990 which gave
rise to deferred taxes and their effects were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Continuing Discontinued
Operations Operations
--------------- ---------------
1991 1990 1991 1990
-------- ------- -------
(In thousands)
Difference between book and tax accruals,
principally contracts......................... $(1,804) $(2,523) $261 $437
Appraisal differences........................... 1,316 7,637 3,953 1,392
Depreciation.......................................(258) 1,244 1,071 657
State and local deferred taxes, net of federal
tax benefits.. (103) 517 1,519 197
Acquisition adjustments...........................(382) 1,972 - (75)
Terminated leases and severance pay............... - - 7,616 -
Other, net........................................(939) 1,797 1,168 107
-------- --------- ------- -------
$(2,170) $10,644 $15,588 $2,715
======= ========= ======= =======
</TABLE>
The components of the net deferred income tax liability as of
December 31, 1992 are as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Deferred tax assets:
Net operating loss carry-forward......... $ 74,787
Excess of amounts expensed for financial statement purposes
over amounts deucted for income tax purposes. 93,891
Other......... 2,816
-----------
Total deferred tax asset................... 171,494
-----------
Deferred tax liabilities:
Costs capitalized for financial statement purposes and
deducted for income tax purposes............... 33,086
Foreign deferred tax liability............... 1,635
-----------
Total deferred tax liability................ 34,721
-----------
Net deferred tax asset before valuation allowance..136,773
Valuation allowance for net deferred tax asset. (138,274)
-----------
Net deferred tax liability................. $(1,501)
===========
</TABLE>
(Loss) income before income taxes from continuing operations
consists of the following:
1992 1991 1990
----------- ---------- -------
(In thousands)
United States.. $(342,304) $(11,013) $32,426
Foreign........ (13,567) 18,144 13,698
----------- ---------- -------
$(355,871) $7,131 $46,124
=========== ========== =======
(Loss) income before income taxes from discontinued operations
consists of
the following:
1992 1991 1990
----------- ------- -------
(In thousands)
United States.. $(228,754) $36,010 $36,932
Foreign........ (22,859) 3,098 -
----------- ------- -------
$(251,613) $39,108 $36,932
=========== ======= =======
The above amounts applicable to discontinued operations
include
a loss of
$49.5 million in 1992 with respect to the disposition of the
Company's overseas
information services business and certain units of the domestic
information services business.
(6) Capital Stock and Warrants
In August 1991, the Company issued 425,000 shares of preferred
stock in
connection with the acquisition of Businessland, Inc. (See Note
9). The
preferred stock is convertible into common stock of the Company,
at any time,
at the option of the holder at a conversion price of $20.00 per
share, subject
to customary anti-dilution provisions and exchangeable for 8.5%
Convertible
Subordinated Notes due 2006 of the Company in whole, but not in
part, at the
option of the Company after July 31, 1993. The Company has the
option to redeem
the shares of preferred stock after July 31, 1993 at $50.00 per
share. Each
share of preferred stock entitles the holder to receive
cumulative cash
dividends at the annual rate of $4.25 per annum per share. The
Company has not
paid dividends on its preferred stock since September 1992.
Cumulative unpaid
dividends at December 31, 1992 aggregate $0.5 million.
In 1969, the Company distributed 1,152,649 warrants of
participation to
holders of its common stock. The warrants of participation,
which
expire on
December 31, 1994, may entitle their holders to receive shares
4-24
of common stock of the Company in the event that JWS disposes of
all or any
significant portion of its water distribution system or the
Company disposes of
any shares of JWS. The number of shares of common stock to be
issued, if any,
will be determined on the basis of a specified formula and will
be distributed
to warrant holders on a pro rata basis.
Under the Company's 1992 and 1991 Stock Option Plans, a
maximum
of 2,500,000
shares and 1,000,000 shares of common stock, respectively, have
been reserved
for grant to key personnel. The per share exercise price of an
option may not
be less than the fair market value of a share of common stock on
the date of
grant. The options are exercisable at various dates and expire
ten years from
the date of grant.
The 1986 Incentive Stock Option and Appreciation Plan, as
amended (the
"Option Plan"), provides that incentive stock options ("ISOs"),
non-qualified
stock options and stock appreciation rights ("SARs") may be
granted to a
maximum of 1,125,000 shares of common stock. If ISOs are
granted,
the per share
exercise price of the option must be the fair market value of a
share of common
stock on the date of grant. The per share exercise price of a
non-qualified
stock option may be below the fair market value of a share of
common stock on
the date of grant.
Neeco, Inc., a computer reseller which the Company acquired
(See Note 9), had
outstanding stock options which were assumed by the Company on
the date of
acquisition. The Neeco options were granted at not less than
fair
market value
at the date of grant, are exercisable at various dates and
expire
five years
from date of grant.
A summary of stock option transactions for the years ended
December 31, 1992,
1991 and 1990 is as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Number of Shares
- --------------------------------------------------------------------
1992 1991 1990
- ---------------------------- ------------ ---------------------------
Balance beginning of year... 1,231,310 1,124,189 1,114,122
Granted..................... 3,079,680 395,075 306,414
Exercised................... (145,706) (220,329) (278,644)
Lapsed or cancelled......... (939,045) (67,625) (17,703)
------------ ---------------------------
Balance end of year......... 3,226,239 1,231,310 1,124,189
------------ -------------- -------------
Exercisable at year-end..... 747,965 598,196 580,439
------------ -------------- -------------
Option Price Per Share
- ---------------------------------------------------------------------
Outstanding at December 31.. $3.00-21.05 $ 6.67-21.05 $6.67-21.05
Granted..................... 3.00-18.25 14.00-15.625 20.92-21.05
Exercised................... 6.67-15.93 6.67-14.49 6.67-15.93
Lapsed or cancelled......... 3.50-21.05 6.67-21.05 6.67-15.93
</TABLE>
As described in Note 1, under the Company's proposed plan of
reorganization,
the holders of the Company's existing preferred and common stock
and warrants
of participation will receive warrants to purchase common stock
of the
reorganized Company in exchange for their equity interests.
(7) Retirement Plans
JWS and a foreign subsidiary have defined benefit pension
plans covering
substantially all eligible employees. The benefits under the
plans are based on
wages and years of service with the respective company. The
Company's policy is
to fund the minimum amount required by law.
In 1990, the Company curtailed the pension benefits under one
of its U.S.
plans and realized a net gain of $3.7 million. Effective May 31,
1991, the
Company terminated that plan and replaced it with a new defined
contribution
plan. The effect of the pension termination and settlement of
the
benefit
obligation was not material to the operating income of the
Company.
4-25
Net pension expense for defined benefit plans for 1992, 1991
and 1990
consists of the following components:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Domestic Foreign
(Discontinued Operations) (Continuing Operations)
- ----------------------------- ----------------------------- 1992 1991
1990 1992 1991 1990
--------- ------------------ --------- --------- ---------
(In thousands)
Service cost-benefits earned............... $1,305 $939 $5,089 $1,301 $1,484 $1,853
Interest on projected benefit obligations.. 1,725 1,490 1,928 2,481 2,108 1,896
Actual return on plan assets............... (2,276) (2,331) (1,963) (5,473) (3,428) (2,241)
Net amortization and deferral.............. 760 869 (267) 2,452 838 (89)
--------- ------------------ --------- --------- ---------
Net pension expense........................ $1,514 $967 $4,787 $761 $1,002 $1,419
========= ================== ========= ========= =========
</TABLE>
The benefit obligations and funded status of the plans at
December 31, 1992 and 1991 are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Domestic Foreign
(Discontinued Operatio(Continuing Operations
--------------------- ---------------------
1992 1991 1992 1991
---------- ---------- ---------- ----------
(In thousands)
Accumulated benefit obligations:
Vested...............................................$14,154 $14,379 $21,214 $20,009
Non-vested........................................... 657 902 - -
Impact of future salary increases................... 8,579 9,235 3,393 3,200
---------- ---------- ---------- ----------
Projected benefit obligations.......................... 23,390 24,516 24,607 23,209
Plan assets at market value.............................22,020 21,006 27,531 27,884
--------- ---------- ---------- ----------
(Deficiency) excess of plan assets over projected benefit
obligations.............................................(1,370) (3,510) 2,924 4,675
Unrecognized net (gain) loss from past experience
different from that assumed and effect of changes in
assumptions.............................................(3,551) 32 (1,670) (3,181)
Unrecognized net obligation (asset) from initial
application of SFAS No. 87........................... 854 925 (889) (1,189)
---------- ---------- ---------- ----------
(Accrued) prepaid pension............................ $(4,067) $(2,553) $ 365 $ 305
========== ========== ========== ==========
</TABLE>
The assumptions used as of December 31, 1992, 1991 and 1990 in
determining
the pension cost and liability shown above were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Domestic Foreign
(Discontinued Operatio(Continuing Operations)
--------------------------------------------
1992 1991 1990 1992 1991 1990
------- ------ ------ ------- ------- -------
Discount rate................ 7.5% 6.5% 7.25% 10% 11% 9%
Rate of salary progressions.. 7% 7% 7% 7% 7% 7%
Rate of return on assets..... 8% 8% 8% 10% 11% 10%
</TABLE>
The unrecognized net asset of the foreign plan is being
amortized over 15
years. The U.S. plan assets are primarily invested in fixed
income securities.
The foreign plan assets are invested 80% in equity securities
and 20% in fixed income securities.
The Company contributes to various union pension funds based
upon wages paid
to union employees of the mechanical/electrical business units.
Such
contributions approximated $41.6 million, $38.5 million and
$36.0
million in
1992, 1991 and 1990, respectively.
4-26
The Company has defined contribution retirement plans that
cover its U.S.
non-union eligible employees. Contributions to these plans are
based on a
percentage of the employee's base compensation. The expense
recognized in 1992,
1991 and 1990 relating to continuing operations for the defined
contribution
plans was $4.7 million, $4.7 million and $1.8 million,
respectively.
Effective January 1, 1993, the Company adopted the provisions
of Statement of
Financial Accounting Standards No. 106, "Accounting For
Postretirement Benefits
Other Than Pensions" (SFAS 106). The estimated present value of
the accumulated
postretirement benefit obligations under SFAS 106 approximated
$7.0 million at
January 1, 1993. The adoption of SFAS 106 did not have a
material
impact upon
the Company's Consolidated Statements of Operations.
(8) Lease Commitments
The Company and its subsidiaries lease land, buildings and
equipment under
various non-cancellable lease agreements. The lease agreements
frequently
include renewal options and require the Company to pay for
utilities, taxes,
insurance and maintenance expense.
Future minimum payments, by year and in the aggregate, under
capital leases
and non-cancellable operating leases with initial or remaining
terms of one
year or more relating to continuing operations consisted of the
following at December 31, 1992:
<TABLE>
<CAPTION>
<S> <C> <C>
Capital Operating
Leases Leases
------- ---------
(In thousands)
1993....................................... $848 $31,227
1994....................................... 1,606 23,377
1995...................................... 867 18,054
1996..................................... 663 13,834
1997...................................... 205 9,923
Thereafter................................ 751 45,691
------- ---------
Total minimum lease payments........... 4,940 $142,106
=========
Amounts representing interest...... 1,005
-------
Present value of net minimum lease payments (includes current
portion of $705).. $3,935
=======
</TABLE>
The above operating lease table includes lease obligations
retained by the
Company in connection with the sale of its domestic information
services
business (See Note 10). Future minimum payments under
non-cancellable operating
leases relating to discontinued operations are as follows (in
thousands):
$11,564, $11,133, $8,993, $6,056, $4,905 and $10,130 in 1993,
1994, 1995, 1996, 1997 and thereafter, respectively.
"Other long-term obligations and deferred credits" at December
31, 1992 and
1991 include capital lease obligations of $3.2 million and $21.0
million,
respectively.
Rent expense relating to continuing operations for the years
ended December
31, 1992, 1991 and 1990 was $26.6 million, $22.8 million and
$21.3 million,
respectively. Rent expense relating to discontinued operations
for the years
ended December 31, 1992, 1991 and 1990 was $20.7 million, $10.0
million and
$5.3 million, respectively.
(9) Business Combinations
In the fourth quarter of 1991, the Company completed the
acquisition of
Businessland, Inc. ("Businessland"). Pursuant to the
acquisition,
the Company
paid $17.0 million in cash and exchanged 1,108,195 shares of its
common stock
for all the outstanding common stock of Businessland. The
Company
4-27
acquired Businessland's 101/4% Senior Notes in the aggregate
principal amount
of $50.0 million for an aggregate of $18.75 million in cash and
425,000 shares
of its $4.25 Convertible Exchangeable Preferred Stock with a
liquidation
preference of $50.00 per share. Businessland was combined with
the Company's
then existing information services business. The acquisition of
Businessland
was accounted for by the purchase method of accounting. The
Company sold the
rental operations of Businessland in 1991 for $10.1 million in
cash. The sale
of the rental operations did not result in a gain or loss to the
Company.
On May 22, 1990, the Company acquired Neeco, Inc. ("Neeco"), a
computer
reseller. Neeco was combined with the Company's then existing
information
services business. The acquisition was accounted for as a
pooling
of interests.
The Company issued 4,669,375 shares of its common stock to the
former holders
of Neeco common stock.
Including the acquisition of Businessland, the Company paid
approximately
$15.4 million and $133.7 million in 1992 and 1991, respectively,
in cash, notes
and common stock for its acquisitions. Net tangible assets
acquired in 1992 and
1991 were approximately $7.0 million and $80.3 million,
respectively.
Except for Neeco, the acquisitions in 1992 and 1991 were
accounted for by the
purchase method of accounting and, accordingly, the consolidated
results of
operations include the results of the acquired companies from
acquisition
dates. Pro forma combined revenues from continuing operations of
the acquired
businesses would have been approximately $2.4 billion in 1991
and
$2.5 billion
in 1990, if the acquisitions had taken place on January 1. Pro
forma combined
income from continuing operations and net income per share from
continuing
operations would have been approximately $7.3 million and $0.14,
respectively,
in 1991 and $31.4 million and $0.74, respectively, in 1990. Pro
forma amounts
for the year ended December 31, 1992 are not materially
different
from the
actual amounts.
(10) Discontinued Operations
Discontinued operations includes the Company's information
services business
and water supply business.
In 1992, the Company's information services business was
negatively impacted
by several industry factors, such as rapid technology change,
steep price
discounting and by the problems encountered with the integration
of
Businessland.
In March 1993, the Company's Board of Directors approved the
disposition of
the Company's U.S. information services business. The Board of
Directors had
previously decided to sell the Company's overseas information
services
business. Accordingly, operating results of the information
services business
have been classified as discontinued operations. In August 1993,
the Company
sold substantially all the assets of its U.S. information
services business.
The Company did not realize a material gain or loss from the
sale. The assets
of the U.S. information services business consisted primarily of
inventory held
for resale and accounts receivable. Under the terms of the
agreement, the
purchaser assumed the debt and other liabilities relating to the
ongoing
operations of the business. The Company received warrants to buy
up to 10% of
the purchaser's common stock for a nominal amount. A subsidiary
of the Company
retained certain lease obligations aggregating $15 million, net
of estimated
settlement amounts and subrentals, at December 31, 1992. Such
lease obligations
relate to closed facilities and facilities identified to be
closed. These lease
obligations are included in the accompanying Consolidated
Balance
Sheet under
the captions "Other accrued expenses and liabilities" and "Other
long-term
obligations and deferred credits" in the amounts of $8.2 million
and $6.8
million, respectively. At December 31, 1992, net assets of the
information
services business aggregated approximately $5.0 million. Such
amount is
included in current assets under the caption "Net assets held
for
sale" in the
accompanying Consolidated Balance Sheet.
4-28
The information services business operated primarily in the
United States,
Europe and Canada. The following presents information about
operations in such
geographical areas:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Operating Identifiable
Revenues (Loss) Income Assets
---------- ------------- ------------
(In thousands)
1992
United States.. $1,418,350 $(144,743) $378,913
Europe......... 245,497 (37,727) 78,072
Canada......... 28,573 (5,469) 10,186
---------- ------------- ------------
$1,692,420 $(187,939) $467,171
========== ============= ============
1991
United States.. $1,106,711 $32,987 $723,759
Europe......... 91,088 1,824 116,094
Canada......... 15,970 (775) 16,781
---------- ------------- ------------
$1,213,769 $34,036 $856,634
========== ============= ============
</TABLE>
In 1990, the information services business was located only in
the United
States. Revenues and operating income of the information
services
business in
1990 were $710.8 million and $29.6 million, respectively. The
information
services business' operating loss in 1992 includes $41.3 million
attributable
to the write-off of goodwill and other intangibles and $26.0
million primarily
relating to severance payments and facilities consolidation.
In connection with the plan to dispose of the overseas
information services
business and certain other of its U.S. information services
businesses, the
Company provided for a loss of $49.5 million in 1992. This loss
represents the
estimated loss to be realized upon the disposition of such
businesses. Such
loss includes $32.1 million related to the write-off of goodwill
and other
intangible assets and $17.4 million for estimated losses to be
incurred up to
the expected disposal dates and the write-down of other assets
to
estimated net
realizable value.
In April 1992, the Company announced its intention to sell its
water supply
business. However, in July 1993, the Company's Board of
Directors
decided not
to proceed with the divestiture due to uncertainties created by
then pending
rate related proceedings and litigation. In December 1993, JWS
entered into an
agreement with respect to the rate related proceedings and
litigation.
Subsequently, the agreement was approved by the New York State
Public Service
Commission on February 2, 1994. Accordingly, the Company
reinstated its plan of
divestiture in the first quarter of 1994 and recorded a $7.4
million loss in
1993 to write-down the assets of the water supply business to
estimated net
realizable value. The financial statements for all periods
presented reflect
the water supply business as discontinued operations.
See Note 17 with respect to the status of a proceeding
initiated in 1988 by
the City of New York to acquire by condemnation all of the water
distribution
system of JWS that is located in New York City.
The assets of the water supply business consists primarily of
utility plant
and equipment which are located in Nassau and Queens Counties in
the State of
New York. The net assets of the water supply business, which
aggregate $57.2
million at December 31, 1992, are classified as long-term assets
in the
accompanying Consolidated Balance Sheet under the caption "Net
assets held for
sale" because the disposition of the water supply business is
expected to take
place after 1993.
Revenues of the water supply business were $59.8 million,
$63.1
million and
$59.2 million in 1992, 1991 and 1990, respectively. Operating
income of the
water supply business was $4.8 million, $14.6 million and $13.3
million in
1992, 1991 and 1990, respectively. The 1992 results include a
provision of $7.0
million related to the settlement litigation referred to above.
4-29
Combined operating results of discontinued operations
including
both the
information services and the water supply businesses are as
follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1992 1991 1990
----------- ---------- --------
(In thousands)
Revenues.................................... $1,752,171 $1,276,876 $769,994
Costs and expenses.......................... 1,935,349 1,228,281 727,090
----------- ---------- --------
Operating (loss) income..................... (183,178) 48,595 42,904
Interest expense............................ 18,944 9,487 5,972
----------- ---------- --------
(Loss) income before taxes.................. (202,122) 39,108 36,932
Provision for income taxes.................. 1,617 14,845 15,332
----------- ---------- --------
(Loss) income from discontinued operations.. $(203,739) $24,263 $21,600
=========== ========== ========
</TABLE>
(11) Other Businesses Sold and Net Assets Held For Sale
On October 16, 1992, the Company completed the sale of five
environmental
businesses for which it received net cash proceeds of $84.1
million. The five
businesses sold were two air pollution control businesses, JWP
Air
Technologies, Inc. and JWP Amcec Corp., two sludge pelletization
projects,
located in New York City and Baltimore, Maryland and Enviro-Gro
Technologies
Co., a sludge processing business. The Company realized a net
gain of
approximately $12.0 million from the sale of these businesses.
The Company has
sold a number of other non-core businesses and other assets in
1993 for net
cash proceeds of $43.4 million and notes and other assets with
an
aggregate
carrying value of $10.9 million. The Company's Board of
Directors
have approved
a plan for the sale of the Company's remaining energy and
environmental related
businesses, other non-core businesses and certain
mechanical/electrical
services operations. In connection with this asset disposition
plan, a loss of
$88.1 million was provided for in 1992. The loss represents the
loss on
businesses sold and the estimated loss to be realized upon the
disposition of
the businesses held for sale. The loss includes $24.1 million
attributable to
the write-off of goodwill and $64.0 million related to the
write-down of other
assets to net realizable value. In 1991, the Company incurred a
loss of $6.6
million in connection with the sale of a certain subsidiary. The
operating
results of these businesses as well as the provisions for
write-down of assets
are included in (loss) income from continuing operations.
Revenues and operating (loss) income of the other businesses
sold and held
for sale for the years ended December 31, 1992, 1991 and 1990
are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1992 1991 1990
--------- -------- --------
Revenues................. $526,894 $501,696 $444,242
Operating (loss) income.. (41,151) 15,325 12,592
</TABLE>
The condensed combined balance sheet relating to discontinued
operations and
other net assets held for sale at December 31, 1992 is as
follows
(in
thousands):
Cash........................... $ 25,297
Accounts receivable, net....... 340,847
Costs and estimated earnings in
excess of billings............. 35,449
Inventories.................... 189,744
Other current assets........... 18,450
--------
609,787
Property, plant and equipment, net.. 200,080
Other assets........................ 17,161
--------
$827,028
========
Notes payable............................ $51,238
Current maturities of long-term debt
and capital lease obligations............ 8,582
Accounts payable......................... 345,446
Billings in excess of costs and estimated
earnings................................. 21,472
Accrued payroll and benefits............. 28,130
Other accrued expenses................... 137,590
--------
592,458
Long-term debt........................... 74,178
Other long-term liabilities.............. 41,887
Net assets held for sale-current......... 32,894
Net assets held for sale-long-term....... 85,611
--------
$827,028
========
4-30
(12) Restructuring Charges
In 1992, the Company recorded $38.7 million of restructuring
charges related
to continuing operations. The Company's business restructuring
plan
contemplates the downsizing and consolidation of the Company's
North American
mechanical/electrical services operations. The Company's
strategy
also provides
for the disposition of non-core businesses and certain
mechanical/electrical
services operations. The restructuring charges consist of $10.8
million
applicable to permanent impairment of goodwill and $27.9 million
for severance
payments, facilities consolidation costs, provisions for
contract
losses and
the write-down of certain assets to net realizable value.
(13) Insurance Reserves
The Company is primarily insured with an indirect wholly-owned
captive
insurance subsidiary ("Defender") for its workers' compensation,
automobile and
general liability insurance. The insurance liability is
determined actuarially
based on claims filed and an estimate of claims incurred but not
yet reported.
The present value of such claims was determined as of December
31, 1992 using a
4% discount rate. The current portion of the insurance liability
was $16.5
million and $6.4 million at December 31, 1992 and 1991,
respectively. Such
amounts are included in "Other accrued expenses and liabilities"
in the
accompanying Consolidated Balance Sheets. The noncurrent portion
of the
insurance liability was $33.1 million and $12.5 million at
December 31, 1992
and 1991, respectively. Such amounts are included in "Other
long-term
obligations and deferred credits". The undiscounted liability
was
approximately
$54.0 million and $20.9 million at December 31, 1992 and 1991,
respectively.
The Company has restated its 1991 financial statements among
other things, to
increase its insurance liability by $4.5 million. The insurance
liability in
1991 was increased primarily to provide for losses on incurred
but not reported
claims.
At December 31, 1992, the Company and Defender had letters of
credit
outstanding totalling $38.2 million which in effect secure their
insurance
obligations. The letters of credit were intended to serve as
collateral for the
obligations of Defender to reimburse the Company's unrelated
insurance carriers
for claims paid in respect of certain years' insurance programs.
In December
1993, these letters of credit were reduced to $36.4 million.
$34.9 million of
such letters of credit expire in December 1994 and $1.5 million
expires in
February 1995. Since October 1992, neither the Company nor
Defender have been
able to obtain additional letters of credit to secure their
insurance
obligations and, as a result, have been required to make cash
collateral
deposits to a third party insurance company to secure those type
obligations.
The deposits totalled $7.7 million as of December 31, 1992 and
are included
under the caption "Miscellaneous" in Other Assets in the
accompanying
Consolidated Balance Sheet. Such deposits have increased to
$29.7
million as of
June 30, 1994.
The Company's proposed plan of reorganization contemplates
that
the letters
of credit, described above, will be drawn upon by the unrelated
insurance
carriers and that the Company's obligations to Defender, which
were pledged as
collateral to the banks issuing such letters of credit, will be
impaired in the
Chapter 11 proceeding as well as any related Company obligations
to those
banks. Beginning in February 1994, Defender ceased making
payments of amounts
owed to the unrelated insurance carriers, which obligations are
in effect
secured by the letters of credit, and the Company's unrelated
insurance
carriers have commenced partial draw downs against certain of
the
letters of
credit. Approximately $5 million has been drawn down against the
letters of credit through June 1994.
(14) Additional Cash Flow Information
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1992 1991 1990
-------- ------- -------
(In thousands)
Cash paid (refunded) during the year for:
Interest................................ $ 62,582 $54,258 $45,044
Income taxes.................... (15,617) 14,400 13,850
Significant non-cash financing and investment transactions are
as follows:
Debt assumed in acquisitions......... $929 $93,662 $11,107
Debt issued to acquire companies.... 2,566 9,648 1,750
Common stock issued for acquisitions.. 749 29,238 1,804
Preferred stock issued to retire debt - 21,250 -
Debt issued to acquire fixed assets... - - 4,122
Fixed assets acquired under capital lease
obligations................... 1,616 2,760 5,831
</TABLE>
(15) Segment Information
The following presents information about continuing operations
by geographic areas:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Operating Identifiable
Revenues Income (Loss) Assets
---------- ------------- ------------
(In thousands)
1992
United States............. $1,793,350 $(220,242) $582,426
Europe.................... 386,003 (15,985) 145,435
Canada.................... 225,224 615 61,218
Net assets held for sale.. - - 118,505
---------- ------------- ------------
$2,404,577 $(235,612) $907,584
========== ============= ============
1991
United States............. $1,713,651 $42,706 $1,842,391
Europe.................... 374,380 5,199 283,315
Canada.................... 230,081 9,746 108,121
---------- ------------- ------------
$2,318,112 $57,651 $2,233,827
========== ============= ============
1990
United States............. $1,712,517 $73,313 $1,323,201
Europe.................... 345,090 9,438 152,871
---------- ------------- ------------
$2,057,607 $82,751 $1,476,072
========== ============= ============
</TABLE>
(16) Selected Unaudited Quarterly Information
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
As Restated
- ----------------------------------
1992 Quarterly Results March 31 June 30 Sept. 30 Dec. 31 Total
- ---------------------------------------- ----------- --------------------- ----------- -----------
(In thousands, except per share data)
Revenues................................ $582,580 $606,824 $609,553 $605,620 $2,404,577
Gross Profit............................ 80,469 82,563 60,918 19,904 243,854
(Loss) from continuing operations before
cumulative effect of accounting change.. (7,822) (31,525) (89,599) (234,569) (363,515)
(Loss) from discontinued operations .... (9,712) (22,489) (38,176) (182,853) (253,230)
Cumulative effect of change in method of
accounting for income taxes............. 4,315 - - - 4,315
----------- --------------------- ----------- -----------
Net (loss).............................. $ (13,219) $(54,014) $(127,775) $(417,422) $(612,430)
=========== ===================== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
As Restated
- --------------------------
1992 Quarterly Results March 31 June 30 Sept. 30 Dec. 31 Total
- ------------------------------------------------------- -------- -------- -------- --------- ---------
(In thousands, except per share data)
(Loss) income per share:
Continuing operations.................................. $(0.20) $(0.80) $(2.22) $(5.78) $(9.00)
Discontinued operations................................ (0.25) (0.54) (0.94) (4.51) (6.24)
Cumulative effect of change in method of accounting for
income taxes........................................... 0.11 - - - 0.11
-------- -------- -------- --------- ---------
Net (loss)............................................. $(0.34) $(1.34) $(3.16) $(10.29) $(15.13)
======== ======== ======== ========= =========
</TABLE>
The loss from continuing operations in the fourth quarter of
1992 includes
the following: (i) restructuring charges of $13.9 million
primarily for
consolidation and downsizing of certain North American
mechanical/electrical
services business units, (ii) $70.2 million for losses
attributable to assets
held for sale, (iii) valuation allowances of $56.1 million
relating to accounts
receivable, work-in-progress on uncompleted contracts and
inventory and (iv) a
valuation allowance of $24.0 million provided against deferred
tax assets. The
loss from discontinued operations in the fourth quarter of 1992
includes the
following: (i) restructuring charges of $18.0 million relating
to
severance
payments and facilities consolidation, (ii) $37.6 million for
losses
attributable to assets held for sale, (iii) valuation allowances
of $62.4
million relating to accounts receivable and inventory and (iv)
$29.3 million
relating to write-off of goodwill and other intangibles.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
As
Restated
----------
1991 Quarterly Results March 31 June 30 Sept. 30 Dec. 31 Total
- ------------------------------------------ -------- -------- -------- ---------- ----------
(In thousands, except per share data)
Revenues.................................. $520,613 $560,015 $585,410 $652,074 $2,318,112
Gross Profit.............................. 86,761 89,065 91,993 76,732 344,551
Income (loss) from continuing operations.. 10,619 9,807 5,583 (21,297) 4,712
Income from discontinued operations....... 3,431 5,042 9,716 6,074 24,263
-------- -------- -------- ---------- ----------
Net income (loss)......................... $14,050 $14,849 $15,299 $(15,223) $28,975
======== ======== ======== ========== ==========
Income (loss) per share:
Continuing operations..................... $0.28 $0.26 $0.14 $(0.58) $0.10
Discontinued operations................... 0.09 0.13 0.25 0.16 0.63
-------- -------- -------- ---------- ----------
Net income per share...................... $0.37 $0.39 $0.39 $(0.42) $0.73
======== ======== ======== ========== ==========
</TABLE>
As discussed in Note 1, the Company has restated its operating
results for
the quarters and years ended December 31, 1991 and 1990 and each
of the
quarters in the nine month period ended September 30, 1992. The
effect of the
restatement was to decrease net income and earnings per share
for the fourth
quarter of 1991 and 1990 by $31.3 million and $9.1 million or
$0.81 and $0.24
per share, respectively, and to decrease (increase) net loss and
net loss per
share for each of the quarters in the nine month period ended
September 30,
1992 as follows (in thousands, except per share data):
Net Loss Quarter Ended Net
Loss Per Share
- -------------------- -------- ---------
March 31, 1992...... $26,451 $ 0.65
June 30, 1992....... (153) (0.01)
September 30, 1992.. 7,554 0.19
(17) Legal Proceedings
Since August 1992, nineteen purported class action lawsuits
have been filed
against the Company arising out of the restatement of earnings,
write-offs and
losses announced by the Company on August 4, 1992 and October 2,
1992. Pursuant
to Stipulation and Court Order on January 15, 1993, a single
consolidated amended class action complaint (the "Complaint") was
filed. The Complaint names
as defendants the Company, certain former officers and
directors, four current
directors, a former subsidiary officer and the Company's then
outside auditor, Ernst & Young.
The Complaint alleges violations of Section 10(b) of the
Securities and
Exchange Act of 1934, Rule 10b-5 promulgated thereunder and
common law fraud
and deceit on the part of the Company and certain other
defendants. Among other
things, the Company is alleged to have intentionally and
materially overstated
its inventory, accounts receivable and earnings in various
public
disseminations during the purported class period May 1, 1991
through October 2,
1992. The Complaint seeks an unspecified amount of damages. The
Company denies
the material allegations in the complaint. The parties are now
engaged in
discovery proceedings. However, the Company expects that under
its proposed
Chapter 11 plan of reorganization, no damages will be
recoverable
from the
Company by claimants in the class action litigation, although
they will receive
warrants to purchase the common stock of the reorganized
Company.
The Company has been informed by the Securities and Exchange
Commission (the
"SEC") that it is conducting a private investigation to
determine
whether there
have been violations of certain provisions of the Federal
securities laws
and/or the rules and regulations of the SEC in connection with
the Company's
financial records, reports and public disclosures. The Company
has been
cooperating with the SEC's staff and has voluntarily produced
requested
documents and information. On April 12, 1994, the SEC's staff
informed the
Company of its intention to recommend that the SEC file a civil
injunction
action against the Company. The Company is currently engaged in
discussions
with the SEC's staff concerning a possible consensual resolution
of the matter.
In January 1992, the Public Service Commission of the State of
New York
("PSC") ordered its staff to perform an audit covering all
aspects of
operations of JWS. The audit report alleged that mismanagement
and imprudence
on the part of JWS may have resulted in excess charges to its
customers of up
to $10.6 million. Based on the audit report, in June 1992 the
PSC
instituted a
proceeding requiring JWS to demonstrate that its rates charged
to
customers are
not excessive and provided for an investigation of JWS's
management practices.
As part of this proceeding and citing the audit report's
assertion without
receiving the audit report in evidence, the PSC ordered that
$10.6 million of
JWS's annual revenues be made temporary and subject to refund,
effective August
6, 1992, pending the completion of the investigation.
Between December 1992 and May 1993, representatives of JWS,
the
PSC, consumer
advocate groups, the County of Nassau, the town of Hempstead and
others
appeared and submitted testimony in the PSC proceedings. On June
3, 1993, the
PSC issued an order suspending hearings and appointed two
administrative law
judges for the purpose of effecting a settlement. Negotiations
among the
parties and the settlement judges were ongoing from that time.
In addition on February 5, 1993, the County of Nassau filed a
complaint in
the Supreme Court of the State of New York alleging that JWS
intentionally
filed false rate applications with the PSC and, as a result, for
the period
from March 31, 1987 through March 31, 1992, JWS had earnings
that
exceeded its
projections by $8.7 million. The complaint alleged that this
conduct
constituted violations of the Racketeer Influenced and Corrupt
Organizations
Act ("RICO") and common law fraud.
On December 22, 1993, JWS, the New York State Consumer
Protection Board,
Nassau County, certain other governmental bodies and a consumer
advocate group
executed an agreement that ended the several regulatory and
legal
proceedings
against JWS described above. Subsequently, the agreement was
approved by the
PSC on February 2, 1994. The agreement provides for, among other
things, a
three year general rate moratorium, resolution of the economic
issues raised by
the PSC arising from its 1992 audit of JWS, settlement of
related
litigation
and the dismissal of Nassau County's RICO lawsuit against JWS.
JWS agreed, in
consideration of avoided litigation and other costs associated
with the
proceedings, to make payments over the next three years
totalling
$11.7 million
to customers in Nassau and Queens Counties in the State of New
York. In
connection with this settlement, the Company provided a pre-tax
charge of $7.0
million in 1992.
4-34
The agreement also provides that JWS will use its best efforts
to
bring about
the separation of Jamaica Water Securities Corp., a subsidiary
of
the Company
which holds substantially all the common stock of JWS, from the
Company.
In 1986, the State of New York enacted a statute requiring the
City of New
York (the "City") to acquire by condemnation all of the JWS
property
constituting or relating to its water distribution system
located
in the City
only if a Supreme Court of the State of New York (the "Supreme
Court") decides
that the amount of compensation to be paid for the system is
determined solely
by the income capitalization method of valuation. If the Court
determines
compensation by a method other than the income capitalization
method or the
award is for more than the rate base of the condemned assets,
the
statute
permits the City to withdraw the proceeding without prejudice or
costs. In
1988, the City instituted a proceeding pursuant to the statute
to
acquire the
system which constitutes approximately 75% of JWS' water utility
plant. JWS
argued at trial that the judicially recognized method for
valuing
public
utility property is by the method known as "Reproduction Cost
New, Less
Depreciation". JWS also sought consequential and severance
damages that would
result from separating the JWS Nassau County water supply system
from that in
the City. The aggregate compensation sought by JWS as of
December
31, 1987 was
approximately $924 million. The City submitted its income
capitalization
valuation, as of December 31, 1987, at approximately $63
million.
In June 1993, the Supreme Court dismissed the City's petition.
The Supreme
Court concluded, among other things, that the statute is
unconstitutional
because it directs the Court to render an advisory opinion.
In February 1994, the New York Court of Appeals held
constitutional a
nearly-identical statute dealing with another water utility. In
April 1994,
upon a request made by the City for reconsideration, the Supreme
Court stated
that it would reconsider its prior decision in light of the
February decision
of the Court of Appeals.
The Company cannot predict when or if the Supreme Court will
conduct further
proceedings under the statute nor is it possible to predict what
the decision
of the Supreme Court might be if it decides to value the JWS
property or the
effect of the pending litigation on the proposed sale of JWS.
In 1993, the Company's French and Belgian information services
subsidiaries
filed petitions in their respective countries seeking relief
from
their
creditors. The French and Belgian subsidiaries have outstanding
unsecured
credit facilities which are guaranteed by the Company
aggregating
approximately
$5.9 million. Such amount has been provided for as a loss in the
accompanying
Consolidated Statement of Operations for the year ended December
31, 1992.
As described in Note 10, in August 1993 the Company sold its
U.S. information
services business and among other things, retained certain
liabilities,
primarily lease obligations. In October 1993, the subsidiary
formerly carrying
on this business filed a voluntary petition under Chapter 7 of
the U.S.
Bankruptcy Code.
In connection with an investigation of the plumbing industry
being conducted
by the New York County District Attorney's office, two related
subsidiaries of
the Company engaged in the plumbing business in New York City
have received
subpoenas for certain of their books and records. The
subsidiaries have
complied with those subpoenas. Additionally, certain employees
of
these
subsidiaries have been subpoenaed to testify as witnesses before
a grand jury
and those employees have complied with the subpoenas.
The Company is subject to other legal proceedings and claims
which have
arisen in the ordinary course of business and have not been
adjudicated. The
Company cannot predict the outcome of such litigation or the
impact that an
adverse result in such litigation will have upon the Company's
financial
position or results of operations.
4-35
(18) Other
JWS is subject to a PSC order which requires that dividend
payments by JWS
not exceed 50% of JWS's net income available to common
shareholders for the
preceding twelve month period and subject further to a
debt/equity ratio
restriction. Under such PSC order, approximately $2.4 million of
JWS's retained
earnings were available for the payment of dividends and $52.7
million of JWS's
retained earnings were restricted as of December 31, 1992.
In September 1992, the PSC issued an order requiring
additional
subjective
certifications before the payment by JWS of cash dividends on
its
common stock.
This resulted in the suspension of dividend payments to the
Company by JWS for
the last two quarters of 1992 and all of 1993. Dividends paid by
JWS in 1992
and 1991 amounted to $1.2 million and $2.0 million,
respectively.
As a result
of the settlement agreement described in Note 17, JWS
recommenced
dividend
payments in 1994.
4-36
MANAGEMENT'S DISCUSSION AND ANALYSIS OF JWP INC. AND
SUBSIDIARIES
FINANCIAL
CONDITION AND RESULTS OF OPERATIONS FOR THE TWO YEARS ENDED
DECEMBER 31, 1993
(Unaudited)
Results of Operations
Revenues for the years ended December 31, 1993 and 1992 were
$2.2 billion and
$2.4 billion, respectively. Net loss for the years ended
December
31, 1993 was
$123.1 million or $3.06 per share compared to a net loss of
$612.4 million or
$15.13 per share in the year earlier period. The Company's loss
from continuing
operations for the years ended December 31, 1993 was $114.0
million or $2.84
per share compared to a loss of $363.5 million or $9.00 per
share
for the year
ended December 31, 1992.
Net loss from continuing operations for the year ended
December
31, 1993
includes net interest expense of $50.2 million compared to $44.2
million of net
interest expense in 1992. The increase in interest expense in
1993 primarily
reflects accruals for penalty interest on debt in default. Net
loss from
continuing operations for the year ended December 31, 1993
includes a net gain
on businesses sold or held for sale of $1.0 million. Net loss
from continuing
operations for the year ended December 31, 1992 includes a net
loss of $76.1
million on the businesses sold or held for sale.
Net loss from discontinued operations for the year ended
December 31, 1993
was $9.1 million or $0.22 per share compared to $253.2 million
or
$6.24 per
share for the year ended December 31, 1992. The loss from
discontinued
operations for the year ended December 31, 1993 reflects a
charge
of $8.1
million related to an adjustment in the carrying value of
liabilities as a
result of the bankruptcy filing under Chapter 7 of the U.S.
Bankruptcy Code by
the Company's subsidiary that formerly carried on the Company's
U.S.
information services business and a charge of $7.4 million to
write down the
net assets of the water supply business to estimated net
realizable value.
The net loss in 1992 reflects (i) a continuing slump in the
Company's
mechanical and electrical services business, principally
attributable to a
downturn in commercial construction; (ii) intense competition in
the Company's
information services business; (iii) restructuring charges
related to the
planned disposition and downsizing of (a) the information
services business,
(b) other non-core businesses and (c) certain
mechanical/electrical operations;
(iv) significant provisions for losses on accounts receivable
and
inventories;
(v) a provision for losses on net assets held for sale; and (vi)
expenses
associated with the shareholder litigation, the Company's
efforts
to
restructure its debt through a consensual arrangement and the
restatement of
the Company's financial statements.
A significant portion of the 1992 loss, particularly with
respect to losses
on accounts receivable and write down of inventories, arose as a
result of
management's review of the Company's year end 1992 financial
statements.
Concurrent with such review, the Company recorded significant
write-offs and
losses in 1992 for impairment of goodwill and other intangibles,
for the
establishment of asset valuation and restructuring reserves
associated with net
assets held for sale and as a result of the decision to
discontinue the
information services business.
On December 21, 1993, three holders of the Company's 73/4%
Convertible
Subordinated Debentures filed an involuntary petition under
Chapter 11 of the
U.S. Bankruptcy Code against the Company. The Company on
February
14, 1994
consented to the entry of an order for relief under Chapter 11
of
the
Bankruptcy Code. At that time the Company adopted a proposed
plan
of
reorganization which, as modified, has the support of the
Official Unsecured
Creditors Committee and the Official Unsecured Junior Creditors
and Interest
Holders Committee. The proposed plan of reorganization
contemplates the
exchange of substantially all of the Company's indebtedness for
new notes of
the reorganized Company, all of its common stock and warrants to
purchase
common stock of the reorganized Company. Holders of the
Company's
common and
preferred stock and warrants of participation will receive
warrants to purchase
common stock of the reorganized Company in exchange for their
equity interests.
The proposed plan also contemplates a business restructuring
plan
which the
Company initially developed in the third quarter of 1992 to
divest
4-37
certain of its non-core businesses. However, there can be no
assurance that the
proposed plan of reorganization will be consummated or, if so,
its timing. See
"Liquidity and Capital Resources" for additional discussion with
respect to the
Company's business restructuring plan.
Following the Company's public announcement in October 1993 of
its then
proposed reorganization plan, the New York Stock Exchange took
action resulting
in the delisting of the Company's common stock.
As of December 31, 1993, the Company had negative net worth of
$302.3 million
and a working capital deficit of $452.3 million after the
reclassification of
debt in default aggregating $501.0 million. The Company is not
in
compliance
with certain covenants contained in its loan agreements. The
Company continues
to experience inadequate cash flow to fund its operations and
service its debt
and other obligations. From September 1992 to February 1994,
when
the Company
obtained debtor-in-possession financing, the Company did not
have
available
credit facilities and, consequently, funded its operations from
working capital
and proceeds from the sale of businesses and other assets. The
Company's surety
companies are reviewing bid and performance bonding requests on
a
case-by-case
basis with special attention paid to large construction projects
and those with
a duration of more than two years. In addition, a surety company
that had been
the primary source of surety bonds for certain subsidiaries,
which together
comprised approximately 20% of the Company's 1993 revenues of
those
mechanical/electrical companies which the Company currently
plans
to retain, is
no longer engaged in the business of issuing such bonds. As a
result, these
subsidiaries are currently not receiving such bonds. However,
the
absence of
available bonding for these subsidiaries has not resulted in a
material
reduction in their backlog. The Company and these subsidiaries
are actively
engaged in discussions with another surety company which has
undertaken due
diligence for the purpose of entering into a new surety bonding
arrangement.
However, there can be no assurance that such a new surety
bonding
arrangement
can be obtained.
The accompanying financial statements have been prepared on a
going concern
basis and do not include any adjustments relating to the
recoverability and
classification of assets or the amounts and classification of
liabilities that
might be necessary should the Company be unable to continue as a
going concern.
The Company's continuation as a going concern is dependent upon
its ability to
restructure its indebtedness in the Chapter 11 proceeding,
obtain
sufficient
bonding to guarantee its performance on construction contracts,
return to
profitability, obtain new credit facilities and otherwise
generate sufficient
cash flow to meet its restructured and other obligations on a
timely basis. See
"Liquidity and Capital Resources."
As a result of the restatements of the Company's first and
second quarter
earnings of 1992, write-offs and losses announced by the Company
on August 4,
1992 and on October 2, 1992, class action lawsuits were filed on
behalf of
shareholders against the Company and certain other defendants.
The class action
lawsuits have been consolidated and the single consolidated
amended class
action complaint alleges, among other things, that the Company
intentionally
and materially overstated assets and earnings in various public
disseminations
in violation of Section 10(b) of the Securities and Exchange Act
of 1934 and
Rule 10b-5 promulgated thereunder. The complaint seeks an
unspecified amount of
damages. The Company has denied the material allegations
contained in the
complaint. The parties are now engaged in discovery proceedings.
However, under
the terms of the Company's proposed plan of reorganization, no
damages will be
recoverable from the Company by the claimants in the class
action
litigation,
although they will receive warrants to purchase the common stock
of the
reorganized Company. See Note I to Condensed Consolidated
Financial Statements
for additional discussion with respect to the shareholder
litigation.
The Company has been informed by the Securities and Exchange
Commission (the
"SEC") that it is conducting a private investigation to
determine
whether there
have been violations of certain provisions of the federal
securities laws
and/or the rules and regulations of the SEC in connection with
the Company's
financial records, reports and public disclosures. The Company
has been
cooperating with the SEC's staff and has voluntarily produced
requested
documents and information. On April 12, 1994, the SEC's staff
informed the
Company of its intention to recommend that the SEC file a civil
injunction
action against the Company. The Company is currently engaged in
discussions
with the SEC's staff concerning a possible consensual resolution
of the matter.
4-38
Selling, general and administrative expenses ("SG&A") were
$216.7 million in
1993 compared to $440.7 million in 1992. The significantly
higher
SG&A expenses
in 1992 reflects a provision of $100.4 million for losses on
accounts and other
receivables (See "Mechanical/Electrical Services" below) and
higher 1992
general corporate expenses of $48.4 million compared to $26.4
million in 1993
(See "General Corporate and Other Expenses"). A reduction of
SG&A
expenses in
1993 was realized from the Company's downsizing and
restructuring
plan.
Mechanical/Electrical Services
Revenues of the mechanical/electrical services business units
for the year
ended December 31, 1993 decreased 8.7% to $2.2 billion from $2.4
billion in
1992. Operating loss for the year ended December 31, 1993 was
$39.1 million
compared to an operating loss of $187.2 million for the year
ended December 31,
1992. In connection with the Company's business restructuring
plan, certain
mechanical/electrical services business units have been sold or
identified for
sale. The operating results of such business units are included
in the
aforementioned operating results. Revenues of the
mechanical/electrical
business units sold or held for sale for the years ended
December
31, 1993 and
1992 were $257.9 million and $526.9 million, respectively. For
the year ended
December 31, 1993, such business units had an operating loss of
$11.8 million
compared to an operating loss of $41.2 million in the year
earlier period.
The operating results in both 1993 and 1992 reflect, among
other things, the
continuing negative impact of the recession and oversupply in
the
commercial
real estate market which has caused intense competition for new
commercial
work. As a result of the reduction of commercial work, many of
the Company's
mechanical/electrical services business units have pursued
noncommercial
projects, primarily governmental and municipal facilities, at
lower margins
than historically available in the commercial marketplace.
Certain of these
business units were not as experienced in performing
noncommercial projects
and, as a result, incurred losses on these long-term contracts.
The operating
loss in 1993 includes $13.0 million of losses incurred by the
Company's
business units in the Midwest. Such losses primarily consist of
job write-downs
and loss contingencies on certain large completed industrial and
municipal
projects. In the fourth quarter of 1993, certain of the
Company's
mechanical
business units in the Western region recorded charges of
approximately $13.1
million for estimated losses on certain large uncompleted
municipal projects.
The losses were primarily attributable to adverse weather
conditions,
management turnover, inadequate estimating of job costs and
labor
problems.
Operating margins in 1993 were also adversely affected by
approximately $7.6
million of losses in the United Kingdom and Canada. Such losses
reflect, among
other things, the continued recession in the United Kingdom and
Canada,
downsizing costs in the United Kingdom and the inadequacy of
available bonding
in Canada. The operating loss for the year ended December 31,
1992 includes a
provision for losses on accounts and other receivables of $100.4
million, due
partially to the impact of the recession on the financial
condition of
customers of the Company's mechanical/electrical services
business units.
Additionally, the Company's financial condition and negative
cash
flow
negatively impacted its ability to settle claims and unapproved
change orders
on a favorable basis. The operating loss for the year ended
December 31, 1992
also includes restructuring charges of $38.7 million for the
downsizing of the
Company's North American mechanical/electrical services
operations, $13.6
million applicable to the write-off of goodwill and a charge of
$15.6 million
relating to the write-off of the small tool inventory. Small
tools are located
at numerous construction sites and generally have short lives.
The Company made
the decision to write-off its small tool inventory because of
the
difficulty
and expense associated with taking periodic physical
inventories.
At December 31, 1993, the mechanical/electrical services
business backlog was
$1.0 billion compared to $1.6 billion at December 31, 1992. Such
backlog
included $954.2 million at December 31, 1993 and $1,263 million
at December 31,
1992 relating to companies which the Company currently intends
to
retain. The
Company's overall backlog in its North American regions and in
the United
Kingdom has stabilized at approximately $1.0 billion through May
1994. The
initial decline is attributable to the downsizing of the
Company's operations,
the Company's weakened financial condition which continues
adversely affects
its ability to obtain new contracts and the continuing recession
in the North
American and overseas construction markets.
4-39
Prospects for a recovery in the commercial office building
market in both
North America and the United Kingdom remain poor for the
immediate future.
Additionally, the surety companies will generally not bond new
projects for
certain non-core businesses which the Company has identified for
sale. Surety
bonds are frequently a precondition to the award of a mechanical
or electrical
contract.
Included in the Condensed Consolidated Balance Sheet as of
December 31, 1993
under the caption "Excess of cost of acquired businesses over
net
assets, less
amortization" is $59.0 million of goodwill. Such goodwill
relates
to the
mechanical/electrical services business units which the Company
currently
intends to retain. Management believes that such goodwill has
not
been
permanently impaired. However, if the Company were to later
decide to divest
these units, goodwill and other write-offs might be required
depending upon
then existing market conditions and their future business
prospects.
Discontinued Operations
In April 1992, the Company announced its intention to sell its
water supply
business. However in July 1993, the Board of Directors decided
not to proceed
with the divestiture due to the then pending rate proceedings
and
litigation.
In December 1993, the Company's subsidiary, Jamaica Water Supply
Company
("JWS"), executed an agreement with respect to the rate related
proceedings and
litigation (See Note I) thereby eliminating significant
uncertainties relating
to the Company's water supply business. Subsequently, the
agreement was
approved by the New York State Public Service Commission on
February 2, 1994.
Accordingly, the Company reinstated its plan of divestiture in
the first
quarter of 1994. In 1993, the Company recorded a $7.4 million
loss to
write-down the net assets of the water supply business to
estimated net
realizable value. The Condensed Consolidated Financial
Statements
reflect the
water supply business as a discontinued operation for all
periods
presented.
See Note I regarding the status of a proceeding initiated in
1988
by the City
of New York with respect to the possible condemnation of the
water distribution
system of JWS that is located in New York City.
For the year ended December 31, 1993, revenues of the water
supply business
increased 11.9% to $66.8 million from $59.8 million in the year
earlier period.
Operating income for the year ended December 31, 1993 was $15.4
million
compared to $4.8 million in the year earlier period. Operating
results for the
year ended December 31, 1992 included a charge of $7.0 million
relating to the
settlement of litigation and regulatory matters. See Note I and
"Liquidity and
Capital Resources."
On January 1, 1994, upon expiration of the then existing
collective
bargaining agreement, the local collective bargaining unit
(Local
374 of the
Utility Workers Union of America) representing 212 employees of
JWS commenced a
strike against JWS. On March 27, 1994, the membership of the
local collective
bargaining unit ratified a new five year collective bargaining
agreement
negotiated between JWS and union officials thereby ending the
work stoppage.
In March 1993, the Company's Board of Directors approved the
disposition of
the Company's U.S. information services business. The Board of
Directors had
previously decided to sell the Company's overseas information
services
business. Accordingly, operating results reflect the information
services
business as discontinued operations. See Note E to the Condensed
Consolidated
Financial Statements. Revenues of the information services
business were $876.7
million and $1.7 billion in 1993 and 1992, respectively.
Operating income of
the information services business in 1993 was $10.2 million
compared to a loss
from operations of $187.9 million in 1992. The loss in 1992
includes charges of
$67.3 million which consist of the write-off of goodwill and
other intangible
assets related to the U.S. information services business and
costs attributable
to employee severance and facilities consolidation. The loss
also
reflects
intense competition among personal computer resellers, decreases
in the prices
of personal computers and the rapid introduction of new
technology. The
difficulties encountered by the Company in successfully
integrating the back
office operations and accounting systems of Businessland Inc.,
which was
acquired in August 1991, with the Company's preexisting
information services
back office operations resulted in additional losses. In 1993,
the Company sold
substantially all the assets of its U.S. and international
information services
subsidiaries. The transactions did not result in a material gain
or loss to the
Company in 1993. See "Liquidity and Capital Resources" below for
additional
information with respect to the disposition of the U.S.
information services
subsidiary.
4-40
In connection with the plan to dispose of the Company's
overseas information
services business and certain of its U.S. information services
units, the
Company provided for losses aggregating $49.5 million in 1992.
These charges
primarily represent the estimated losses to be realized upon the
disposition of
such business units in 1993. Such amount is in addition to the
aforementioned
loss from operations of $187.9 million and is included in the
accompanying
Consolidated Statement of Operations under the caption "Loss
from
disposal of
businesses" in Discontinued Operations.
General Corporate and Other Expenses
General corporate and other expenses for the year ended
December 31, 1993
were $26.4 million compared to $48.4 million in 1992. Corporate
expenses for
the year ended December 31, 1993 include approximately $12.0
million of
expenses related to legal, consulting and other professional
fees
arising from
the shareholder litigation and the proposed debt restructuring.
The higher
amount of corporate expense for the year ended December 31, 1992
was related
primarily to fees paid in 1992 to lending institutions for
extensions,
amendments and waivers to the Company's revolving credit
agreement ($4.5
million), the accelerated vesting of deferred compensation as a
result of the
termination of employment of certain officers ($5.6 million),
employee
termination costs ($1.8 million) and relocation of the corporate
headquarters,
primarily the write-off of leasehold improvements and
abandonment
of a lease
($4.2 million).
Liquidity and Capital Resources
For the year ended December 31, 1993, the Company's operations
used $44.5
million in cash primarily due to operating losses and working
capital
requirements. From September 1992 to February 1994, the Company
had no
available lines of credit and experienced significant cash
outflow as a result
of adverse publicity associated with the restatements of its
first and second
quarter 1992 financial statements, defaults under its loan
agreements, senior
management changes and from operating losses. In February 1994,
the Company
obtained a $35 million debtor-in-possession credit facility
("DIP
Loan") from
Belmont Capital Partners II, L.P., an affiliate of Fidelity
Investments
("Belmont"), which is described in greater detail below.
The Company's consolidated cash balance decreased from $86.8
million at
December 31, 1992 to $39.5 million at December 31, 1993. The
December 31, 1993
cash balance includes $3.0 million in foreign bank accounts.
Such
bank accounts
are not available to support the Company's domestic
mechanical/electrical
services business or to pay corporate expenses. The negative
operating cash
flow reflects continued pressure on accounts payable and other
sources in
working capital caused by the Company's weakened financial
condition, recurring
operating losses, restructuring costs and professional fees
relating to debt
restructuring negotiations and shareholder litigation. Cash
deposits made to
secure insurance obligations also negatively impacted cash flow.
As a consequence of the Company's financial difficulties, an
asset
disposition program was initiated in the third quarter of 1992
with respect to
the Company's non-core businesses and certain other assets to
raise cash to
reduce operating cash outflow and to reduce debt. A total of
$139.0 million of
net cash proceeds was realized from that program in 1992
including: $84.1
million from the sale of five energy and environmental related
businesses,
$21.1 million from the sale of the Company's computer lease
portfolio, $18.4
million from the sale of the Company's interest in a hospital's
central utility
plant and $8.8 million from the sale of a rental equipment
business. The cash
proceeds from these asset dispositions in 1992 were used to
reduce debt and for
working capital requirements. During 1993, the Company received
net cash
proceeds of $43.4 million from the sale of certain overseas
information
services business units, other non-core businesses and other
assets. Such
proceeds were used primarily for working capital requirements.
In 1993, the Company's information services business and its
Canadian
mechanical and electrical services subsidiary made net
repayments
of $13.1
million and $6.2 million, respectively, of notes payable to
various lending
institutions.
4-41
In February 1994, the Company and substantially all of its
subsidiaries
entered into an agreement with Belmont in respect to a DIP Loan.
The agreement
provides a credit facility to the Company of up to $35 million
at
an interest
rate of 12% per annum during the period of the reorganization
proceeding. Also,
Belmont will receive, as additional interest, a percentage of
the
securities to
be issued under the Company's plan of reorganization. The DIP
Loan is secured
by a first lien on substantially all of the assets of the
Company
and most of
its subsidiaries. As of June 1994, the Company had drawn down
$20
million under
the DIP Loan.
The Company is in default of certain covenants of the DIP
Loan.
Pursuant to
written waivers of default, dated April 27, 1994 and May 6,
1994,
the Company
has been permitted by Belmont to draw on its line of credit.
Under the
circumstances, any additional borrowings under the DIP Loan will
require
further waivers of default.
The DIP Loan is intended to be repaid upon the effective date
of the proposed
plan of reorganization. The Company is actively seeking a
working
capital
facility of approximately $40 million. The proceeds of this new
facility will
be used to refinance the Company's borrowings under the DIP Loan
and to provide
working capital to the reorganized Company. However, there can
be
no assurance
that the Company will be able to obtain a new working capital
facility or, if
so, the amount of any such facility. Obtaining such a facility
is
a condition
to the confirmation of the Company's plan of organization.
In August 1993, the Company sold substantially all the assets
of its U.S.
information services subsidiary to ENTEX Information Services,
Inc. ("ENTEX"),
a newly organized company owned by a private investor and the
management of the
U.S. information services subsidiaries. As part of the
consideration for its
sale, the Company received warrants to buy up to 10% of the
purchaser's common
stock for a nominal amount. The Company has ascribed no value to
these
warrants. Additionally, ENTEX assumed substantially all the debt
and other
liabilities and obligations relating to the ongoing operations
of
the U.S.
information services subsidiary; that subsidiary retained
certain
lease
obligations and certain tax liabilities. The Company was also
released from
approximately $210 million of its guarantees of indebtedness and
similar
obligations of the subsidiary. In October 1993, this subsidiary
filed a
voluntary petition under Chapter 7 of the U.S. Bankruptcy Code.
As described in Notes A and C to the Company's Condensed
Consolidated
Financial Statements, the Company is in default of covenants
contained in its
loan agreements under which approximately $501.0 million was
outstanding at
December 31, 1993 and 1992, including $484.4 million owed to
senior lenders and
$16.6 million owed to subordinated note holders. With respect to
the defaulted
senior loan agreements, "standstill arrangements" were
negotiated
which covered
the period from mid-December of 1992 through April 30, 1993.
Under the
standstill arrangements, the senior lenders agreed, in
principle,
to forebear
the receipt of principal and to accept payment of interest
during
such periods
at reduced rates ranging from 4% to 6.75%. Since April 30, 1993,
no standstill
arrangement has been in place and the Company ceased making
principal and
interest payments. However, interest continued to accrue under
the terms of the
respective loan agreements which in certain circumstances
include
default rate
premiums of an additional 2% and in one case 4%. Interest ceased
to accrue on
December 21, 1993, the date on which an involuntary bankruptcy
petition was
filed against the Company. At December 31, 1993, accrued
interest
on defaulted
debt was $43.3 million. The Company has pledged to the holders
of
its senior
notes and bank indebtedness the common stock of five
subsidiaries
held for sale
and certain proceeds from the sale of one of these subsidiaries.
The combined
net book value of these subsidiaries was $23.2 million at
December 31, 1993.
The Company has not made scheduled semiannual interest
payments
since
September 1, 1993 with respect to its 73/4% Convertible
Subordinated
Debentures. All interest payments on such debt were previously
made when due.
The outstanding principal balance of the debentures at December
31, 1993, in
the amount of approximately $7.0 million, has been included in
"Debt in
default" in the accompanying Condensed Consolidated Balance
Sheet.
4-42
In June 1993, the Company's management developed a business
restructuring
plan. The plan contemplates the sale of a number of domestic
mechanical and
electrical services business units and the reorganization of the
Company
principally around a smaller international mechanical/electrical
services
business which had revenues of approximately $1.9 billion in
both
1993 and
1992.
The Company's proposed plan of reorganization contemplates
that
the creditors
of JWP INC. will exchange approximately $623 million of holding
company debt
and other liabilities for approximately $139 million of recourse
debt,
approximately $48 million of nonrecourse debt, 100% of the
equity
of the
Company and warrants to purchase the common stock of the
reorganized Company.
All of the new debt, except for $67 million, is expected to be
paid from the
proceeds of asset sales. As indicated previously under the
proposed plan of
reorganization, holders of the Company's common and preferred
stock and
warrants of participation will receive warrants to purchase
common stock of the
reorganized Company in exchange for their equity interests.
Only JWP INC., the holding company is the subject of the
proceeding under
Chapter 11. The Company's mechanical/electrical, water supply
and
other
operating subsidiaries are not parties to this proceeding. All
operating
subsidiary payments have been made in the ordinary courses of
business.
See "Results of Operations" with respect to the Company's
ability to continue
as a going concern.
See Note D with respect to the status of certain liabilities
of
the Company
which were in existence prior to February 14, 1994, the date
that
the Company
consented to the entry of the order for relief under Chapter 11
of the U.S.
Bankruptcy Code. See also Note D with respect to the recorded
liabilities as of
December 31, 1993 which are subject to compromise under the
Company's plan of
reorganization.
The Company's Canadian subsidiary, Comstock Canada, is
negotiating with a
Canadian bank to obtain a Canadian $7.5 million (approximately
U.S.$5.6
million) secured demand loan credit facility with interest at
the
Canadian
prime rate (8% at June 1994) plus 1%. The new credit facility
would be secured
by all the assets of Comstock Canada and would be guaranteed by
the Company.
In June 1994, a number of the Company's U.K. subsidiaries
entered into a
demand credit facility with a U.K. bank with an aggregate credit
limit of
Pounds14.1 million (approximately U.S.$21.7 million). The credit
facility
consists of the following components with the individual credit
limits as
indicated: an overdraft line of up to Pounds7.0 million
(approximately
U.S.$10.7 million), a facility for the issuance of guarantees,
bonds and
indemnities of up to Pounds7.4 million (approximately U.S.$11.4
million) and
other credit facilities of up to Pounds0.75 million
(approximately U.S.$1.2
million). The overdraft facility is secured by substantially all
of the assets
of the Company's principal U.K. subsidiaries. The overdraft
facility provides
for interest at the U.K. bank reference rate (51/2% as of June
1994) plus 3%.
This credit facility will expire in December 1994.
JWS, a subsidiary of the Company carried in "Net assets held
for sale" in the
accompanying Condensed Consolidated Balance Sheets, had two
revolving credit
agreements each of which permitted unsecured borrowings of up to
$10.0 million
with interest rates equal to the prime rate (71/4% at June 30,
1994). Both
agreements expired on April 30, 1994 and the borrowings
thereunder have been
permitted by the lenders to remain outstanding. JWS is currently
negotiating
new revolving credit agreements. As of December 31, 1993, JWS
had
equal
borrowings under each agreement aggregating $4.8 million. These
borrowings are
reflected as current liabilities in the Condensed Balance Sheet
of "Net assets
held for sale" which is presented in Note E to the Condensed
Consolidated
Financial Statements.
The Company's mechanical/electrical services business does not
require
significant commitments for capital expenditures. The Company's
water supply
business anticipates making capital expenditures of
approximately
$53 million
for the utility plant over the five years ended December 31,
1998
including
approximately $9 million in 1994. These capital expenditures are
expected to be
financed by internally
4-43
generated funds from the water supply business with any
remaining
long-term
financing requirements during that period obtained from the
proceeds of newly
issued first mortgage bonds and from bank loans. However, the
Company's
financial difficulties are making it difficult for the water
supply business to
finance its capital programs.
On December 22, 1993, JWS, the New York State Consumer
Protection Board,
Nassau County, certain other governmental bodies and a consumer
advocate group
executed an agreement that ended the several regulatory and
legal
proceedings
against JWS which are described above and in Note I to the
Condensed
Consolidated Financial Statements. Subsequently, the agreement
was approved by
the New York State Public Service Commission (the "'PSC") on
February 2, 1994.
The agreement provides for, among other things, a three year
moratorium on
rates charged by JWS, resolution of the economic issues raised
by
the PSC
arising from its 1992 audit of JWS, settlement of related
litigation and the
dismissal of an action brought against JWS by Nassau County of
the State of New
York alleging violations of the Racketeer Influenced and Corrupt
Organizations
Act and common law fraud. JWS also agreed, in consideration of
avoided
litigation and other costs associated with the proceedings, to
make payments
over the next three years totalling $11.7 million to customers
in
Nassau and
Queens Counties in the State of New York. The agreement also
provides that JWS
will use its best efforts to bring about the separation of
Jamaica Water
Securities Corp., a subsidiary of the Company which holds
substantially all the
common stock of JWS, from the Company.
At December 31, 1993, the Company and a wholly-owned captive
insurance
subsidiary ("Defender") had letters of credit outstanding
totalling $36.4
million which in effect secure their workers' compensation,
automobile and
general liability insurance obligations. The letters of credit
were intended to
serve as collateral for the obligations of Defender to reimburse
the Company's
unrelated insurance carriers for claims paid in respect of
certain years'
insurance programs. A total of $34.9 million of such letters of
credit expire
in December 1994 and $1.5 million in February 1995. Since
October
1992, neither
the Company nor Defender have been able to obtain additional
letters of credit
to secure these type of obligations and, as a result, have been
required to
make cash collateral deposits to a third party insurance company
to secure such
obligations. The deposits totalled $21.3 million and $7.7
million
as of
December 31, 1993 and 1992, respectively, and are included under
the caption
"Miscellaneous" in Other Assets in the accompanying Condensed
Consolidated
Balance Sheets. Such deposits have increased to $29.7 million as
of June 30,
1994. They expect to be required to post additional cash
collateral insurance
deposits at least until the Company completes its reorganization
in the Chapter
11 proceedings. The need to provide cash collateral has
adversely
affected the
Company's cash flow.
The Company's proposed plan of reorganization contemplates
that
the letters
of credit described above will be drawn upon by the unrelated
insurance
carriers and that the Company's obligations to Defender, which
were pledged
collateral to the banks issuing such letters of credit, will be
impaired under
the Chapter 11 proceeding as well as any related Company
obligations to those
banks. Beginning in February 1994, Defender ceased making
payments for amounts
owed to the unrelated insurance carriers, which obligations are
in effect
secured by the letters of credit, and the Company's unrelated
insurance
carriers have commenced partial draw downs against certain of
the
letters of
credit. Approximately $5 million has been drawn against these
letters of credit
through June 1994.
The Company has not paid dividends on its preferred stock
since
September
1992. Cumulative unpaid dividends through December 31, 1993
aggregate $2.3
million.
The Company has substantial net operating loss carryforwards
("NOL") for U.S.
Federal income tax purposes. If the Company exchanges its
existing indebtedness
for newly issued equity and for debt as contemplated by the
proposed plan of
reorganization, a significant portion of the NOL may not be
available to reduce
future U.S. taxable income. Additionally, due to recent changes
in the U.S.
Federal income tax laws, the timing of any such reorganization
could further
impact and reduce the amount of the NOL (See Note H).
4-44
In September 1992, the PSC issued an order that resulted in
the
suspension of
dividend payments to the Company by JWS for the last two
quarters
of 1992 and
for the year ended December 31, 1993. Dividends paid by JWS in
1992 amounted to
$1.2 million. As a result of the settlement agreement described
above, JWS
recommenced payment of dividends in 1994.
Impact of New Accounting Pronouncement
The Financial Accounting Standards Board issued Statement of
Financial
Accounting Standards No. 112 "Employers' Accounting for
Postemployment
Benefits" which will be effective beginning in 1994. The
adoption
of this
standard will not have a material impact upon the Company's
consolidated financial position or its results of operations.
<TABLE>
<CAPTION>
JWP INC. and Subsidiaries
Condensed Consolidated Balance Sheets (unaudited)
(In thousands)
<S> <C> <C>
December 31,
--------------------
1993 1992
----------- -----------
ASSETS
Current Assets
Cash and cash
equivalents.............. $ 39,534 $86,836
Accounts receivable, net. 455,944 458,273
Costs and estimated earnings in excess of billings on
uncompleted contracts.... 61,987 67,817
Inventories............. 5,221 6,618
Prepaid expenses and other... 13,240 9,746
Net assets held for sale... 20,454 32,894
----------- -----------
Total Current Assets......... 596,380 662,184
--------- -----------
Net assets held for sale... 63,161 85,611
Investments, notes and other long-term
receivables................... 19,737 22,440
Property, plant and equipment,
net........................... 39,266 51,087
Other Assets
Excess of cost of acquired businesses over net assets, less
amortization.. 58,973 61,542
Miscellaneous.............. 28,925 24,720
------ -----------
87,898 86,262
----------- -----------
Total Assets............. $806,442 $907,584
=========== ===========
LIABILITIES AND SHAREHOLDERS' (DEFICIT)
Current Liabilities
Notes payable............ $ 172 $6,452
Current maturities of long-term debt and capital lease
obligations........ 2,327 2,634
Debt in default........ 501,007 501,007
Accounts payable....... 209,867 224,840
Billings in excess of costs and estimated earnings on
uncompleted contracts... 115,179 125,764
Other accrued expenses and
liabilities................. 220,152 166,398
----------- -----------
Total Current Liabilities. 1,048,704 1,027,095
--------- -----------
Long-term debt........ 2,538 4,111
Other long-term obligations. 57,462 52,357
Shareholders' (Deficit)
Preferred Stock, $1 par value, 25,000,000
shares authorized, 425,000
shares of Series A issued and outstanding 21,250 21,250
Common Stock, $.10 par value, 75,000,000
shares authorized, 40,715,541
and 40,754,051 outstanding, excluding 727,389 and 591,775
treasury shares in 1993 and 1992....... 4,072 4,075
Warrants of Participation........... 576 576
Capital surplus................. 204,247 203,505
Cumulative translation adjustments (6,068) (3,930)
(Deficit).......................... (526,339) (401,455)
----------- -----------
Total Shareholders'
(Deficit)............................ (302,262) (175,979)
----------- -----------
Total Liabilities and Shareholders'
(Deficit)............................. $806,442 $907,584
=========== ===========
</TABLE>
See notes to condensed consolidated financial
statements.
<TABLE>
<CAPTION>
JWP INC. and Subsidiaries
Condensed Consolidated Statements of Operations
(unaudited)
(In thousands, except per share data)
<S> <C> <C>
Year Ended December 31,
--------------------------
1993 1992
--------------- -----------
Revenues........................ $2,194,735 $2,404,577
------------- -----------
Costs and Expenses
Cost of sales.............. 2,043,558 2,160,723
Selling, general and administrative. 216,709 440,725
Restructuring charges.......... - 38,741
--------------- -----------
2,260,267 2,640,189
--------------- -----------
Operating (Loss)............ (65,532) (235,612)
Interest expense, net........ (50,187) (44,181)
Net gain (loss) on businesses sold
or held for sale............... 1,028 (76,078)
--------------- -----------
(Loss) Before Income
Taxes...................... (114,691) (355,871)
(Benefit) provision for income
taxes............................. (700) 7,644
--------------- -----------
(Loss) From Continuing Operations Before Cumulative Effect of
Accounting Change................ (113,991) (363,515)
--------------- -----------
Discontinued Operations
Income (loss) from operations, net of income
taxes...................... 11,263 (203,739)
(Loss) from disposal of businesses, net of income
taxes................. (20,350) (49,491)
--------------- -----------
(Loss) from discontinued
operations.......................... (9,087) (253,230)
--------------- -----------
Cumulative Effect of Change in Method of Accounting for Income
Taxes.... - 4,315
------------- -----------
Net (Loss)............ $(123,078) $(612,430)
=============== ===========
(Loss) Per Share
Continuing operations........... $(2.84) $(9.00)
Discontinued operations
Income (loss) from
operations.......................... 0.28 (5.02)
(Loss) from disposal of
businesses...................... (0.50) (1.22)
--------------- -----------
(Loss) from discontinued
operations.................. (0.22) (6.24)
-------------- -----------
Cumulative effect of change in method of accounting for income
taxes.... - 0.11
--------------- -----------
Net (loss)............ $(3.06) $(15.13)
=============== ===========
</TABLE>
See notes to condensed consolidated financial
statements.
<TABLE>
<CAPTION>
JWP INC. and Subsidiaries Condensed Consolidated Statements of
Cash Flows
(unaudited) (In thousands)
<S> <C> <C>
Year Ended December 31,
--------------------
1993 1992
- ---------------------------------------------------------------
Net (Loss).................. $(123,078) $(612,430)
Adjustments to Reconcile Net (Loss) to Net Cash
(Used in) Operating Activities
Depreciation and amortization...... 35,246 68,993
Restructuring charges applicable
to continuing operations.... - 38,741
Restructuring charges applicable to discontinued operations..
- 25,950
Net (gain) loss from businesses
sold or held for sale........ (1,028) 76,078
Provision for losses on accounts
and other receivables....... 13,663 113,903
Inventory valuation adjustments.... - 59,787
Write-off of deferred debt
issuance cost..................... - 2,876
Write-off of fixed assets and
miscellaneous assets........... - 11,167
Write-off of goodwill and other
intangibles.................. - 54,873
Stock compensation.................. 727 9,518
Deferred income taxes............. 4,138 7,136
Loss from disposal of discontinued
operations................ 20,350 49,491
Equity and other losses in
unconsolidated subsidiary........... - 5,690
Cumulative effect of accounting
change for income taxes...... - (4,315)
Other, net.......................... 2,411 21,112
---------- -----------
(47,571) (71,429)
Change in Operating Assets and
Liabilities Excluding Effect
of Businesses Disposed of and Acquired
Decrease in accounts receivable....... 41,286 73,379
Decrease in inventories and contracts
in progress............ 35,292 123,884
(Decrease) in accounts payable and
accrued expenses.......... (73,563) (190,752)
Changes in other assets and liabilities 17 15,335
--------- -----------
Net Cash (Used in) Operations............(44,539) (49,583)
---------- -----------
Cash Flows from Financing Activities
Proceeds from long-term debt........... 710 85,302
Payments of long-term debt and capital
lease obligations..... 6,027) (68,514)
Proceeds from issuance of common stock and exercise
of stock options......................... - 1,911
Payment of preferred dividends......... - (1,354)
Redemption of preferred stock of
subsidiary company.......... (500) -
Acquisition of common stock for the
treasury................. - (8,130)
(Decrease) increase in notes payable, net (19,269) 30,258
--------- -----------
Net Cash (Used in ) Provided by
Financing Activities........... (25,086) 39,473
---------- -----------
Cash Flows from Investment Activities
Proceeds from sale of businesses
and other assets............ 43,400 138,971
Acquisition of businesses, net of
cash acquired.............. - (15,899)
Purchase of property, plant and
equipment.................... (17,329) (36,411)
Purchase of environmental facilities - (32,044)
Net disbursements for other
investments...................... - (9,695)
Cash balance of businesses held for
sale or sold............. (3,748) (26,241)
Other, net........................... - 1,672
-------- -----------
Net Cash Provided by Investment
Activities..................... 22,323 20,353
--- -----------
(Decrease) Increase in Cash and Cash
Equivalents............... (47,302) 10,243
Cash and Cash Equivalents at Beginning
of Year................. 86,836 76,593
---------- -----------
Cash and Cash Equivalents at End of Year $39,534 $86,836
=== ===========
See notes to condensed consolidated financial
statements.
</TABLE>
<TABLE>
<CAPTION>
JWP INC. and Subsidiaries
Condensed Consolidated Statements of Shareholders' Equity
(Deficit) (unaudited)
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Cumulative tained
Preferred Common Warrants of Capital Translation Earnings Shareholders'
Stock Stock Participation Surplus Adjustments (Deficit) Equity (Deficit)
--------- ------- ------------- --------- ----------- ----------- ----------------
Balance December 31,
1991 ...................... $21,250 $4,018 $576 $212,703 $4,807 $212,782 $456,136
Common stock issued in
connection with
acquisitions............... - 10 - 739 - - 749
Exercise of stock options.. - 14 - 1,897 - - 1,911
Acquisition of common
stock for the treasury..... - (57) - (8,073) - - (8,130)
Guaranteed future value of
stock issued to acquire
businesses................. - - - (12,308) - - (12,308)
Deferred compensation and
officer bonus.............. - 55 - 9,463 - - 9,518
Foreign currency
translation adjustment..... - - - - (8,737) - (8,737)
Preferred stock dividends.. - - - - - (1,807) (1,807)
Other, net................. - 35 - (916) - - (881)
Net loss................... - - - - - (612,430) (612,430)
--------- ------- ---------------------- ----------- ----------- ----------------
Balance December 31,
1992....................... 21,250 4,075 576 203,505 (3,930) (401,455) (175,979)
Deferred compensation...... - 9 - 718 - - 727
Foreign currency
translation adjustment..... - - - - (2,138) - (2,138)
Preferred stock dividends.. - - - - - (1,806) (1,806)
Other, net................. - (12) - 24 - - 12
Net loss................... - - - - - (123,078) (123,078)
--------- ------- ---------------------- ----------- ----------- ----------------
Balance December 31,
1993....................... $21,250 $4,072 $576 $204,247 $(6,068) $(526,339) $(302,262)
========= ======= ============= ========= =========== =========== ================
</TABLE>
See notes to condensed consolidated financial
statements.
JWP INC. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
NOTE A Basis of Presentation
The accompanying financial statements have been prepared
assuming that JWP
INC. (the "Company") will continue as a going concern. The
matters discussed
below raise substantial doubt about the Company's ability to
continue as a
going concern. The financial statements do not include any
adjustments relating
to the recoverability and classification of assets or the
amounts and
classification of liabilities that might be necessary should the
Company be
unable to continue as a going concern. The Company's
continuation
as a going
concern is dependent upon its ability to restructure its
indebtedness under its
Chapter 11 proceedings, obtain sufficient bonding to guarantee
its performance
on construction contracts, return to profitability, obtain new
credit
facilities and generate sufficient cash flow to meet its
restructured and other obligations on a timely basis.
The Company has a working capital deficit of $452.3 million
after the
reclassification of long-term debt in default and a
shareholders'
deficit of
$302.3 million at December 31, 1993. Many of the Company's
mechanical/electrical services contracts require surety bonds to
guarantee the
performance of such contracts. The Company's surety companies
are
reviewing bid
and performance bonding requests on a case-by-case basis with
special attention
paid to large construction projects and those with durations of
more than two
years. In addition, a surety company that had been the primary
source of surety
bonds for certain subsidiaries, which together comprised
approximately 20% of
the Company's 1993 revenues of those mechanical/electrical
companies which the
Company currently plans to retain, is no longer engaged in the
business of
issuing such bonds. As a result, subsidiaries are currently not
receiving such
bonds. However, the absence of available bonding for these
subsidiaries has not
resulted in a material reduction in their backlog. The Company
and these
subsidiaries are actively engaged in discussions with another
surety company
which has undertaken due diligence for the purpose of entering
into a new
surety bonding arrangement. However, there can be no assurance
that such a new
surety bonding arrangement can be obtained.
The Company is focused on returning to profitability and
restructuring its
operations primarily around a smaller international
mechanical/electrical
services business. The Company has formulated a business
restructuring plan
which includes the sale of its information services business,
water supply
business, several non-core businesses and certain
mechanical/electrical
services operations and the closing or downsizing of
unprofitable
operations
(See Notes D and E). The proceeds from the sale of these
businesses and other
assets to date have been used for working capital and to reduce
debt. There is
no assurance that the Company will be able to consummate the
remaining sales
and, if consummated, whether the Company will realize the
proceeds contemplated
by the plan.
As described in Note C, the Company is in default of covenants
contained in
its senior note agreements, bank credit agreement, 12%
subordinated note
agreements and its 73/4% Convertible Subordinated Debentures and
is presently
in a Chapter 11 proceeding. The outstanding amount of such debt
in default at
December 31, 1993 is $501.0 million.
On December 21, 1993, three holders of the Company's 73/4%
Convertible
Subordinated Debentures filed an involuntary petition under
Chapter 11 of the
U.S. Bankruptcy Code against the Company. The Company on
February
14, 1994
consented to the entry of an order for relief under Chapter 11
of
the
Bankruptcy Code. At the time, the Company adopted a proposed
plan
of
reorganization and its subsidiaries continue to operate in the
normal course of
business. The proposed plan of reorganization which, as
modified,
has the
support of the Official Unsecured Creditors Committee and the
Official
Unsecured Junior Creditors and Interest Holders Committee. The
proposed plan of
reorganization contemplates that the Company's creditors will
exchange
approximately $623 million of holding company debt and other
liabilities for
approximately $139 million of recourse debt, approximately $48
million of
nonrecourse debt, 100% of the equity of the Company and warrants
to purchase
common stock of the reorganized Company. All of the new debt,
except for
approximately $67 million, is expected to be paid from the
proceeds of asset
sales. The holders
4-50
of the Company's common and preferred stock and warrants of
participation will
receive warrants to purchase common stock of the reorganized
Company in
exchange for their equity interests. There can be no assurance
that the
proposed plan of reorganization will be consummated or, if so,
its timing.
The Company's mechanical/electrical services, water supply and
other
operating subsidiaries are not parties to this Chapter 11
proceeding. All
operating subsidiary payments continue to be paid in the
ordinary
course of
business.
In April 1992, the Company announced its intention to sell its
water supply
business. However, in July 1993, the Company's Board of
Directors
decided not
to proceed with the divestiture due to uncertainties created by
the then
pending rate related matters and litigation which are described
in Note J. In
December 1993, the Company's subsidiary, Jamaica Water Supply
Company ("JWS"),
entered into an agreement with respect to the rate related
proceedings and
litigation thereby eliminating significant uncertainties
relating
to the water
supply business. Subsequently, the agreement was approved by the
New York State
Public Service Commission on February 2, 1994. Accordingly, the
Company
reinstated its plan of divestiture in the first quarter of 1994.
In March 1993,
the Company's Board of Directors approved the disposition of the
Company's U.S.
information services business. The Board of Directors had
previously decided to
sell the Company's overseas information services subsidiaries.
Accordingly,
operating results for all periods presented have been
reclassified to reflect
the Company's information services business and water supply
business as
discontinued operations (see Note E).
As described above and in Notes E and F, the Company has
developed a business
restructuring plan which contemplates the sale of its
information
services
business, certain of its mechanical/electrical services business
units, its
water supply business and certain other non-core businesses. As
a
result, the
net assets of businesses to be sold have been classified in the
Condensed
Consolidated Balance Sheets as of December 31, 1993 and 1992 as
"Net assets
held for sale" and carried as either current or long-term assets
on the basis
of their actual or expected disposition dates.
As described in Note I, a consolidated class action lawsuit
for
unspecified
damages was filed against the Company, certain former officers
and directors,
four current directors, a former subsidiary officer and the
Company's then
auditors, Ernst & Young. The complaint alleges violations of
Section 10(b) of
the Securities and Exchange Act of 1934, Rule 10b-5 promulgated
thereunder and
common law fraud and deceit on the part of the Company and other
named
defendants. The Company has denied the material allegations
contained in the
complaint. The parties are now engaged in the discovery
proceedings. However,
the Company expects that under the terms of its proposed plan of
reorganization, no amounts will be recoverable from the Company
by claimants in
the class action litigation, although they will receive warrants
to purchase
the common stock of the reorganized Company.
NOTE B Net (Loss) Per Share
Net loss per common share has been calculated based on the
weighted average
number of shares of common stock outstanding and common stock
equivalents
relating to warrants and stock options outstanding when the
effect of such
equivalents are dilutive (40,816,783 and 40,583,185 for the
years
ended
December 31, 1993 and 1992, respectively). Per share amounts of
loss from
continuing operations and net loss reflects amounts paid and
accrued on the
Company's preferred stock.
NOTE C Debt in Default
Debt in default at December 31, 1993 and 1992 consists of (in
thousands):
<TABLE>
<CAPTION>
<S> <C>
Notes payable to banks under revolving credit facility at prime
plus 3/4%$155,795
Senior notes payable to insurance companies, 9.1% to
10.95%............. 328,572
--------
Total senior
debt....................................................... 484,367
Subordinated notes payable to insurance companies, 12%......... 9,600
73/4% Convertible Subordinated Debentures...................... 7,040
--------
$501,007
====
</TABLE>
The Company failed to make principal and interest payments and
is in default
of various financial covenants contained in its senior notes and
12%
subordinated notes including minimum tangible net worth and
minimum current
ratio. The revolving credit facility contains certain financial
and other
covenants, including minimum tangible net worth and minimum
current ratio,
under which the Company is also in default. As a result, the
entire amount of
such notes and bank indebtedness has been classified in the
accompanying
Condensed Consolidated Balance Sheets as "Debt in default".
Additionally, the
Company has not made scheduled semiannual interest payments
since September 1,
1993 with respect to its 73/4% Convertible Subordinated
Debentures and,
accordingly, such debentures have been classified as "Debt in
default" in the
accompanying Condensed Consolidated Balance Sheet.
Effective April 1993, the Company ceased making payments of
principal and
interest under its revolving credit facility and its senior and
subordinated
notes. Interest continued to accrue in accordance with the
provisions of these
loan documents which in certain circumstances included default
rates of an
additional 2% and in one case 4%. Interest ceased to accrue on
December 21,
1993, the date on which an involuntary bankruptcy petition was
filed against
the Company. The Company has pledged to the holders of its
senior
notes and
bank indebtedness the common stock of five subsidiaries held for
sale and
certain proceeds of the sale of one of those subsidiaries which
had a combined
net book value of $23.3 million as of December 31, 1993.
Certain of the Company's loan agreements contain covenants
which restrict its
ability to pay dividends on its common stock. The Company does
not meet the
financial ratio requirements under such covenants and
consequently is
restricted from paying dividends on its common stock.
The Company's 73/4% Convertible Subordinated Debentures are
convertible into
common stock at any time on or prior to September 1, 2012 at
$30.11 per share
which is subject to change as defined in the indenture agreement
pursuant to
which the debentures were issued. The debentures are redeemable,
at the
Company's option, on any date prior to maturity at redemption
prices (expressed
as percentages of principal amount) ranging from 102.325% in
1994
to 100% in
1997 and thereafter, plus accrued interest. In 1992, the Company
purchased $8.7
million of its 73/4% debentures and realized a net gain of $1.8
million from
early retirement of such debt.
See Note A with respect to the contemplated exchange of the
debt in default
for new debt and equity securities under the Company's proposed
plan of
reorganization.
As of June 1994, the estimated fair value of the Company's
obligations under
its revolving credit facility approximates $50 million or
approximately 30% of
the amount of its pre-bankruptcy petition date principal and
accrued interest.
The estimated fair value of the senior notes approximates $122
million or
approximately 34% of the amount of its pre-bankruptcy petition
date principal
and accrued interest. Such valuations were based upon recent
private
transactions involving the purchase and sale of a limited number
of such debt
instruments. However, the estimated values described above are
not necessarily
indicative of their fair market value because these debt
instruments are not
actively traded or exchanged. The estimated fair value of the
defaulted 12%
subordinated notes and 73/4% Convertible Subordinated Debentures
is nominal.
Such valuations were based upon comparison with similarly rated
securities and
are not necessarily indicative of the current market value.
NOTE D Pre-Consent Date Bankruptcy Claims Subject to Compromise
As described in Note A, on February 14, 1994, the Company
consented to the
entry of an order for relief under Chapter 11 of the U.S.
Bankruptcy Code.
Under Chapter 11, certain claims against the Company in
existence
prior to the
date that an involuntary petition was filed against the Company,
December 21,
1993, are stayed while the Company continues business as a
debtor-in-possession. These claims which total approximately
$623 million are subject to compromise under the Company's
proposed reorganization plan.
<TABLE>
As detailed in the following table, the Company's Condensed
Consolidated Balance Sheet as of December 31, 1993 includes
certain
liabilities which are subject to compromise under the Company's
reorganization plan.
<CAPTION>
Other Accrued Other Long- Accounts
Debt in
Expenses and term Payable Default
Liabilities Obligations Total
-------- ------- ------------- ----------- --------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Debt in default (Note C)............... $- $501,007 $- $- $501,007
Accrued interest (Note C).............. - - 43,315 - 43,315
Amount due to JWP Information Services, Inc.
(Note E).................................... - - 24,933 - 24,933
Foreign debt guarantees..................... - - 6,037 - 6,037
Stock price guarantees...................... - - 5,118 - 5,118
Preferred dividends in arrears.............. - - 2,257 - 2,257
Unexpired leases............................ - - - 1,718 1,718
Unfunded directors' retirement benefits..... - - - 975 975
Insurance reserves (Note G)................. - - 9,600 26,800 36,400
Other impaired claims....................... 400 - 699 - 1,099
-------- ------- ------- ------- ------
$400 $501,007 $91,959 $29,493 $622,859
======== ======== ======== ======= ========
</TABLE>
The Bankruptcy Court established April 8, 1994 as the bar date
for filing of claims and certain claims have been filed against
the Company which are contingent or in dispute. Additional
claims
may arise subsequent to the petition date resulting from
rejection by the Company of executory contracts,
including leases, and from determination by the Court or agreed
to by the
parties at interest of allowed claims for contingent or disputed
amounts.
The Company has received approval from the Bankruptcy Court to
pay or
otherwise honor certain of its pre-consent date bankruptcy
obligations
including employee wages and benefits, amounts due under its
property,
casualty, workers' compensation and other insurance programs,
and
amounts
payable under a JWP employee stay bonus and severance pay plan.
NOTE E Discontinued Operations
Discontinued operations includes the Company's information
services business
and water supply business.
In March 1993, the Company's Board of Directors approved the
disposition of
the Company's U.S. information services business. The Board of
Directors had
previously decided to sell the Company's overseas information
services
business. Accordingly, operating results of the information
services business
have been classified as discontinued operations. In August 1993,
the Company
sold substantially all of the assets of its U.S. information
services business.
The Company did not realize a material gain or loss from the
sale
in 1993. The
assets of the U.S. information services business consisted
primarily of
inventory held for resale and accounts receivable. Under the
terms of the
agreement, the purchaser assumed the debt and other liabilities
relating to the
ongoing operations of the business. The Company received
warrants
to buy up to
10% of the purchaser's common stock for a nominal amount.
In October 1993, the Company's U.S. information services
subsidiary filed a
voluntary petition under Chapter 7 of the U.S. Bankruptcy Code.
In connection
with the bankruptcy filing, the Company recorded a loss of $8.1
million. Such
amount is included in "Loss from disposal of businesses" in the
accompanying
Condensed Consolidated Statement of Operations. At December 31,
1993, the
Company owed its bankrupt U.S. information services subsidiary
$24.9 million.
Such amount is included in "Other accrued expenses and
liabilities" in the
accompanying Condensed Consolidated Balance Sheet.
As described in Note A, in March 1994, the Company reinstated
its plan of divestiture in respect to its water supply business.
As a result, the Company recorded a loss of $7.4 million in the
fourth quarter of 1993 to record the net assets of the water
supply business at their estimated net realizable value.
Additionally, the Company recorded a loss of $1.5 million to
further writedown the estimated realizable value of one of its
information services businesses to its estimated net realizable
value based upon current market conditions. Also, the Company
sold substantially all of the assets of its international
information services businesses in 1993. The sale of such
businesses results in a loss of $3.3 million in 1993. Such
amounts are included as "Loss from disposal of businesses" in
the
accompanying Condensed Consolidated Statement of Operations.
Note I discusses the status of a proceeding initiated in 1988
by the City of New York to acquire by condemnation all of the
water distribution system of JWS that is located in New York
City.
Combined operating results of discontinued operations
including both the information services and water supply
business
are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
---------- ----------
1993 1992
(In thousands)
<S> <C> <C>
Revenues.................................... $943,455 $1,752,171
Costs and expenses.......................... 917,872 1,935,349
--------- -----------
Operating income (loss)..................... 25,583 (184,178)
Interest expense............................ (14,320) (18,944)
--------- -----------
Income (loss) before taxes.................. 11,263 (202,122)
Provision for income taxes.................. - 1,617
--------- -----------
Income (loss) from discontinued operations.. $11,263 $(203,739)
========= ===========
</TABLE>
NOTE F Other Businesses Sold and Net Assets Held For Sale
In May 1993, the Company completed the sale of Software House,
Inc., a
manufacturer of security systems, for cash proceeds of $12.6
million and
realized a net gain of approximately $2.7 million. In addition
to Software
House and the U.S. information services business, the Company
sold a number of
non-core businesses and other assets in 1993 for cash proceeds
of
approximately
$43.4 million. Additionally, the Company received notes and
other
assets with
an aggregate carrying value of $10.9 million. The Company did
not
realize a
material gain or loss from these divestitures in 1993. The
Company's Board of
Directors has approved a plan for the sale of the Company's
remaining energy
and environmental related businesses, other non-core businesses
and certain
mechanical/electrical services operations. In connection with
this asset
disposition plan, a loss of $88.1 million was provided for in
1992. The
operating results of these businesses are included in the
determination of the
(loss) from continuing operations.
Revenues and operating (loss) of other businesses sold and
held
for sale for
the years ended December 31, 1993 and 1992 are as follows:
Year Ended
December 31,
-------------------
1993 1992
--------- ---------
(In thousands)
Revenues.......... $257,910 $526,894
Operating (loss).. (11,802) (41,151)
The assets of the water supply business consists primarily of
utility plant
and equipment which are located in Nassau and Queens Counties in
the State of
New York. The net assets of the water supply business, which
aggregate $63.2
million and $57.2 million as of December 31, 1993 and 1992,
respectively, are
classified as long-term assets in the accompanying Consolidated
Balance Sheet
under the caption "Net assets held for sale" because the
disposition of the
water supply business is expected to take place after 1994.
4-54
A condensed balance sheet relating to discontinued operations
and other net
assets held for sale at December 31, 1993 is as follows (in
thousands):
Cash.................................. $17,617
Accounts receivable, net.............. 59,869
Costs and estimated earnings in excess
of billings........................... 4,889
Inventories........................... 13,089
Other current assets.................. 2,597
--------
98,061
Property, plant and equipment, net.... 154,836
Other assets.......................... 12,653
--------
$265,550
========
Current maturities of long-term debt
and capital lease obligations....... $9,783
Accounts payable.................... 13,610
Billings in excess of costs and
estimated earnings.................. 9,200
Other accrued expenses.............. 72,696
--------
105,289
Long-term debt...................... 36,945
Other long-term liabilities......... 39,701
Net assets held for sale-current.... 20,454
Net assets held for sale-long-term.. 63,161
--------
$265,550
========
NOTE G Insurance Reserves
The Company is primarily insured with an indirect wholly-owned
captive
insurance subsidiary ("Defender") for its workers' compensation,
automobile and
general liability insurance. The insurance liability is
determined actuarially
based on claims filed and an estimate of claims incurred but not
yet reported.
The present value of such claims was determined as of December
31, 1993 and
1992 using a 4% discount rate. The estimated current portion of
the insurance
liability was $17.7 million and $16.5 million at December 31,
1993 and 1992,
respectively. Such amounts are included in "Other accrued
expenses and
liabilities" in the accompanying Consolidated Balance Sheets.
The
noncurrent
portion of the insurance liability was $41.0 million and $33.1
million at
December 31, 1993 and 1992, respectively. Such amounts are
included in "Other
long-term obligations". The undiscounted liability was
approximately $65.2
million and $54.0 million at December 31, 1993 and 1992,
respectively.
At December 31, 1993, the Company and Defender had letters of
credit
outstanding totalling $36.4 million which in effect secure their
insurance
obligations. Such letters of credit expire in December 1994
($34.9 million) and
in February 1995 ($1.5 million). The letters of credit were
intended to serve
as collateral for the obligations of Defender to reimburse the
Company's
unrelated insurance carriers for claims paid in respect of
certain years'
insurance programs. Since October 1992, neither the Company nor
Defender have
been able to obtain additional letters of credit to secure their
insurance
obligations and as a result has been required to make cash
collateral deposits
to a third party insurance company to secure such obligations.
The deposits
totalled $21.3 million and $7.7 million as of December 31, 1993
and 1992,
respectively, and are classified as a long-term asset in the
accompanying
Condensed Consolidated Balance Sheets under the caption
"Miscellaneous" in
Other Assets. Such deposits have increased to $29.7 million as
of
June 30,
1994.
The Company's proposed plan of reorganization contemplates
that
the letters
of credit described above will be drawn upon by the unrelated
insurance
carriers and that the Company's obligations to Defender, which
were pledged as
collateral to the banks issuing such letters of credit, will be
impaired under
the Chapter 11 proceeding as well as any related Company
obligations to those
banks. Beginning in February 1994, Defender ceased making
payments of amounts
owed to the unrelated insurance carriers, which obligations are
in effect
secured by the letters of credit, and the Company's unrelated
insurance
carriers have commenced partial draw downs against certain of
the
letters of
credit. Approximately $5 million has been drawn against certain
of the letters
of credit through June 1994.
NOTE H Income Taxes
The Company files a consolidated federal income tax return
including all U.S.
subsidiaries. At December 31, 1993, the Company has a net
operating loss
carry-forward ("NOL") for U.S. income tax purposes expiring
4-55
in years through 2008 which approximates $500 million. The
Company has provided
a valuation allowance for the full amount of such NOLs. As
described in Note A,
the Company is contemplating a restructuring of its indebtedness
with certain
of its creditors on the basis of an exchange of newly issued
equity and debt
securities for debt. If the Company is able to restructure its
debt on such
basis, a substantial portion of the NOL may not be available to
reduce future
U.S. taxable income. Additionally, due to recent changes in the
U.S. Federal
income tax laws, the timing of any such debt restructuring could
further impact
and reduce the amount of NOL.
At December 31, 1993 and 1992 (after having given effect to
the
adoption of
SFAS No. 109), the valuation allowance recorded against the
deferred tax assets
were $170.1 million and $138.3 million, respectively. These
amounts relate to
certain deferred tax assets for which realization requires
taxable income in
the subsidiary which gave rise to the deferred tax asset.
NOTE I Legal Proceedings
Since August 1992, nineteen purported class action lawsuits
have been filed
against the Company arising out of the restatement of earnings,
write-offs and
losses announced by the Company on August 4, 1992 and October 2,
1992. Pursuant
to Stipulation and Court Order on January 15, 1993, a single
consolidated
amended class action complaint (the "Complaint") was filed. The
Complaint names
as defendants the Company, certain former officers and
directors,
four current
directors, a former subsidiary officer and the Company's then
outside auditor,
Ernst & Young.
The Complaint alleges violations of Section 10(b) of the
Securities and
Exchange Act of 1934, Rule 10b-5 promulgated thereunder and
common law fraud
and deceit on the part of the Company and certain other
defendants. Among other
things, the Company is alleged to have intentionally and
materially overstated
its inventory, accounts receivable and earnings in various
public
disseminations during the purported class period May 1, 1991
through October 2,
1992. The Complaint seeks an unspecified amount of damages. The
Company denies
the material allegations in the Complaint. The parties are now
engaged in
discovery proceedings. However, the Company expects that under
the terms of its
proposed Chapter 11 plan of reorganization, no damages will be
recoverable from
the Company by claimants in the class action litigation,
although
they will
receive warrants to purchase the common stock of the reorganized
Company.
The Company has been informed by the Securities and Exchange
Commission (the
"SEC") that it was conducting a private investigation to
determine whether
there have been violations of certain provisions of the federal
securities laws
and/or the rules and regulations of the SEC in connection with
the Company's
financial records, reports and public disclosures. The Company
has been
cooperating with the SEC's staff and has voluntarily produced
requested
documents and information. On April 12, 1994, the SEC's staff
informed the
Company of its intention to recommend that the SEC file a civil
injunction
action against the Company. The Company is currently engaged in
discussions
with the SEC's staff concerning a possible consensual resolution
of the matter.
On December 22, 1993, JWS, a subsidiary of the Company, and
representatives
from New York State, New York City, Nassau County and a consumer
advocate group
executed an agreement that ended the several regulatory and
legal
proceedings
against JWS. Subsequently, the agreement was approved by the New
York State
Public Service Commission (the "PSC") on February 2, 1994. The
agreement
provides for, among other things, a three year general rate
moratorium,
resolution of the economic issues raised by the PSC arising from
its 1992 audit
of JWS, settlement of related litigation and the dismissal of an
action brought
against JWS by Nassau County in the State of New York alleging
violations of
the Racketeer Influenced and Corrupt Organization Act and common
law fraud. JWS
agreed, in consideration of avoided litigation and other costs
associated with
the proceedings, to make payments over the next three years
totalling $11.7
million to customers in Nassau and Queens Counties in the State
of New York. In
connection with this settlement, the Company provided a pre-tax
charge of $7.0
million in 1992. The agreement also provides that JWS will use
its best efforts
to bring about the separation of Jamaica Water Securities Corp.,
a subsidiary
of the Company which holds substantially all the common stock of
JWS, from the
Company.
4-56
In 1986, the State of New York enacted a statute requiring the
City of New
York (the "City") to acquire by condemnation all of the JWS
property
constituting or relating to its water distribution system
located
in the City
only if a Supreme Court of the State of New York (the "Supreme
Court") decides
that the amount of compensation to be paid for the system is
determined solely
by the income capitalization method of valuation. If the Court
determines
compensation by a method other than the income capitalization
method or the
award is for more than the rate base of the condemned assets,
the
statute
permits the City to withdraw the proceeding without prejudice or
costs. In
1988, the City instituted a proceeding pursuant to the statute
to
acquire the
system which constitutes approximately 75% of JWS' water utility
plant. JWS
argued at trial that the judicially recognized method for
valuing
public
utility property is by the method known as "Reproduction Cost
New, Less
Depreciation". JWS also sought consequential and severance
damages that would
result from separating the JWS Nassau County water supply system
from that in
the City. The aggregate compensation sought by JWS as of
December
31, 1987 was
approximately $924 million. The City submitted its income
capitalization
valuation, as of December 31, 1987, at approximately $63
million.
In June 1993, the Supreme Court dismissed the City's petition.
The Supreme
Court concluded, among other things, that the statute is
unconstitutional
because it directs the Court to render an advisory opinion.
In February 1994, the New York Court of Appeals held
constitutional a
nearly-identical statute dealing with another water utility. In
April 1994,
upon a request for reconsideration by the City, the Supreme
Court
stated that
it would reconsider its prior decision in light of the February
decision of the
Court of Appeals.
The Company cannot predict when or if the Supreme Court will
conduct further
proceedings under the statute nor is it possible to predict what
the decision
of the Supreme Court might be if it decides to value the JWS
property or the
effect of the pending litigation on the proposed sale of JWS.
In 1993, the Company's French and Belgian information services
subsidiaries
filed petitions in their respective countries seeking relief
from
their
creditors. The French and Belgian subsidiaries have outstanding
unsecured
credit facilities which are guaranteed by the Company
aggregating
approximately
$5.9 million. Such amount was provided for as a loss in 1992.
As described in Note D, in August 1993 the Company sold its
U.S. information
services business. In October 1993, the subsidiary formerly
carrying on this
business filed a voluntary petition under Chapter 7 of the U.S.
Bankruptcy
Code.
In connection with an investigation of the plumbing industry
being conducted
by the New York County District Attorney's office, two related
subsidiaries of
the Company engaged in the plumbing business in New York City
have received
subpoenas for certain of their books and records. The
subsidiaries have
complied with those subpoenas. Additionally, certain employees
of
these
subsidiaries have been subpoenaed to testify as witnesses before
a grand jury
and those employees have complied with the subpoenas.
The Company is subject to other legal proceedings and claims
which have
arisen in the ordinary course of business and have not been
adjudicated. The
Company cannot predict the outcome of such litigation or the
impact that an
adverse result in such litigation will have upon the Company's
financial
position or results of operations.
NOTE J Other
JWS is subject to a PSC order which requires that dividend
payments by JWS
not exceed 50% of JWS's net income available to common
shareholders for the
preceding twelve month period and subject further to a
debt/equity ratio
restriction. Under such PSC order, approximately $2.5 million of
JWS's retained
earnings were available for the payment of dividends and $44.7
million of JWS's
retained earnings were restricted as of December 31, 1993.
4-57
<PAGE>
In September 1992, the PSC issued an order requiring
additional
subjective certifications before the payment by JWS of cash
dividends on its common stock. This resulted in the suspension
of
dividend payments to the Company by JWS for
the last two quarters of 1992 and all of 1993. Dividends paid by
JWS in 1992 and 1991 amounted to $1.2 million and $2.0 million,
respectively. As a result of the settlement agreement described
in Note I, JWS recommenced dividend payments in 1994.
NOTE K Adoption of New Accounting Pronouncement
Effective January 1, 1993, the Company adopted the provisions
of Statement of Financial Accounting Standards No. 106,
"Accounting For Postretirement Benefits Other Than Pensions"
(SFAS 106). The estimated present value of the accumulated
postretirement benefit obligations under SFAS 106 approximated
$7.0 million at January 1, 1993. Such amount relates to the
Company's water supply business. The net assets of the water
supply business are included in "Net assets held for sale" in
the accompanying Condensed Consolidated Balance Sheets. The
adoption of SFAS 106 did not have a material impact upon the
Company's consolidated results of operations.
The financial Accounting Standards Board issued Statement of
Financial Accounting No. 112 "Employers' Accounting for
Postemployment Benefits" which will be effective in 1994. This
standard will not have a material impact upon the Company's
consolidated financial position or its results of operations.
JWP INC. and Subsidiaries
Condensed Consolidated Balance Sheet (unaudited)
(In thousands)
<TABLE>
<CAPTION>
March 31,
1994
----------
ASSETS
<S> <C>
Current Assets
Cash and cash equivalents.................................... $ 42,027
Accounts receivable, net........................... 434,879
Costs and estimated earnings in excess of billings on
uncompleted contracts............ 66,294
Inventories.................................................. 7,638
Prepaid expenses and other........................ 9,247
Net assets held for sale....................... 15,819
----------
Total Current Assets................. ......... 575,904
----------
Net assets held for sale.................... 60,520
Investments, notes and other long-term receivables......... 19,387
Property, plant and equipment, net.................. 38,382
Other Assets
Excess of cost of acquired businesses over net assets, less
amortization............... 58,591
Miscellaneous.............................................. 31,819
----------
90,410
Total Assets................................... $784,603
==========
LIABILITIES AND SHAREHOLDERS' (DEFICIT)
Current Liabilities
Notes payable by foreign subsidiaries........ $ 2,915
Debtor-in-possession note payable............ 15,000
Current maturities of long-term debt and capital lease
obligations..................... 2,243
Accounts payable......... ............. 179,270
Billings in excess of costs and estimated earnings on
uncompleted contracts............ 109,398
Other accrued expenses and liabilities.......... 142,024
--------
Total Current Liabilities............. ....... 450,850
----------
Long-term debt............................ ............. 2,497
Other long-term obligations................... ....... 17,869
Pre-consent date bankruptcy claims subject to compromise...622,859
Shareholders' (Deficit)
Preferred Stock, $1 par value, 25,000,000 shares authorized,
425,000 shares of Series A issued and
outstanding...................................... 21,250
Common Stock, $.10 par value, 75,000,000 shares authorized,
40,715,541 shares outstanding, excluding 727,389 treasury
shares....................... 4,072
Warrants of Participation................... 576
Capital surplus..................................... 204,247
Cumulative translation adjustments............ (7,004)
(Deficit)...............................................(532,613)
----------
Total Shareholders' (Deficit)............. (309,472)
----------
Total Liabilities and Shareholders' (Deficit)......... $784,603
==========
</TABLE>
See notes to condensed consolidated financial
statements.
<TABLE>
<CAPTION>
JWP INC. and Subsidiaries
Condensed Consolidated Statement of Operations
(unaudited)
(In thousands, except per share data)
Three Months
Ended
March 31, 1994
--------------
<S> <C>
Revenues..................................... $435,554
--------------
Costs and Expenses
Cost of sales................................ 393,257
Selling, general and administrative.......... 45,689
Reorganization charges....................... 3,600
--------------
442,546
--------------
Operating (Loss)............................. (6,992)
Interest expense, net........................ (176)
--------------
(Loss) Before Income Taxes................... (7,168)
Provision for income taxes................... 250
--------------
(Loss) From Continuing Operations............ (7,418)
--------------
Discontinued Operations
Income from operations, net of income taxes.. 1,144
--------------
Net (Loss)................................... $(6,274)
==============
(Loss) Per Share
Continuing operations........................ $(0.18)
Discontinued operations...................... 0.03
--------------
Net (loss)................................... $(0.15)
==============
</TABLE>
See notes to condensed consolidated financial statements
<TABLE>
JWP INC. and Subsidiaries Condensed Consolidated Statement of
Cash Flows (unaudited) (In thousands)
<CAPTION>
Three Months
Ended
March 31, 1994
-------------
<S> <C>
Net (Loss)..................... ....... $(6,274)
Adjustments to Reconcile Net (Loss) to Net Cash
(Used in) Operating Activities
Depreciation and amortization........... 5,665
Change in operating assets and
liabilities................................. (16,553)
-------------
Net Cash (Used in) Operations............ (17,162)
-------------
Cash Flows from Financing Activities
Proceeds from debtor-in-possession financing 15,000
Payments of long-term debt and capital lease
obligations................... (745)
Increase in notes payable, net of European and Canadian
subsidiaries....... 2,779
-----------
Net Cash Provided by Financing
Activities.................................. 17,034
----------
Cash Flows from Investment Activities
Proceeds from sale of businesses and other assets 2,990
Purchase of property, plant and equipment, primarily water
utility assets.. (2,846)
Decrease in cash balances of businesses held for sale or
sold.............. 4,899
Purchase of investment held for sale............ (2,422)
--------------
Net Cash Provided by Investment Activities...... 2,621
--------------
Increase in Cash and Cash Equivalents............ 2,493
Cash and Cash Equivalents at December 31, 1993... 39,534
--------------
Cash and Cash Equivalents at March 31, 1994..... $42,027
==============
</TABLE>
See notes to condensed consolidated financial statements.
<TABLE>
JWP INC. and Subsidiaries
Condensed Consolidated Statement of Shareholders' (Deficit)
(unaudited)
(In thousands)
<CAPTION>
Cumulative For the Three Months Ended Preferred Common Warrants of
Capital Translation Shareholders' March 31, 1994 Stock Stock Participation
Surplus Adjustments (Deficit) (Deficit)
- ---------------------------- --------- ------ ------------- -------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance December 31, 1993... $21,250 $4,072 $576 $204,247 $(6,068) $(526,339) $(302,262)
Foreign currency translation
adjustments................. - - - - (936) - (936)
Net loss.................... - - - - - (6,274) (6,274)
--------- ------ ------------- -------- ----------- ----------- -----------
Balance March 31, 1994...... $21,250 $4,072 $576 $204,247 $(7,004) $(532,613) $(309,472)
========= ====== ============= ======== =========== =========== =============
</TABLE>
See notes to condensed consolidated financial statements.
NOTE A Basis of Presentation
On February 14, 1994, JWP (the "Company") became a
debtor-in-possession under Chapter 11 of the U.S. Bankruptcy
Code. The accompanying financial statements have been prepared
on
the basis of the principles prescribed by the American
Institute of Certified Public Accountants' Statement of Position
90-7, "Financial Reporting by Entities in Reorganization Under
the Bankruptcy Code". As a result, liabilities of the Company
that are expected to be compromised as a result of the
bankruptcy
proceeding have been reclassified to the caption "Pre-consent
date bankruptcy claims subject to compromise" in the
accompanying
Condensed Consolidated Balance Sheet. See Note B with respect to
the Company's petition for relief under Chapter 11 and its
proposed plan of reorganization. During the reorganization
process, the Company has continued to expense the various legal
and other professional fees incurred. These fees are reflected
in
the accompanying Condensed Consolidated Statement of Operations
under the caption "Reorganization charges". Additionally,
effective December 21, 1993, the Company ceased to accrue
interest on its defaulted debt. See Note D with respect to debt
in default.
The accompanying financial statements have been prepared
assuming that JWP INC. (the "Company") will continue as a going
concern. The matters discussed in these Notes to Condensed
Consolidated Financial Statements raise substantial doubt about
the Company's ability to continue as a going concern. The
financial statements do not include any adjustments relating to
the recoverability and classification of assets or the amounts
and classification of liabilities that might be necessary should
the Company be unable to continue as a going concern. The
Company's continuation as a going concern is dependent upon its
ability to restructure its indebtedness in connection with its
reorganization under Chapter 11 of the U.S. Bankruptcy Code,
obtain sufficient bonding to guarantee its performance on
construction contracts, return to profitability, obtain
credit facilities and generate sufficient cash flow to meet its
restructured and other obligations on a timely basis.
Many of the Company's mechanical/electrical services'
contracts
require surety bonds to guarantee the performance of such
contracts. The Company's surety companies are reviewing bid and
performance bonding requests on a case-by-case basis with
special
attention paid to large construction projects and those with
durations of more than two years. In addition, a surety company
that had been the primary source of surety bonds for certain
subsidiaries, which together comprised approximately 20% of the
Company's 1993 revenues of those mechanical/electric
subsidiaries
which the Company currently plans to retain, is no longer
engaged
in the business of issuing such bonds. As a result, these
subsidiaries are currently not receiving such bonds. However,
the
absence of available bonding for these subsidiaries has not
resulted in a material reduction in their backlog. The Company
and these subsidiaries are actively engaged in discussions with
another surety company which has undertaken due diligence for
the
purpose of entering into a new surety bonding arrangement.
However, there can be no assurance that such a new surety
bonding
arrangement can be obtained.
The Company is focused on returning to profitability and
restructuring its operations primarily around a smaller
international mechanical/electrical services business. In 1992,
the Company formulated a business restructuring plan which
included the sale of its information services business, water
supply business, several non-core businesses and certain
mechanical/electrical services operations and the closing or
downsizing of unprofitable operations. The proceeds from the
sale
of these businesses and other assets has been used for working
capital and to reduce debt. There is no assurance that the
Company will be able to consummate the remaining sales and, if
consummated, whether the Company will realize the proceeds
contemplated by the plan.
In April 1992, the Company announced its intention to sell its
water supply business. However, in July 1993, the Company's
Board
of Directors decided not to proceed with the divestiture due to
uncertainties created by a then pending rate-related proceeding
with the New York State Public Service Commission (the JWP INC.
and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)
4-63
"PSC") and litigation which are described in Note I. In December
1993, the
Company's subsidiary Jamaica Water Supply Company ("JWS"),
executed an
agreement with respect to the rate proceeding and litigation
thereby
eliminating significant uncertainties relating to the water
supply business.
Subsequently, this agreement was approved by the PSC on February
2, 1994.
Accordingly, the Company reinstated its plan of divestiture in
the first
quarter of 1994. As a result, the water supply business is
presented as a
discontinued operation in the accompanying Condensed
Consolidated
Financial
Statements.
NOTE B Chapter 11 Bankruptcy Proceeding
On December 21, 1993, three holders of the Company's 73/4%
Convertible
Subordinated Debentures filed an involuntary petition under
Chapter 11 of the
U.S. Bankruptcy Code against the Company. The Company on
February
14, 1994
consented to the entry of an order for relief under Chapter 11
of
the
Bankruptcy Code. At that time, the Company adopted a proposed
plan of
reorganization and its subsidiaries continue to operate in the
normal course of
business. The proposed plan of reorganization, as modified, has
the support of
the Official Unsecured Creditors Committee and the Official
Unsecured Junior
Creditors and Interest Holders Committee. The plan of
reorganization
contemplates that the Company's creditors will exchange
approximately $623
million of holding company debt and other liabilities for
approximately $139 million of recourse debt, approximately $48
million of onrecourse debt, 100% of the equity of the Company
and
warrants to purchase common tock of the reorganized Company. All
of the new debt, except for approximately $67 million, is
expected to be paid from the proceeds of asset sales. The
holders
of the Company's common and preferred stock and warrants of
participation will receive warrants to purchase common stock of
the reorganized Company in exchange for their equity interests.
However, there can be no assurance that the proposed plan of
reorganization will be consummated or, if so, its timing.
Under Chapter 11, certain claims against the Company in
existence prior to the date that an involuntary petition was
filed against the Company, December 21, 1993, are stayed while
the Company continues business as a debtor-in-possession. The
pre-consent date bankruptcy claims reflected in the Company's
Condensed Consolidated Balance Sheet as of March 31, 1994 total
approximately $623 million as detailed in the following table.
<TABLE>
<CAPTION>
Other
Accrued Other Long- Accounts Debt in Expenses and term
Payable Default Liabilities Obligations Total
-------- -------- ------------- ----------- --------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Debt in default (Note D).................... $- $501,007 $- $- $501,007
Accrued interest (Note D)................... - - 43,315 - 43,315
Amount due to JWP Information Services, Inc.
(Note I).................................... - - 24,933 - 24,933
Foreign debt guarantees..................... - - 6,037 - 6,037
Stock price guarantees...................... - - 5,118 - 5,118
Preferred dividends in arrears.............. - - 2,257 - 2,257
Unexpired leases............................ - - - 1,718 1,718
Unfunded directors' retirement benefits..... - - - 975 975
Insurance reserves (Note G)................. - - 9,600 26,800 36,400
Other impaired claims....................... 400 - 699 - 1,099
---- -------- ------- ------- --------
$400 $501,007 $91,959 $29,493 $622,859
==== ======== ======= ======= ========
</TABLE>
The Bankruptcy Court established April 8, 1994 as the bar date
for filing of claims and certain claims have been filed against
the Company which are contingent or in dispute. Further,
additional claims may arise subsequent to the petition date
resulting from rejection by the Company of executory contracts,
including leases, and from determination by the Court, or agreed
to by the parties at interest, of allowed claims for contingent
or disputed amounts.
The Company has received approval from the Bankruptcy Court to
pay or otherwise honor certain of its pre-consent date
bankruptcy
obligations including employee wages and benefits, amounts due
under its property, casualty, workers' compensation and other
insurance programs, and amounts payable under a JWP employee
stay bonus and severance pay plan.
The Company's mechanical/electrical services, water supply and
other operating subsidiaries are not parties to the Chapter 11
proceeding. All operating subsidiary payments continue to be
paid
in the ordinary course of business.
NOTE C Debtor-in-Possession Financing ("DIP Loan")
In February 1994, the Company and substantially all of its
subsidiaries entered into an agreement with Belmont Capital
Partners II, L.P., an affiliate of Fidelity Investments
("Belmont") to provide for a DIP Loan. The agreement provides
to
the Company a credit facility of up to $35 million at an
interest
rate of 12% per annum during the period of the reorganization
proceeding. Also, Belmont will receive, as additional interest,
a
percentage of the securities to be issued under the Company's
plan of reorganization. The DIP Loan is secured by a first lien
on substantially all of the assets of the Company and most of
its
subsidiaries. As of June 1994, the Company had drawn down $20
million under the DIP Loan of which $15 million was outstanding
as of March 31, 1994.
The Company is in default of certain covenants of the DIP
Loan. Pursuant to written waivers of default, dated April 27,
1994 and May 6, 1994, the Company has been permitted by Belmont
to draw on its line of credit. Under the circumstances, any
additional borrowings under the DIP Loan will require further
waivers of default.
The DIP Loan is intended to be repaid upon the effective date
of the proposed plan of reorganization. The Company is actively
seeking a working capital facility of approximately $40 million.
The proceeds of this new facility will be used to refinance the
Company's borrowings under the DIP Loan and to provide
working capital to the reorganized Company. There can be no
assurance that the Company will be able to obtain a new working
capital facility or, if so, the amount of any such facility.
Obtaining such a facility is a condition to the confirmation of
the Company's plan of reorganization.
NOTE D Debt in Default
<TABLE>
<CAPTION>
Debt in default consists of the following as of March
31, 1994
(in thousands):
<S> <C>
Notes payable to banks under revolving credit facility at prime plus 3/4%$155,795
Senior notes payable to insurance companies, 9.1% to10.95%............. 328,572
--------
Total senior debt.......................................... 484,367
Subordinated notes payable to insurance companies, 12%.................. 9,600
73/4% Convertible Subordinated Debentures............................ 7,040
--------
$501,007
========
</TABLE>
Total accrued interest on the above described debt was $43.3
million as of
March 31, 1994. Interest, including penalty interest in certain
circumstances,
ceased accruing on December 21, 1993, the date on which an
involuntary
bankruptcy petition was filed against the Company.
See Note B in respect to the contemplated exchange of the debt
in default for new debt and equity securities under the
Company's
proposed plan of reorganization.
As of June 1994, the estimated fair value of the Company's
obligations under its revolving credit facility approximates $50
million or approximately 30% of
the amount of its pre-bankruptcy petition date principal
4-65
and accrued interest. The estimated fair value of the senior
notes approximates
$122 million or approximately 34% of the amount of its
pre-bankruptcy petition
date principal and accrued interest. Such valuations were based
upon recent
private transactions involving the purchase and sale of a
limited
number of
such debt instruments. However, the estimated values described
above are not
necessarily indicative of their fair market value because these
debt
instruments are not actively traded or exchanged. The estimated
fair market
value of the defaulted subordinated notes and 73/4% Convertible
Subordinated
Debentures is nominal. Such valuations were based upon
comparison
with
similarly rated securities and are not necessarily indicative of
their current
market value.
NOTE E Net Assets Held For Sale
In 1992, the Company developed a business restructuring plan
which
contemplated the sale of its information services business,
certain of its
mechanical/electrical services business units, its water supply
business and
certain non-core businesses. The business restructuring plan has
been
incorporated into the Company's proposed plan of reorganization.
As a result,
businesses to be sold have been classified in the accompanying
Condensed
Consolidated Balance Sheet as "Net assets held for sale".
For the three months ended March 31, 1994, businesses sold or
held for sale
generated revenues of $42.0 million and operating loss of $2.8
million.
The assets of the water supply business consists primarily of
utility plant
and equipment which are located in Nassau and Queens Counties in
the State of
New York. The net assets of the water supply business, which
aggregate $60.5
million and $63.2 million as of March 31, 1994 and December 31,
1993,
respectively, are classified as long-term assets in the
accompanying Condensed
Consolidated Balance Sheet under the caption "Net assets held
for
sale" because
the disposition of the water supply business is expected to take
place after
1994.
A Condensed Balance Sheet relating to net assets held for sale
including discontinued operations at March 31, 1994 is as
follows
(in thousands):
Cash.................................. $10,282
Accounts receivable, net.............. 45,220
Costs and estimated earnings in excess
of billings........................... 3,347
Inventories........................... 11,856
Other current assets.................. 2,574
--------
73,279
Property, plant and equipment, net.... 153,048
Other assets.......................... 15,577
--------
$241,904
========
Notes payable............................ $111
Current maturities of long-term debt
and capital lease obligations............ 9,626
Accounts payable......................... 11,520
Billings in excess of costs and estimated
earnings................................. 6,070
Other accrued expenses................... 61,208
--------
88,535
Long-term debt........................... 36,806
Other long-term liabilities.............. 40,224
Net assets held for sale-current......... 15,819
Net assets held for sale-long-term....... 60,520
--------
$241,904
========
NOTE F Discontinued Operations
As described in Note A, the Company's water supply business is
reflected in
the accompanying condensed consolidated financial statements as
a
discontinued
operation. See Note I in respect to the status of a proceeding
initiated in
1988 by the City of New York to acquire by condemnation all of
the water
distribution system of JWS that is located in New York City.
For the three months ended March 31, 1994, the water supply
business had
revenues of $14.4 million and operating income of $2.1 million.
4-66
NOTE G Insurance Reserves
The Company is primarily insured with an indirect wholly-owned
captive
insurance subsidiary ("Defender") for workers' compensation,
automobile and
general liability insurance. At March 31, 1994, they had letters
of credit
outstanding totalling $36.4 million which in effect secure their
insurance
obligations. Such letters of credit expire in December 1994
($34.9 million) and
in February 1995 ($1.5 million). The letters of credit were
intended to serve
as collateral for the obligations of Defender to reimburse the
Company's
unrelated insurance carriers for claims paid in respect of
certain years'
insurance programs. Since October 1992, neither the Company nor
Defender have
been able to obtain additional letters of credit to secure their
insurance
obligations and, as a result, have been required to make cash
collateral
deposits to a third party insurance company to secure those type
of
obligations. The deposits totalled $29.7 million as of June 30,
1994 and are
classified as a long-term asset in the accompanying Condensed
Consolidated
Balance Sheet under the caption "Miscellaneous" in Other Assets.
The Company's proposed plan of reorganization contemplates the
letters of
credit described above will be drawn upon by the unrelated
insurance carriers
and that the Company's obligations to Defender, which were
pledged collateral
to the banks issuing such letters of credit, will be impaired
under the Chapter
11 proceeding as well as related Company obligations to those
banks. Beginning
in February 1994, Defender ceased making payments of amounts
owed
to the
unrelated insurance carriers, which obligations are in effect
secured by the
letters of credit, and the Company's unrelated insurance
carriers
have
commenced partial draw downs against the letters of credit.
Approximately $5
million has been drawn against certain of the letters of credit
through June
1994.
The Company anticipates that all of the letters of credit
described above
will be drawn upon and the Company's obligations to reimburse
the
banks issuing
such letters of credit will be impaired under the Chapter 11
proceeding. As a
result, the Company has reclassified $36.4 million of its
insurance reserves to
the caption "Pre-consent date bankruptcy claims subject to
compromise" in the
accompanying Condensed Consolidated Balance Sheet.
NOTE H Income Taxes
The Company has a net operating loss carry-forward ("NOL") for
U.S. income
tax purposes expiring in years through 2008 which approximates
$500 million.
The Company has provided a valuation allowance for the full
amount of such
NOLs. As described in Notes A and B, the Company is
contemplating
a
restructuring of its indebtedness with certain of its creditors
on the basis of
an exchange of newly issued equity and debt securities for debt.
If the Company
is able to restructure its debt on such basis, a substantial
portion of the NOL
may not be available to reduce future U.S. taxable income.
Additionally, due to
recent changes in the U.S. Federal income tax laws, the timing
of
any such debt
restructuring could further impact and reduce the amount of NOL.
NOTE I Legal Proceedings
Since August 1992, nineteen purported class action lawsuits
have been filed
against the Company arising out of the restatement of earnings,
write-offs and
losses announced by the Company on August 4, 1992 and October 2,
1992. Pursuant
to Stipulation and Court Order on January 15, 1993, a single
consolidated
amended class action complaint (the "Complaint") was filed. The
Complaint names
as defendants the Company, certain former officers and
directors,
four current
directors, a former subsidiary officer and the Company's then
outside auditor,
Ernst & Young.
The Complaint alleges violations of Section 10(b) of the
Securities and
Exchange Act of 1934, Rule 10b-5 promulgated thereunder and
common law fraud
and deceit on the part of the Company and certain other
defendants. Among other
things, the Company is alleged to have intentionally and
materially overstated
its inventory, accounts receivable and earnings in various
public
disseminations during the purported class
4-67
period May 1, 1991 through October 2, 1992. The Complaint seeks
an unspecified
amount of damages. The Company denies the material allegations
in
the
Complaint. The parties are now engaged in discovery proceedings.
However, the
Company expects that under the terms of its proposed Chapter 11
plan of
reorganization, no damages will be recoverable from the Company
by claimants in
the class action litigation, although they will receive warrants
to purchase
the common stock of the reorganized Company.
The Company has been informed by the Securities and Exchange
Commission (the
"SEC") that it was conducting a private investigation to
determine whether
there have been violations of certain provisions of the federal
securities laws
and/or the rules and regulations of the SEC in connection with
the Company's
financial records, reports and public disclosures. The Company
has been
cooperating with the SEC's staff and has voluntarily produced
requested
documents and information. On April 12, 1994, the SEC's staff
informed the
Company of its intention to recommend that the SEC file a civil
injunction
action against the Company. The Company is currently engaged in
discussions
with the SEC's staff concerning a possible consensual resolution
of the matter.
On December 22, 1993, JWS, the New York State Consumer
Protection Board,
Nassau County, certain other governmental bodies and a consumer
advocate group
executed an agreement that ended the several regulatory and
legal
proceedings
against JWS. Subsequently, the agreement was approved by the PSC
on February 2,
1994. The agreement provides for, among other things, a three
year moratorium
on rates charged by JWS, resolution of the economic issues
raised
by the PSC
arising from its 1992 audit of JWS, settlement of related
litigation and the
dismissal of an action brought against JWS by Nassau County in
the State of New
York alleging violations of the Racketeer Influenced and Corrupt
Organizations
Act and common law fraud. JWS agreed, in consideration of
avoided
litigation
and other costs associated with the proceedings, to make
payments
over the next
three years totalling $11.7 million to customers in Nassau and
Queens Counties
in the State of New York. In connection with this settlement,
the
Company
provided a pre-tax charge of $7.0 million in 1992. The agreement
also provides
that JWS will use its best efforts to bring about the separation
of Jamaica
Water Securities Corp., a subsidiary of the Company which holds
substantially
all the common stock of JWS, from the Company.
In 1986, the State of New York enacted a statute requiring the
City of New
York (the "City") to acquire by condemnation all of the JWS
property
constituting or relating to its water distribution system
located
in the City
only if a Supreme Court of the State of New York (the "Supreme
Court") decides
that the amount of compensation to be paid for the system is
determined solely
by the income capitalization method of valuation. If the Court
determines
compensation by a method other than the income capitalization
method or the
award is for more than the rate base of the condemned assets,
the
statute
permits the City to withdraw the proceeding without prejudice or
costs. In
1988, the City instituted a proceeding pursuant to the statute
to
acquire the
system which constitutes approximately 75% of JWS' water utility
plant. JWS
argued at trial that the judicially recognized method for
valuing
public
utility property is by the method known as "Reproduction Cost
New, Less
Depreciation". JWS also sought consequential and severance
damages that would
result from separating the JWS Nassau County water supply system
from that in
the City. The aggregate compensation sought by JWS as of
December
31, 1987 was
approximately $924 million. The City submitted its income
capitalization
valuation, as of December 31, 1987, at approximately $63
million.
In June 1993, the Supreme Court dismissed the City's petition.
The Supreme
Court concluded, among other things, that the statute is
unconstitutional
because it directs the Court to render an advisory opinion.
In February 1994, the New York Court of Appeals held
constitutional a
nearly-identical statute dealing with another water utility. In
April 1994,
upon a request for reconsideration by the City, the Supreme
Court
stated that
it would reconsider its prior decision in light of the February
decision of the
Court of Appeals.
The Company cannot predict when or if the Supreme Court will
conduct further
proceedings under the statute nor is it possible to predict what
the decision
of the Supreme Court might be if it decides to value the JWS
property or the
effect of the pending litigation on the proposed sale of JWS.
4-68
In 1993, the Company's French and Belgian information services
subsidiaries
filed petitions in their respective countries seeking relief
from
their
creditors. The French and Belgian subsidiaries have outstanding
unsecured
credit facilities which are guaranteed by the Company
aggregating
approximately
$5.9 million. Such amount was provided for as a loss in 1992.
In August 1993, the Company sold its U.S. information services
business. In
October 1993, the subsidiary formerly carrying on this business
filed a
voluntary petition under Chapter 7 of the U.S. Bankruptcy Code.
The Company
owes $24.9 million to this subsidiary.
In connection with an investigation of the plumbing industry
being conducted
by the New York County District Attorney's office, two related
subsidiaries of
the Company engaged in the plumbing business in New York City
have received
subpoenas for certain of their books and records. The
subsidiaries have
complied with those subpoenas. Additionally, certain employees
of
these
subsidiaries have been subpoenaed to testify as witnesses before
a grand jury
and those employees have complied with the subpoenas.
The Company is subject to other legal proceedings and claims
which have
arisen in the ordinary course of business and have not been
adjudicated. The
Company cannot predict the outcome of such litigation or the
impact that an
adverse result in such litigation will have upon the Company's
financial
position or results of operations.
NOTE J Net Loss Per Share
Net loss per share for the three months ended March 31, 1994
has been
calculated based upon the weighted average number of shares of
common stock
outstanding and common stock equivalents relating to warrants
and
stock options
outstanding when the effect of such equivalents are dilutive
(40,715,541
shares). Because of the filing of a petition for relief under
Chapter 11 of the
U.S. Bankruptcy Code, the Company ceased accruing dividends on
its preferred
stock, accordingly no preferred stock dividends were utilized in
the
calculation of loss per share.
As described in Note B, under the Company's proposed plan of
reorganization,
holders of the Company's preferred and common stock and warrants
of
participation will receive warrants to purchase common stock of
the reorganized
Company in exchange for their equity interests.
NOTE K Impact of New Accounting Pronouncement
The Financial Accounting Standards Board has issued Statement
of Financial
Accounting Standards No. 112 "Employers' Accounting for
Postemployment
Benefits" (SFAS 112), which was effective January 1, 1994. The
Company is in
process of developing the data necessary to adopt SFAS 112.
Accordingly, the
accompanying condensed consolidated financial statements do not
include any
effects of the adoption of SFAS 112. The Company does not
anticipate that the
adoption of SFAS 112 will have a material effect upon the
Company's financial
position or its results of operations.
4-69
Exhibit 5
LIQUIDATION ANALYSIS
Most Likely Scenario. Set forth below is a liquidation
analysis
for JWP and
its Nondebtor Subsidiaries, which was prepared by the Debtor
with
the
assistance of Lazard Freres & Co. assuming a hypothetical
Chapter
7 liquidation
in which a Court-appointed trustee would liquidate the assets of
JWP. There are
a number of complex factors to consider when preparing a
liquidation analysis
of JWP and its Nondebtor Subsidiaries. Chief among them is the
reaction of
management, employees, customers and bonding companies to the
liquidation
process. Keeping these diverse constituencies together during a
liquidation
would be extremely difficult. Since the specialty contracting
business is
service oriented and depends upon the financial credibility of
its businesses
and its management's relationships, the assumptions regarding
the
values that
can be obtained in a liquidation are highly speculative.
The ability of the Nondebtor Subsidiaries to carry on their
normal operations
during a liquidation would be problematic, at best. JWP believes
that the most
likely scenario resulting from a failure of JWP to reorganize
pursuant to
Chapter 11-and the resulting need to liquidate the company,
whether pursuant to
Chapter 7 or Chapter 11-would be to precipitate a Chapter 11 or
a
Chapter 7
filing by each of the operating subsidiaries. These subsidiary
filings would be
forced by a liquidity crisis at the subsidiaries due to the
collapse of the JWP
cash management/funding system and would be necessary to protect
the value of
whatever assets could be gleaned from these businesses.
Accompanying the
bankruptcy filings of the subsidiaries would likely be a
substantial exodus of
key management personnel (few of whom are contractually tied to
JWP or the
subsidiaries). As a result of these bankruptcy filings, the
bonding companies
would cease to issue new bonds, would take over jobs wherever
claims arose and
would attempt to withdraw from bid bonds already written but not
yet awarded.
New contract awards would be scarce (in fact, JWP's
subsidiaries,
once in
bankruptcy, may no longer be qualified for a substantial amount
of, if not all,
public work), suppliers would put the subsidiaries on a
cash-on-demand basis
with the requirement to bring current any outstanding balance,
and receivable
collections (which are essentially progress payments for jobs in
process) would
be substantially slowed, even beyond what JWP has already
experienced as
customers hold payments to assure job completion if the
subsidiary defaults.
If the subsidiaries which have filed for bankruptcy cannot be
sold as going
concerns, then in JWP's opinion, the liquidation of the domestic
U.S.
mechanical and electrical companies would produce no value at
all
for the
estate of the Debtor, since the bonding companies would arrange
to complete the
unfinished projects and would be entitled to the related
contract
receivables.
Other JWP operations-the Water Supply companies, the Canadian
and the United
Kingdom MES Companies (which currently have separate banking and
bonding
facilities), non-MES companies that do not require bonding, and
certain
corporate assets, such as notes and receivables-would still have
a liquidation
value of approximately $100 million.
A substantial additional dilutive factor in a liquidation
scenario from the
perspective of JWP's unsecured creditors would be the
substantial
new claims
against JWP resulting from the bonding companies pursuant to
their respective
JWP indemnification agreements.
These proceeds would be used to satisfy the following secured
or subsidiary claims in full:
<TABLE>
<CAPTION>
Recovery:
<S> <C> <C>
Net Proceeds Available for Distribution to Creditors...$100,000,000
Less: Priority Claims................................. (5,600,000) 100.0%
Less: Subsidiary Secured Debt (UK and Canada).......... (2,900,000) 100.0%
Less: Capitalized Leases and other Miscellaneous Debt.. (4,300,000) 100.0%
-------------
Proceeds Available to JWP INC Claimants............... $87,200,000
=============
The remaining proceeds would be distributed to JWP INC.
creditors as follows:
</TABLE>
<TABLE>
<CAPTION>
Recovery:
<S> <C> <C>
Proceeds Available to JWP INC. Claimants..............$87,200,000
Less: Proceeds to General Unsecured Senior Claims.....(87,200,000) 14.0%
Less: Proceeds to 12.00% Subordinated Notes due 1996.. 0 0.0%
Less: Proceeds to Neeco 7.75% Convertible Sub Debt.... 0 0.0%
-------------
Total Proceeds to Equity Holders...................... $0
=============
</TABLE>
Alternative Liquidation Scenario
As an alternative to the scenario described above, the bonding
companies
could give time to JWP and the Nondebtor Subsidiary managements
to sell each of
the individual businesses as going concerns. In the interim, new
bonding
capacity would be limited, and the subsidiaries' backlog would
deteriorate
significantly during the liquidation process, further reducing
the "on-going"
value of the subsidiaries. Quantifying the value of the
individual businesses
becomes difficult at best and must be made based upon a series
of
static
assumptions. Changes in any of these underlying assumptions, or
individual
company operations or management would likely result in
substantially lower
valuations.
The Debtor, with the assistance of Lazard, has estimated that
a
Chapter 7
trustee would receive $154,900,000 of net proceeds from the sale
of the
Nondebtor Subsidiaries' businesses as going concerns (after
taking into account
costs of disposition-the trustee at 5% of gross receipts and
other fees at 2%
of gross receipts-and income taxes related to the gains on the
sales plus cash
flow generated prior to the sales) to satisfy claims. These
proceeds would be
used to satisfy the following secured [or subsidiary] claims in
full:
<TABLE>
<CAPTION>
Recovery:
<S> <C> <C>
Net Proceeds Available for Distribution to Creditors...$154,900,000
Less: Priority Claims.............................. (5,600,000) 100.0%
Less: Subsidiary Secured Debt (UK and Canada)..........(2,900,000) 100.0%
Less: Capitalised Leases and other Miscellaneous Debt..(4,300,000) 100.0%
-------------
Proceeds Available to JWP INC Claimants................$142,100,000
===========
</TABLE>
The remaining proceeds would be distributed to JWP INC.
creditors
as follows:
<TABLE>
<CAPTION>
Recovery:
<S> <C> <C>
Proceeds Available to JWP INC. Claimants..............$142,100,000
Less: Proceeds to General Unsecured Senior Claims.....(142,100,000) 22.8%
Less: Proceeds to 12.00% Subordinated Notes due 1996.. 0 0.0%
Less: Proceeds to Neeco 7.75% Convertible Sub Debt.... 0 0.0%
--------------
Total Proceeds to Equity Holders..................... $ 0
==============
</TABLE>
As can be seen, the recoveries under a Most Likely Chapter 7
liquidation are far below those expected to be realized under
the Plan-even in the Alternative Liquidation Scenario.
There can be no assurance that the values estimated in this
liquidation
analysis would be realized if the entities were in fact
liquidated. Actual
liquidation proceeds could be materially lower, or higher, than
the amounts set
forth above and no representation or warranty can be or is being
made with
respect to the actual proceeds that would be received in a
Chapter 7 liquidation.
<PAGE>
<PAGE>
HEARING DATE: September 28, 1994
TIME: 9:30 a.m.
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- -----------------------------------X
In re : CHAPTER 11
:
JWP INC., : Case No.
: 93-B-46404 (JHG)
Debtor. :
- -----------------------------------X
NOTICE OF (A) SOLICITATION OF VOTES TO
ACCEPT OR REJECT THE DEBTOR'S THIRD AMENDED PLAN OF
REORGANIZATION AND (B) HEARING TO CONSIDER CONFIRMATION
OF THE DEBTOR'S THIRD AMENDED PLAN OF REORGANIZATION
TO: ALL CREDITORS, INDENTURE TRUSTEES, EQUITY
SECURITY HOLDERS AND OTHER PARTIES-IN-INTEREST:
PLEASE TAKE NOTICE that this Court has entered an order
dated August 22, 1994 (the "Order") approving the Debtor's Third
Amended Disclosure Statement (the "Disclosure Statement").
Pursuant to the Order, (i) copies of the Disclosure Statement
together with the Third Amended Joint Plan of Reorganization
proposed by the Debtor and its affiliate, SellCo Corporation,
dated August 9, 1994 (the "Plan"), without exhibits which are
available upon request, have been mailed to all known creditors
and equity interest holders of the Debtor, (ii) ballots (which
contain information as to voting instructions and deadlines)
have been mailed to all known creditors and interest holders
entitled to vote to accept or reject the Plan, and (iii)
notifications of non-voting status have been mailed to all
classes of creditors that are not entitled to vote to accept or
reject the Plan.
Pursuant to the Order, only ballots that are executed and
received by the Debtor, c/o Donlin, Recano & Company, Inc.
either by (i) first class mail, at P.O. Box 2034, Murray Hill
Station, New York, New York 10156-0701, or (ii) hand-delivery,
Federal Express, overnight mail or other courier service, at 419
Park Avenue South, Suite 1206, New York, New York 10016, no
later than 5:00 p.m., New York time, on September 23, 1994, will
be counted.
PLEASE TAKE FURTHER NOTICE that a hearing to consider
confirmation of the Plan (the "Confirmation Hearing") shall be
held before the Honorable Jeffry H. Gallet, United States
Bankruptcy Judge, Room 523 of the United States Bankruptcy
Court, Alexander Hamilton Custom House, One Bowling Green, New
York, New York 10004-1408 on September 28, 1994 at 9:30 a.m. or
as soon thereafter counsel may be heard.
PLEASE TAKE FURTHER NOTICE that objections, if any, to
confirmation of the Plan shall be in writing, and shall (a)
state the name and address of the objecting party and the nature
of the claim or interest of such party, (b) state with
particularity the basis and nature of each objection to the Plan
and (c) be filed, together with proof of service, with the
United States Bankruptcy Court (with a copy to the Judge's
Chambers) and served so that such objections are received by
4:00 p.m., New York time, no later than September 13, 1994, by
the Clerk of the Court, the Judge's Chambers and the following
parties: (i) Stroock & Stroock & Lavan, Attorneys for the
Debtor, Seven Hanover Square, New York, New York 10004,
Attention: Lawrence M. Handelsman, Esq., (ii) Weil, Gotshal &
Manges, Co-Counsel for the Official Committee of Unsecured
Creditors, 767 Fifth Avenue, New York, New York 10153,
Attention: Michael F. Walsh, Esq., (iii) Wachtell, Lipton, Rosen
& Katz, Co-Counsel for the Official Committee of Unsecured
Creditors, 51 West 52nd Street, New York, New York 10019,
Attention: Chaim Fortgang, Esq., (iv) Tenzer, Greenblatt, Fallon
& Kaplan, Attorneys for the Official Committee of Junior
Creditors and Interest Holders, 405 Lexington Avenue, New York,
New York 10174, Attention: James D. Glass, Esq., and (v) the
Office of the United States Trustee, 80 Broad Street, New York,
New York 10004, Attention: Craig Freeman, Esq.
PLEASE TAKE FURTHER NOTICE that objections to the Plan
which are not timely filed may not be considered by the Court.
<PAGE>
PLEASE TAKE FURTHER NOTICE that the Confirmation Hearing
may be adjourned from time to time without further notice to
holders of claims, holders of equity interests, or other
parties-in-interest other than the announcement of the adjourned
hearing date in open court.
Dated: New York, New York
August 22, 1994
By Order of the United States
Bankruptcy Court for the Southern
District of New York
Stroock & Stroock & Lavan
Attorneys for the Debtor
7 Hanover Square
New York, New York 10004
<PAGE>
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
X Chapter 11 Case No. 93 B 46404
(JHG)
In re :
: NOTIFICATION OF NON-VOTING STATUS
JWP INC. :
: Third Amended Joint Plan of
Debtor. : Reorganization proposed by the
X Debtor and its affiliate, SellCo
Corporation dated August 9, 1994
On August 22, 1994, the United States Bankruptcy Court for the
Southern District of New York (the "Court") approved the Third
Amended Disclosure Statement filed by the above captioned Debtor
and authorized the Debtor to solicit votes with regard to the
acceptance or rejection of the Third Amended Joint Plan of
Reorganization proposed by the Debtor and its affiliate, SellCo
Corporation dated August 9, 1994 (the "Plan") attached as an
exhibit thereto.
UNDER THE TERMS OF THE PLAN, YOUR CLAIM(S) TO THE EXTENT ALLOWED
WILL BE PAID IN FULL OR REINSTATED. AS A RESULT, YOUR CLAIM(S)
IS/ARE NOT IMPAIRED AND YOU ARE NOT ENTITLED TO VOTE ON THE
PLAN.
THE DOCUMENTS ENCLOSED ARE PROVIDED, THEREFORE, FOR
INFORMATIONAL PURPOSES ONLY.
<PAGE>
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
X Chapter 11 Case No.
In re : 93 B 46404 (JHG)
:
: BALLOT
:
JWP INC. : MUST BE RECEIVED BY
: 5:00 P.M. NEW YORK TIME
Debtor. : SEPTEMBER 23, 1994
X
OLD NOTE CREDITORS
(SEE REVERSE FOR DEFINITION OF OLD NOTES)
JWP INC. OLD NOTEHOLDER BALLOT FOR ACCEPTING OR REJECTING THIRD
AMENDED JOINT PLAN OF REORGANIZATION PROPOSED BY THE DEBTOR AND
ITS AFFILIATE, SELLCO CORPORATION DATED AUGUST 9, 1994
ACCEPT REJECT
CLASS PLAN OF REORG. PLAN OF REORG.
2 _____________ _____________
PLEASE SEE REVERSE SIDE FOR VOTING INFORMATION AND IMPORTANT
INSTRUCTIONS BEFORE COMPLETING THIS BALLOT
DATED: SIGNED:
TITLE:
(Please sign exactly as name or
names appear hereon. Full
title
of one signing in
representative
capacity should be clearly
designated after signature.
Names of all joint holders
should
be written even if signed by
only
one.)
PLEASE NOTE: ANY BALLOT WHICH IS EXECUTED AND DATED BUT WHICH
DOES
NOT INDICATE AN ACCEPTANCE OR REJECTION OF THE PLAN SHALL BE
DEEMED TO BE AN ACCEPTANCE OF THE PLAN.
<PAGE>
On August 22, 1994, the United States Bankruptcy Court for the
Southern District of New York (the "Court") approved the Third
Amended Disclosure Statement filed by the Debtor and directed
the
Debtor to solicit votes with regard to the acceptance or
rejection
of the Third Amended Joint Plan of Reorganization proposed by
the
Debtor and its affiliate, SellCo Corporation dated August 9,
1994
(the "Plan") attached as an exhibit thereto.
The Old Notes covered by this Ballot mean the notes issued by
the
Debtor in accordance with the Old Note Agreements. See Schedule
2
of the Plan for a complete list of Old Note Agreements.
INSTRUCTIONS
1. TO HAVE YOUR VOTE COUNT, YOU MUST INDICATE ACCEPTANCE
OR
REJECTION OF THE PLAN IN THE BOX ON THE REVERSE SIDE AND SIGN
AND
RETURN THIS BALLOT IN THE ENCLOSED ENVELOPE (i) BY REGULAR MAIL
TO: JWP INC., c/o DONLIN, RECANO, & COMPANY, INC., P.O. BOX
2034,
MURRAY HILL STATION, NEW YORK, NY 10156-0701 OR (ii) BY HAND
DELIVERY, FEDERAL EXPRESS OR OTHER COURIER SERVICE TO JWP INC.
c/o
DONLIN, RECANO & COMPANY, INC. 419 PARK AVENUE SOUTH, SUITE
1206,
NEW YORK, NY 10016. ANY BALLOT WHICH IS EXECUTED BUT WHICH DOES
NOT INDICATE AN ACCEPTANCE OR REJECTION OF THE PLAN SHALL BE
DEEMED AN ACCEPTANCE OF THE PLAN. BALLOTS MUST BE RECEIVED NO
LATER THAN 5:00 P.M., NEW YORK TIME ON SEPTEMBER 23, 1994. IF A
BALLOT IS RECEIVED AFTER THIS TIME, IT MAY NOT BE COUNTED.
BALLOTS RECEIVED BY FACSIMILE WILL NOT BE COUNTED.
2. It is important that you vote. The Plan can be
confirmed by the Court and thereby made binding if it is
accepted
by the holders of at least 2/3 in amount and more than 1/2 in
number of claims actually voting in each voting class of claims.
The votes of the claims actually voted in your class will bind
those in the class who do not vote. In the event that the
requisite acceptances are not obtained, the Court may
nevertheless
confirm the Plan if the Court finds that it accords fair and
equitable treatment to, and does not discriminate unfairly
against, the class(es) rejecting it, and otherwise satisfies the
requirements of Section 1129(b) of the Bankruptcy Code.
3. Your signature is required in order for your vote to
be
counted. Please sign exactly as your name or names appear on
the
ballot. Names of all joint holders should be written even if
signed by only one. If the claim is held by a corporation, the
ballot should be executed in the name of the corporation by an
authorized officer. If the claim is held by a partnership, the
ballot must be executed in the name of the partnership by a
general partner. If you are signing in a representative
capacity,
indicate your title after your signature.
4. This ballot has been prepared to reflect the class in
which you are eligible to vote. If you have claims in more than
one class, you may, however, receive more than one ballot. IF
YOU
RECEIVE MORE THAN ONE BALLOT, YOU SHOULD ASSUME THAT EACH BALLOT
IS FOR A CLAIM IN A SEPARATE CLASS AND SHOULD COMPLETE AND
RETURN
ALL OF THEM.
5. For administrative convenience, ballots are being sent
to all holders of impaired Claims/Interests in Classes 2, 3,
4(B),
4(C), 6, 7, 8, 9, 10, and 11. However, pursuant to Section 1126
of the Bankruptcy Code, only the holders of Claims/Interests
allowed under Section 502 of the Bankruptcy Code may vote to
accept or reject the Plan. Thus, only the ballots of holders of
Claims/Interests in Class 2, 3, 4(B), 4(C), 6, 7, 8, 9, 10, and
11
that are allowed (or temporarily allowed for the purpose of
voting
on the Plan), in a fixed amount as of September 23, 1994, the
last
day to return ballots, will be counted.
6. This ballot is for voting purposes only and does not
constitute and shall not be deemed a proof of claim or an
admission by the Debtor of the validity of a claim.
<PAGE>
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
X Chapter 11 Case No.
In re : 93 B 46404 (JHG)
:
: BALLOT
:
JWP INC. : MUST BE RECEIVED BY
: 5:00 P.M. NEW YORK TIME
Debtor. : SEPTEMBER 23, 1994
X
CREDITORS UNDER AMENDED AND RESTATED CREDIT
AGREEMENT DATED SEPTEMBER 11, 1992
JWP INC. OLD CREDIT AGREEMENT HOLDERS BALLOT FOR ACCEPTING OR
REJECTING THIRD AMENDED JOINT PLAN OF REORGANIZATION
PROPOSED BY THE DEBTOR AND ITS AFFILIATE,
SELLCO CORPORATION DATED AUGUST 9, 1994
ACCEPT REJECT
CLASS PLAN OF REORG. PLAN OF REORG.
3 _____________ _____________
PLEASE SEE REVERSE SIDE FOR VOTING INFORMATION AND IMPORTANT
INSTRUCTIONS BEFORE COMPLETING THIS BALLOT
DATED: SIGNED:
TITLE:
(Please sign exactly as name or
names appear hereon. Full
title
of one signing in
representative
capacity should be clearly
designated after signature.
Names of all joint holders
should
be written even if signed by
only
one.)
PLEASE NOTE: ANY BALLOT WHICH IS EXECUTED AND DATED BUT WHICH
DOES
NOT INDICATE AN ACCEPTANCE OR REJECTION OF THE PLAN SHALL BE
DEEMED TO BE AN ACCEPTANCE OF THE PLAN.
<PAGE>
On August 22, 1994, the United States Bankruptcy Court for the
Southern District of New York (the "Court") approved the Third
Amended Disclosure Statement filed by the Debtor and directed
the
Debtor to solicit votes with regard to the acceptance or
rejection
of the Third Amended Joint Plan of Reorganization proposed by
the
Debtor and its affiliate, SellCo Corporation dated August 9,
1994
(the "Plan") attached as an exhibit thereto.
INSTRUCTIONS
1. TO HAVE YOUR VOTE COUNT, YOU MUST INDICATE ACCEPTANCE
OR
REJECTION OF THE PLAN IN THE BOX ON THE REVERSE SIDE AND SIGN
AND
RETURN THIS BALLOT IN THE ENCLOSED ENVELOPE (i) BY REGULAR MAIL
TO: JWP INC., c/o DONLIN, RECANO, & COMPANY, INC., P.O. BOX
2034,
MURRAY HILL STATION, NEW YORK, NY 10156-0701 OR (ii) BY HAND
DELIVERY, FEDERAL EXPRESS OR OTHER COURIER SERVICE TO JWP INC.
c/o
DONLIN, RECANO & COMPANY, INC. 419 PARK AVENUE SOUTH, SUITE
1206,
NEW YORK, NY 10016. ANY BALLOT WHICH IS EXECUTED BUT WHICH DOES
NOT INDICATE AN ACCEPTANCE OR REJECTION OF THE PLAN SHALL BE
DEEMED AN ACCEPTANCE OF THE PLAN. BALLOTS MUST BE RECEIVED NO
LATER THAN 5:00 P.M., NEW YORK TIME ON SEPTEMBER 23, 1994. IF A
BALLOT IS RECEIVED AFTER THIS TIME, IT MAY NOT BE COUNTED.
BALLOTS RECEIVED BY FACSIMILE WILL NOT BE COUNTED.
2. It is important that you vote. The Plan can be
confirmed by the Court and thereby made binding if it is
accepted
by the holders of at least 2/3 in amount and more than 1/2 in
number
of claims actually voting in each voting class of claims. The
votes of the claims actually voted in your class will bind those
in the class who do not vote. In the event that the requisite
acceptances are not obtained, the Court may nevertheless confirm
the Plan if the Court finds that it accords fair and equitable
treatment to, and does not discriminate unfairly against, the
class(es) rejecting it, and otherwise satisfies the requirements
of Section 1129(b) of the Bankruptcy Code.
3. Your signature is required in order for your vote to
be
counted. Please sign exactly as your name or names appear on
the
ballot. Names of all joint holders should be written even if
signed by only one. If the claim is held by a corporation, the
ballot should be executed in the name of the corporation by an
authorized officer. If the claim is held by a partnership, the
ballot must be executed in the name of the partnership by a
general partner. If you are signing in a representative
capacity,
indicate your title after your signature.
4. This ballot has been prepared to reflect the class in
which you are eligible to vote. If you have claims in more than
one class, you may, however, receive more than one ballot. IF
YOU
RECEIVE MORE THAN ONE BALLOT, YOU SHOULD ASSUME THAT EACH BALLOT
IS FOR A CLAIM IN A SEPARATE CLASS AND SHOULD COMPLETE AND
RETURN
ALL OF THEM.
5. For administrative convenience, ballots are being sent
to all holders of impaired Claims/Interests in Classes 2, 3,
4(B),
4(C), 6, 7, 8, 9, 10, and 11. However, pursuant to Section 1126
of the Bankruptcy Code, only the holders of Claims/Interests
allowed under Section 502 of the Bankruptcy Code may vote to
accept or reject the Plan. Thus, only the ballots of holders of
Claims/Interests in Class 2, 3, 4(B), 4(C), 6, 7, 8, 9, 10, and
11
that are allowed (or temporarily allowed for the purpose of
voting
on the Plan), in a fixed amount as of September 23, 1994, the
last
day to return ballots, will be counted.
6. This ballot is for voting purposes only and does not
constitute and shall not be deemed a proof of claim or an
admission by the Debtor of the validity of a claim.
<PAGE>
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
X Chapter 11 Case No.
In re : 93 B 46404 (JHG)
:
: BALLOT
:
JWP INC. : MUST BE RECEIVED BY
: 5:00 P.M. NEW YORK TIME
Debtor. : SEPTEMBER 23, 1994
X
JWP INC. OTHER BORROWED MONEY BALLOT FOR ACCEPTING OR
REJECTING
THIRD AMENDED JOINT PLAN OF REORGANIZATION PROPOSED BY THE
DEBTOR AND ITS AFFILIATE, SELLCO CORPORATION DATED AUGUST 9,
1994
ELECTION TO
REDUCE CLAIM
ACCEPT REJECT FOR CASH
CLASS PLAN OF REORG. PLAN OF REORG. (see
instruction
5 on reverse)
4B _____________ _____________ ____________
PLEASE SEE REVERSE SIDE FOR VOTING INFORMATION AND IMPORTANT
INSTRUCTIONS BEFORE COMPLETING THIS BALLOT
DATED: SIGNED:
TITLE:
(Please sign exactly as name or
names appear hereon. Full
title of one signing in repr-
esentative capacity should be
clearly designated after signa-
ture. Names of all joint
holders should be written even
if signed by only one.)
PLEASE NOTE: ANY BALLOT WHICH IS EXECUTED AND DATED BUT WHICH
DOES NOT INDICATE AN ACCEPTANCE OR REJECTION OF THE PLAN SHALL
BE DEEMED TO BE AN ACCEPTANCE OF THE PLAN.
<PAGE>
On August 22, 1994, the United States Bankruptcy Court for the
Southern District of New York (the "Court") approved the Third
Amended Disclosure Statement filed by the Debtor and directed
the Debtor to solicit votes with regard to the acceptance or
rejection of the Third Amended Joint Plan of Reorganization
proposed by the Debtor and its affiliate, SellCo Corporation
dated August 9, 1994 (the "Plan") attached as an exhibit
thereto.
INSTRUCTIONS
1. TO HAVE YOUR VOTE COUNT, YOU MUST INDICATE ACCEPTANCE
OR REJECTION OF THE PLAN IN THE BOX ON THE REVERSE SIDE AND SIGN
AND RETURN THIS BALLOT IN THE ENCLOSED ENVELOPE (i) BY REGULAR
MAIL TO: JWP INC., c/o DONLIN, RECANO, & COMPANY, INC., P.O.
BOX 2034, MURRAY HILL STATION, NEW YORK, NY 10156-0701 OR (ii)
BY HAND DELIVERY, FEDERAL EXPRESS OR OTHER COURIER SERVICE TO
JWP INC., c/o DONLIN, RECANO & COMPANY, INC. 419 PARK AVENUE
SOUTH, SUITE 1206, NEW YORK, NY 10016. ANY BALLOT WHICH IS
EXECUTED BUT WHICH DOES NOT INDICATE AN ACCEPTANCE OR REJECTION
OF THE PLAN SHALL BE DEEMED AN ACCEPTANCE OF THE PLAN. BALLOTS
MUST BE RECEIVED NO LATER THAN 5:00 P.M., NEW YORK TIME ON
SEPTEMBER 23, 1994. IF A BALLOT IS RECEIVED AFTER THIS TIME, IT
MAY NOT BE COUNTED. BALLOTS RECEIVED BY FACSIMILE WILL NOT BE
COUNTED.
2. It is important that you vote. The Plan can be
confirmed by the Court and thereby made binding if it is
accepted by the holders of at least 2/3 in amount and more than
1/2 in number of claims actually voting in each voting class of
claims. The votes of the claims actually voted in your class
will bind those in the class who do not vote. In the event that
the requisite acceptances are not obtained, the Court may
nevertheless confirm the Plan if the Court finds that it accords
fair and equitable treatment to, and does not discriminate
unfairly against, the class(es) rejecting it, and otherwise
satisfies the requirements of Section 1129(b) of the Bankruptcy
Code.
3. Your signature is required in order for your vote to
be counted. Please sign exactly as your name or names appear on
the ballot. Names of all joint holders should be written even
if signed by only one. If the claim is held by a corporation,
the ballot should be executed in the name of the corporation by
an authorized officer. If the claim is held by a partnership,
the ballot must be executed in the name of the partnership by a
general partner. If you are signing in a representative
capacity, indicate your title after your signature.
4. This ballot has been prepared to reflect the class in
which you are eligible to vote. If you have claims in more than
one class, you may, however, receive more than one ballot. IF
YOU RECEIVE MORE THAN ONE BALLOT, YOU SHOULD ASSUME THAT EACH
BALLOT IS FOR A CLAIM IN A SEPARATE CLASS AND SHOULD COMPLETE
AND RETURN ALL OF THEM.
5. Election for claim to be treated as a small unsecured
claim. As provided in Article III, Section 4 1.(a) of the Plan,
holders of Class 4 Claims against JWP allowed in an amount
greater than $10,000.00 may elect to reduce the claim to
$10,000.00 and in full satisfaction of such Claim be treated as
a Class 4A claim. Acceptance of this election (and the
reduction of your Claim) must be indicated by a check in the
"Election To Reduce Claim For Cash" box on the reverse side.
This will be your only opportunity to make this election. If
you fail to elect, your allowed claim will be treated in the
same manner as all other Class 4B allowed claims as provided
under the Plan. Furthermore, taking the Cash Election
constitutes a waiver and release of the holders claim(s) in
excess of $10,000.00.
6. For administrative convenience, ballots are being sent
to all holders of impaired Claims/Interests in Classes 2, 3,
4(B), 4(C), 6, 7, 8, 9, 10, and 11. However, pursuant to
Section 1126 of the Bankruptcy Code, only the holders of
Claims/Interests allowed under Section 502 of the Bankruptcy
Code may vote to accept or reject the Plan. Thus, only the
ballots of holders of Claims/Interests in Class 2, 3, 4(B),
4(C), 6, 7, 8, 9, 10, and 11 that are allowed (or temporarily
allowed for the purpose of voting on the Plan), in a fixed
amount as of September 23, 1994, the last day to return ballots,
will be counted.
7. This ballot is for voting purposes only and does not
constitute and shall not be deemed a proof of claim/interest or
an admission by the Debtor of the validity of a claim.
<PAGE>
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
X Chapter 11 Case No.
In re : 93 B 46404 (JHG)
:
: BALLOT
:
JWP INC. : MUST BE RECEIVED BY
: 5:00 P.M. NEW YORK TIME
Debtor. : SEPTEMBER 23, 1994
X
JWP INC. GENERAL UNSECURED CREDITOR BALLOT FOR ACCEPTING OR
REJECTING THIRD AMENDED JOINT PLAN OF REORGANIZATION PROPOSED
BY THE DEBTOR AND ITS AFFILIATE, SELLCO CORPORATION DATED
AUGUST 9, 1994
ELECTION TO
REDUCE CLAIM
ACCEPT REJECT FOR CASH
CLASS PLAN OF REORG. PLAN OF REORG. (see
instruction
5 on reverse)
4C _____________ _____________ ____________
PLEASE SEE REVERSE SIDE FOR VOTING INFORMATION AND IMPORTANT
INSTRUCTIONS BEFORE COMPLETING THIS BALLOT
DATED: SIGNED:
TITLE:
(Please sign exactly as name or
names appear hereon. Full
title of one signing in
representative capacity should
be clearly designated after
signature. Names of all joint
holders should be written even
if signed by only one.)
PLEASE NOTE: ANY BALLOT WHICH IS EXECUTED AND DATED BUT WHICH
DOES NOT INDICATE AN ACCEPTANCE OR REJECTION OF THE PLAN SHALL
BE DEEMED TO BE AN ACCEPTANCE OF THE PLAN.
<PAGE>
On August 22, 1994, the United States Bankruptcy Court for the
Southern District of New York (the "Court") approved the Third
Amended Disclosure Statement filed by the Debtor and directed
the Debtor to solicit votes with regard to the acceptance or
rejection of the Third Amended Joint Plan of Reorganization
proposed by the Debtor and its affiliate, SellCo Corporation
dated August 9, 1994 (the "Plan") attached as an exhibit
thereto.
INSTRUCTIONS
1. TO HAVE YOUR VOTE COUNT, YOU MUST INDICATE ACCEPTANCE
OR REJECTION OF THE PLAN IN THE BOX ON THE REVERSE SIDE AND SIGN
AND RETURN THIS BALLOT IN THE ENCLOSED ENVELOPE (i) BY REGULAR
MAIL TO: JWP INC., c/o DONLIN, RECANO, & COMPANY, INC., P.O. BOX
2034, MURRAY HILL STATION, NEW YORK, NY 10156-0701 OR (ii) BY
HAND DELIVERY, FEDERAL EXPRESS OR OTHER COURIER SERVICE TO JWP
INC. c/o DONLIN, RECANO & COMPANY, INC. 419 PARK AVENUE SOUTH,
SUITE 1206, NEW YORK, NY 10016. ANY BALLOT WHICH IS EXECUTED
BUT WHICH DOES NOT INDICATE AN ACCEPTANCE OR REJECTION OF THE
PLAN SHALL BE DEEMED AN ACCEPTANCE OF THE PLAN. BALLOTS MUST BE
RECEIVED NO LATER THAN 5:00 P.M., NEW YORK TIME ON SEPTEMBER 23,
1994. IF A BALLOT IS RECEIVED AFTER THIS TIME, IT MAY NOT BE
COUNTED. BALLOTS RECEIVED BY FACSIMILE WILL NOT BE COUNTED.
2. It is important that you vote. The Plan can be
confirmed by the Court and thereby made binding if it is
accepted by the holders of at least 2/3 in amount and more than
1/2 in number of claims actually voting in each voting class of
claims. The votes of the claims actually voted in your class
will bind those in the class who do not vote. In the event that
the requisite acceptances are not obtained, the Court may
nevertheless confirm the Plan if the Court finds that it accords
fair and equitable treatment to, and does not discriminate
unfairly against, the class(es) rejecting it, and otherwise
satisfies the requirements of Section 1129(b) of the Bankruptcy
Code.
3. Your signature is required in order for your vote to
be counted. Please sign exactly as your name or names appear on
the ballot. Names of all joint holders should be written even
if signed by only one. If the claim is held by a corporation,
the ballot should be executed in the name of the corporation by
an authorized officer. If the claim is held by a partnership,
the ballot must be executed in the name of the partnership by a
general partner. If you are signing in a representative
capacity, indicate your title after your signature.
4. This ballot has been prepared to reflect the class in
which you are eligible to vote. If you have claims in more than
one class, you may, however, receive more than one ballot. IF
YOU RECEIVE MORE THAN ONE BALLOT, YOU SHOULD ASSUME THAT EACH
BALLOT IS FOR A CLAIM IN A SEPARATE CLASS AND SHOULD COMPLETE
AND RETURN ALL OF THEM.
5. Election for claim to be treated as a small unsecured
claim. As provided in Article III, Section 4 1.(a) of the Plan,
holders of Class 4 Claims against JWP allowed in an amount
greater than $10,000.00 may elect to reduce the claim to
$10,000.00 and in full satisfaction of such Claim be treated as
a Class 4A claim. Acceptance of this election (and the
reduction of your Claim) must be indicated by a check in the
"Election To Reduce Claim For Cash" box on the reverse side.
This will be your only opportunity to make this election. If
you fail to elect, your allowed claim will be treated in the
same manner as all other Class 4C allowed claims as provided
under the Plan. Furthermore, taking the Cash Election
constitutes a waiver and release of the holders claim(s) in
excess of $10,000.00.
6. For administrative convenience, ballots are being sent
to all holders of impaired Claims/Interests in Classes 2, 3,
4(B), 4(C), 6, 7, 8, 9, 10, and 11. However, pursuant to
Section 1126 of the Bankruptcy Code, only the holders of
Claims/Interests allowed under Section 502 of the Bankruptcy
Code may vote to accept or reject the Plan. Thus, only the
ballots of holders of Claims/Interests in Class 2, 3, 4(B),
4(C), 6, 7, 8, 9, 10, and 11 that are allowed (or temporarily
allowed for the purpose of voting on the Plan), in a fixed
amount as of September 23, 1994, the last day to return ballots,
will be counted.
7. This ballot is for voting purposes only and does not
constitute and shall not be deemed a proof of claim/interest or
an admission by the Debtor of the validity of a claim.
<PAGE>
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
X Chapter 11 Case No.
In re : 93 B 46404 (JHG)
:
: BALLOT
:
JWP INC. : MUST BE RECEIVED BY
: 5:00 P.M. NEW YORK TIME
Debtor. : SEPTEMBER 23, 1994
X
JWP INC. SUBORDINATED DEBT CLAIMS BALLOT FOR ACCEPTING OR
REJECTING THIRD AMENDED JOINT PLAN OF REORGANIZATION PROPOSED BY
THE DEBTOR AND ITS AFFILIATE, SELLCO
CORPORATION DATED AUGUST 9, 1994
ACCEPT REJECT
CLASS PLAN OF REORG. PLAN OF REORG.
6 _____________ _____________
PLEASE SEE REVERSE SIDE FOR VOTING INFORMATION AND IMPORTANT
INSTRUCTIONS BEFORE COMPLETING THIS BALLOT
DATED: SIGNED:
TITLE:
(Please sign exactly as name or
names appear hereon. Full
title
of one signing in
representative
capacity should be clearly
designated after signature.
Names of all joint holders
should
be written even if signed by
only
one.)
PLEASE NOTE: ANY BALLOT WHICH IS EXECUTED AND DATED BUT WHICH
DOES
NOT INDICATE AN ACCEPTANCE OR REJECTION OF THE PLAN SHALL BE
DEEMED TO BE AN ACCEPTANCE OF THE PLAN.
<PAGE>
On August 22, 1994, the United States Bankruptcy Court for the
Southern District of New York (the "Court") approved the Third
Amended Disclosure Statement filed by the Debtor and directed
the
Debtor to solicit votes with regard to the acceptance or
rejection
of the Third Amended Joint Plan of Reorganization proposed by
the
Debtor and its affiliate, SellCo Corporation dated August 9,
1994
(the "Plan") attached as an exhibit thereto.
INSTRUCTIONS
1. TO HAVE YOUR VOTE COUNT, YOU MUST INDICATE ACCEPTANCE
OR
REJECTION OF THE PLAN IN THE BOX ON THE REVERSE SIDE AND SIGN
AND
RETURN THIS BALLOT IN THE ENCLOSED ENVELOPE (i) BY REGULAR MAIL
TO: JWP INC., c/o DONLIN, RECANO, & COMPANY, INC., P.O. BOX
2034,
MURRAY HILL STATION, NEW YORK, NY 10156-0701 OR (ii) BY HAND
DELIVERY, FEDERAL EXPRESS OR OTHER COURIER SERVICE TO JWP INC.
c/o
DONLIN, RECANO & COMPANY, INC. 419 PARK AVENUE SOUTH, SUITE
1206,
NEW YORK, NY 10016. ANY BALLOT WHICH IS EXECUTED BUT WHICH DOES
NOT INDICATE AN ACCEPTANCE OR REJECTION OF THE PLAN SHALL BE
DEEMED AN ACCEPTANCE OF THE PLAN. BALLOTS MUST BE RECEIVED NO
LATER THAN 5:00 P.M., NEW YORK TIME ON SEPTEMBER 23, 1994. IF A
BALLOT IS RECEIVED AFTER THIS TIME, IT MAY NOT BE COUNTED.
BALLOTS RECEIVED BY FACSIMILE WILL NOT BE COUNTED.
2. It is important that you vote. The Plan can be
confirmed by the Court and thereby made binding if it is
accepted
by the holders of at least 2/3 in amount of interests actually
voting in each voting class of interests. The votes of the
claims
actually voted in your class will bind those in the class who do
not vote. In the event that the requisite acceptances are not
obtained, the Court may nevertheless confirm the Plan if the
Court
finds that it accords fair and equitable treatment to, and does
not discriminate unfairly against, the class(es) rejecting it,
and
otherwise satisfies the requirements of Section 1129(b) of the
Bankruptcy Code.
3. Your signature is required in order for your vote to
be
counted. Please sign exactly as your name or names appear on
the
ballot. Names of all joint holders should be written even if
signed by only one. If the interest is held by a corporation,
the
ballot should be executed in the name of the corporation by an
authorized officer. If the interest is held by a partnership,
the
ballot must be executed in the name of the partnership by a
general partner. If you are signing in a representative
capacity,
indicate your title after your signature.
4. This ballot has been prepared to reflect the class in
which you are eligible to vote. If you have claims in more than
one class, you may, however, receive more than one ballot. IF
YOU
RECEIVE MORE THAN ONE BALLOT, YOU SHOULD ASSUME THAT EACH BALLOT
IS FOR A CLAIM IN A SEPARATE CLASS AND SHOULD COMPLETE AND
RETURN
ALL OF THEM.
5. For administrative convenience, ballots are being sent
to all holders of impaired Claims/Interests in Classes 2, 3,
4(B),
4(C), 6, 7, 8, 9, 10, and 11. However, pursuant to Section 1126
of the Bankruptcy Code, only the holders of Claims/Interests
allowed under Section 502 of the Bankruptcy Code may vote to
accept or reject the Plan. Thus, only the ballots of holders of
Claims/Interests in Class 2, 3, 4(B), 4(C), 6, 7, 8, 9, 10, and
11
that are allowed (or temporarily allowed for the purpose of
voting
on the Plan), in a fixed amount as of September 23, 1994, the
last
day to return ballots, will be counted.
6. This ballot is for voting purposes only and does not
constitute and shall not be deemed a proof of claim or an
admission by the Debtor of the validity of a claim.
<PAGE>
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
X Chapter 11 Case No.
In re : 93 B 46404 (JHG)
:
: BALLOT
:
JWP INC. : MUST BE RECEIVED BY
: 5:00 P.M. NEW YORK TIME
Debtor. : SEPTEMBER 23, 1994
X
JWP INC. CONTINGENT AND STATUTORY SUBORDINATED CLAIMS BALLOT FOR
ACCEPTING OR REJECTING THIRD AMENDED JOINT PLAN OF
REORGANIZATION
PROPOSED BY THE DEBTOR AND ITS AFFILIATE, SELLCO CORPORATION
DATED AUGUST 9, 1994
ELECTION TO RECEIVE CASH
IN LIEU OF NEW SERIES Z
ACCEPT REJECT WARRANT(s) (see
CLASS PLAN OF REORG. PLAN OF REORG. instruction 6 on
reverse)
7 _____________ _____________ ________________________
PLEASE SEE REVERSE SIDE FOR VOTING INFORMATION AND IMPORTANT
INSTRUCTIONS BEFORE COMPLETING THIS BALLOT
DATED: SIGNED:
TITLE:
(Please sign exactly as name or
names appear hereon. Full
title of one signing in
representative capacity should
be clearly designated after
signature. Names of all joint
holders should be written even
if signed by only one.)
PLEASE NOTE: ANY BALLOT WHICH IS EXECUTED AND DATED BUT WHICH
DOES NOT INDICATE AN ACCEPTANCE OR REJECTION OF THE PLAN SHALL
BE DEEMED TO BE AN ACCEPTANCE OF THE PLAN.
<PAGE>
On August 22, 1994, the United States Bankruptcy Court for the
Southern District of New York (the "Court") approved the Third
Amended Disclosure Statement filed by the Debtor and directed
the Debtor to solicit votes with regard to the acceptance or
rejection of the Third Amended Joint Plan of Reorganization
proposed by the Debtor and its affiliate, SellCo Corporation
dated August 9, 1994 (the "Plan") attached as an exhibit
thereto.
INSTRUCTIONS
1. TO HAVE YOUR VOTE COUNT, YOU MUST INDICATE ACCEPTANCE
OR REJECTION OF THE PLAN IN THE BOX ON THE REVERSE SIDE AND SIGN
AND RETURN THIS BALLOT IN THE ENCLOSED ENVELOPE (i) BY REGULAR
MAIL TO: JWP INC., c/o DONLIN, RECANO, & COMPANY, INC., P.O. BOX
2034, MURRAY HILL STATION, NEW YORK, NY 10156-0701 OR (ii) BY
HAND DELIVERY, FEDERAL EXPRESS OR OTHER COURIER SERVICE TO JWP
INC. c/o DONLIN, RECANO & COMPANY, INC. 419 PARK AVENUE SOUTH,
SUITE 1206, NEW YORK, NY 10016. ANY BALLOT WHICH IS EXECUTED
BUT WHICH DOES NOT INDICATE AN ACCEPTANCE OR REJECTION OF THE
PLAN SHALL BE DEEMED AN ACCEPTANCE OF THE PLAN. BALLOTS MUST BE
RECEIVED NO LATER THAN 5:00 P.M., NEW YORK TIME ON SEPTEMBER 23,
1994. IF A BALLOT IS RECEIVED AFTER THIS TIME, IT MAY NOT BE
COUNTED. BALLOTS RECEIVED BY FACSIMILE WILL NOT BE COUNTED.
2. It is important that you vote. The Plan can be
confirmed by the Court and thereby made binding if it is
accepted by the holders of at least 2/3 in amount and more than
1/2 in number of claims actually voting in each voting class of
claims. The votes of the claims actually voted in your class
will bind those in the class who do not vote. In the event that
the requisite acceptances are not obtained, the Court may
nevertheless confirm the Plan if the Court finds that it accords
fair and equitable treatment to, and does not discriminate
unfairly against, the class(es) rejecting it, and otherwise
satisfies the requirements of Section 1129(b) of the Bankruptcy
Code.
3. Your signature is required in order for your vote to
be counted. Please sign exactly as your name or names appear on
the ballot. Names of all joint holders should be written even
if signed by only one. If the claim is held by a corporation,
the ballot should be executed in the name of the corporation by
an authorized officer. If the claim is held by a partnership,
the ballot must be executed in the name of the partnership by a
general partner. If you are signing in a representative
capacity, indicate your title after your signature.
4. This ballot has been prepared to reflect the class in
which you are eligible to vote. If you have claims in more than
one class, you may, however, receive more than one ballot. IF
YOU RECEIVE MORE THAN ONE BALLOT, YOU SHOULD ASSUME THAT EACH
BALLOT IS FOR A CLAIM IN A SEPARATE CLASS AND SHOULD COMPLETE
AND RETURN ALL OF THEM.
5. For administrative convenience, ballots are being sent
to all holders of impaired Claims/Interests in Classes 2, 3,
4(B), 4(C), 6, 7, 8, 9, 10, and 11. However, pursuant to
Section 1126 of the Bankruptcy Code, only the holders of
Claims/Interests allowed under Section 502 of the Bankruptcy
Code may vote to accept or reject the Plan. Thus, only the
ballots of holders of Claims/Interests in Class 2, 3, 4(B),
4(C), 6, 7, 8, 9, 10, and 11 that are allowed (or temporarily
allowed for the purpose of voting on the Plan), in a fixed
amount as of September 23, 1994, the last day to return ballots,
will be counted.
6. Pursuant to Article IV, Section J, 6. of the Plan, at
the option of the holder of an allowed claim in Class 8, such
holder shall be entitled to receive from Reorganized JWP $0.10
in lieu of each whole New Series Z Warrant such holder might
otherwise be entitled to receive under the Plan provided,
however, that Reorganized JWP shall not be obligated to
distribute cash to such holder on account of such whole New
Series Z Warrants unless such holder is entitled to receive in
the aggregate at least $1.00 on account of such whole New Series
Z Warrants. Acceptance of this election must be indicated by a
check in the "Election to Receive Cash in Lieu of New Series Z
Warrants" box on the reserve side. This will be your only
opportunity to make this election.
7. This ballot is for voting purposes only and does not
constitute and shall not be deemed a proof of claim or an
admission by the Debtor of the validity of a claim.
<PAGE>
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
X Chapter 11 Case No.
In re : 93 B 46404 (JHG)
:
: BALLOT
:
JWP INC. : MUST BE RECEIVED BY
: 5:00 P.M. NEW YORK TIME
Debtor. : SEPTEMBER 23, 1994
X
JWP INC. OLD PREFERRED STOCK BALLOT FOR ACCEPTING OR
REJECTING THIRD AMENDED JOINT PLAN OF REORGANIZATION PROPOSED
BY THE DEBTOR AND ITS AFFILIATE, SELLCO CORPORATION DATED
AUGUST 9, 1994
ELECTION TO RECEIVE CASH
IN LIEU OF NEW SERIES Z
ACCEPT REJECT WARRANT(s) (see
CLASS PLAN OF REORG. PLAN OF REORG. instruction 6 on
reverse)
8 _____________ _____________ ________________________
PLEASE SEE REVERSE SIDE FOR VOTING INFORMATION AND IMPORTANT
INSTRUCTIONS BEFORE COMPLETING THIS BALLOT
DATED: SIGNED:
TITLE:
(Please sign exactly as name or
names appear hereon. Full
title of one signing in
representative capacity should
be clearly designated after
signature. Names of all joint
holders should be written even
if signed by only one.)
PLEASE NOTE: ANY BALLOT WHICH IS EXECUTED AND DATED BUT WHICH
DOES NOT INDICATE AN ACCEPTANCE OR REJECTION OF THE PLAN SHALL
BE DEEMED TO BE AN ACCEPTANCE OF THE PLAN.
<PAGE>
On August 22, 1994, the United States Bankruptcy Court for the
Southern District of New York (the "Court") approved the Third
Amended Disclosure Statement filed by the Debtor and directed
the Debtor to solicit votes with regard to the acceptance or
rejection of the Third Amended Joint Plan of Reorganization
proposed by the Debtor and its affiliate, SellCo Corporation
dated August 9, 1994 (the "Plan") attached as an exhibit
thereto.
INSTRUCTIONS
1. TO HAVE YOUR VOTE COUNT, YOU MUST INDICATE ACCEPTANCE
OR REJECTION OF THE PLAN IN THE BOX ON THE REVERSE SIDE AND SIGN
AND RETURN THIS BALLOT IN THE ENCLOSED ENVELOPE (i) BY REGULAR
MAIL TO: JWP INC., c/o DONLIN, RECANO, & COMPANY, INC., P.O.
BOX 2034, MURRAY HILL STATION, NEW YORK, NY 10156-0701 OR (ii)
BY HAND DELIVERY, FEDERAL EXPRESS OR OTHER COURIER SERVICE TO
JWP INC. c/o DONLIN, RECANO & COMPANY, INC. 419 PARK AVENUE
SOUTH, SUITE 1206, NEW YORK, NY 10016. ANY BALLOT WHICH IS
EXECUTED BUT WHICH DOES NOT INDICATE AN ACCEPTANCE OR REJECTION
OF THE PLAN SHALL BE DEEMED AN ACCEPTANCE OF THE PLAN. BALLOTS
MUST BE RECEIVED NO LATER THAN 5:00 P.M., NEW YORK TIME ON
SEPTEMBER 23, 1994. IF A BALLOT IS RECEIVED AFTER THIS TIME, IT
MAY NOT BE COUNTED. BALLOTS RECEIVED BY FACSIMILE WILL NOT BE
COUNTED.
2. It is important that you vote. The Plan can be
confirmed by the Court and thereby made binding if it is
accepted by the holders of at least 2/3 in amount of interests
actually voting in each voting class of interests. The votes of
the interests actually voted in your class will bind those in
the class who do not vote. In the event that the requisite
acceptances are not obtained, the Court may nevertheless confirm
the Plan if the Court finds that it accords fair and equitable
treatment to, and does not discriminate unfairly against, the
class(es) rejecting it, and otherwise satisfies the requirements
of Section 1129(b) of the Bankruptcy Code.
3. Your signature is required in order for your vote to
be counted. Please sign exactly as your name or names appear on
the ballot. Names of all joint holders should be written even
if signed by only one. If the interest is held by a
corporation, the ballot should be executed in the name of the
corporation by an authorized officer. If the interest is held
by a partnership, the ballot must be executed in the name of the
partnership by a general partner. If you are signing in a
representative capacity, indicate your title after your
signature.
4. This ballot has been prepared to reflect the class in
which you are eligible to vote. If you have claims in more than
one class, you may, however, receive more than one ballot. IF
YOU RECEIVE MORE THAN ONE BALLOT, YOU SHOULD ASSUME THAT EACH
BALLOT IS FOR A CLAIM IN A SEPARATE CLASS AND SHOULD COMPLETE
AND RETURN ALL OF THEM.
5. For administrative convenience, ballots are being sent
to all holders of impaired Claims/Interests in Classes 2, 3,
4(B), 4(C), 6, 7, 8, 9, 10, and 11. However, pursuant to
Section 1126 of the Bankruptcy Code, only the holders of
Claims/Interests allowed under Section 502 of the Bankruptcy
Code may vote to accept or reject the Plan. Thus, only the
ballots of holders of Claims/Interests in Class 2, 3, 4(B),
4(C), 6, 7, 8, 9, 10, and 11 that are allowed (or temporarily
allowed for the purpose of voting on the Plan), in a fixed
amount as of September 23, 1994, the last day to return ballots,
will be counted.
6. Pursuant to Article IV, Section J, 6. of the Plan, at
the option of the holder of an allowed interest in Class 8, such
holder shall be entitled to receive from Reorganized JWP $0.10
in lieu of each whole New Series Z Warrant such holder might
otherwise be entitled to receive under the Plan provided,
however, that Reorganized JWP shall not be obligated to
distribute cash to such holder on account of such whole New
Series Z Warrants unless such holder is entitled to receive in
the aggregate at least $1.00 on account of such whole New Series
Z Warrants. Acceptance of this election must be indicated by a
check in the "Election to Receive Cash in Lieu of New Series Z
Warrants" box on the reserve side. This will be your only
opportunity to make this election.
7. This ballot is for voting purposes only and does not
constitute and shall not be deemed a proof of claim/interest or
an admission by the Debtor of the validity of a claim.
<PAGE>
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
X Chapter 11 Case No.
In re : 93 B 46404 (JHG)
:
: BALLOT
:
JWP INC. : MUST BE RECEIVED BY
: 5:00 P.M. NEW YORK TIME
Debtor. : SEPTEMBER 23, 1994
X
JWP INC. OLD COMMON STOCK AND RELATED INTERESTS BALLOT FOR
ACCEPTING OR REJECTING THIRD AMENDED JOINT PLAN OF
REORGANIZATION PROPOSED BY THE DEBTOR AND ITS AFFILIATE,
SELLCO CORPORATION DATED AUGUST 9, 1994
ELECTION TO RECEIVE CASH
IN LIEU OF NEW SERIES Z
ACCEPT REJECT WARRANT(s) (see
CLASS PLAN OF REORG. PLAN OF REORG. instruction 6 on
reverse)
9 _____________ _____________ ________________________
PLEASE SEE REVERSE SIDE FOR VOTING INFORMATION AND IMPORTANT
INSTRUCTIONS BEFORE COMPLETING THIS BALLOT
DATED: SIGNED:
TITLE:
(Please sign exactly as name or
names appear hereon. Full
title of one signing in repr-
esentative capacity should be
clearly designated after signa-
ture. Names of all joint
holders should be written even
if signed by only one.)
PLEASE NOTE: ANY BALLOT WHICH IS EXECUTED AND DATED BUT WHICH
DOES NOT INDICATE AN ACCEPTANCE OR REJECTION OF THE PLAN SHALL
BE DEEMED TO BE AN ACCEPTANCE OF THE PLAN.
<PAGE>
On August 22, 1994, the United States Bankruptcy Court for the
Southern District of New York (the "Court") approved the Third
Amended Disclosure Statement filed by the Debtor and directed
the Debtor to solicit votes with regard to the acceptance or
rejection of the Third Amended Joint Plan of Reorganization
proposed by the Debtor and its affiliate, SellCo Corporation
dated August 9, 1994 (the "Plan") attached as an exhibit
thereto.
INSTRUCTIONS
1. TO HAVE YOUR VOTE COUNT, YOU MUST INDICATE ACCEPTANCE
OR REJECTION OF THE PLAN IN THE BOX ON THE REVERSE SIDE AND SIGN
AND RETURN THIS BALLOT IN THE ENCLOSED ENVELOPE (i) BY REGULAR
MAIL TO: JWP INC., c/o DONLIN, RECANO, & COMPANY, INC., P.O.
BOX 2034, MURRAY HILL STATION, NEW YORK, NY 10156-0701 OR (ii)
BY HAND DELIVERY, FEDERAL EXPRESS OR OTHER COURIER SERVICE TO
JWP INC. c/o DONLIN, RECANO & COMPANY, INC. 419 PARK AVENUE
SOUTH, SUITE 1206, NEW YORK, NY 10016. ANY BALLOT WHICH IS
EXECUTED BUT WHICH DOES NOT INDICATE AN ACCEPTANCE OR REJECTION
OF THE PLAN SHALL BE DEEMED AN ACCEPTANCE OF THE PLAN. BALLOTS
MUST BE RECEIVED NO LATER THAN 5:00 P.M., NEW YORK TIME ON
SEPTEMBER 23, 1994. IF A BALLOT IS RECEIVED AFTER THIS TIME, IT
MAY NOT BE COUNTED. BALLOTS RECEIVED BY FACSIMILE WILL NOT BE
COUNTED.
2. It is important that you vote. The Plan can be
confirmed by the Court and thereby made binding if it is
accepted by the holders of at least 2/3 in amount of interests
actually voting in each voting class of interests. The votes of
the interests actually voted in your class will bind those in
the class who do not vote. In the event that the requisite
acceptances are not obtained, the Court may nevertheless confirm
the Plan if the Court finds that it accords fair and equitable
treatment to, and does not discriminate unfairly against, the
class(es) rejecting it, and otherwise satisfies the requirements
of Section 1129(b) of the Bankruptcy Code.
3. Your signature is required in order for your vote to
be counted. Please sign exactly as your name or names appear on
the ballot. Names of all joint holders should be written even
if signed by only one. If the interest is held by a
corporation, the ballot should be executed in the name of the
corporation by an authorized officer. If the interest is held
by a partnership, the ballot must be executed in the name of the
partnership by a general partner. If you are signing in a
representative capacity, indicate your title after your
signature.
4. This ballot has been prepared to reflect the class in
which you are eligible to vote. If you have claims in more than
one class, you may, however, receive more than one ballot. IF
YOU RECEIVE MORE THAN ONE BALLOT, YOU SHOULD ASSUME THAT EACH
BALLOT IS FOR A CLAIM IN A SEPARATE CLASS AND SHOULD COMPLETE
AND RETURN ALL OF THEM.
5. For administrative convenience, ballots are being sent
to all holders of impaired Claims/Interests in Classes 2, 3,
4(B), 4(C), 6, 7, 8, 9, 10, and 11. However, pursuant to
Section 1126 of the Bankruptcy Code, only the holders of
Claims/Interests allowed under Section 502 of the Bankruptcy
Code may vote to accept or reject the Plan. Thus, only the
ballots of holders of Claims/Interests in Class 2, 3, 4(B),
4(C), 6, 7, 8, 9, 10, and 11 that are allowed (or temporarily
allowed for the purpose of voting on the Plan), in a fixed
amount as of September 23, 1994, the last day to return ballots,
will be counted.
6. Pursuant to Article IV, Section J, 6. of the Plan, at
the option of the holder of an allowed interest in Class 9, such
holder shall be entitled to receive from Reorganized JWP $0.10
in lieu of each whole New Series Z Warrant such holder might
otherwise be entitled to receive under the Plan provided,
however, that Reorganized JWP shall not be obligated to
distribute cash to such holder on account of such whole New
Series Z Warrants unless such holder is entitled to receive in
the aggregate at least $1.00 on account of such whole New Series
Z Warrants. Acceptance of this election must be indicated by a
check in the "Election to Receive Cash in Lieu of New Series Z
Warrants" box on the reserve side. This will be your only
opportunity to make this election.
7. This ballot is for voting purposes only and does not
constitute and shall not be deemed a proof of claim/interest or
an admission by the Debtor of the validity of a claim.
<PAGE>
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
X Chapter 11 Case No.
In re : 93 B 46404 (JHG)
:
JWP INC. : BALLOT
:
: MUST BE RECEIVED BY
: 5:00 P.M. NEW YORK TIME
Debtor. : SEPTEMBER 23, 1994
X
JWP INC. SHAREHOLDER LITIGATION BALLOT FOR ACCEPTING OR
REJECTING THIRD AMENDED JOINT PLAN OF REORGANIZATION PROPOSED
BY THE DEBTOR AND ITS AFFILIATE, SELLCO CORPORATION DATED
AUGUST 9, 1994
ELECTION TO RECEIVE CASH
IN LIEU OF NEW SERIES Z
ACCEPT REJECT WARRANT(s) (see
CLASS PLAN OF REORG. PLAN OF REORG. instruction 6 on
reverse)
10 _____________ _____________ ________________________
PLEASE SEE REVERSE SIDE FOR VOTING INFORMATION AND IMPORTANT
INSTRUCTIONS BEFORE COMPLETING THIS BALLOT
DATED: SIGNED:
TITLE:
(Please sign exactly as name or
names appear hereon. Full
title of one signing in repr-
esentative capacity should be
clearly designated after signa-
ture. Names of all joint
holders should be written even
if signed by only one.)
PLEASE NOTE: ANY BALLOT WHICH IS EXECUTED AND DATED BUT WHICH
DOES NOT INDICATE AN ACCEPTANCE OR REJECTION OF THE PLAN SHALL
BE DEEMED TO BE AN ACCEPTANCE OF THE PLAN.
<PAGE>
On August 22, 1994, the United States Bankruptcy Court for the
Southern District of New York (the "Court") approved the Third
Amended Disclosure Statement filed by the Debtor and directed
the Debtor to solicit votes with regard to the acceptance or
rejection of the Third Amended Joint Plan of Reorganization
proposed by the Debtor and its affiliate, SellCo Corporation
dated August 9, 1994 (the "Plan") attached as an exhibit
thereto.
INSTRUCTIONS
1. TO HAVE YOUR VOTE COUNT, YOU MUST INDICATE ACCEPTANCE
OR REJECTION OF THE PLAN IN THE BOX ON THE REVERSE SIDE AND SIGN
AND RETURN THIS BALLOT IN THE ENCLOSED ENVELOPE (i) BY REGULAR
MAIL TO: JWP INC., c/o DONLIN, RECANO, & COMPANY, INC., P.O. BOX
2034, MURRAY HILL STATION, NEW YORK, NY 10156-0701 OR (ii) BY
HAND DELIVERY, FEDERAL EXPRESS OR OTHER COURIER SERVICE TO JWP
INC. c/o DONLIN, RECANO & COMPANY, INC. 419 PARK AVENUE SOUTH,
SUITE 1206, NEW YORK, NY 10016. ANY BALLOT WHICH IS EXECUTED
BUT WHICH DOES NOT INDICATE AN ACCEPTANCE OR REJECTION OF THE
PLAN SHALL BE DEEMED AN ACCEPTANCE OF THE PLAN. BALLOTS MUST BE
RECEIVED NO LATER THAN 5:00 P.M., NEW YORK TIME ON SEPTEMBER 23,
1994. IF A BALLOT IS RECEIVED AFTER THIS TIME, IT MAY NOT BE
COUNTED. BALLOTS RECEIVED BY FACSIMILE WILL NOT BE COUNTED.
2. It is important that you vote. The Plan can be
confirmed by the Court and thereby made binding if it is
accepted by the holders of at least 2/3 in amount of interests
actually voting in each voting class of interests. The votes of
the interests actually voted in your class will bind those in
the class who do not vote. In the event that the requisite
acceptances are not obtained, the Court may nevertheless confirm
the Plan if the Court finds that it accords fair and equitable
treatment to, and does not discriminate unfairly against, the
class(es) rejecting it, and otherwise satisfies the requirements
of Section 1129(b) of the Bankruptcy Code.
3. Your signature is required in order for your vote to
be counted. Please sign exactly as your name or names appear on
the ballot. Names of all joint holders should be written even
if signed by only one. If the interest is held by a
corporation, the ballot should be executed in the name of the
corporation by an authorized officer. If the interest is held
by a partnership, the ballot must be executed in the name of the
partnership by a general partner. If you are signing in a
representative capacity, indicate your title after your
signature.
4. This ballot has been prepared to reflect the class in
which you are eligible to vote. If you have claims in more than
one class, you may, however, receive more than one ballot. IF
YOU RECEIVE MORE THAN ONE BALLOT, YOU SHOULD ASSUME THAT EACH
BALLOT IS FOR A CLAIM IN A SEPARATE CLASS AND SHOULD COMPLETE
AND RETURN ALL OF THEM.
5. For administrative convenience, ballots are being sent
to all holders of impaired Claims/Interests in Classes 2, 3,
4(B), 4(C), 6, 7, 8, 9, 10, and 11. However, pursuant to
Section 1126 of the Bankruptcy Code, only the holders of
Claims/Interests allowed under Section 502 of the Bankruptcy
Code may vote to accept or reject the Plan. Thus, only the
ballots of holders of Claims/Interests in Class 2, 3, 4(B),
4(C), 6, 7, 8, 9, 10, and 11 that are allowed (or temporarily
allowed for the purpose of voting on the Plan), in a fixed
amount as of September 23, 1994, the last day to return ballots,
will be counted.
6. Pursuant to Article IV, Section J, 6. of the Plan, at
the option of the holder of an allowed interest in Class 10,
such holder shall be entitled to receive from Reorganized JWP
$0.10 in lieu of each whole New Series Z Warrant such holder
might otherwise be entitled to receive under the Plan provided,
however, that Reorganized JWP shall not be obligated to
distribute cash to such holder on account of such whole New
Series Z Warrants unless such holder is entitled to receive in
the aggregate at least $1.00 on account of such whole New Series
Z Warrants. Acceptance of this election must be indicated by a
check in the "Election to Receive Cash in Lieu of New Series Z
Warrants" box on the reserve side. This will be your only
opportunity to make this election.
7. This ballot is for voting purposes only and does not
constitute and shall not be deemed a proof of claim/interest or
an admission by the Debtor of the validity of a claim.
<PAGE>
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
X Chapter 11 Case No.
In re : 93 B 46404 (JHG)
:
JWP INC. : BALLOT
:
: MUST BE RECEIVED BY
: 5:00 P.M. NEW YORK TIME
Debtor. : SEPTEMBER 23, 1994
X
JWP INC. EQUITY INTEREST - WARRANTS OF PARTICIPATION BALLOT FOR
ACCEPTING OR REJECTING THIRD AMENDED JOINT PLAN OF
REORGANIZATION PROPOSED BY THE DEBTOR AND ITS AFFILIATE,
SELLCO CORPORATION DATED AUGUST 9, 1994
ELECTION TO RECEIVE CASH
IN LIEU OF NEW SERIES Z
ACCEPT REJECT WARRANT(s) (see
CLASS PLAN OF REORG. PLAN OF REORG. instruction 6 on
reverse)
11 _____________ _____________ ________________________
PLEASE SEE REVERSE SIDE FOR VOTING INFORMATION AND IMPORTANT
INSTRUCTIONS BEFORE COMPLETING THIS BALLOT
DATED: SIGNED:
TITLE:
(Please sign exactly as name or
names appear hereon. Full
title of one signing in repr-
esentative capacity should be
clearly designated after signa-
ture. Names of all joint
holders should be written even
if signed by only one.)
PLEASE NOTE: ANY BALLOT WHICH IS EXECUTED AND DATED BUT WHICH
DOES NOT INDICATE AN ACCEPTANCE OR REJECTION OF THE PLAN SHALL
BE DEEMED TO BE AN ACCEPTANCE OF THE PLAN.
<PAGE>
On August 22, 1994, the United States Bankruptcy Court for the
Southern District of New York (the "Court") approved the Third
Amended Disclosure Statement filed by the Debtor and directed
the Debtor to solicit votes with regard to the acceptance or
rejection of the Third Amended Joint Plan of Reorganization
proposed by the Debtor and its affiliate, SellCo Corporation
dated August 9, 1994 (the "Plan") attached as an exhibit
thereto.
INSTRUCTIONS
1. TO HAVE YOUR VOTE COUNT, YOU MUST INDICATE ACCEPTANCE
OR REJECTION OF THE PLAN IN THE BOX ON THE REVERSE SIDE AND SIGN
AND RETURN THIS BALLOT IN THE ENCLOSED ENVELOPE (i) BY REGULAR
MAIL TO: JWP INC., c/o DONLIN, RECANO, & COMPANY, INC., P.O.
BOX 2034, MURRAY HILL STATION, NEW YORK, NY 10156-0701 OR (ii)
BY HAND DELIVERY, FEDERAL EXPRESS OR OTHER COURIER SERVICE TO
JWP INC. c/o DONLIN, RECANO & COMPANY, INC. 419 PARK AVENUE
SOUTH, SUITE 1206, NEW YORK, NY 10016. ANY BALLOT WHICH IS
EXECUTED BUT WHICH DOES NOT INDICATE AN ACCEPTANCE OR REJECTION
OF THE PLAN SHALL BE DEEMED AN ACCEPTANCE OF THE PLAN. BALLOTS
MUST BE RECEIVED NO LATER THAN 5:00 P.M., NEW YORK TIME ON
SEPTEMBER 23, 1994. IF A BALLOT IS RECEIVED AFTER THIS TIME, IT
MAY NOT BE COUNTED. BALLOTS RECEIVED BY FACSIMILE WILL NOT BE
COUNTED.
2. It is important that you vote. The Plan can be
confirmed by the Court and thereby made binding if it is
accepted by the holders of at least 2/3 in amount of interests
actually voting in each voting class of interests. The votes of
the interests actually voted in your class will bind those in
the class who do not vote. In the event that the requisite
acceptances are not obtained, the Court may nevertheless confirm
the Plan if the Court finds that it accords fair and equitable
treatment to, and does not discriminate unfairly against, the
class(es) rejecting it, and otherwise satisfies the requirements
of Section 1129(b) of the Bankruptcy Code.
3. Your signature is required in order for your vote to
be counted. Please sign exactly as your name or names appear on
the ballot. Names of all joint holders should be written even
if signed by only one. If the interest is held by a
corporation, the ballot should be executed in the name of the
corporation by an authorized officer. If the interest is held
by a partnership, the ballot must be executed in the name of the
partnership by a general partner. If you are signing in a
representative capacity, indicate your title after your
signature.
4. This ballot has been prepared to reflect the class in
which you are eligible to vote. If you have claims in more than
one class, you may, however, receive more than one ballot. IF
YOU RECEIVE MORE THAN ONE BALLOT, YOU SHOULD ASSUME THAT EACH
BALLOT IS FOR A CLAIM IN A SEPARATE CLASS AND SHOULD COMPLETE
AND RETURN ALL OF THEM.
5. For administrative convenience, ballots are being sent
to all holders of impaired Claims/Interests in Classes 2, 3,
4(B), 4(C), 6, 7, 8, 9, 10, and 11. However, pursuant to
Section 1126 of the Bankruptcy Code, on the holders of
Claims/Interests allowed under Section 502 of the Bankruptcy
Code may vote to accept or reject the Plan. Thus, only the
ballots of holders of Claims/Interests in Class 2, 3, 4(B),
4(C), 6, 7, 8, 9, 10, and 11 that are allowed (or temporarily
allowed for the purpose of voting on the Plan), in a fixed
amount as of September 23, 1994, the last day to return ballots,
will be counted.
6. Pursuant to Article IV, Section J, 6. of the Plan, at
the option of the holder of an allowed interest in Class 11,
such holder shall be entitled to receive from Reorganized JWP
$0.10 in lieu of each whole New Series Z Warrant such holder
might otherwise be entitled to receive under the Plan provided,
however, that Reorganized JWP shall not be obligated to
distribute cash to such holder on account of such whole New
Series Z Warrants unless such holder is entitled to receive in
the aggregate at least $1.00 on account of such whole New Series
Z Warrants. Acceptance of this election must be indicated by a
check in the "Election to Receive Cash in Lieu of New Series Z
Warrants" box on the reserve side. This will be your only
opportunity to make this election.
7. This ballot is for voting purposes only and does not
constitute and shall not be deemed a proof of claim/interest or
an admission by the Debtor of the validity of a claim.
