SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
-----------
FORM T-3
FOR APPLICATIONS FOR QUALIFICATION OF INDENTURES UNDER THE
TRUST INDENTURE ACT OF 1939
----------
(Name of applicant)
(Address of Principal Executive Offices)
SellCo Corporation
Six International Drive
Rye Brook, New York 10573
------------
SECURITIES TO BE ISSUED UNDER THE INDENTURE TO BE QUALIFIED
-----------------------------------------------------------
TITLE OF CLASS AMOUNT
12% Subordinated Contingent Maximum of
Payment Notes Due 2004 $48,700,000
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.
SellCo Corporation
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 the applicant,
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 is 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 the applicant
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.
The applicant 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 as part of the reorganization; (b) the recipients
are holders of "Claims" against the debtor; 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
SellCo had no subsidiaries.
AS OF EFFECTIVE DATE
The diagram attached as Annex 1 shows the applicant's
direct
and indirect subsidiaries proposed to be operating following the
confirmation 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.
As of September 28, 1994 and Effective Date
<TABLE>
<CAPTION>
Name Office Address
<S> <C> <C>
Frank T. MacInnis Director and President c/o SellCo
Corporation
Six
International Drive
Rye Brook, NY
10573
Leicle E. Chesser Chief Financial Officer- c/o SellCo
Executive Vice President Six
International Drive
Rye Brook, NY
10573
Joseph W. Barnett Secretary c/o SellCo
Six
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.
As of September 28, 1994 and Effective Date
<TABLE>
<CAPTION>
Percentage of
Name and Complete Title of Class Amount
Voting Securities
Mailing Address Owned Owned
Owned
<S> <S> <S>
<S>
JWP INC. Common Stock 100 Shares
100%
6 International Drive
Rye Brook, NY 10573-1058
</TABLE>
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. The applicant is a newly organized corporation, has
never had any previously issued securities, and
therefore no person, within 3 years of the date
hereof,
acted as an underwriter of any of the securities of
the
applicant, SellCo.
b. The securities proposed to be offered will be
exchanged
with certain holders of claims against the applicant's
affiliate, 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
AMOUNT AMOUNT
TITLE OF CLASS AUTHORIZED OUTSTANDING
Common Stock, $.01 par value 1,000 shares 100 shares
As of Effective Date
AMOUNT AMOUNT
TITLE OF CLASS AUTHORIZED OUTSTANDING
12% Subordinated $46,000,000[FN] $46,000,000[FN]
Contingent Payment Notes
Due 2004
Common Stock, $.01 par value 1,000 shares 100 shares
___________________
<F1> This amount is an estimate. The maximum amount to be
issued under the indenture is $48,700,000.
For a description of the securities to be issued by SellCo's
affiliate, JWP, pursuant to the Plan which are to be guaranteed
by SellCo, which guaranty shall rank senior in right of payment
to the Notes, see the Disclosure Statement "IV. SUMMARY OF THE
PLAN" and subpart A. thereof "A. PROPERTY TO BE DISTRIBUTED
UNDER
THE PLAN".
(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 of SellCo,
each holder of a share of such common stock will be entitled to
one vote on all matters on which such shareholders are entitled
to vote. SellCo will be a wholly-owned subsidiary of JWP.
As of Effective Date
With respect to the voting rights of the common stock of SellCo,
each holder of a share of such common stock will be entitled to
one vote on all matters on which such shareholders are entitled
to vote. SellCo will be a wholly-owned subsidiary of JWP.
For a description of the voting rights of the securities to be
issued by SellCo's affiliate, JWP, 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[FN]
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) the Company 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;
or
(ii) the Company defaults in the payment of the principal
of
any Security when the same becomes due and payable at
maturity, upon redemption or otherwise; or
(iii) the Company fails to observe or perform any covenant,
condition or agreement on the part of the Company to be
observed or performed pursuant to Section 4.06 of the
indenture or pursuant to Article 3 or Article 5 of the
indenture; or
(iv) the Company 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); or
<F1> 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>
(v) 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
(vi) 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
(vii) the Liens on any of the Collateral granted or
purported to be granted pursuant to the Pledge Agreement
shall be or become unenforceable or invalid, or the
priority
thereof shall become diminished.
If an Event of Default (other than an Event of Default
specified in clause (v) or (vi) of Section 6.01(a) in which
case there is automatic acceleration) 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 Note
holders 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 Class 2, to Class 3, to Class 4B (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
against
JWP 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 make any change
in Section 2 of the Intercreditor Agreement. (Section
9.02(a)(vii))
In addition, any change in the provisions of Article 10
under which the Notes are subordinated on the terms and
conditions therein contained to the indebtedness represented by
the Series A Senior Notes and Series B Senior Notes issued by
the
applicant's affiliate, JWP, without the consent of each holder
of
such Senior Notes is prohibited. (Section 9.02(b))
Upon the receipt by the Company or any of its Subsidiaries
of the proceeds of an Asset Sale other than (i) Net Cash
Proceeds
used for the redemption of (A) securities pursuant to Seciton
3.08 or (B) Series A Notes or Software House Notes pursuant to
the Series A Indenture or the Software House Indenture,
respectively, and (ii) proceeds pledged to the Trustee pursuant
to the terms of the Pledge Agreements, 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
shall be subject to the lien in such Collateral granted to the
Software House Indenture Trustee and the Series A Indenture
Trustee. (Section 11.01(b))
(d) Satisfaction and Discharge. The indenture shall cease
to be of further effect other than with respect to:
(i) the Company's compensation and indemnity obligations
(Section 7.07), (ii) obligations of the Trustee and/or the
Paying Agent to pay to the Company excess money or
securities (Section 8.02) and monies unclaimed after the
requisite time period (Section 8.02), and (iii) obligations
of the Obligors to pay unpaid Holders of Notes under
Section
8.02 after the turnover to the Company by the Trustee
and/or
the Paying Agent of unclaimed monies;
when (A) 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 the
Company has paid all sums payable with respect thereto (Section
8.02) or (B) upon the occurrence of an automatic redemption of
all Notes under Section 3.09 of the indenture.
(e) Evidence of Compliance.
(i) 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 fiscal Quarter of the
Company 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, 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))
(ii) 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 fiscal Quarter of the Company 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 setting forth in reasonable
detail the assets of the Company and its Subsidiaries sold
during
the previous fiscal quarter and the amount, type, and
disposition
of all proceeds received in connection therewith (Section
4.04(b)).
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.
There are no other obligors with respect to the indenture
securities.
<PAGE>
CONTENTS
CONTENTS OF APPLICATION FOR QUALIFICATION. This
application
for qualification comprises:
a. Pages numbered 1 to 14, 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 T3A. Certificate of Incorporation of SellCo
Corporation
filed with Delaware Secretary of State on July
27,
1994
Exhibit T3B. Amended and Restated Certificate of Incorporation
of Sellco Corporation filed with Delaware
Secretary of State on September 29, 1994
Exhibit T3C. By Laws of SellCo Corporation
Exhibit T3D. 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)
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 SellCo Corporation, 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.
SELLCO CORPORATION
By:/s/ Frank T. MacInnis
Title: President
Attest: By:/s/ Leicle E. Chesser
Title: Vice President
/s/ Joseph W. Barnett
Title: Secretary
<PAGE>
ANNEX 1
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.
G/M Tech 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.
JWP Technical Services of Guam, Inc.
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>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------
FORM T-1
-------------------------------
STATEMENT OF ELIGIBILITY AND QUALIFICATION 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)
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
- ---------------------------------------------------------
(Exact name of trustee as specified in its
charter)
<TABLE>
<S> <C>
Not applicable 06-0850628
- -------------------------------
- -----------------------------
(State of incorporation if (I.R.S.
Employer
not a national bank Identification
No.)
</TABLE>
777 Main Street, Hartford, Connecticut 06115
- --------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Patricia Beaudry, 777 Main Street, Hartford, CT (203) 728-2065
- ----------------------------------------------------------------
- -
(Name, address and telephone number of agent for service)
SellCo Corporation
- ----------------------------------------------------------------
- -
(Exact name of obligors as specified in its charter)
<TABLE>
<S> <C>
Delaware 13-3788477
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
Six International Drive, Rye Brook, New York, 10573
- ----------------------------------------------------------------
- -
(Address of principal executive offices) (Zip Code)
12% Subordinated Contingent Payment Notes Due 2004
- ----------------------------------------------------------------
- -
(Title of the indenture securities)
<PAGE>
Item 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:
The Comptroller of the Currency,
Washington, D.C.
Federal Reserve Bank of Boston
Boston, Massachusetts
Federal Deposit Insurance Corporation
Washington, D.C.
(b) Whether it is authorized to exercise
corporate trust powers:
The trustee is so authorized.
Item 2. Affiliations with obligor. If the obligor is an
affiliate of the trustee, describe each such affiliation.
None with respect to the trustee; none with respect
to
Hartford National Corporation, Shawmut Corporation, Shawmut
Service Corporation and Shawmut National Corporation (the
"affiliates").
Item 16. List of exhibits. List below all exhibits filed as a
part of this statement of eligibility and qualification.
1. A copy of the Articles of Association and
By-Laws
of the trustee as now in effect.
2. A copy of the Certificate of Authority of the
trustee to do Business and the Certification of Fiduciary Powers
of the Trustee.
3. A copy of the By-laws of the trustee are
provided
in Exhibit 1 referenced above.
4. Consent of the trustee required by Section
321(b)
of the Act.
5. A copy of the latest Consolidated Reports of
Condition and Income of the trustee, published pursuant to law
or
the requirements of its supervising or examining authority.
<PAGE>
NOTES
Inasmuch as this Form T-1 is filed prior to the
ascertainment by the trustee of all facts on which to base its
answer to Item 2, the answer to said Item is based upon
incomplete information. Said Item may, however, be considered
correct unless amended by an amendment to this Form T-1.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture
Act
of 1939, the trustee, Shawmut Bank Connecticut, National
Association, a national banking association organized and
existing under the laws of the United States, 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 Hartford, and State of Connecticut, on the day
of October, 1994.
----------------------------
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION
Trustee
By /s/ ROBERT L. REYNOLDS
---------------------------
Robert L. Reynolds
Assistant Vice President
<PAGE>
EXHIBIT 1
ARTICLES OF ASSOCIATION
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
FIRST. The title of this Association, which shall carry on the
business of banking under the laws of the United States, shall
be
"Shawmut Bank Connecticut, National Association".
SECOND. The main office of the Association shall be in
Hartford,
County of Hartford, State of Connecticut. The general business
of the Association shall be conducted at its main office and its
branches.
THIRD. The board of directors of this Association shall consist
of not less than five (5) nor more than twenty-five (25)
shareholders, the exact number of directors within such minimum
and maximum limits to be fixed and determined from time to time
by resolution of a majority of the full board of directors or
by resolution of the shareholders at any annual or special
meeting thereof. Unless otherwise provided by the laws of the
United States, any vacancy in the board of directors for any
reason, including an increase in the number thereof, may be
filled by action of the board of directors.
FOURTH. The annual meeting of the shareholders for the election
of directors and the transaction of whatever other business may
be brought before said meeting shall be held at the main office
or such other place as the board of directors may designate, on
the day of each year specified therefor in the bylaws, but if no
election is held on that day, it may be held on any subsequent
day according to the provisions of law; and all elections shall
be held according to such lawful regulations as may be
prescribed
by the board of directors.
FIFTH. The authorized amount of capital stock of this
Association shall be three million five hundred thousand
(3,500,000) shares of common stock of the par value of six and
25/100 dollars ($6.25) each, but said capital stock may be
increased or decreased from time to time, in accordance with the
provisions of the laws of the United States.
No holder of shares of the capital stock of any class of the
corporation shall have any pre-emptive or preferential right of
subscription to any shares of any class of stock of the
corporation, whether now or hereafter authorized, or to
any obligations convertible into stock of the corporation,
issued
or sold, nor any right of subscription to any thereof other than
such, if any, as the board of directors, in its discretion, may
from time to time determine and at such price as the board of
directors may from time to time fix.
The Association, at any time and from time to time, may
authorize
and issue debt obligations, whether or not subordinated, without
the approval of the shareholders.
<PAGE>
SIXTH. The board of directors shall appoint one of its members
president of this Association, who shall be chairman of the
board, unless the board appoints another director to be the
chairman. The board of directors shall have the power to
appoint
one or more vice presidents; and to appoint a secretary and
such other officers and employees as may be required to transact
the business of this Association.
The board of directors shall have the power to define the duties
of the officers and employees of the Association; to fix the
salaries to be paid to them; to dismiss them; to require bonds
from them and to fix the penalty thereof; to regulate the manner
in which any increase of the capital of the Association shall be
made; to manage and administer the business and affairs of
the Association; to make all bylaws that it may be lawful for
them to make; and generally to do and perform all acts that it
may be legal for a board of directors to do and perform.
SEVENTH. The board of directors shall have the power to change
the location of the main office to any other place within the
limits of the City of Hartford, Connecticut, without the
approval
of the shareholders but subject to the approval of the
Comptroller of the Currency; and shall have the power to
establish or change the location of any branch or branches of
the
Association to any other location, without the approval of the
shareholders but subject to the approval of the Comptroller of
the Currency.
EIGHTH. The corporate existence of this Association shall
continue until terminated in accordance with the laws of the
United States.
NINTH. The board of directors of this Association, or any three
or more shareholders owning, in the aggregate, not less than ten
percent (10%) of the stock of this Association, may call a
special meeting of shareholders at any time. Unless otherwise
provided by the laws of the United States, a notice of
the time, place and purpose of every annual and special meeting
of the shareholders shall be given by first class mail, postage
prepaid, mailed at least ten (10) days prior to the date of such
meeting to each shareholder of record at his address as shown
upon the books of this Association.
TENTH. Any person, his heirs, executors, or administrators may
be indemnified or reimbursed by the Association for reasonable
expenses actually incurred in connection with any action, suit,
or proceeding, civil or criminal, to which he or they shall be
made a party by reason of his being or having been a director,
officer, or employee of the Association or any firm,
corporation,
or organization which he served in any such capacity at the
request of the Association: provided, that no person shall be so
indemnified or reimbursed in relation to any matter in such
action, suit, or proceeding as to which he shall finally be
adjudged to have been guilty of or liable for gross negligence,
willful misconduct or criminal acts in the performance of his
duties to the Association: and, provided further, that no person
shall be so indemnified or reimbursed in relation to any matter
in such action, suit, or proceeding which has been made the
subject of a compromise settlement except with the approval
of a court of competent jurisdiction, or the holders of record
of
a majority of the outstanding shares of the Association, or the
board of directors, acting by vote of directors not parties to
the same or substantially the same action, suit, or proceeding,
constituting a majority of the whole number of directors.
The foregoing right of indemnification or reimbursement shall
not
be exclusive of other rights to which such person, his heirs,
executors, or administrators may be entitled as a matter of law.
<PAGE>
The Association may, upon the affirmative vote of a majority of
its board of directors, purchase insurance for the purpose of
indemnifying its directors, officers and other employees to the
extent that such indemnification is allowed in the preceding
paragraph. Such insurance may, but need not, be for the
benefit of all directors, officers, or employees.
ELEVENTH. These articles of association may be amended at any
regular or special meeting of the shareholders by the
affirmative
vote of the holders of a majority of the stock of this
Association, unless the vote of the holders of greater amount of
stock is required by law, and in that case by the vote of the
holders of such greater amount. The notice of any shareholders'
meeting at which an amendment to the articles of association of
this Association is to be considered shall be given as
hereinabove set forth.
I hereby certify that the articles of association of this
Association, in their entirety, are listed above in items first
through eleventh.
Secretary/Assistant Secretary
- --------------------------------------------------
Dated at , as of
.
- ----------------------------------
- --------------------
Revision of January 11, 1993
<PAGE>
BYLAWS
OF
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
ARTICLE I
MEETINGS OF SHAREHOLDERS
Section 1.1 Annual Meeting. The regular annual meeting of the
shareholders to elect directors and transact whatever other
business may properly come before the meeting, shall be held at
the main office of the association, city of Hartford, state of
Connecticut or such other places as the board of directors
may designate, at 1:00 o'clock, on the third Wednesday of April
of each year, or if that date falls on a legal holiday in the
state in which the association is located, on the next following
banking day. If, for any cause, an election of directors is not
made on that date, or in the event of a legal holiday, on the
next following banking day, an election may be held on any
subsequent day within 60 days of the date fixed, to be
designated
by the board directors, or, if the directors fail to fix the
date, by shareholders representing two-thirds of the shares.
Section 1.2. Special Meetings. Except as otherwise specifically
provided by statute, special meetings of the shareholders may be
called for any purpose at any time by the board of directors or
upon call of the Chairman or at the written request of
shareholders owning, in the aggregate, not less than ten
(10) percent of the stock of the association.
Section 1.3. Notice of Meetings. Unless otherwise provided by
the laws of the United States, a notice of the time, place and
purpose of every regular annual meeting or special meeting of
shareholders shall be given by first-class mail, postage
prepaid,
mailed at least ten (10) days prior to the date of such
meeting to each shareholder of record at his address as shown
upon the books of the association. If an annual or special
shareholders' meeting is adjourned to a different date, time, or
place, notice need not be given of the new date, time or place,
if the new date, time or place is announced at the meeting
before adjournment, unless any additional items of business are
to be considered, or the association becomes aware of an
intervening event materially affecting any matter to be voted on
more than 10 days prior to the date to which the meeting is
adjourned. If a new record date for the adjourned meeting
is fixed, however, notice of the adjourned meeting must be given
to persons who are shareholders as of the new record date.
Section 1.4. Proxies. Shareholders may vote at any meeting of
the shareholders by proxies duly authorized in writing. Proxies
shall be valid only for one meeting, to be specified therein,
and
any adjournments of such meeting. Proxies shall be dated and
filed with the records of the meeting. Proxies with
rubber-stamped facsimile signatures may be used and unexecuted
proxies may be counted upon receipt of a confirming telegram
from
the shareholder. Proxies meeting the above requirements
submitted at any time during a meeting shall be accepted.
<PAGE>
Section 1.5. Quorum. A majority of the outstanding capital
stock, represented in person or by proxy, shall constitute a
quorum at any meeting of shareholders, but less than a quorum
may
adjourn any meeting, from time to time, and the meeting may be
held, as adjourned, without further notice.
Section 1.6. Voting. In deciding on questions at meetings of
shareholders, except in the election of directors, each
shareholder shall be entitled to one vote for each share of
stock
held. A majority of votes cast shall decide each matter
submitted to the shareholders at the meeting except in cases
where by law a larger vote is required.
ARTICLE II
DIRECTORS
Section 2.1. Board of Directors. The board of directors shall
manage and administer the business and affairs of the
association. Except as expressly limited by law, all corporate
powers of the association shall be vested in and may be
exercised
by the board.
Section 2.2. Number. The board shall consist of not less than
five nor more than twenty-five shareholders, the exact number
within such minimum and maximum limits to be fixed and
determined
from time to time by resolution of a majority of the full board
or by resolution of a majority of the shareholders at any
meeting
thereof.
Section 2.3. Term. The directors of this association shall hold
office for one year and until their successors are elected and
have qualified.
Section 2.4. Oath. Each person elected or appointed a director
of this association must take the oath of such office as
prescribed by the laws of the United States. No person elected
or appointed a director of this association shall exercise the
functions of such office until he has taken such oath.
Section 2.5. Honorary Directors. There may not be more than
five
honorary directors of the association who shall be entitled to
attend meetings of the board and take part in its proceedings
but
without the right to vote. Honorary directors shall be
appointed
at the annual meeting of the board of directors to hold office
until the next annual meeting provided, however, that the board
may at any regularly constituted meeting between annual meetings
of the board of directors appoint honorary directors within the
limitations imposed by this bylaw.
Section 2.6. Vacancies. Any vacancies occurring in the board of
directors for any reason, including an increase in the number
thereof, may be filled, in accordance with the laws of the
United
States, by appointment by the remaining directors, and any
director so appointed shall hold office until the next annual
meeting and until his successor is elected and has qualified.
<PAGE>
Section 2.7. Organization Meeting. The. annual meeting of the
board of directors shall be held at the main office of the
association to organize the new board and appoint committees of
the board and officers of the association for the succeeding
year, and for transacting such other business as properly
may come before the meeting. Such meeting shall be held on the
day of the election of directors or as soon thereafter as
practicable, and, in any event, within 30 days thereof. If, at
the time fixed for such meeting, there shall not be a quorum,
the
directors present may adjourn the meeting, from time to time,
until a quorum is obtained.
Section 2.8. Regular Meetings. The regular meetings of the
board
of directors shall be held, without notice, at the main office,
or at such other place as has been duly authorized by the board,
on such day and at such time as the board shall determine. When
any regular meeting of the board falls upon a holiday, the
meeting shall be held on the next banking business day unless
the
board shall designate another day.
Section 2.9. Special Meetings. Special meetings of the board of
directors may be called by the chairman, the president, or at
the
request of seven or more directors. Each member of the board of
directors shall be given notice stating the time and place by
telegram, letter, or in person, of each special meeting.
Section 2.10. Quorum. A majority of the members of the board
shall constitute a quorum at any meeting. If the number of
directors is reduced below the number that would constitute a
quorum, no business may be transacted, except selecting
directors
to fill vacancies in conformance with these bylaws. If a
quorum is present, the board of directors may take action
through
the vote of a majority of the directors who are in attendance.
Section 2.11. Record Time. The board of directors may fix a day
and hour, not exceeding fifty (50) days preceding the date fixed
for the payment of any dividend or for any meeting of the
shareholders as a record time for the determination of
shareholders entitled to receive such dividend, or as the time
as of which shareholders entitled to notice of and to vote at
such meeting shall be determined, as the case may be, and only
shareholders of record at the time so fixed shall be entitled to
receive such dividend or to notice of and to vote at such
meeting.
Section 2.12. Fees. All directors other than directors who are
officers of the association or its affiliates shall be entitled
to reasonable fees for their services as such directors and as
members of committees of the board, said fees to be fixed by
vote
of the board.
ARTICLE III
COMMITTEES OF THE BOARD
Section 3.1. Executive Committee. The board of directors may
establish an executive committee consisting of the chairman, not
less than five directors, not officers, who are appointed by the
board, and such other directors as the board may appoint. The
board shall designate the chairman thereof. The Executive
Committee shall possess and may exercise such powers as are
provided in these bylaws and all other delegable powers of the
board and shall meet at the call of any member thereof. All
action of said committee shall be reported to the board at the
next regular board meeting thereafter. Four members of the
Committee, of whom not less than three shall be directors who
are
not officers, shall be necessary to constitute a quorum.
Section 3.2. Loan and Investment Committee. The board of
directors shall establish a loan and investment committee
consisting of the chairman, the president, not less than four
directors, not officers, who are appointed by the board, and
such
other directors as the board may appoint. The committee shall
ensure that the association's credit and investment policies are
adequate and that lending and investment activities are
conducted
in accordance with the association's policies and with
applicable
laws and regulations. The committee shall exercise oversight
and
receive reports with respect to lending activities and credit
risk management. The committee shall also exercise oversight
and
receive reports with respect to the association's securities
portfolio and securities portfolio activities to ensure
appropriate portfolio diversification, asset quality, liquidity,
and profitability. The committee shall also have oversight
responsibilities with respect to the association's investment
policy, liquidity policy, liquidity contingency planning and
interest rate risk exposure. All action by the committee shall
be reported to the board at the next regular board meeting
thereafter. Four members of the committee, of whom not less
than
two shall be directors who are not officers, shall be necessary
to constitute a quorum.
Section 3.3. Trust Committee. The board of directors shall
establish a trust committee consisting of the president and not
less than four directors, not officers, who are appointed by the
board and such other directors as the board may appoint. The
trust committee shall have authority, between meetings of the
board, to discharge the responsibilities of the association with
respect to the exercise of fiduciary powers, except as the board
may by resolution or other appropriate action otherwise from
time
to time determine. All action by said committee shall be
reported
to the board at the next regular board meeting thereafter. Four
members of the trust committee, of whom at least two shall be
directors who are not officers, shall be necessary to constitute
a quorum.
Section 3.4. Audit Committee. The audit committee of Shawmut
National Corporation, no member of whom is an officer of the
association, is designated to oversee the audit affairs of the
association. Members of the association's board of directors,
none of whom may be officers of the association, may serve
on the audit committee of Shawmut National Corporation. In
addition, the board may, from time to time, appoint an audit
committee consisting of not less than four members of the board,
no one of whom shall be an executive officer of the association,
to perform such audit functions as may be assigned by the board.
The duty of the audit committee shall be to examine at least
once
during each calendar year and within 15 months of the last
examination of affairs of the association or cause suitable
examination to be made by auditors responsible only to the board
of directors and to report the result of such examination in
writing to the board at the next regular meeting thereafter.
Such report shall state whether the association is in a sound
condition, whether fiduciary powers have been administered
according to law and sound fiduciary principles, whether
adequate
internal controls and procedures are being maintained, and shall
recommend to the board of directors such changes in the manner
of
conducting the affairs of the association as shall be
deemed advisable.
Section 3.5. Community Affairs Committee. The board of
directors
shall establish a community affairs committee consisting of not
less than four directors and such other persons as shall be
appointed by the board. The community affairs committee shall
oversee compliance by the association with the policies and
provisions of the Community Reinvestment Act of 1978, as
amended; shall establish and supervise policies relating to
voluntary corporate contributions and other matters of business
and community conduct, all as the board or the chairman may from
time to time specify or request. All actions by said committee
shall be reported to the board at the next regular
board meeting thereafter. Three members of the committee, of
whom at least two shall be directors who are not officers, shall
be necessary to constitute a quorum.
Section 3.6. Substitute Committee Members. In the case of the
absence of any member of any committee of the board from any
meeting of such committee, the directors who are not officers
and
are present at such meeting, or the senior officer present if no
such directors are there, may designate a substitute to
serve in lieu of such absent member. Such substitute need not
be
a director unless such absent member is a director but in any
case when the board of directors shall have designated one or
more alternate members for such committee, the substitute shall
be selected from such of said alternates as are then available.
Section 3.7. Additional Committees. The board of directors may
by resolution designate one or more additional committees, each
consisting of two or more of the directors. Any such additional
committee shall have and may exercise such powers as the board
may from time to time prescribe for furthering the business
and affairs of the association.
ARTICLE IV
WAIVER OF NOTICE; WRITTEN CONSENT; PARTICIPATION BY TELEPHONE
Section 4.1. Waiver of Notice. Notice of the time, place and
purpose of any regular meeting of the board of directors or a
committee thereof may be waived in writing by any director or
member of such committee, as the case may be, either before or
after such meeting. Attendance in person at a meeting of the
board of directors or a committee thereof shall be deemed to
constitute a waiver of notice thereof.
Section 4.2. Written Consent. Unless otherwise restricted by
the
articles of association or these bylaws, any action required or
permitted to be taken at any meeting of the board of directors
or
a committee thereof may be taken without a meeting if a consent
in writing, setting forth the action to so be taken, shall be
signed before or after such action by all of the directors, or
all of the members of a committee thereof, as the case may be.
Such written consent shall be filed with the records of the
association.
Section 4.3. Participation by Telephone. One or more directors
may participate in a meeting of the board of directors, of a
committee of the board, or of the shareholders, by means of
conference telephone or similar communications equipment by
means
of which all persons participating in the meeting can hear
each other. Participation in this manner shall constitute
presence in person at such meeting.
ARTICLE V
OFFICERS AND EMPLOYEES
Section 5.1. Officers. The officers of the association shall
consist of a chairman, a president, one or more vice chairmen,
one or more executive vice presidents, one or more senior vice
presidents, one or more vice presidents, a secretary, an auditor
and such other officers as may be appropriate for the prompt and
orderly transaction of the business of the association. Any
officer may hold more than one office, except that the chairman
and president may not also serve as secretary. The chairman,
the
president, any vice chairman, and the auditor shall be elected
annually by the board of directors to serve for one year and
until his successor is elected and qualifies. All other
officers
shall be appointed to hold office during the pleasure of the
board, which may in its discretion delegate the authority to
appoint and remove any officer or officers (other than the
auditor) below the ranks of president and vice chairman.
Section 5.2. Chairman. The chairman shall preside or designate
the presiding officer at all meetings of the board of directors
and shareholders. The chairman shall be the chief executive
officer of the association unless otherwise designated by the
board, and may have and exercise such further powers and duties
as from time to time may be conferred upon or assigned to the
chairman by the board of directors. The chairman may establish
advisory committees for any branch, region, or division of the
association to advise on the affairs of such branch, region, or
division; provided that such advisory committee members shall
not
attend meetings of the board of directors or any committee
thereof, and shall not participate in the management of the
association. If at any time the office of chairman shall be
vacant, the powers and duties of that office shall devolve upon
the president; if the office of president shall be vacant, the
powers and duties of that office shall devolve upon the
chairman;
and if the office of the chairman and president are vacant,
the board shall designate one or more officers of the
association
to perform the duties of chairman until such time as a new
chairman is appointed.
Section 5.3. President. The president shall have general
executive powers and may also have and exercise such further
powers and duties as may be conferred upon or assigned by the
board or the chairman.
Section 5.4. Vice Chairman. Each Vice Chairman shall perform
such duties as may be assigned from time to time by the board of
directors or the chairman.
Section 5.5. Secretary. The secretary of the association, or
other designated officer of the association, shall keep accurate
minutes of all meetings of the board of directors; shall attend
to the giving of all notices required by these bylaws; shall be
custodian of the corporate seal, records, documents and papers
of the association; shall provide for the keeping of proper
records of all transactions of the association; shall have and
may exercise any and all other powers and duties pertaining by
law, regulation or practice, or imposed by the bylaws; and shall
also perform such other duties as may be assigned from time
to time, by the board of directors or the chairman.
Section 5.6. Auditor. The general auditor of the association,
or
his designee, shall be the officer in charge of auditing. Said
officer shall be responsible for the conduct of a program of
continuous audits of the association and all of its departments
and shall make, or cause to be made, further examinations as he
deems necessary or are required from time to time by the
responsible audit committee or the board. Said officer shall
report the results of audit activities periodically to the
responsible audit committee or the board.
Section 5.7. Other Officers. All other officers shall perform
such duties and exercise such powers as shall pertain to their
respective offices, or as shall be imposed by law, or as may be
conferred upon, or assigned to them by the board of directors or
the chairman.
Section 5.8. Resignation. An officer may resign at any time by
delivering notice to the association. A resignation is
effective
when the notice is given unless the notice specifies a later
effective date.
ARTICLE VI
SIGNING AUTHORITY
Section 6.1. Signing Authority. Each officer of this
association, excluding the auditor and each other officer whose
primary duties are auditing in nature, shall have authority for
and on behalf of this association to execute, deliver, sign and
endorse checks, drafts, pledges, certificates, receipts for
money, warehouse receipts, bills of lading or similar documents,
contracts arising in the ordinary course of the business of the
association, bankers' acceptances made by the association,
commercial credits of the association, securities and
property received in trust or for deposit, proxies to vote stock
held by the association in any capacity, petitions, foreclosures
and other deeds, powers, leases, assignments, discharges,
releases, extensions, purchase agreements, conveyances, and
other
written instruments pertaining to real estate or interest
therein
and, where indicated, to affix the corporate seal of the
association to any of the foregoing; to guarantee and witness
signatures upon securities, documents or other written
instruments; to purchase, sell, assign, pledge or transfer funds
or other securities of the association or within its control as
a
fiduciary; and, subject to the approval of such officer or
committee as the board may designate, to accept trusts and
appointments and to execute trust indentures and any other
instruments establishing trusts or making appointments. Each
officer at the level of senior vice president or above, shall be
empowered to authorize another person or persons, whether or not
such other person or persons are officers or employees of the
association, to sign or endorse any of the foregoing documents
on
behalf of the association in a particular transaction; but such
officer shall by signed entry personally note the fact of such
authorization on the records of the association relating to such
transaction. The officer in charge of the international
division
of the association, or in his absence his designee, shall be
empowered to authorize another person or persons, whether or not
such other person or persons are officers or employees of the
association, to execute documents and do such other acts and
things as may be required in connection with a particular loan
or extension of credit, proceeding before a court or other
judicial or administrative body, or other transaction; but such
officer shall by signed entry personally note the fact of such
authorization on the records of the association relating to such
act or transaction. Any one officer at the level of senior vice
president or above shall have authority for and on behalf of the
association to borrow money. The chairman, the president, any
vice chairman, any executive vice president, and the senior vice
president or other officer in charge of investment
administration
or such other officers as may be designated by the chairman may
each, acting singly, authorize borrowings and request advances
from any Federal Reserve Bank or any Federal Home Loan Bank, as
the case may be, and may agree with said bank upon appropriate
terms and collateral for such transactions. The officers and
other employees of the association shall have such further
signature powers as may be specified by the board of directors
or
by the chairman or his designee.
ARTICLE VII
STOCK AND STOCK CERTIFICATES
Section 7.1. Transfers. Shares of stock shall be transferable
on
the books of the association, and a transfer book shall be kept
in which all transfers of stock shall be recorded. Every person
becoming a shareholder by such transfer shall in proportion to
his or her shares, succeed to all rights of the prior holder of
such shares. The board of directors may impose conditions upon
the transfer of the stock reasonably calculated to simplify the
work of the association with respect to stock transfer, voting
shareholder meetings, and related matters and to protect it
against fraudulent transfer.
Section 7.2. Stock Certificates. Certificates of stock shall
bear the signature of the chairman or president (which may be
engraved, printed or impressed), and shall be signed manually or
by facsimile process by the secretary or assistant secretary,
and
the seal of the association shall be engraved thereon. Each
certificate shall recite on its face that the stock represented
thereby is transferable only upon the books of the association
properly endorsed.
ARTICLE VIII
CORPORATE SEAL
Section 8. Corporate Seal. The board of directors shall provide
a seal for the association. The secretary shall have custody
thereof and may designate such other officers as may have
counterparts.
ARTICLE IX
MISCELLANEOUS PROVISIONS
Section 9.1. Fiscal Year. The fiscal year of the association
shall be the calendar year.
Section 9.2. Records. The articles of association, the bylaws
and the proceedings of all meetings of the shareholders, the
board of directors, and standing committees of the board, shall
be recorded in appropriate minute books provided for that
purpose. The minutes of each meeting shall be signed by the
secretary or other officer appointed to act as secretary of the
meeting.
ARTICLE X
BYLAWS
Section 10. Amendments. These bylaws may be altered, amended,
or added to or repealed by a vote of a majority of the members
of
the board then in office at any meeting, provided that notice
thereof shall have been given in the notice of such meeting.
A true copy
Attest:
Secretary/Assistant
Secretary
- ---------------------------------------
Dated at , as of
.
- ---------------------------------------
- ----------------------
Revision of January 11, 1993
<PAGE>
EXHIBIT 2
[LOGO]
- ----------------------------------------------------------------
- -
COMPTROLLER OF THE CURRENCY
ADMINISTRATOR OF NATIONAL BANKS
- ----------------------------------------------------------------
Washington, D.C. 20219
CERTIFICATE
I, Eugene A. Ludwig, Comptroller of the Currency, do hereby
certify that:
1. The Comptroller of the Currency, pursuant to Revised
Statutes
324, et seq., as amended, 12 U.S.C. 1, et seq., as amended, has
possession,
custody and control of all records pertaining to the chartering,
regulation and
supervision of all National Banking Associations.
2. "Shawmut Bank Connecticut, National Association",
Hartford,
Connecticut, Charter No. 1338, is a National Banking Association
formed
under the laws of the United States and is authorized thereunder
to transact
the business of banking and exercise fiduciary powers on the
date
of this
certificate.
IN TESTIMONY WHEREOF, I have hereunto
subscribed my name and caused the seal of
the Office of the Comptroller of the
Currency to be affixed to these
presents at the Treasury Department, in
the City of Washington and District of
Columbia, this 14th day of July, 1994.
/s/ EUGENE A. LUDWIG
-----------------------------
Comptroller of the Currency
<PAGE>
EXHIBIT 4
CONSENT OF THE TRUSTEE
REQUIRED BY SECTION 321(b)
OF THE TRUST INDENTURE ACT OF 1939
The undersigned, as Trustee under an Indenture to be
entered
into between SellCo Corporation and Shawmut Bank Connecticut,
National Association, Trustee, does hereby consent that,
pursuant
to Section 321(b) of the Trust Indenture Act of 1939, reports of
examinations with respect to the undersigned by Federal, State,
Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon
request therefor.
SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION
Trustee
By /s/ ROBERT L. REYNOLDS
-------------------------------
Robert L. Reynolds
Assistant Vice President
Dated: October , 1994
-----
<PAGE>
EXHIBIT 5
<TABLE>
<S> <C>
<C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590
FFIEC 031
Address: 777 MAIN STREET
Page RC-1
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Consolidated Report of Condition for Insured Commercial
and State-Chartered Savings Banks for June 30, 1994
All schedules are to be reported in thousands of dollars.
Unless
otherwise indicated, report the amount outstanding as of the
last
business day of the quarter.
Schedule RC--Balance Sheet
<TABLE>
<CAPTION>
C400 <-
--------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou
- ----------------------------------------------------------------
- - ------------------------------------- -------------
<S>
<C> <C>
ASSETS
//////////////////
1. Cash and balances due from depository institutions (from
Schedule RC-A): //////////////////
a. Noninterest-bearing balances and currency and
coin(1)................................... 0081 875,210
1.a.
b. Interest-bearing balances(2)
............................................................
0071 145,435 1.b.
2. Securities:
//////////////////
a. Held-to-maturity securities (from Schedule RC-B, column
A).............................. 1754 3,906,126 2.a.
b. Available-for-sale securities (from Schedule RC-B, column
D) ............................ 1773 779,309 2.b.
3. 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 IBFs: //////////////////
a. Federal funds
sold............................................................
.......... 0276 233,300 3.a.
b. Securities purchased under agreements to
resell......................................... 0277
0 3.b.
4. Loans and lease financing receivables:
//////////////////
a. Loans and leases, net of unearned income (from Schedule
RC-C) RCFD 2122 9,146,312 ////////////////// 4.a.
b. LESS: Allowance for loan and lease
losses................... RCFD 3123 309,789
////////////////// 4.b.
c. LESS: Allocated transfer risk
reserve....................... RCFD 3128 0
////////////////// 4.c.
d. Loans and leases, net of unearned income,
//////////////////
allowance, and reserve (item 4.a minus 4.b and
4.c)..................................... 2125 8,836,523
4.d.
5. Assets held in trading
accounts........................................................
.... 3545 0 5.
6. Premises and fixed assets (including capitalized
leases)................................... 2145 178,499
6.
7. Other real estate owned (from Schedule
RC-M)............................................... 2150
32,388 7.
8. Investments in unconsolidated subsidiaries and associated
companies (from Schedule RC-M) ... 2130 0 8.
9. Customers' liability to this bank on acceptances
outstanding............................... 2155 31,941
9.
10. Intangible assets (from Schedule
RC-M).....................................................
2143 77,424 10.
11. Other assets (from Schedule
RC-F)..........................................................
2160 644,600 11.
12. Total assets (sum of items 1 through
11)................................................... 2170
15,740,755 12.
</TABLE>
- ------------
(1) Includes cash items in process of collection and unposted
debits.
(2) Includes time certificates of deposit not held in trading
accounts.
<PAGE>
<TABLE>
<S> <C>
<C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590
FFIEC 031
Address: 777 MAIN STREET
Page RC-2
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC--Continued
<TABLE>
<CAPTION>
Dollar Amounts in Thousands ///////// Bil Mil Thou
- ----------------------------------------------------------------
- -
- ------------------------------ -------------------------
<S>
<C> <C>
LIABILITIES
///////////////////////
13. Deposits:
///////////////////////
a. In domestic offices (sum of totals of columns A and C
from
Schedule RC-E, part I) ..... RCON 2200 9,763,814 13.a.
(1) Noninterest-bearing(1)
................................ RCON 6631 2,762,398
/////////////////////// 13.a.(1)
(2) Interest-bearing
...................................... RCON 6636
7,001,416 /////////////////////// 13.a.(2)
b. In foreign offices, Edge and Agreement subsidiaries, and
IBFs (from Schedule RC-E, ///////////////////////
part II)
................................................................
.
............. RCFN 2200 196,619 13.b.
(1) Noninterest-bearing
................................... RCFN 6631 0
/////////////////////// 13.b.(1)
(2) Interest-bearing
...................................... RCFN 6636
196,619 /////////////////////// 13.b.(2)
14. 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 IBFs:
///////////////////////
a. Federal funds purchased
...............................................................
RCFD 0278 1,860,850 14.a.
b. Securities sold under agreements to repurchase
........................................ RCFD 0279
1,284,572 14.b.
15. a. Demand notes issued to the U.S. Treasury
.............................................. RCON 2840
447,595 15.a.
b. Trading liabilities
................................................................
.
.. RCFD 3548 6,575 15.b.
16. Other borrowed money:
///////////////////////
a. With original maturity of one year or less
............................................ RCFD 2332
497,414 16.a.
b. With original maturity of more than one year
.......................................... RCFD 2333
260,803 16.b.
17. Mortgage indebtedness and obligations under capitalized
leases ........................... RCFD 2910 9,784
17.
18. Bank's liability on acceptances executed and outstanding
................................. RCFD 2920 31,941
18.
19. Subordinated notes and debentures
........................................................ RCFD
3200 0 19.
20. Other liabilities (from Schedule RC-G)
................................................... RCFD 2930
177,566 20.
21. Total liabilities (sum of items 13 through 20)
........................................... RCFD 2948
14,537,533 21.
///////////////////////
22. Limited-life preferred stock and related surplus
......................................... RCFD 3282
0 22.
EQUITY CAPITAL
///////////////////////
23. Perpetual preferred stock and related surplus
............................................ RCFD 3838
0 23.
24. Common stock
................................................................
.
............ RCFD 3230 19,487 24.
25. Surplus (exclude all surplus related to preferred
stock).................................. RCFD 3839
926,125 25.
26. a. Undivided profits and capital reserves
................................................ RCFD 3632
275,774 26.a.
b. Net unrealized holding gains (losses) on
available-for-sale securities ................ RCFD 8434
(18,164) 26.b.
27. Cumulative foreign currency translation adjustments
...................................... RCFD 3284 0
27.
28. Total equity capital (sum of items 23 through 27)
........................................ RCFD 3210
1,203,222 28.
29. Total liabilities, limited-life preferred stock, and equity
capital (sum of items 21, 22, ///////////////////////
and 28)
................................................................
.
................. RCFD 3300 15,740,755 29.
</TABLE>
Memorandum
To be reported only with the March Report of Condition.
<TABLE>
<S>
<C>
1. Indicate in the box at the right the number of the statement
below that best describes the
most comprehensive level of auditing work performed for the
bank by independent external Number
auditors as of any date during 1993
...............................................................
RCFD 6724 N/A M.1.
</TABLE>
1 = Independent audit of the bank conducte in accordance with
generally accepted auditing standards by a certified public
accounting firm which submits a report on the bank
2 = Independent audit of the bank's parent holding company
conducted in accordance with generally accepted auditing
standards by a certified public accounting firm which submits a
report on the consolidated holding company (but not on the bank
separately)
3 = Directors' examination of the bank conducted in accordance
with generally accepted auditing standards by a certified public
accounting firm (may be required by state chartering authority)
4 = Directors' examination of the bank performed by other
external auditors (may be required by state chartering
authority)
5 = Review of the bank's financial statements by external
auditors
6 = Compilation of the bank's financial statements by external
auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
- --------------
(1) Includes total demand deposits and noninterest-bearing time
and savings deposits.
<PAGE>
<TABLE>
<S> <C>
<C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590
FFIEC 031
Address: 777 MAIN STREET
Page RC-3
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
----------
</TABLE>
Schedule RC-A--Cash and Balances Due From Depository
Institutions
Exclude assets held in trading accounts.
<TABLE>
<CAPTION>
C405 <-
-----------------------------------------
(Column A) (Column B)
Consolidated Domestic
Bank Offices
-------------------- --------------------
Dollar Amounts
in Thousands RCFD Bil Mil Thou RCON Bil Mil Thou
- ----------------------------------------------------------------
- -
- ----------- ----- ------------------- -------------
<S>
<C> <C> <C>
1. Cash items in process of collection, unposted debits, and
currency and ////////////////// //////////////////
coin
................................................................
.
... 0022 672,793 ////////////////// 1.
a. Cash items in process of collection and unposted debits
.............. ////////////////// 0020 520,047 1.a.
b. Currency and coin
....................................................
////////////////// 0080 152,746 1.b.
2. Balances due from depository institutions in the U.S.
................... ////////////////// 0082 133,071
2.
a. U.S. branches and agencies of foreign banks (including
their IBFs) ... 0083 0 ////////////////// 2.a.
b. Other commercial banks in the U.S. and other depository
institutions ////////////////// //////////////////
in the U.S. (including their IBFs)
................................... 0085 133,071
////////////////// 2.b.
3. Balances due from banks in foreign countries and foreign
central banks .. ////////////////// 0070 136,505 3.
a. Foreign branches of other U.S. banks
................................. 0073 0
////////////////// 3.a.
b. Other banks in foreign countries and foreign central banks
........... 0074 136,505 ////////////////// 3.b.
4. Balances due from Federal Reserve Banks
................................. 0090 78,276 0090
78,276 4.
5. Total (sum of items 1 through 4) (total of column A must
equal
////////////////// //////////////////
Schedule RC, sum of items 1.a and 1.b)
.................................. 0010 1,020,645 0010
1,020,645 5.
</TABLE>
<TABLE>
<CAPTION>
Memorandum
Dollar Amounts in Thousands RCON Bil Mil Thou
- ----------------------------------------------------------------
- -
- --------------------------------- --------------------
<S>
<C>
1. Noninterest-bearing balances due from commercial banks in the
U.S. (included in item 2, //////////////////
column B above)
................................................................
.
............. 0050 132,636 M.1.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
<C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590
FFIEC 031
Address: 777 MAIN STREET
Page RC-4
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-B--Securities
Exclude assets held in trading accounts.
<TABLE>
<CAPTION>
C410 <-
- ----------------------------------------------------------------
- -
- ---------- --------
Held-to-maturity Available-for-sale
- -----------------------------------------
- -----------------------------------------
(Column A)
(Column B) (Column C) (Column D)
Amortized Cost
Fair Value Amortized Cost Fair Value(1)
--------------------
- -------------------- -------------------- --------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou
RCFD
Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
- -------------------------------------- ----- -------------
- -----
- ------------- ----- ------------- ----- -------------
<S> <C> <C>
<C> <C> <C>
1. U.S. Treasury securities ......... 0211 1,068,833
0213
1,016,552 1286 534,139 1287 515,844 1.
2. U.S. Government agency //////////////////
////////////////// ////////////////// //////////////////
and corporation obligations //////////////////
////////////////// ////////////////// //////////////////
(exclude mortgage-backed //////////////////
////////////////// ////////////////// //////////////////
securities): //////////////////
////////////////// ////////////////// //////////////////
a. Issued by U.S. Govern- //////////////////
////////////////// ////////////////// //////////////////
ment agencies(2) .............. 1289 0
1290
0 1291 0 1293 0 2.a.
b. Issued by U.S. //////////////////
////////////////// ////////////////// //////////////////
Government-sponsored //////////////////
////////////////// ////////////////// //////////////////
agencies(3) ................... 1294 0
1295
0 1297 0 1298 0 2.b.
3. Securities issued by states //////////////////
////////////////// ////////////////// //////////////////
and political subdivisions //////////////////
////////////////// ////////////////// //////////////////
in the U.S.: //////////////////
////////////////// ////////////////// //////////////////
a. General obligations ........... 1676 0
1677
0 1678 135 1679 137 3.a.
b. Revenue obligations ........... 1681 0
1686
0 1690 0 1691 0 3.b.
c. Industrial development //////////////////
////////////////// ////////////////// //////////////////
and similar obligations ....... 1694 0
1695
0 1696 0 1697 0 3.c.
4. Mortgage-backed //////////////////
////////////////// ////////////////// //////////////////
securities (MBS): //////////////////
////////////////// ////////////////// //////////////////
a. Pass-through securities: //////////////////
////////////////// ////////////////// //////////////////
(1) Guaranteed by //////////////////
////////////////// ////////////////// //////////////////
GNMA ...................... 1698 0
1699
0 1701 78,175 1702 80,542 4.a.(1)
(2) Issued by FNMA //////////////////
////////////////// ////////////////// //////////////////
and FHLMC ................. 1703 1,752,887
1705
1,708,934 1706 0 1707 0 4.a.(2)
(3) Privately-issued .......... 1709 19,308
1710
18,253 1711 0 1713 0 4.a.(3)
b. CMOs and REMICs: //////////////////
////////////////// ////////////////// //////////////////
(1) Issued by FNMA //////////////////
////////////////// ////////////////// //////////////////
and FHLMC ................. 1714 0
1715
0 1716 0 1717 0 4.b.(1)
(2) Privately-issued //////////////////
////////////////// ////////////////// //////////////////
and collateralized //////////////////
////////////////// ////////////////// //////////////////
by MBS issued or //////////////////
////////////////// ////////////////// //////////////////
guaranteed by //////////////////
////////////////// ////////////////// //////////////////
FNMA, FHLMC, or //////////////////
////////////////// ////////////////// //////////////////
GNMA ...................... 1718 0
1719
0 1731 0 1732 0 4.b.(2)
(3) All other privately- //////////////////
////////////////// ////////////////// //////////////////
issued .................... 1733 146,608
1734
144,265 1735 151,600 1736 139,578 4.b.(3)
5. Other debt securities: //////////////////
////////////////// ////////////////// //////////////////
a. Other domestic debt //////////////////
////////////////// ////////////////// //////////////////
securities .................... 1737 915,240
1738
904,035 1739 0 1741 0 5.a.
b. Foreign debt //////////////////
////////////////// ////////////////// //////////////////
securities .................... 1742 3,250
1743
3,250 1744 0 1746 0 5.b.
</TABLE>
- -------------
(1) Includes equity securities without readily determinable fair
values at historical cost in item 6.c, column D.
(2) Includes Small Business Administration "Guaranteed Loan Pool
Certificates," U.S. Maritime Administration obligations, and
Export-Import Bank participation certificates.
(3) Includes obligations (other than pass-through securities,
CMOs, and REMICs) issued by the Farm Credit System, the Federal
Home Loan Bank System, the Federal Home Loan Mortgage
Corporation, the Federal National Mortgage Association, the
Financing Corporation, Resolution Funding Corporation, the
Student Loan Marketing Association, and the Tennessee Valley
Authority.
<PAGE>
<TABLE>
<S> <C>
<C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590
FFIEC 031
Address: 777 MAIN STREET
Page RC-5
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-B--Continued
<TABLE>
<CAPTION>
Held-to-maturity Available-for-sale
- -----------------------------------------
- -----------------------------------------
(Column A)
(Column B) (Column C) (Column D)
Amortized Cost
Fair Value Amortized Cost Fair Value(1)
--------------------
- -------------------- -------------------- --------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD
Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
- ------------------------------------ ----- ------------- -----
- ------------- ----- ------------- ----- -------------
<S> <C> <C>
<C> <C> <C>
6. Equity securities: //////////////////
////////////////// ////////////////// //////////////////
a. Investments in mutual //////////////////
////////////////// ////////////////// //////////////////
funds ....................... //////////////////
////////////////// 1747 5,016 1748 5,016
6.a.
b. Other equity securities //////////////////
////////////////// ////////////////// //////////////////
with readily determin- //////////////////
////////////////// ////////////////// //////////////////
able fair values ............ //////////////////
////////////////// 1749 0 1751 0
6.b.
c. All other equity //////////////////
////////////////// ////////////////// //////////////////
securities(1) ............... //////////////////
////////////////// 1752 38,192 1753 38,192
6.c.
7. Total (sum of items 1 //////////////////
////////////////// ////////////////// //////////////////
through 6) (total of //////////////////
////////////////// ////////////////// //////////////////
column A must equal //////////////////
////////////////// ////////////////// //////////////////
Schedule RC, item 2.a) //////////////////
////////////////// ////////////////// //////////////////
(total of column D must //////////////////
////////////////// ////////////////// //////////////////
equal Schedule RC, //////////////////
////////////////// ////////////////// //////////////////
item 2.b) ...................... 1754 3,906,126 1771
3,795,289 1772 807,257 1773 779,309 7.
</TABLE>
<TABLE>
<CAPTION>
Memoranda
C412 <-
--------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou
- ----------------------------------------------------------------
- -
- ---------------------------------- ----- -------------
<S>
<C> <C>
1. Pledged securities(2)
................................................................
.
........ 0416 2,899,544 M.1.
2. Maturity and repricing data for debt securities(2)(3)(4)
(excluding those in nonaccrual status): //////////////////
a. Fixed rate debt securities with a remaining maturity of:
//////////////////
(1) Three months or less
................................................................
.
.. 0343 0 M.2.a.(1)
(2) Over three months through 12 months
.................................................... 0344
22,223 M.2.a.(2)
(3) Over one year through five years
....................................................... 0345
2,058,261 M.2.a.(3)
(4) Over five years
................................................................
.
....... 0346 2,384,920 M.2.a.(4)
(5) Total fixed rate debt securities (sum of Memorandum
items 2.a.(1) through 2.a.(4)) ..... 0347 4,465,404
M.2.a.(5)
b. Floating rate debt securities with a repricing frequency
of: //////////////////
(1) Quarterly or more frequently
...........................................................
4544 6,016 M.2.b.(1)
(2) Annually or more frequently, but less frequently than
quarterly ........................ 4545 170,807
M.2.b.(2)
(3) Every five years or more frequently, but less
frequently than annually ................. 4551 0
M.2.b.(3)
(4) Less frequently than every five years
.................................................. 4552
0 M.2.b.(4)
(5) Total floating rate debt securities (sum of Memorandum
items 2.b.(1) through 2.b.(4)) .. 4553 176,823
M.2.b.(5)
c. Total debt securities (sum of Memorandum items 2.a.(5) and
2.b.(5)) (must equal total debt //////////////////
securities from Schedule RC-B, sum of items 1 through 5,
columns A and D, minus nonaccrual //////////////////
debt securities included in Schedule RC-N, item 9, column
C) ............................... 0393 4,642,227 M.2.c.
3. Not applicable
//////////////////
4. Held-to-maturity debt securities restructured and in
compliance with modified terms (included //////////////////
in Schedule RC-B, items 3 through 5, column A, above)
......................................... 5365 0
M.4.
5. Not applicable
//////////////////
6. Floating rate debt securities with a remaining maturity of
one
year or less(2) (included in //////////////////
Memorandum item 2.b.(5) above)
................................................................
5519 3,001 M.6.
7. Amortized cost of held-to-maturity securities sold or
transferred to available-for-sale or //////////////////
trading securities during the calendar year-to-date
........................................... 1778 238
M.7.
</TABLE>
- -------------
(1) Includes equity securities without readily determinable fair
values at historical cost in item 6.c, column D.
(2) Includes held-to-maturity securities at amortized cost and
available-for-sale securities at fair value.
(3) Exclude equity securities, e.g., investments in mutual
funds,
Federal Reserve stock, common stock, and preferred stock.
(4) Memorandum item 2 is not applicable to savings banks that
must complete supplemental Schedule RC-J.
<PAGE>
<TABLE>
<S> <C>
<C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590
FFIEC 031
Address: 777 MAIN STREET
Page RC-6
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-C--Loans and Lease Financing Receivables
Part I. Loans and Leases
<TABLE>
<CAPTION>
Do not deduct the allowance for loan and lease losses from
amounts
reported in this schedule. Report total loans and leases, net
of
unearned
income. Exclude assets held in trading accounts.
C415 <-
-----------------------------------------
(Column A) (Column B)
Consolidated Domestic
Bank Offices
-------------------- --------------------
Dollar Amounts
in Thousands RCFD Bil Mil Thou RCON Bil Mil Thou
- ----------------------------------------------------------------
- -
- ------------ ----- ------------- ----- -------------
<S>
<C> <C> <C>
1. Loans secured by real estate
........................................... 1410 5,239,388
////////////////// 1.
a. Construction and land development
................................... ////////////////// 1415
76,735 1.a.
b. Secured by farmland (including farm residential and other
////////////////// //////////////////
improvements)
.......................................................
////////////////// 1420 1,719 1.b.
c. Secured by 1-4 family residential properties:
////////////////// //////////////////
(1) Revolving, open-end loans secured by 1-4 family
residential ////////////////// //////////////////
properties and extended under lines of credit
................... ////////////////// 1797 417,777
1.c.(1)
(2) All other loans secured by 1-4 family residential
properties: ////////////////// //////////////////
(a) Secured by first liens
...................................... //////////////////
5367 3,226,287 1.c.(2)(a)
(b) Secured by junior liens
..................................... //////////////////
5368
211,935 1.c.(2)(b)
d. Secured by multifamily (5 or more) residential properties
........... ////////////////// 1460 100,761 1.d.
e. Secured by nonfarm nonresidential properties
........................ ////////////////// 1480
1,204,174 1.e.
2. Loans to depository institutions:
////////////////// //////////////////
a. To commercial banks in the U.S.
..................................... //////////////////
1505
17 2.a.
(1) To U.S. branches and agencies of foreign banks
.................. 1506 0 //////////////////
2.a.(1)
(2) To other commercial banks in the U.S.
........................... 1507 17
////////////////// 2.a.(2)
b. To other depository institutions in the U.S.
........................ 1517 0 1517
0 2.b.
c. To banks in foreign countries
....................................... //////////////////
1510 0 2.c.
(1) To foreign branches of other U.S. banks
......................... 1513 0
////////////////// 2.c.(1)
(2) To other banks in foreign countries
............................. 1516 0
////////////////// 2.c.(2)
3. Loans to finance agricultural production and other loans to
farmers .... 1590 1,280 1590 1,280 3.
4. Commercial and industrial loans:
////////////////// //////////////////
a. To U.S. addressees (domicile)
....................................... 1763 2,624,506
1763 2,624,506 4.a.
b. To non-U.S. addressees (domicile)
................................... 1764 0 1764
0 4.b.
5. Acceptances of other banks:
////////////////// //////////////////
a. Of U.S. banks
....................................................... 1756
240 1756 240 5.a.
b. Of foreign banks
.................................................... 1757
0 1757 0 5.b.
6. Loans to individuals for household, family, and other
personal ////////////////// //////////////////
expenditures (i.e., consumer loans) (includes purchased
paper) ......... ////////////////// 1975 455,734 6.
a. Credit cards and related plans (includes check credit and
other ////////////////// //////////////////
revolving credit plans)
............................................. 2008
26,062 ////////////////// 6.a.
b. Other (includes single payment, installment, and all
student loans) . 2011 429,672 //////////////////
6.b.
7. Loans to foreign governments and official institutions
(including ////////////////// //////////////////
foreign central banks)
................................................. 2081
0 2081 0 7.
8. Obligations (other than securities and leases) of states and
political ////////////////// //////////////////
subdivisions in the U.S. (includes nonrated industrial
development ////////////////// //////////////////
obligations)
...........................................................
2107 76,157 2107 76,157 8.
9. Other loans
............................................................
1563 755,405 ////////////////// 9.
a. Loans for purchasing or carrying securities (secured and
unsecured) . ////////////////// 1545 103,947 9.a.
b. All other loans (exclude consumer loans)
............................ ////////////////// 1564
651,458 9.b.
10. Lease financing receivables (net of unearned income)
................... ////////////////// 2165 3,418
10.
a. Of U.S. addressees (domicile)
....................................... 2182 3,418
////////////////// 10.a.
b. Of non-U.S. addressees (domicile)
................................... 2183 0
////////////////// 10.b.
11. LESS: Any unearned income on loans reflected in items 1-9
above ........ 2123 9,833 2123 9,833 11.
12. Total loans and leases, net of unearned income (sum of items
1 through ////////////////// //////////////////
10 minus item 11) (total of column A must equal Schedule RC,
item 4.a) . 2122 9,146,312 2122 9,146,312 12.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
<C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590
FFIEC 031
Address: 777 MAIN STREET
Page RC-7
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-C--Continued
Part I. Continued
<TABLE>
<CAPTION>
(Column A) (Column B)
Consolidated Domestic
Memoranda
Bank Offices
-------------------- --------------------
Dollar Amounts
in Thousands RCFD Bil Mil Thou RCON Bil Mil Thou
- ----------------------------------------------------------------
- -
- ------------ ----- ------------- ----- -------------
<S>
<C> <C> <C>
1. Commercial paper included in Schedule RC-C, part I, above
.............. 1496 0 1496 0 M.1.
2. Loans and leases restructured and in compliance with
modified
terms ////////////////// //////////////////
(included in Schedule RC-C, part I, above):
////////////////// //////////////////
a. Loans secured by real estate:
////////////////// //////////////////
(1) To U.S. addressees (domicile)
................................... 1687 43,012
M.2.a.(1)
(2) To non-U.S. addressees (domicile)
............................... 1689 0 M.2.a.(2)
b. Loans to finance agricultural production and other loans
to farmers . 1613 0 M.2.b.
c. Commercial and industrial loans:
//////////////////
(1) To U.S. addressees (domicile)
................................... 1758 0
M.2.c.(1)
(2) To non-U.S. addressees
(domicile)................................ 1759 0
M.2.c.(2)
d. All other loans (exclude loans to individuals for
household, //////////////////
family, and other personal expenditures)
............................ 1615 700 M.2.d.
e. Lease financing receivables:
//////////////////
(1) Of U.S. addressees (domicile)
................................... 1789 0
M.2.e.(1)
(2) Of non-U.S. addressees (domicile)
............................... 1790 0 M.2.e.(2)
f. Total (sum of Memorandum items 2.a through 2.e)
..................... 1616 43,712 M.2.f.
3. Maturity and repricing data for loans and leases(1)
(excluding those //////////////////
in nonaccrual status):
//////////////////
a. Fixed rate loans and leases with a remaining maturity of:
//////////////////
(1) Three months or less
............................................ 0348
450,888
M.3.a.(1)
(2) Over three months through 12 months
............................. 0349 81,259 M.3.a.(2)
(3) Over one year through five years
................................ 0356 819,672
M.3.a.(3)
(4) Over five years
................................................. 0357
2,399,164 M.3.a.(4)
(5) Total fixed rate loans and leases (sum of
//////////////////
Memorandum items 3.a.(1) through 3.a.(4))
....................... 0358 3,750,983 M.3.a.(5)
b. Floating rate loans with a repricing frequency of:
//////////////////
(1) Quarterly or more frequently
.................................... 4554 3,963,831
M.3.b.(1)
(2) Annually or more frequently, but less frequently than
quarterly . 4555 554,895 M.3.b.(2)
(3) Every five years or more frequently, but less
frequently than //////////////////
annually
........................................................ 4561
722,391 M.3.b.(3)
(4) Less frequently than every five years
........................... 4564 3,881 M.3.b.(4)
(5) Total floating rate loans (sum of Memorandum items
3.b.(1) //////////////////
through 3.b.(4))
................................................ 4567
5,244,998 M.3.b.(5)
c. Total loans and leases (sum of Memorandum items 3.a.(5)
and 3.b.(5)) //////////////////
(must equal the sum of total loans and leases, net, from
//////////////////
Schedule RC-C, part I, item 12, plus unearned income from
//////////////////
Schedule RC-C, part I, item 11, minus total nonaccrual
loans and //////////////////
leases from Schedule RC-N, sum of items 1 through 8,
column C) ...... 1479 8,995,981 M.3.c.
4. Loans to finance commercial real estate, construction, and
land //////////////////
development activities (not secured by real estate) included
in //////////////////
Schedule RC-C, part I, items 4 and 9, column A, page RC-6(2)
........... 2746 37,810 M.4.
5. Loans and leases held for sale (included in Schedule RC-C,
part I, above) 5369 238,903 M.5.
6. Adjustable rate closed-end loans secured by first liens on
1-4 family //////////////////
residential properties (included in Schedule RC-C, part I,
item ////////////////// RCON Bil Mil Thou
1.c.(2)(a), column B, page RC-6)
....................................... //////////////////
5370 1,470,716 M.6.
</TABLE>
- -------------
(1) Memorandum item 3 is not applicable to savings banks that
must complete
supplemental Schedule RC-J.
(2) Exclude loans secured by real estate that are included in
Schedule RC-C,
part I, item 1, column A.
<PAGE>
<TABLE>
<S> <C>
<C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590
FFIEC 031
Address: 777 MAIN STREET
Page
RC-7a
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-C--Continued
Part II. Loans to Small Businesses and Small Farms
Schedule RC-C, Part II is to be reported only with the June
Report of
Condition.
Report the number and amount currently outstanding as of June 30
of business
loans with "original amounts" of $1,000,000 or less and farm
loans with
"original amounts" of $500,000 or less. The following guidelines
should be used
to determine the "original amount" of a loan: (1) For loans
drawn
down under
lines of credit or loan commitments, the "original amount" of
the
loan is the
size of the line of credit or loan commitment when the line of
credit or loan
commitment was most recently approved, extended, or renewed
prior
to the report
date. However, if the amount currently outstanding as of the
report date
exceeds this size, the "original amount" is the amount currently
outstanding on
the report date. (2) For loan participations and syndications,
the "original
amount" of the loan participation or syndication is the entire
amount of the
credit originated by the lead lender. (3) For all other loans,
the "original
amount" is the total amount of the loan at origination or the
amount currently
oustanding as of the report date, whichever is larger.
Loans to Small Businesses
<TABLE>
<S>
<C>
1. Indicate in the appropriate box at the right whether all or
substantially C418 <-
all of the bank's "Loans secured by nonfarm nonresidential
properties" in domestic ------ --------
offices reported in Schedule RC-C, part I, item 1.e, column B,
and all or substantially YES NO
all of the bank's "Commercial and industrial loans to U.S.
addressees" in domestic offices ---------------------
reported in Schedule RC-C, part I, item 4.a, column B, have
original amounts of $100,000 6999 ///
1.
or less (see instructions)
................................................................
X
</TABLE>
If YES, complete items 2.a and 2.b below, skip items 3 and 4,
and
go to item 5. If NO, skip items 2.a and 2.b, complete items 3
and 4 below, and go to item 5.
<TABLE>
<S>
<C> <C>
--------------------
2. Report the total number of loans currently outstanding for
each of the Number of Loans
--------------------
following Schedule RC-C, part I, loan categories:
RCON ////////////
------
a. "Loans secured by nonfarm nonresidential properties" in
domestic //////////////////
offices reported in Schedule RC-C, part I, item 1.e,
column B ........... 5562 N/A 2.a.
b. "Commercial and industrial loans to U.S. addressees" in
domestic offices //////////////////
reported in Schedule RC-C, part I, item 4.a, column B
................... 5563 N/A 2.b.
</TABLE>
<TABLE>
<CAPTION>
(Column A) (Column B)
Amount
Currently
Number of Loans Outstanding
-------------------- --------------------
Dollar
Amounts in Thousands RCON ///////////// RCON Bil Mil Thou
- ----------------------------------------------------------------
- -
- ---------------- ------ ----- -------------
<S>
<C> <C>
3. Number and amount currently outstanding of "Loans secured by
nonfarm ///////////////////////////////////////
nonresidential properties" in domestic offices reported in
Schedule RC-C, ///////////////////////////////////////
part I, item 1.e, column B (sum of items 3.a through 3.c must
be less than ///////////////////////////////////////
or equal to Schedule RC-C, part I, item 1.e, column B):
///////////////////////////////////////
a. With original amounts of $100,000 or less
................................ 5564 1,127 5565
39,831 3.a.
b. With original amounts of more than $100,000 through
$250,000 ............. 5566 1,073 5567 131,881
3.b.
c. With original amounts of more than $250,000 through
$1,000,000 ........... 5568 1,131 5569 422,956
3.c.
4. Number and amount currently outstanding of "Commercial and
industrial ///////////////////////////////////////
loans to U.S. addressees" in domestic offices reported in
Schedule RC-C, ///////////////////////////////////////
part I, item 4.a, column B (sum of items 4.a through 4.c must
be less than ///////////////////////////////////////
or equal to Schedule RC-C, part I, item 4.a, column B):
///////////////////////////////////////
a. With original amounts of $100,000 or less
................................ 5570 2,304 5571
49,374 4.a.
b. With original amounts of more than $100,000 through
$250,000 ............. 5572 507 5573 50,467
4.b.
c. With original amounts of more than $250,000 through
$1,000,000 ........... 5574 477 5575 148,262
4.c.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
<C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590
FFIEC 031
Address: 777 MAIN STREET
Page
RC-7b
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-C--Continued
Part II. Continued
Agricultural Loans to Small Farms
<TABLE>
<S>
<C>
5. Indicate in the appropriate box at the right whether all or
substantially
all of the bank's "Loans secured by farmland (including farm
residential and YES NO
other improvements)" in domestic offices reported in Schedule
RC-C, part I,
item 1.b, column B, and all or substantially all of the bank's
"Loans to ----------------------
finance agricultural production and other loans to farmers" in
domestic offices 6860 /// 5.
reported in Schedule RC-C, part I, item 3, column B, have
original amounts of X
$100,000 or less (see instructions)
................................................................
.
- ----------------------
</TABLE>
If YES, complete items 6.a and 6.b below and do not complete
items 7 and 8. If NO, skip items 6.a and 6.b and complete items
7
and 8 below.
<TABLE>
<S>
<C>
6. Report the total number of loans currently outstanding for
each of the ----------------------
following Schedule RC-C, part I, loan categories:
Number of Loans
--------------------
a. "Loans secured by farmland (including farm residential and
other RCON ////////////
improvements)" in domestic offices reported in Schedule
RC-C, part I, //////////////////
item 1.b, column B
....................................................... 5576
N/A 6.a.
b. "Loans to finance agricultural production and other loans
to farmers" in //////////////////
domestic offices reported in Schedule RC-C, part I, item
3,
column B ..... 5577 N/A 6.b.
</TABLE>
<TABLE>
<CAPTION>
(Column A) (Column B)
Amount
Currently
Number of Loans Outstanding
-------------------- --------------------
Dollar
Amounts in Thousands RCON ///////////// RCON Bil Mil Thou
- ----------------------------------------------------------------
- -
- ---------------- ------ ----- -------------
<S>
<C> <C>
7. Number and amount currently outstanding of "Loans secured by
farmland ///////////////////////////////////////
(including farm residential and other improvements)" in
domestic offices ///////////////////////////////////////
reported in Schedule RC-C, part I, item 1.b, column B (sum of
items 7.a ///////////////////////////////////////
through 7.c must be less than or equal to Schedule RC-C, part
I, item 1.b, ///////////////////////////////////////
column B):
///////////////////////////////////////
a. With original amounts of $100,000 or less
................................ 5578 3 5579
98 7.a.
b. With original amounts of more than $100,000 through
$250,000 ............. 5580 2 5581 312
7.b.
c. With original amounts of more than $250,000 through
$500,000 ............. 5582 4 5583 579
7.c.
8. Number and amount currently outstanding of "Loans to finance
agricultural ///////////////////////////////////////
production and other loans to farmers" in domestic offices
reported in ///////////////////////////////////////
Schedule RC-C, part I, item 3, column B (sum of items 8.a
through 8.c ///////////////////////////////////////
must be less than or equal to Schedule RC-C, part I, item 3,
column B): ///////////////////////////////////////
a. With original amounts of $100,000 or less
................................ 5584 23 5585
480 8.a.
b. With original amounts of more than $100,000 through
$250,000 ............. 5586 2 5587 233
8.b.
c. With original amounts of more than $250,000 through
$500,000 ............. 5588 2 5589 567
8.c.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
<C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590
FFIEC 031
Address: 777 MAIN STREET
Page RC-8
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-D--Trading Assets and Liabilities
Schedule RC-D is to be completed only by banks with $1 billion
or
more in total assets or with $2 billion or more in par/notional
amount of interest rate, foreign exchange rate, and other
commodity and equity contracts (as reported in Schedule RC-L,
items 11, 12, and 13).
<TABLE>
<CAPTION>
C420 <-
----------------- --------
Dollar Amounts in Thousands ///////// Bil Mil Thou
- ----------------------------------------------------------------
- -
- --------------------------------- -------------------------
<S>
<C> <C>
ASSETS
///////////////////////
1. U.S. Treasury securities in domestic offices
................................................ RCON 3531
0 1.
2. U.S. Government agency and corporation obligations in
domestic offices (exclude mortgage-
///////////////////////
backed securities)
................................................................
.
......... RCON 3532 0 2.
3. Securities issued by states and political subdivisions in
the
U.S. in domestic offices ...... RCON 3533 0 3.
4. Mortgage-backed securities in domestic offices:
///////////////////////
a. Pass-through securities issued or guaranteed by FNMA,
FHLMC, or GNMA ..................... RCON 3534 0
4.a.
b. CMOs and REMICs issued by FNMA or FHLMC
.................................................. RCON 3535
0 4.b.
c. All other
................................................................
.
............... RCON 3536 0 4.c.
5. Other debt securities in domestic offices
................................................... RCON 3537
0 5.
6. Certificates of deposit in domestic offices
................................................. RCON 3538
0 6.
7. Commercial paper in domestic offices
........................................................ RCON
3539 0 7.
8. Bankers acceptances in domestic offices
..................................................... RCON
3540
0 8.
9. Other trading assets in domestic offices
.................................................... RCON 3541
0 9.
10. Trading assets in foreign offices
...........................................................
RCFN 3542 0 10.
11. Revaluation gains on interest rate, foreign exchange rate,
and other commodity and equity ///////////////////////
contracts:
///////////////////////
a. In domestic offices
................................................................
.
..... RCON 3543 0 11.a.
b. In foreign offices
................................................................
.
...... RCFN 3544 0 11.b.
12. Total trading assets (sum of items 1 through 11) (must equal
Schedule RC, item 5) ........... RCFD 3545 0 12.
///////// Bil Mil Thou
LIABILITIES
---------- -------------
13. Liability for short positions
...............................................................
RCFD 3546 0 13.
14. Revaluation losses on interest rate, foreign exchange rate,
and other commodity and equity ///////////////////////
contracts
................................................................
.
.................. RCFD 3547 6,575 14.
15. Total trading liabilities (sum of items 13 and 14) (must
equal Schedule RC, item 15.b) ...... RCFD 3548 6,575
15.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
<C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590
FFIEC 031
Address: 777 MAIN STREET
Page RC-9
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-E--Deposit Liabilities
Part I. Deposits in Domestic Offices
<TABLE>
<CAPTION>
C425 <-
- --------------------------------------------------------------
Nontransaction
Transaction Accounts Accounts
- ----------------------------------------- --------------------
(Column A) (Column B) (Column C)
Total transaction Memo: Total Total
accounts (including demand deposits nontransaction
total demand (included in accounts
deposits) column A) (including MMDAs)
- -------------------- -------------------- --------------------
Dollar Amounts in Thousands RCON
Bil Mil Thou RCON Bil Mil Thou RCON Bil Mil Thou
- ---------------------------------------------------------- -----
- ------------- ----- ------------- ----- -------------
<S> <C>
<C> <C> <C>
Deposits of:
////////////////// ////////////////// //////////////////
1. Individuals, partnerships, and corporations .......... 2201
3,339,818 2240 2,308,854 2346 5,743,349 1.
2. U.S. Government ...................................... 2202
59,873 2280 59,873 2520 0 2.
3. States and political subdivisions in the U.S. ........ 2203
156,286 2290 134,195 2530 203,512 3.
4. Commercial banks in the U.S. ......................... 2206
106,373 2310 106,373 ////////////////// 4.
a. U.S. branches and agencies of foreign banks .......
////////////////// ////////////////// 2347 0
4.a.
b. Other commercial banks in the U.S. ................
////////////////// ////////////////// 2348 1,500
4.b.
5. Other depository institutions in the U.S. ............ 2207
92,936 2312 92,936 2349 0 5.
6. Banks in foreign countries ........................... 2213
2,164 2320 2,164 ////////////////// 6.
a. Foreign branches of other U.S. banks ..............
////////////////// ////////////////// 2367 0
6.a.
b. Other banks in foreign countries ..................
////////////////// ////////////////// 2373 0
6.b.
7. Foreign governments and official institutions
////////////////// ////////////////// //////////////////
(including foreign central banks) .................... 2216
289 2300 289 2377 0 7.
8. Certified and official checks ........................ 2330
57,714 2330 57,714 ////////////////// 8.
9. Total (sum of items 1 through 8) (sum of
////////////////// ////////////////// //////////////////
columns A and C must equal Schedule RC,
////////////////// ////////////////// //////////////////
item 13.a) ........................................... 2215
3,815,453 2210 2,762,398 2385 5,948,361 9.
</TABLE>
<TABLE>
<CAPTION>
Memoranda
Dollar Amounts in Thousands RCON Bil Mil Thou
- ----------------------------------------------------------------
- -
- ----------------------------------- ----- -------------
<S>
<C> <C>
1. Selected components of total deposits (i.e., sum of item 9,
columns A and C): //////////////////
a. Total Individual Retirement Accounts (IRAs) and Keogh Plan
accounts ......................... 6835 931,299 M.1.a.
b. Total brokered deposits
................................................................
.
.... 2365 464,856 M.1.b.
c. Fully insured brokered deposits (included in Memorandum
item 1.b above): //////////////////
(1) Issued in denominations of less than $100,000
........................................... 2343 48
M.1.c.(1)
(2) Issued either in denominations of $100,000 or in
denominations greater than $100,000 //////////////////
and participated out by the broker in shares of
$100,000 or less ........................ 2344 458,356
M.1.c.(2)
d. Total deposits denominated in foreign currencies
............................................ 3776
0
M.1.d.
e. Preferred deposits (uninsured deposits of states and
political subdivisions in the U.S. //////////////////
reported in item 3 above which are secured or
collateralized as required under state law) ... 5590
359,797 M.1.e.
2. Components of total nontransaction accounts (sum of Memoranda
items 2.a through 2.d must //////////////////
equal item 9, column C above):
//////////////////
a. Savings deposits:
//////////////////
(1) Money market deposit accounts (MMDAs)
................................................... 6810
837,541 M.2.a.(1)
(2) Other savings deposits (excludes MMDAs)
................................................. 0352
2,372,564 M.2.a.(2)
b. Total time deposits of less than $100,000
................................................... 6648
1,923,177 M.2.b.
c. Time certificates of deposit of $100,000 or more
............................................ 6645
815,079
M.2.c.
d. Open-account time deposits of $100,000 or more
.............................................. 6646
0 M.2.d.
3. All NOW accounts (included in column A above)
.................................................. 2398
1,053,054 M.3.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
<C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590
FFIEC 031
Address: 777 MAIN STREET
Page
RC-10
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-E--Continued
Part I. Continued
Memoranda (continued)
<TABLE>
<CAPTION>
Deposit Totals for FDIC Insurance Assessments(1)
Dollar Amounts in Thousands RCON Bil Mil Thou
- ----------------------------------------------------------------
- -
- --------------------------------- ----- -------------
<S>
<C> <C>
4. Total deposits in domestic offices (sum of item 9, column A
and item 9, column C) ///////////////////
(must equal Schedule RC, item 13.a)
......................................................... 2200
9,763,814 M.4.
//////////////////
a. Total demand deposits (must equal item 9, column B)
...................................... 2210 2,762,398
M.4.a.
b. Total time and savings deposits(2) (must equal item 9,
column A plus item 9, column C //////////////////
minus item 9, column B)
................................................................
.
. 2350 7,001,416 M.4.b.
</TABLE>
------------
(1) An amended Certified Statement should be submitted to the
FDIC if the deposit totals reported in this item are
amended after the semiannual Certified Statement
originally
covering this report date has been filed with the FDIC.
(2) For FDIC insurance assessment purposes, "total time and
savings deposits" consists of nontransaction accounts and
all transaction accounts other than demand deposits.
<TABLE>
<CAPTION>
Dollar Amounts in Thousands RCON Bil Mil Thou
- ----------------------------------------------------------------
- -
- ---------------------------------- ----- -------------
<S>
<C> <C>
5. Time deposits of less than $100,000 and open-account time
deposits of $100,000 or more //////////////////
(included in Memorandum items 2.b and 2.d above) with a
remaining maturity or repricing //////////////////
frequency of:(1)
//////////////////
a. Three months or less
................................................................
.
...... 0359 572,417 M.5.a.
b. Over three months through 12 months (but not over 12
months) ............................... 3644 718,973
M.5.b.
6. Maturity and repricing data for time certificates of deposit
of $100,000 or more:(1) //////////////////
a. Fixed rate time certificates of deposit of $100,000 or
more
with a remaining maturity of: //////////////////
(1) Three months or less
................................................................
.
.. 2761 223,575 M.6.a.(1)
(2) Over three months through 12 months
.................................................... 2762
223,827 M.6.a.(2)
(3) Over one year through five years
....................................................... 2763
363,434 M.6.a.(3)
(4) Over five years
................................................................
.
....... 2765 4,243 M.6.a.(4)
(5) Total fixed rate time certificates of deposit of
$100,000 or more (sum of //////////////////
Memorandum items 6.a.(1) through 6.a.(4))
.............................................. 2767
815,079 M.6.a.(5)
b. Floating rate time certificates of deposit of $100,000 or
more with a repricing frequency of: //////////////////
(1) Quarterly or more frequently
...........................................................
4568 0 M.6.b.(1)
(2) Annually or more frequently, but less frequently than
quarterly ........................ 4569 0
M.6.b.(2)
(3) Every five years or more frequently, but less
frequently than annually ................. 4571 0
M.6.b.(3)
(4) Less frequently than every five years
.................................................. 4572
0 M.6.b.(4)
(5) Total floating rate time certificates of deposit of
$100,000 or more (sum of //////////////////
Memorandum items 6.b.(1) through 6.b.(4))
.............................................. 4573
0 M.6.b.(5)
c. Total time certificates of deposit of $100,000 or more
(sum
of Memorandum items 6.a.(5) //////////////////
and 6.b.(5)) (must equal Memorandum item 2.c. above)
....................................... 6645 815,079
M.6.c.
</TABLE>
- -------------
(1) Memorandum items 5 and 6 are not applicable to savings banks
that must
complete supplemental Schedule RC-J.
<PAGE>
<TABLE>
<S> <C>
<C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590
FFIEC 031
Address: 777 MAIN STREET
Page
RC-11
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-E--Continued
Part II. Deposits in Foreign Offices (including Edge and
Agreement subsidiaries and IBFs)
<TABLE>
<CAPTION>
Dollar Amounts in Thousands RCFN Bil Mil Thou
- ----------------------------------------------------------------
- -
- ---------------------------------- ----- -------------
<S>
<C> <C>
Deposits of:
//////////////////
1. Individuals, partnerships, and corporations
................................................... 2621
196,619 1.
2. U.S. banks (including IBFs and foreign branches of U.S.
banks)
................................ 2623 0 2.
3. Foreign banks (including U.S. branches and
//////////////////
agencies of foreign banks, including their IBFs)
.............................................. 2625
0 3.
4. Foreign governments and official institutions (including
foreign central banks) ............... 2650 0 4.
5. Certified and official checks
................................................................
.
2330 0 5.
6. All other deposits
................................................................
.
........... 2668 0 6.
7. Total (sum of items 1 through 6) (must equal Schedule RC,
item
13.b) .......................... 2200 196,619 7.
</TABLE>
Schedule RC-F--Other Assets
<TABLE>
<CAPTION>
C430 <-
-------------------------
Dollar Amounts in Thousands ////////// Bil Mil Thou
- ----------------------------------------------------------------
- -
- --------------------------------- -------------------------
<S>
<C> <C>
1. Income earned, not collected on loans
........................................................ RCFD
2164 47,928 1.
2. Net deferred tax assets(1)
................................................................
.
.. RCFD 2148 128,218 2.
3. Excess residential mortgage servicing fees receivable
........................................ RCFD 5371
34,070 3.
4. Other (itemize amounts that exceed 25% of this item)
......................................... RCFD 2168
434,384 4.
a. TEXT 3549
- ---------------------------------------------------- RCFD 3549
/////////////////////// 4.a.
b. TEXT 3550
- ---------------------------------------------------- RCFD 3550
/////////////////////// 4.b.
c. TEXT 3551
- ---------------------------------------------------- RCFD 3551
/////////////////////// 4.c.
5. Total (sum of items 1 through 4) (must equal Schedule RC,
item
11) ........................... RCFD 2160 644,600 5.
</TABLE>
<TABLE>
<CAPTION>
Memorandum
Dollar Amounts in Thousands ////////// Bil Mil Thou
- ----------------------------------------------------------------
- -
- --------------------------------- -------------------------
<S>
<C> <C>
1. Deferred tax assets disallowed for regulatory capital
purposes
............................... RCFD 5610 30,674 M.1.
</TABLE>
Schedule RC-G--Other Liabilities
<TABLE>
<CAPTION>
C435 <-
-------------------------
Dollar Amounts in Thousands ////////// Bil Mil Thou
- ----------------------------------------------------------------
- -
- --------------------------------- -------------------------
<S>
<C> <C>
1. a. Interest accrued and unpaid on deposits in domestic
offices(2) ............................ RCON 3645
13,800
1.a.
b. Other expenses accrued and unpaid (includes accrued income
taxes payable) ................. RCFD 3646 55,957
1.b.
2. Net deferred tax liabilities(1)
..............................................................
RCFD 3049 0 2.
3. Minority interest in consolidated subsidiaries
............................................... RCFD 3000
0 3.
4. Other (itemize amounts that exceed 25% of this item)
......................................... RCFD 2938
107,809 4.
a. TEXT 3552
- ---------------------------------------------------- RCFD 3552
/////////////////////// 4.a.
A/P SECURITIES PURCHSED
52,593
b. TEXT 3553
- ---------------------------------------------------- RCFD 3553
/////////////////////// 4.b.
c. TEXT 3554
- ---------------------------------------------------- RCFD 3554
/////////////////////// 4.c.
5. Total (sum of items 1 through 4) (must equal Schedule RC,
item
20) ........................... RCFD 2930 177,566 5.
</TABLE>
- ------------
(1) See discussion of deferred income taxes in Glossary entry on
"income
taxes."
(2) For savings banks, include "dividends" accrued and unpaid on
deposits.
<PAGE>
<TABLE>
<S> <C>
<C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590
FFIEC 031
Address: 777 MAIN STREET
Page
RC-12
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-H--Selected Balance Sheet Items for Domestic Offices
<TABLE>
<CAPTION>
C440 <-
--------------------
Domestic Offices
--------------------
Dollar Amounts in Thousands RCON Bil Mil Thou
- ----------------------------------------------------------------
- -
- ------------------------------------ ----- -------------
<S>
<C> <C>
1. Customers' liability to this bank on acceptances outstanding
.................................... 2155 31,941 1.
2. Bank's liability on acceptances executed and outstanding
........................................ 2920 31,941
2.
3. Federal funds sold and securities purchased under agreements
to resell .......................... 1350 233,300 3.
4. Federal funds purchased and securities sold under agreements
to repurchase ...................... 2800 3,145,422 4.
5. Other borrowed money
................................................................
.
........... 2850 758,217 5.
EITHER
//////////////////
6. Net due from own foreign offices, Edge and Agreement
subsidiaries, and IBFs ..................... 2163
N/A
6.
OR
//////////////////
7. Net due to own foreign offices, Edge and Agreement
subsidiaries, and IBFs ....................... 2941
51,619 7.
8. Total assets (excludes net due from foreign offices, Edge and
Agreement subsidiaries, and IBFs) . 2192 15,595,754 8.
9. Total liabilities (excludes net due to foreign offices, Edge
and Agreement subsidiaries, and IBFs) 3129 14,340,911 9.
Items 10-17 include held-to-maturity and available-for-sale
securities in domestic offices.
RCON Bil Mil Thou
----- -------------
10. U.S. Treasury securities
................................................................
.
...... 1779 1,584,677 10.
11. U.S. Government agency and corporation obligations (exclude
mortgage-backed //////////////////
securities)
................................................................
.
................... 1785 0 11.
12. Securities issued by states and political subdivisions in
the
U.S. ............................. 1786 137 12.
13. Mortgage-backed securities:
//////////////////
a. Pass-through securities:
//////////////////
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA
............................................ 1787
1,833,429
13.a.(1)
(2) Privately-issued
................................................................
.
....... 1869 19,308 13.a.(2)
b. CMOs and REMICs:
//////////////////
(1) Issued by FNMA and FHLMC
................................................................
1877 0 13.b.(1)
(2) Privately-issued
................................................................
.
....... 2253 286,186 13.b.(2)
14. Other domestic debt securities
................................................................
.
3159 915,240 14.
15. Foreign debt securities
................................................................
.
....... 3160 3,250 15.
16. Equity securities:
//////////////////
a. Investments in mutual funds
................................................................
.
3161 5,016 16.a.
b. Other equity securities with readily determinable fair
values ............................... 3162 0
16.b.
c. All other equity securities
................................................................
.
3169 38,192 16.c.
17. Total held-to-maturity and available-for-sale securities
(sum
of items 10 through 16) .......... 3170 4,685,435 17.
</TABLE>
Memorandum (to be completed only by banks with IBFs and other
"foreign"
offices)
<TABLE>
<CAPTION>
Dollar Amounts in Thousands RCON Bil Mil Thou
- ----------------------------------------------------------------
- -
- ------------------------------------ ----- -------------
<S>
<C> <C>
EITHER
//////////////////
1. Net due from the IBF of the domestic offices of the reporting
bank .............................. 3051 N/A M.1.
OR
//////////////////
2. Net due to the IBF of the domestic offices of the reporting
bank ................................ 3059 N/A
M.2.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
<C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590
FFIEC 031
Address: 777 MAIN STREET
Page
RC-13
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-I--Selected Assets and Liabilities of IBFs
<TABLE>
<CAPTION>
To be completed only by banks with IBFs and other "foreign"
offices.
C445 <-
--------------------
Dollar Amounts in Thousands RCFN Bil Mil Thou
- ----------------------------------------------------------------
- -
- ------------------------------------ ----- -------------
<S>
<C> <C>
1. Total IBF assets of the consolidated bank (component of
Schedule RC, item 12) .................. 2133 N/A
1.
2. Total IBF loans and lease financing receivables (component
of
Schedule RC-C, part I, item 12, //////////////////
column A)
................................................................
.
..................... 2076 N/A 2.
3. IBF commercial and industrial loans (component of Schedule
RC-C, part I, item 4, column A) ..... 2077 N/A 3.
4. Total IBF liabilities (component of Schedule RC, item 21)
...................................... 2898 N/A 4.
5. IBF deposit liabilities due to banks, including other IBFs
(component of Schedule RC-E, //////////////////
part II, items 2 and 3)
................................................................
.
....... 2379 N/A 5.
6. Other IBF deposit liabilities (component of Schedule RC-E,
part II, items 1, 4, 5, and 6) ...... 2381 N/A 6.
</TABLE>
Schedule RC-K--Quarterly Averages (1)
<TABLE>
<CAPTION>
C455 <-
-------------------------
Dollar Amounts in Thousands ///////// Bil Mil Thou
- ----------------------------------------------------------------
- -
- ------------------------------ -------------------------
<S>
<C> <C>
ASSETS
///////////////////////
1. Interest-bearing balances due from depository institutions
............................... RCFD 3381 113,132 1.
2. U.S. Treasury securities and U.S. Government agency and
corporation obligations(2) ....... RCFD 3382 3,557,492
2.
3. Securities issued by states and political subdivisions in
the
U.S.(2) .................... RCFD 3383 408 3.
4. a. Other debt securities(2)
..............................................................
RCFD 3647 1,099,528 4.a.
b. Equity securities(3) (includes investments in mutual
funds
and Federal Reserve stock) . RCFD 3648 47,593 4.b.
5. 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 IBFs ...................... RCFD 3365 86,013 5.
6. Loans:
///////////////////////
a. Loans in domestic offices:
///////////////////////
(1) Total loans
................................................................
.
...... RCON 3360 9,223,155 6.a.(1)
(2) Loans secured by real estate
...................................................... RCON
3385 5,209,698 6.a.(2)
(3) Loans to finance agricultural production and other
loans to farmers ............... RCON 3386 1,094
6.a.(3)
(4) Commercial and industrial loans
................................................... RCON 3387
2,806,178 6.a.(4)
(5) Loans to individuals for household, family, and other
personal expenditures ....... RCON 3388 436,911
6.a.(5)
(6) Obligations (other than securities and leases) of
states and political subdivisions ///////////////////////
in the U.S.
................................................................
.
...... RCON 3389 52,626 6.a.(6)
b. Total loans in foreign offices, Edge and Agreement
subsidiaries, and IBFs ............. RCFN 3360 0
6.b.
7. Assets held in trading accounts
..........................................................
RCFD
3401 0 7.
8. Lease financing receivables (net of unearned income)
..................................... RCFD 3484 2,938
8.
9. Total assets
................................................................
.
............ RCFD 3368 15,427,856 9.
LIABILITIES
///////////////////////
10. Interest-bearing transaction accounts in domestic offices
(NOW accounts, ATS accounts, ///////////////////////
and telephone and preauthorized transfer accounts) (exclude
demand deposits) ............. RCON 3485 1,052,580 10.
11. Nontransaction accounts in domestic offices:
///////////////////////
a. Money market deposit accounts (MMDAs)
................................................. RCON 3486
674,355 11.a.
b. Other savings deposits
................................................................
RCON 3487 2,337,570 11.b.
c. Time certificates of deposit of $100,000 or more
...................................... RCON 3345 654,640
11.c.
d. All other time deposits
...............................................................
RCON 3469 1,817,001 11.d.
12. Interest-bearing deposits in foreign offices, Edge and
Agreement subsidiaries, and IBFs .. RCFN 3404 166,104
12.
13. 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 IBFs .............. RCFD 3353
4,145,690 13.
14. Other borrowed money
................................................................
.
.... RCFD 3355 559,025 14.
</TABLE>
- -------------
(1) For all items, banks have the option of reporting either (1)
an average of daily figures for the quarter, or
(2) an average of weekly figures (i.e., the Wednesday of each
week of the quarter).
(2) Quarterly averages for all debt securities should be based
on
amortized cost.
(3) Quarterly averages for all equity securities should be based
on historical cost.
<PAGE>
<TABLE>
<S> <C>
<C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590
FFIEC 031
Address: 777 MAIN STREET
Page
RC-14
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-L--Off-Balance Sheet Items
<TABLE>
<CAPTION>
Please read carefully the instructions for the preparation of
Schedule RC-L. Some of the amounts
reported in Schedule RC-L are regarded as volume indicators and
not necessarily as measures of risk.
C460 <-
--------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou
- ----------------------------------------------------------------
- -
- ----------------------------------- ----- -------------
<S>
<C> <C>
1. Unused commitments:
//////////////////
a. Revolving, open-end lines secured by 1-4 family
residential properties, e.g., home
//////////////////
equity lines
................................................................
.
.............. 3814 434,131 1.a.
b. Credit card lines
................................................................
.
......... 3815 0 1.b.
c. Commercial real estate, construction, and land
development:
//////////////////
(1) Commitments to fund loans secured by real estate
....................................... 3816 64,337
1.c.(1)
(2) Commitments to fund loans not secured by real estate
................................... 6550 19,581
1.c.(2)
d. Securities underwriting
................................................................
.
... 3817 0 1.d.
e. Other unused commitments
................................................................
.
.. 3818 4,646,357 1.e.
2. Financial standby letters of credit and foreign office
guarantees ............................. 3819 717,700
2.
a. Amount of financial standby letters of credit conveyed to
others RCFD 3820 1,464 ////////////////// 2.a.
3. Performance standby letters of credit and foreign office
guarantees ........................... 3821 52,474
3.
a. Amount of performance standby letters of credit conveyed
to //////////////////
others
..........................................................
RCFD
3822 0 ////////////////// 3.a.
4. Commercial and similar letters of credit
...................................................... 3411
8,082 4.
5. Participations in acceptances (as described in the
instructions) conveyed to others by
//////////////////
the reporting bank
................................................................
.
........... 3428 0 5.
6. Participations in acceptances (as described in the
instructions) acquired by the reporting
//////////////////
(nonaccepting) bank
................................................................
.
.......... 3429 0 6.
7. Securities borrowed
................................................................
.
.......... 3432 0 7.
8. Securities lent (including customers' securities lent where
the customer is indemnified //////////////////
against loss by the reporting bank)
...........................................................
3433 0 8.
9. Mortgages transferred (i.e., sold or swapped) with recourse
that have been treated as sold //////////////////
for Call Report purposes:
//////////////////
a. FNMA and FHLMC residential mortgage loan pools:
//////////////////
(1) Outstanding principal balance of mortgages
transferred
as of the report date ........... 3650 135,753
9.a.(1)
(2) Amount of recourse exposure on these mortgages as of
the report date ................... 3651 135,753
9.a.(2)
b. Private (nongovernment-issued or -guaranteed) residential
mortgage loan pools: //////////////////
(1) Outstanding principal balance of mortgages
transferred
as of the report date ........... 3652 0
9.b.(1)
(2) Amount of recourse exposure on these mortgages as of
the report date ................... 3653 0
9.b.(2)
c. Farmer Mac agricultural mortgage loan pools:
//////////////////
(1) Outstanding principal balance of mortgages
transferred
as of the report date ........... 3654 0
9.c.(1)
(2) Amount of recourse exposure on these mortgages as of
the report date ................... 3655 0
9.c.(2)
10. When-issued securities:
//////////////////
a. Gross commitments to purchase
..............................................................
3434 0 10.a.
b. Gross commitments to sell
................................................................
.
. 3435 0 10.b.
11. Interest rate contracts (exclude when-issued securities):
//////////////////
a. Notional value of interest rate swaps
...................................................... 3450
2,353,000 11.a.
b. Futures and forward contracts
..............................................................
3823 1,617,000 11.b.
c. Option contracts (e.g., options on Treasuries):
//////////////////
(1) Written option contracts
...............................................................
3824 542,750 11.c.(1)
(2) Purchased option contracts
.............................................................
3825 1,317,750 11.c.(2)
12. Foreign exchange rate contracts:
//////////////////
a. Notional value of exchange swaps (e.g., cross-currency
swaps) .............................. 3826 0
12.a.
b. Commitments to purchase foreign currencies and U.S.
dollar
exchange (spot, forward, //////////////////
and futures)
................................................................
.
.............. 3415 6,636,878 12.b.
c. Option contracts (e.g., options on foreign currency):
//////////////////
(1) Written option contracts
...............................................................
3827 0 12.c.(1)
(2) Purchased option contracts
.............................................................
3828 0 12.c.(2)
</TABLE>
<PAGE>
<TABLE>
<S> <C>
<C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590
FFIEC 031
Address: 777 MAIN STREET
Page
RC-15
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-L--Continued
<TABLE>
<CAPTION>
C461 <-
--------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou
- ----------------------------------------------------------------
- -
- ----------------------------------- ----- -------------
<S>
<C> <C>
13. Contracts on other commodities and equities:
//////////////////
a. Notional value of other swaps (e.g., oil swaps)
............................................ 3829
0
13.a.
b. Futures and forward contracts (e.g., stock index and
commodity--precious metals, //////////////////
wheat, cotton, livestock--contracts)
....................................................... 3830
0 13.b.
c. Option contracts (e.g., options on commodities,
individual
stocks and stock indexes): //////////////////
(1) Written option contracts
...............................................................
3831 0 13.c.(1)
(2) Purchased option contracts
.............................................................
3832 0 13.c.(2)
14. All other off-balance sheet liabilities (itemize and
describe
each component of this item //////////////////
over 25% of Schedule RC, item 28, "Total equity capital")
..................................... 3430 0 14.
//////////////////
a. TEXT 3555
- ------------------------------------------------------ RCFD
3555
////////////////// 14.a.
b. TEXT 3556
- ------------------------------------------------------ RCFD
3556
////////////////// 14.b.
c. TEXT 3557
- ------------------------------------------------------ RCFD
3557
////////////////// 14.c.
d. TEXT 3558
- ------------------------------------------------------ RCFD
3558
////////////////// 14.d.
15. All other off-balance sheet assets (itemize and describe
each
component of this item //////////////////
over 25% of Schedule RC, item 28, "Total equity capital")
..................................... 5591 0 15.
//////////////////
a. TEXT 5592
- ------------------------------------------------------ RCFD
5592
////////////////// 15.a.
b. TEXT 5593
- ------------------------------------------------------ RCFD
5593
////////////////// 15.b.
c. TEXT 5594
- ------------------------------------------------------ RCFD
5594
////////////////// 15.c.
d. TEXT 5595
- ------------------------------------------------------ RCFD
5595
////////////////// 15.d.
</TABLE>
Memoranda
<TABLE>
<CAPTION>
Dollar Amounts in Thousands RCFD Bil Mil Thou
- ----------------------------------------------------------------
- -
- ----------------------------------- ----- -------------
<S>
<C> <C>
1. Not applicable
//////////////////
2. Not applicable
//////////////////
3. Unused commitments with an original maturity exceeding one
year that are reported in //////////////////
Schedule RC-L, items 1.a through 1.e, above (report only the
unused portions of commitments //////////////////
that are fee paid or otherwise legally binding)
............................................... 3833
2,816,829 M.3.
a. Participations in commitments with an original maturity
//////////////////
exceeding one year conveyed to others
........................... RCFD 3834 19,202
////////////////// M.3.a.
4. To be completed only by banks with $1 billion or more in
total assets: //////////////////
Standby letters of credit and foreign office guarantees
(both
financial and performance) issued //////////////////
to non-U.S. addressees (domicile) included in Schedule RC-L,
items 2 and 3, above ............. 3377 247,737 M.4.
5. To be completed for the September report only:
//////////////////
Installment loans to individuals for household, family, and
other personal expenditures that //////////////////
have been securitized and sold without recourse (with
servicing retained), amounts //////////////////
outstanding by type of loan:
//////////////////
a. Loans to purchase private passenger automobiles
............................................ 2741
N/A
M.5.a.
b. Credit cards and related plans
.............................................................
2742 N/A M.5.b.
c. All other consumer installment credit (including mobile
home loans) ........................ 2743 N/A
M.5.c.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
<C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590
FFIEC 031
Address: 777 MAIN STREET
Page
RC-16
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-M--Memoranda
<TABLE>
<CAPTION>
C465 <-
--------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou
- ----------------------------------------------------------------
- -
- ------------------------------------- ----- -------------
<S>
<C> <C>
1. Extensions of credit by the reporting bank to its executive
officers, directors, principal //////////////////
shareholders, and their related interests as of the report
date: //////////////////
a. Aggregate amount of all extensions of credit to all
executive officers, directors, principal //////////////////
shareholders, and their related interests
..................................................... 6164
2,850 1.a.
b. Number of executive officers, directors, and principal
shareholders to whom the amount of all //////////////////
extensions of credit by the reporting bank (including
extensions of credit to //////////////////
related interests) equals or exceeds the lesser of
$500,000
or 5 percent Number //////////////////
of total capital as defined for this purpose in agency
regulations. RCFD 6165 6 //////////////////
1.b.
2. Federal funds sold and securities purchased under agreements
to resell with U.S. branches //////////////////
and agencies of foreign banks(1) (included in Schedule RC,
items 3.a and 3.b) .................... 3405 0
2.
3. Not applicable.
//////////////////
4. Outstanding principal balance of 1-4 family residential
mortgage loans serviced for others //////////////////
(include both retained servicing and purchased servicing):
//////////////////
a. Mortgages serviced under a GNMA contract
...................................................... 5500
25,771 4.a.
b. Mortgages serviced under a FHLMC contract:
//////////////////
(1) Serviced with recourse to servicer
........................................................ 5501
79,375 4.b.(1)
(2) Serviced without recourse to servicer
..................................................... 5502
772,633 4.b.(2)
c. Mortgages serviced under a FNMA contract:
//////////////////
(1) Serviced under a regular option contract
.................................................. 5503
56,379 4.c.(1)
(2) Serviced under a special option contract
.................................................. 5504
2,531,783 4.c.(2)
d. Mortgages serviced under other servicing contracts
............................................ 5505
4,598,318
4.d.
5. To be completed only by banks with $1 billion or more in
total
assets: //////////////////
Customers' liability to this bank on acceptances outstanding
(sum of items 5.a and 5.b must //////////////////
equal Schedule RC, item 9):
//////////////////
a. U.S. addressees (domicile)
................................................................
.
... 2103 31,941 5.a.
b. Non-U.S. addressees (domicile)
................................................................
2104 0 5.b.
6. Intangible assets:
//////////////////
a. Mortgage servicing rights
................................................................
.
.... 3164 17,632 6.a.
b. Other identifiable intangible assets:
//////////////////
(1) Purchased credit card relationships
....................................................... 5506
0 6.b.(1)
(2) All other identifiable intangible assets
.................................................. 5507
4,262 6.b.(2)
c. Goodwill
................................................................
.
..................... 3163 55,530 6.c.
d. Total (sum of items 6.a through 6.c) (must equal Schedule
RC, item 10) ........................ 2143 77,424
6.d.
e. Intangible assets that have been grandfathered for
regulatory capital purposes ................ 6442
0
6.e.
YES NO
7. Does your bank have any mandatory convertible debt that is
part of your Tier 2 capital? .......... 6167 ///
7.
X
If yes, complete items 7.a through 7.e:
RCFD Bil Mil Thou
----- -------------
a. Total equity contract notes, gross
............................................................
3290 N/A 7.a.
b. Common or perpetual preferred stock dedicated to redeem
the
above notes ....................... 3291 N/A 7.b.
c. Total equity commitment notes, gross
..........................................................
3293
N/A 7.c.
d. Common or perpetual preferred stock dedicated to redeem
the
above notes ....................... 3294 N/A 7.d.
e. Total (item 7.a minus 7.b plus 7.c minus 7.d)
................................................. 3295
N/A 7.e.
</TABLE>
- -------------
(1) Do not report federal funds sold and securities purchased
under agreements to resell with other commercial banks in
the
U.S. in this item.
<PAGE>
<TABLE>
<S> <C>
<C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590
FFIEC 031
Address: 777 MAIN STREET
Page
RC-17
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-M--Continued
<TABLE>
<CAPTION>
Dollar Amounts in Thousands ///////// Bil Mil Thou
- ----------------------------------------------------------------
- -
- ---------------------------- -------------------------
<S>
<C> <C>
8. a. Other real estate owned:
///////////////////////
(1) Direct and indirect investments in real estate
ventures ......................... RCFD 5372 0
8.a.(1)
(2) All other real estate owned:
///////////////////////
(a) Construction and land development in domestic
offices ....................... RCON 5508 6,966
8.a.(2)(a)
(b) Farmland in domestic offices
................................................ RCON 5509
0 8.a.(2)(b)
(c) 1-4 family residential properties in domestic
offices ....................... RCON 5510 6,043
8.a.(2)(c)
(d) Multifamily (5 or more) residential properties in
domestic offices .......... RCON 5511 927
8.a.(2)(d)
(e) Nonfarm nonresidential properties in domestic
offices ....................... RCON 5512 18,452
8.a.(2)(e)
(f) In foreign offices
..........................................................
RCFN
5513 0 8.a.(2)(f)
(3) Total (sum of items 8.a.(1) and 8.a.(2)) (must equal
Schedule RC, item 7) ....... RCFD 2150 32,388
8.a.(3)
b. Investments in unconsolidated subsidiaries and associated
companies: ///////////////////////
(1) Direct and indirect investments in real estate
ventures ......................... RCFD 5374 0
8.b.(1)
(2) All other investments in unconsolidated subsidiaries
and associated companies ... RCFD 5375 0
8.b.(2)
(3) Total (sum of items 8.b.(1) and 8.b.(2)) (must equal
Schedule RC, item 8) ....... RCFD 2130 0
8.b.(3)
c. Total assets of unconsolidated subsidiaries and
associated
companies ................ RCFD 5376 0 8.c.
9. Noncumulative perpetual preferred stock and related surplus
included in Schedule RC, ///////////////////////
item 23, "Perpetual preferred stock and related surplus"
............................... RCFD 3778 0 9.
10. Mutual fund and annuity sales in domestic offices during the
quarter (include ///////////////////////
proprietary, private label, and third party mutual funds):
///////////////////////
a. Money market funds
................................................................
.
. RCON 6441 39,322 10.a.
b. Equity securities funds
.............................................................
RCON 8427 4,703 10.b.
c. Debt securities funds
...............................................................
RCON 8428 3,190 10.c.
d. Other mutual funds
................................................................
.
. RCON 8429 0 10.d.
e. Annuities
................................................................
.
.......... RCON 8430 0 10.e.
</TABLE>
<TABLE>
<CAPTION>
Memorandum
Dollar Amounts in Thousands RCFD Bil Mil Thou
- ----------------------------------------------------------------
- -
- -------------------------------- ----- -------------
<S>
<C> <C>
1. Interbank holdings of capital instruments (to be completed
for the December report only): //////////////////
a. Reciprocal holdings of banking organizations' capital
instruments ........................ 3836 N/A
M.1.a.
b. Nonreciprocal holdings of banking organizations' capital
instruments ..................... 3837 N/A M.1.b.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
<C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590
FFIEC 031
Address: 777 MAIN STREET
Page
RC-18
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-N--Past Due and Nonaccrual Loans, Leases,
and Other Assets
<TABLE>
<CAPTION>
The FFIEC regards the information reported in
all of Memorandum item 1, in items 1 through 10,
C470 <-
- --------------------------------------------------------------
column A, and in Memorandum items 2 through 4,
(Column A) (Column B) (Column C)
column A, as confidential.
Past
due Past due 90 Nonaccrual
30
through 89 days or more
days
and still and still
accruing accruing
- -------------------- -------------------- --------------------
Dollar Amounts in Thousands RCFD
Bil
Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
- ------------------------------------------------------ -----
- ------------- ----- ------------- ----- -------------
<S> <C>
<C> <C> <C>
1. Loans secured by real estate:
////////////////// ////////////////// //////////////////
a. To U.S. addressees (domicile) ................ 1245
87,042 1246 20,512 1247 129,736 1.a.
b. To non-U.S. addressees (domicile) ............ 1248
0 1249 0 1250 0 1.b.
2. Loans to depository institutions and
////////////////// ////////////////// //////////////////
acceptances of other banks:
////////////////// ////////////////// //////////////////
a. To U.S. banks and other U.S. depository
////////////////// ////////////////// //////////////////
institutions ................................. 5377
0 5378 0 5379 0 2.a.
b. To foreign banks ............................. 5380
0 5381 0 5382 0 2.b.
3. Loans to finance agricultural production and
////////////////// ////////////////// //////////////////
other loans to farmers .......................... 1594
9 1597 0 1583 117 3.
4. Commercial and industrial loans:
////////////////// ////////////////// //////////////////
a. To U.S. addressees (domicile) ................ 1251
17,828 1252 1,695 1253 24,247 4.a.
b. To non-U.S. addressees (domicile) ............ 1254
0 1255 0 1256 0 4.b.
5. Loans to individuals for household, family, and
////////////////// ////////////////// //////////////////
other personal expenditures:
////////////////// ////////////////// /////////////////
a. Credit cards and related plans ............... 5383
437 5384 117 5385 266 5.a.
b. Other (includes single payment, installment,
////////////////// ////////////////// //////////////////
and all student loans) ....................... 5386
6,800 5387 230 5388 5,636 5.b.
6. Loans to foreign governments and official
////////////////// ////////////////// //////////////////
institutions .................................... 5389
0 5390 0 5391 0 6.
7. All other loans ................................. 5459
4,840 5460 191 5461 162 7.
8. Lease financing receivables:
////////////////// ////////////////// //////////////////
a. Of U.S. addressees (domicile) ................ 1257
0 1258 0 1259 0 8.a.
b. Of non-U.S. addressees (domicile) ............ 1271
0 1272 0 1791 0 8.b.
9. Debt securities and other assets (exclude other
////////////////// ////////////////// //////////////////
real estate owned and other repossessed assets) . 3505
0 3506 0 3507 0 9.
</TABLE>
Amounts reported in items 1 through 8 above include guaranteed
and unguaranteed
portions of past due and nonaccrual loans and leases. Report in
item 10 below
certain guaranteed loans and leases that have already been
included in the
amounts reported in items 1 through 8.
<TABLE>
<CAPTION>
RCFD
Bil
Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
-----
- ------------- ----- ------------- ----- -------------
<S> <C>
<C> <C> <C>
10. Loans and leases reported in items 1
through 8 above which are wholly or partially
////////////////// ////////////////// //////////////////
guaranteed by the U.S. Government ............... 5612
807 5613 229 5614 187 10.
a. Guaranteed portion of loans and leases
////////////////// ////////////////// //////////////////
included in item 10 above .................... 5615
703 5616 229 5617 179 10.a.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
<C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590
FFIEC 031
Address: 777 MAIN STREET
Page
RC-19
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-N--Continued
<TABLE>
<CAPTION>
C473 <-
- --------------------------------------------------------------
(Column A) (Column B) (Column C)
Past
due Past due 90 Nonaccrual
30
through 89 days or more
days
and still and still
Memoranda
accruing accruing
- -------------------- -------------------- --------------------
Dollar Amounts in Thousands RCFD
Bil
Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
- ------------------------------------------------------ -----
- ------------- ----- ------------- ----- -------------
<S> <C>
<C> <C> <C>
1. Restructured loans and leases included in
////////////////// ////////////////// //////////////////
Schedule RC-N, items 1 through 8, above ......... 1658
199 1659 0 1661 1,570 M.1.
2. Loans to finance commercial real estate,
////////////////// ////////////////// //////////////////
construction, and land development activities
////////////////// ////////////////// //////////////////
(not secured by real estate) included in
////////////////// ////////////////// //////////////////
Schedule RC-N, items 4 and 7, above ............. 6558
2,506 6559 0 6560 2,053 M.2.
</TABLE>
<TABLE>
<CAPTION>
3. Loans secured by real estate in domestic offices RCON
Bil
Mil Thou RCON Bil Mil Thou RCON Bil Mil Thou
-----
- ------------- ----- ------------- ----- -------------
<S> <C>
<C> <C> <C>
(included in Schedule RC-N, item 1, above):
////////////////// ////////////////// //////////////////
a. Construction and land development ............ 2759
12,451 2769 6,083 3492 16,905 M.3.a.
b. Secured by farmland .......................... 3493
0 3494 0 3495 379 M.3.b.
c. Secured by 1-4 family residential properties:
////////////////// ////////////////// //////////////////
(1) Revolving, open-end loans secured by
////////////////// ////////////////// //////////////////
1-4 family residential properties and
////////////////// ////////////////// //////////////////
extended under lines of credit ........... 5398
4,362 5399 65 5400 2,248 M.3.c.(1)
(2) All other loans secured by 1-4 family
////////////////// ////////////////// //////////////////
residential properties ................... 5401
27,274 5402 6,173 5403 26,957 M.3.c.(2)
d. Secured by multifamily (5 or more)
////////////////// ////////////////// //////////////////
residential properties ....................... 3499
2,668 3500 160 3501 1,769 M.3.d.
e. Secured by nonfarm nonresidential properties . 3502
40,287 3503 8,031 3504 76,078 M.3.e.
</TABLE>
<TABLE>
<CAPTION>
(Column A) (Column B)
Past
due 30 Past due 90
through
89 days days or more
- -------------------- --------------------
RCFD
Bil
Mil Thou RCFD Bil Mil Thou
-----
- ------------- ----- -------------
<S> <C>
<C> <C>
4. Interest rate, foreign exchange rate, and other
////////////////// //////////////////
commodity and equity contracts:
////////////////// //////////////////
a. Book value of amounts carried as assets ...... 3522
0 3528 0 M.4.a.
b. Replacement cost of contracts with a
////////////////// //////////////////
positive replacement cost .................... 3529
0 3530 0 M.4.b.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
<C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590
FFIEC 031
Address: 777 MAIN STREET
Page
RC-20
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-O--Other Data for Deposit Insurance Assessments
<TABLE>
<CAPTION>
An amended Certified Statement should be submitted to the FDIC
if
the amounts reported in items 1
through 10 of this schedule are amended after the semiannual
Certified Statement originally covering
this report date has been filed with the FDIC.
C475 <-
--------------------
Dollar Amounts in Thousands RCON Bil Mil Thou
- ----------------------------------------------------------------
- -
- ---------------------------------- ----- -------------
<S>
<C> <C>
1. Unposted debits (see instructions):
//////////////////
a. Actual amount of all unposted debits
...................................................... 0030
N/A 1.a.
OR
//////////////////
b. Separate amount of unposted debits:
//////////////////
(1) Actual amount of unposted debits to demand deposits
................................... 0031 0
1.b.(1)
(2) Actual amount of unposted debits to time and savings
deposits(1) ...................... 0032 0
1.b.(2)
2. Unposted credits (see instructions):
//////////////////
a. Actual amount of all unposted credits
..................................................... 3510
N/A 2.a.
OR
//////////////////
b. Separate amount of unposted credits:
//////////////////
(1) Actual amount of unposted credits to demand deposits
.................................. 3512 110,947
2.b.(1)
(2) Actual amount of unposted credits to time and savings
deposits(1) ..................... 3514 0
2.b.(2)
3. Uninvested trust funds (cash) held in bank's own trust
department (not included in total //////////////////
deposits in domestic offices)
................................................................
3520 0 3.
4. Deposits of consolidated subsidiaries in domestic offices
and
in insured branches in //////////////////
Puerto Rico and U.S. territories and possessions (not
included in total deposits): //////////////////
a. Demand deposits of consolidated subsidiaries
.............................................. 2211
13,275 4.a.
b. Time and savings deposits(1) of consolidated subsidiaries
................................. 2351 0 4.b.
c. Interest accrued and unpaid on deposits of consolidated
subsidiaries ...................... 5514 0 4.c.
5. Deposits in insured branches in Puerto Rico and U.S.
territories and possessions: //////////////////
a. Demand deposits in insured branches (included in Schedule
RC-E, Part II) .................. 2229 0 5.a.
b. Time and savings deposits(1) in insured branches
(included
in Schedule RC-E, Part II) ..... 2383 0 5.b.
c. Interest accrued and unpaid on deposits in insured
branches //////////////////
(included in Schedule RC-G, item 1.b)
..................................................... 5515
0 5.c.
Item 6 is not applicable to state nonmember banks that have not
been authorized by the //////////////////
Federal Reserve to act as pass-through correspondents.
//////////////////
6. Reserve balances actually passed through to the Federal
Reserve by the reporting bank on //////////////////
behalf of its respondent depository institutions that are
also reflected as deposit liabilities //////////////////
of the reporting bank:
//////////////////
a. Amount reflected in demand deposits (included in Schedule
RC-E, Part I, //////////////////
Memorandum item 4.a)
................................................................
.
..... 2314 0 6.a.
b. Amount reflected in time and savings deposits(1)
(included
in Schedule RC-E, Part I, //////////////////
Memorandum item 4.b)
................................................................
.
..... 2315 0 6.b.
7. Unamortized premiums and discounts on time and savings
deposits:(1) //////////////////
a. Unamortized premiums
................................................................
.
..... 5516 0 7.a.
b. Unamortized discounts
................................................................
.
.... 5517 0 7.b.
8. To be completed by banks with "Oakar deposits."
Total "Adjusted Attributable Deposits" of all institutions
acquired under Section 5(d)(3) of //////////////////
the Federal Deposit Insurance Act (from most recent FDIC
Oakar Transaction Worksheet(s)) .... 5518 242,934 8.
9. Deposits in lifeline accounts
................................................................
5596 ///////////// 9.
10. Benefit-responsive "Depository Institution Investment
Contracts" (included in total //////////////////
deposits in domestic offices)
................................................................
8432 0 10.
</TABLE>
- --------------
(1) For FDIC insurance assessment purposes, "time and savings
deposits"
consists of nontransaction accounts and all transaction
accounts other than
demand deposits.
<PAGE>
<TABLE>
<S> <C>
<C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590
FFIEC 031
Address: 777 MAIN STREET
Page
RC-21
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-O--Continued
Memoranda (to be completed each quarter except as noted)
<TABLE>
<CAPTION>
Dollar Amounts in Thousands RCON Bil Mil Thou
- ----------------------------------------------------------------
- -
- --------------------------------- ----- -------------
<S>
<C> <C>
1. Total deposits in domestic offices of the bank (sum of
Memorandum items 1.a.(1) and 1.b.(1) //////////////////
must equal Schedule RC, item 13.a):
//////////////////
a. Deposit accounts of $100,000 or less:
//////////////////
(1) Amount of deposit accounts of $100,000 or less
........................................ 2702 5,837,328
M.1.a.(1)
(2) Number of deposit accounts of $100,000 or less (to be
Number //////////////////
completed for the June report only)
........................ RCON 3779 814,627
////////////////// M.1.a.(2)
b. Deposit accounts of more than $100,000:
//////////////////
(1) Amount of deposit accounts of more than $100,000
........... Number 2710 3,926,486
M.1.b.(1)
(2) Number of deposit accounts of more than $100,000
........... RCON 2722 7,236 //////////////////
M.1.b.(2)
</TABLE>
2. Estimated amount of uninsured deposits in domestic offices of
the bank: a. An estimate of your bank's uninsured deposits
can
be determined by multiplying the number of deposit accounts
of
more than $100,000 reported in Memorandum item 1.b.(2) above
by $100,000 and subtracting the result from the amount of
deposit accounts of more than $100,000 reported in Memorandum
item 1.b.(1) above.
<TABLE>
<S>
<C> <C>
Indicate in the appropriate box at the right whether your
bank has a method or procedure
for determining a better estimate of uninsured deposits
than the estimate YES NO
described above
................................................................
.
.......... 6861 /// M.2.a.
X
RCON Bil Mil Thou
b. If the box marked YES has been checked, report the
estimate
of uninsured deposits ----- -------------
determined by using your bank's method or procedure
....................................... 5597 N/A
M.2.b.
</TABLE>
<TABLE>
<S>
<C> <C>
C477 <-
Person to whom questions about the Reports of Condition and
Income should be directed:
- ----------
</TABLE>
<TABLE>
<S>
<C>
ROBERT DUFF, ASSISTANT VICE PRESIDENT
(203) 986-2474
- ----------------------------------------------------------------
- -
- ------------------ --------------------------------------
Name and Title (TEXT 8901)
Area code and phone number (TEXT 8902)
</TABLE>
<PAGE>
<TABLE>
<S> <C>
<C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590
FFIEC 031
Address: 777 MAIN STREET
Page
RC-22
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-R--Risk-Based Capital
This schedule must be completed by all banks as follows: Banks
that reported total assets of $1 billion or more in Schedule RC,
item 12, for June 30, 1993, must complete items 2 through 9 and
Memorandum item 1. Banks with assets of less than $1 billion
must complete items 1 through 3 below or Schedule RC-R in its
entirety, depending on their response to item 1 below.
<TABLE>
<S>
<C> <C>
C480 <-
1. Test for determining the extent to which Schedule RC-R must
be
completed. To be completed ---------------
only by banks with total assets of less than $1 billion.
Indicate in the appropriate YES NO
box at the right whether the bank has total capital greater
than or equal to eight percent ------------ ---------------
of adjusted total assets
...............................................................
RCFD 6056 //// 1.
</TABLE>
For purposes of this test, adjusted total assets equals
total assets less cash, U.S. Treasuries, U.S. Government agency
obligations, and 80 percent of U.S. Government-sponsored agency
obligations plus the allowance for loan and lease losses and
selected off-balance sheet items as reported on Schedule RC-L
(see instructions). If the box marked YES has been checked,
then
the bank only has to complete items 2 and 3 below. If the box
marked NO has been checked, the bank must complete the remainder
of this schedule. A NO response to item 1 does not necessarily
mean that the bank's actual risk-based capital ratio is less
than
eight percent or that the bank is not in compliance with the
risk-based capital guidelines.
<TABLE>
<CAPTION>
(Column A) (Column B)
Subordinated Debt(1) Other
and Intermediate Limited-
Items 2 and 3 are to be completed by all banks.
Term Preferred Life Capital
Stock Instruments
-------------------- --------------------
Dollar Amounts
in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou
- ----------------------------------------------------------------
- -
- ------------- ----- ------------- ----- -------------
<S>
<C> <C> <C>
2. Subordinated debt(1) and other limited-life capital
instruments (original ////////////////// //////////////////
weighted average maturity of at least five years) with a
remaining ////////////////// //////////////////
maturity of:
////////////////// //////////////////
a. One year or less
...................................................... 3780
0 3786 0 2.a.
b. Over one year through two years
....................................... 3781 0
3787 0 2.b.
c. Over two years through three years
.................................... 3782 0 3788
0 2.c.
d. Over three years through four years
................................... 3783 0 3789
0 2.d.
e. Over four years through five years
.................................... 3784 0 3790
0 2.e.
f. Over five years
....................................................... 3785
0 3791 0 2.f.
</TABLE>
<TABLE>
<S>
<C>
RCFD Bil Mil Thou
3. Total qualifying capital (i.e., Tier 1 and Tier 2 capital)
allowable under the risk-based --------------------
capital guidelines
................................................................
.
........... 3792 1,315,830 3.
</TABLE>
<TABLE>
<CAPTION>
(Column A) (Column B)
Items 4-9 and Memorandum item 1 are to be completed
Assets Credit Equiv-
by banks that answered NO to item 1 above and
Recorded alent Amount
by banks with total assets of $1 billion or more.
on the of Off-Balance
Balance Sheet Sheet Items(2)
-------------------- --------------------
RCFD Bil Mil Thou RCFD Bil Mil Thou
----- ------------- ----- -------------
<S>
<C> <C> <C>
4. Assets and credit equivalent amounts of off-balance sheet
items assigned
to the Zero percent risk category:
////////////////// //////////////////
a. Assets recorded on the balance sheet:
////////////////// //////////////////
(1) Securities issued by, other claims on, and claims
unconditionally ////////////////// //////////////////
guaranteed by, the U.S. Government and its agencies
and
other ////////////////// //////////////////
OECD central governments
.......................................... 3794 1,682,256
////////////////// 4.a.(1)
(2) All other
......................................................... 3795
257,131 ////////////////// 4.a.(2)
b. Credit equivalent amount of off-balance sheet items
................... ////////////////// 3796 0
4.b.
</TABLE>
- --------------
(1) Exclude mandatory convertible debt reported in Schedule
RC-M,
item 7.e, "Total."
(2) Do not report in column B the risk-weighted amount of assets
reported in column A.
<PAGE>
<TABLE>
<S> <C>
<C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590
FFIEC 031
Address: 777 MAIN STREET
Page
RC-23
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RC-R--Continued
<TABLE>
<CAPTION>
(Column A) (Column B)
Assets Credit Equiv-
Recorded alent Amount
on the of Off-Balance
Balance Sheet Sheet Items(1)
-------------------- --------------------
Dollar Amounts
in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou
- ----------------------------------------------------------------
- -
- ------------- ----- ------------- ----- -------------
<S>
<C> <C> <C>
5. Assets and credit equivalent amounts of off-balance sheet
items ////////////////// //////////////////
assigned to the 20 percent risk category:
////////////////// //////////////////
a. Assets recorded on the balance sheet:
////////////////// //////////////////
(1) Claims conditionally guaranteed by the U.S. Government
and its ////////////////// //////////////////
agencies and other OECD central governments
........................ 3798 28,703
//////////////////
5.a.(1)
(2) Claims collateralized by securities issued by the U.S.
Govern- ////////////////// //////////////////
ment and its agencies and other OECD central
governments; by ////////////////// //////////////////
securities issued by U.S. Government-sponsored
agencies; and ////////////////// //////////////////
by cash on deposit
................................................. 3799
0 ////////////////// 5.a.(2)
(3) All other
.......................................................... 3800
2,841,097 ////////////////// 5.a.(3)
b. Credit equivalent amount of off-balance sheet items
................... ////////////////// 3801 206,582
5.b.
6. Assets and credit equivalent amounts of off-balance sheet
items ////////////////// //////////////////
assigned to the 50 percent risk category:
////////////////// //////////////////
a. Assets recorded on the balance sheet
.................................. 3802 3,482,611
////////////////// 6.a.
b. Credit equivalent amount of off-balance sheet items
................... ////////////////// 3803 224,752
6.b.
7. Assets and credit equivalent amounts of off-balance sheet
items ////////////////// //////////////////
assigned to the 100 percent risk category:
////////////////// //////////////////
a. Assets recorded on the balance sheet
.................................. 3804 7,786,693
////////////////// 7.a.
b. Credit equivalent amount of off-balance sheet items
................... ////////////////// 3805 2,142,903
7.b.
8. On-balance sheet asset values excluded from the calculation
of
the ////////////////// //////////////////
risk-based capital ratio(2)
.............................................. 3806
(27,947) ////////////////// 8.
9. Total assets recorded on the balance sheet (sum of
////////////////// //////////////////
items 4.a, 5.a, 6.a, 7.a, and 8, column A)(must equal
Schedule
RC, ////////////////// //////////////////
item 12 plus items 4.b and 4.c)
.......................................... 3807 16,050,544
////////////////// 9.
</TABLE>
<TABLE>
<CAPTION>
(Column A) (Column B)
Notional Replacement
Principal Cost
Memorandum
Value (Market Value)
-------------------- --------------------
Dollar Amounts
in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou
- ----------------------------------------------------------------
- -
- ------------- ----- ------------- ----- -------------
<S>
<C> <C> <C>
1. Notional principal value and replacement cost of interest
rate
and ////////////////// //////////////////
foreign exchange rate contracts (in column B, report only
those ////////////////// //////////////////
contracts with a positive replacement cost):
////////////////// //////////////////
a. Interest rate contracts (exclude futures contracts)
................... ////////////////// 3808 24,909
M.1.a.
(1) With a remaining maturity of one year or less
..................... 3809 900,000 //////////////////
M.1.a.(1)
(2) With a remaining maturity of over one year
........................ 3810 2,770,750
////////////////// M.1.a.(2)
b. Foreign exchange rate contracts (exclude contracts with an
original ////////////////// //////////////////
maturity of 14 days or less and futures contracts)
.................... ////////////////// 3811 182,605
M.1.b.
(1) With a remaining maturity of one year or less
..................... 3812 6,314,817 //////////////////
M.1.b.(1)
(2) With a remaining maturity of over one year
........................ 3813 0
////////////////// M.1.b.(2)
</TABLE>
- --------------
(1) Do not report in column B the risk-weighted amount of assets
reported in
column A.
(2) Until a final rule on the regulatory capital treatment of
net
unrealized
holding gains (losses) on available-for-sale securities that
is applicable
to the reporting bank has taken effect, a bank that has
adopted FASB
Statement No. 115 should include the difference between the
fair value and
the amortized cost of its available-for-sale securities in
item 8 and report
the amortized cost of these securities in items 4 through 7
above. Item 8
also includes on-balance sheet asset values (or portions
thereof) of
off-balance sheet interest rate, foreign exchange rate, and
commodity
contracts and those contracts (e.g., futures contracts) not
subject to
risk-based capital. Exclude from item 8 margin accounts and
accrued
receivables as well as any portion of the allowance for loan
and lease
losses in excess of the amount that may be included in Tier
2
capital.
25
<PAGE>
<TABLE>
<S> <C>
<C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590
FFIEC 031
Address: 777 MAIN STREET
Page
RC-24
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Optional Narrative Statement Concerning the Amounts
Reported in the Reports of Condition and Income
at close of business on June 30, 1994
<TABLE>
<S>
<C>
- ---------------------------------------------------------------
- ----------------------------------, ---------------------------
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
HARTFORD Connecticut
Legal Title of Bank
City State
</TABLE>
The management of the reporting bank may, if it wishes, submit a
brief narrative statement on the amounts reported in the Reports
of Condition and Income. This optional statement will be made
available to the public, along with the publicly available data
in the Reports of Condition and Income, in response to any
request for individual bank report data. However, the
information
reported in column A and in all of Memorandum item 1 of Schedule
RC-N is regarded as confidential and will not be released to the
public. BANKS CHOOSING TO SUBMIT THE NARRATIVE STATEMENT SHOULD
ENSURE THAT THE STATEMENT DOES NOT CONTAIN THE NAMES OR OTHER
IDENTIFICATIONS OF INDIVIDUAL BANK CUSTOMERS, REFERENCES TO THE
AMOUNTS REPORTED IN THE CONFIDENTIAL ITEMS IN SCHEDULE RC-N, OR
ANY OTHER INFORMATION THAT THEY ARE NOT WILLING TO HAVE MADE
PUBLIC OR THAT WOULD COMPROMISE THE PRIVACY OF THEIR CUSTOMERS.
Banks choosing not to make a statement may check the "No
comment"
box below and should make no entries of any kind in the space
provided for the narrative statement; i.e., DO NOT enter in this
space such phrases as "No statement," "Not applicable," "N/A,"
"No comment," and "None."
The optional statement must be entered on this sheet. The
statement should not exceed 100 words. Further, regardless of
the number of words, the statement must not exceed 750
characters, including punctuation, indentation, and standard
spacing between words and sentences. If any submission should
exceed 750 characters, as defined, it will be truncated at 750
characters with no notice to the submitting bank and the
truncated statement will appear as the bank's statement both on
agency computerized records and in computer-file
releases to the public.
All information furnished by the bank in the narrative statement
must be accurate and not misleading. Appropriate efforts shall
be taken by the submitting bank to ensure the statement's
accuracy. The statement must be signed, in the space provided
below, by a senior officer of the bank who thereby attests to
its
accuracy.
If, subsequent to the original submission, material changes are
submitted for the data reported in the Reports of Condition and
Income, the existing narrative statement will be deleted from
the
files, and from disclosure; the bank, at its option, may replace
it with a statement, under signature, appropriate to the amended
data.
The optional narrative statement will appear in agency records
and in release to the public exactly as submitted (or amended as
described in the preceding paragraph) by the management of the
bank (except for the truncation of statements exceeding the
750-character limit described above). THE STATEMENT
WILL NOT BE EDITED OR SCREENED IN ANY WAY BY THE SUPERVISORY
AGENCIES FOR ACCURACY OR RELEVANCE. DISCLOSURE OF THE STATEMENT
SHALL NOT SIGNIFY THAT ANY FEDERAL SUPERVISORY AGENCY HAS
VERIFIED OR CONFIRMED THE ACCURACY OF THE INFORMATION CONTAINED
THEREIN. A STATEMENT TO THIS EFFECT WILL APPEAR ON ANY
PUBLIC RELEASE OF THE OPTIONAL STATEMENT SUBMITTED BY THE
MANAGEMENT OF THE REPORTING BANK.
No comment /X/ (RCON 6979) C471 C472
<-
- ----------------------------------------------------------------
- -
BANK MANAGEMENT STATEMENT (please type or print clearly):
(TEXT 6980)
- -------------------------------------- ----------------
Signature of Executive Officer of Bank Date of
Signature
<PAGE>
<TABLE>
<S> <C>
<C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590
Address: 777 MAIN STREET
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
THIS PAGE IS TO BE COMPLETED BY ALL BANKS
<TABLE>
<S>
<C>
NAME AND ADDRESS OF BANK
OMB No. For OCC: 1557-0081
OMB No. For FDIC: 3064-0052
OMB No. For Federal Reserve: 7100-0036
Expiration Date: 2/28/95
PLACE LABEL HERE
SPECIAL REPORT
(Dollar Amounts in Thousands)
- ----------------------------------------------------------------
- -
- -
CLOSE OF BUSINESS FDIC Certificate Number
DATE C-700 <-
6/30/94 |0|2|4|9|9|
</TABLE>
LOANS TO EXECUTIVE OFFICERS (Complete as of each Call Report
Date)
The following information is required by Public Laws 90-44 and
102-242, but does not constitute a part of the Report of
Condition. With each Report of Condition, these Laws require
all
banks to furnish a report of all loans or other extensions of
credit to their executive officers made since the date of
the previous Report of Condition. Data regarding individual
loans or other extensions of credit are not required. If no
such
loans or other extensions of credit were made during the period,
insert "none" against subitem(a). (Exclude the first $15,000 of
indebtedness of each executive officer under bank credit card
plan.) See Sections 215.2 and 215.3 of Title 12 of the Code of
Federal Regulations (Federal Reserve Board Regulation O) for the
definitions of "executive officer" and "extension of credit,"
respectively. Exclude loans and other extensions of credit to
directors and principal shareholders who are not executive
officers.
<TABLE>
<S>
<C> <C>
a. Number of loans made to executive officers since the previous
Call Report date .............. RCFD 3561 0
a.
b. Total dollar amount of above loans (in thousands of dollars)
................................ RCFD 3562 0
b.
c. Range of interest charged on above loans
(example: 9 3/4% = 9.75)
.......................................... RCFD 7701 0.00
% to RCFD 7702 0.00 % c.
</TABLE>
<TABLE>
<S>
<C>
- --------------------------------------------------------
----------------------
SIGNATURE AND TITLE OF OFFICER AUTHORIZED TO SIGN REPORT
DATE (Month, Day, Year)
- ----------------------------------------------------------------
- -
- ---- ---------------------------------
NAME AND TITLE OF PERSON TO WHOM INQUIRIES MAY BE DIRECTED (TEXT
8903) AREA CODE/PHONE NUMBER (TEXT
8904)
ROBERT DUFF ASSISTANT VICE PRESIDENT
(203) 986-2474
</TABLE>
FDIC 8040/53 (12-92)
<PAGE>
<TABLE>
<S> <C>
<C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590
FFIEC 031
Address: 777 MAIN STREET
Page RI-1
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Consolidated Report of Income
for the period January 1, 1994-June 30, 1994
All Report of Income schedules are to be reported on a calendar
year-to-date
basis in thousands of dollars.
Schedule RI--Income Statement
<TABLE>
<CAPTION>
I480 <-
--------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- ----------------------------------------------------------------
- -
- ------------------------------ ----- -------------
<S>
<C> <C>
1. Interest income:
//////////////////
a. Interest and fee income on loans:
//////////////////
(1) In domestic offices:
//////////////////
(a) Loans secured by real estate
................................................... 4011
196,635 1.a.(1)(a)
(b) Loans to depository institutions
............................................... 4019
126 1.a.(1)(b)
(c) Loans to finance agricultural production and other
loans to farmers ............ 4024 45 1.a.(1)(c)
(d) Commercial and industrial loans
................................................ 4012
81,941 1.a.(1)(d)
(e) Acceptances of other banks
..................................................... 4026
3 1.a.(1)(e)
(f) Loans to individuals for household, family, and
other personal expenditures: //////////////////
(1) Credit cards and related plans
............................................. 4054
1,399 1.a.(1)(f)(1)
(2) Other
................................................................
.
..... 4055 16,286 1.a.(1)(f)(2)
(g) Loans to foreign governments and official
institutions ......................... 4056 0
1.a.(1)(g)
(h) Obligations (other than securities and leases) of
states and political //////////////////
subdivisions in the U.S.:
//////////////////
(1) Taxable obligations
........................................................ 4503
31 1.a.(1)(h)(1)
(2) Tax-exempt obligations
..................................................... 4504
1,398 1.a.(1)(h)(2)
(i) All other loans in domestic offices
............................................ 4058
16,786
1.a.(1)(i)
(2) In foreign offices, Edge and Agreement subsidiaries,
and IBFs ...................... 4059 0 1.a.(2)
b. Income from lease financing receivables:
//////////////////
(1) Taxable leases
................................................................
.
.... 4505 91 1.b.(1)
(2) Tax-exempt leases
................................................................
.
. 4307 0 1.b.(2)
c. Interest income on balances due from depository
institutions:(1) //////////////////
(1) In domestic offices
................................................................
4105 3 1.c.(1)
(2) In foreign offices, Edge and Agreement subsidiaries,
and IBFs ...................... 4106 1,917 1.c.(2)
d. Interest and dividend income on securities:
//////////////////
(1) U.S. Treasury securities and U.S. Government agency
and
corporation obligations .... 4027 103,941 1.d.(1)
(2) Securities issued by states and political subdivisions
in the U.S.: //////////////////
(a) Taxable securities
.............................................................
4506 0 1.d.(2)(a)
(b) Tax-exempt securities
..........................................................
4507
9 1.d.(2)(b)
(3) Other domestic debt securities
..................................................... 3657
29,126 1.d.(3)
(4) Foreign debt securities
............................................................
3658 94 1.d.(4)
(5) Equity securities (including investments in mutual
funds) .......................... 3659 1,408 1.d.(5)
e. Interest income from assets held in trading accounts
................................... 4069 0 1.e.
</TABLE>
- ------------
(1) Includes interest income on time certificates of deposit not
held in trading accounts.
<PAGE>
<TABLE>
<S> <C>
<C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590
FFIEC 031
Address: 777 MAIN STREET
Page RI-2
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RI--Continued
<TABLE>
<CAPTION>
Dollar Amounts
in Thousands Year-to-date
- ----------------------------------------------------------------
- -
- ------------------ --------------
<S>
<C> <C> <C> <C>
1. Interest income (continued)
RIAD Bil Mil Thou
f. Interest income on 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 IBFs
.................... 4020 1,330 1.f.
g. Total interest income (sum of items 1.a through 1.f)
................ 4107 452,569 1.g.
2. Interest expense:
//////////////////
a. Interest on deposits:
//////////////////
(1) Interest on deposits in domestic offices:
//////////////////
(a) Transaction accounts (NOW accounts, ATS accounts,
and //////////////////
telephone and preauthorized transfer accounts)
.............. 4508 5,649 2.a.(1)(a)
(b) Nontransaction accounts:
//////////////////
(1) Money market deposit accounts (MMDAs)
................... 4509 7,486 2.a.(1)(b)(1)
(2) Other savings deposits
.................................. 4511 21,212
2.a.(1)(b)(2)
(3) Time certificates of deposit of $100,000 or
more ........ 4174 11,912 2.a.(1)(b)(3)
(4) All other time deposits
................................. 4512 37,615
2.a.(1)(b)(4)
(2) Interest on deposits in foreign offices, Edge and
Agreement //////////////////
subsidiaries, and IBFs
.......................................... 4172 2,737
2.a.(2)
b. Expense of 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 IBFs
.................... 4180 77,496 2.b.
c. Interest on demand notes issued to the U.S. Treasury and
on //////////////////
other borrowed money
................................................ 4185
8,839 2.c.
d. Interest on mortgage indebtedness and obligations under
//////////////////
capitalized leases
.................................................. 4072
436 2.d.
e. Interest on subordinated notes and debentures
....................... 4200 0 2.e.
f. Total interest expense (sum of items 2.a through 2.e)
............... 4073 173,382 2.f.
3. Net interest income (item 1.g minus 2.f)
............................... ////////////////// RIAD 4074
279,187 3.
4. Provisions:
//////////////////
a. Provision for loan and lease losses
................................. ////////////////// RIAD
4230 (1,933) 4.a.
b. Provision for allocated transfer risk
............................... ////////////////// RIAD 4243
0 4.b.
5. Noninterest income:
//////////////////
a. Income from fiduciary activities
.................................... 4070 35,011
5.a.
b. Service charges on deposit accounts in domestic offices
............. 4080 33,116 5.b.
c. Trading gains (losses) and fees from foreign exchange
transactions .. 4075 (286) 5.c.
d. Other foreign transaction gains (losses)
............................ 4076 0 5.d.
e. Gains (losses) and fees from assets held in trading
accounts ........ 4077 1,046 5.e.
f. Other noninterest income:
//////////////////
(1) Other fee income
................................................ 5407
28,253 5.f.(1)
(2) All other noninterest income*
................................... 5408 22,474
5.f.(2)
g. Total noninterest income (sum of items 5.a through 5.f)
............. ////////////////// RIAD 4079 119,614
5.g.
6. a. Realized gains (losses) on held-to-maturity securities
.............. ////////////////// RIAD 3521 467
6.a.
b. Realized gains (losses) on available-for-sale securities
............ ////////////////// RIAD 3196 (3,041)
6.b.
7. Noninterest expense:
//////////////////
a. Salaries and employee benefits
...................................... 4135 140,465
7.a.
b. Expenses of premises and fixed assets (net of rental
income) //////////////////
(excluding salaries and employee benefits and mortgage
interest) .... 4217 44,063 7.b.
c. Other noninterest expense*
.......................................... 4092 152,231
7.c.
d. Total noninterest expense (sum of items 7.a through 7.c)
............ ////////////////// RIAD 4093 336,759
7.d.
8. Income (loss) before income taxes and extraordinary items
and
other //////////////////
adjustments (item 3 plus or minus items 4.a, 4.b, 5.g, 6.a,
6.b, and 7.d) ////////////////// RIAD 4301 61,401
8.
9. Applicable income taxes (on item 8)
.................................... ////////////////// RIAD
4302 19,897 9.
10. Income (loss) before extraordinary items and other
adjustments //////////////////
(item 8 minus 9)
.......................................................
////////////////// RIAD 4300 41,504 10.
</TABLE>
- ------------
*Describe on Schedule RI-E--Explanations.
<PAGE>
<TABLE>
<S> <C>
<C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590
FFIEC 031
Address: 777 MAIN STREET
Page RI-3
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RI--Continued
<TABLE>
<CAPTION>
Year-to-date
--------------------
Dollar Amounts in
Thousands RIAD Bil Mil Thou
- ----------------------------------------------------------------
- -
- ---------- ----- -------------
<S>
<C> <C> <C> <C>
11. Extraordinary items and other adjustments:
//////////////////
a. Extraordinary items and other adjustments, gross of
income
taxes* . 4310 0 11.a.
b. Applicable income taxes (on item 11.a)*
........................... 4315 0 11.b.
c. Extraordinary items and other adjustments, net of income
taxes //////////////////
(item 11.a minus 11.b)
............................................
//////////////////
RIAD 4320 0 11.c.
12. Net income (loss) (sum of items 10 and 11.c)
......................... ////////////////// RIAD 4340
41,504 12.
</TABLE>
<TABLE>
<CAPTION>
Memoranda
Year-to-date
--------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- ----------------------------------------------------------------
- -
- ------------------------------------- ----- -------------
<S>
<C> <C>
1. Interest expense incurred to carry tax-exempt securities,
loans, and leases acquired after //////////////////
August 7, 1986, that is not deductible for federal income
tax
purposes .......................... 4513 5 M.1.
2. Fee income from the sale and servicing of mutual funds and
annuities in domestic offices //////////////////
(included in Schedule RI, item 5.g)
.............................................................
8431 670 M.2.
3. Estimated foreign tax credit included in applicable income
taxes, items 9 and 11.b above ........ 4309 0
M.3.
4. To be completed only by banks with $1 billion or more in
total assets: //////////////////
Taxable equivalent adjustment to "Income (loss) before
income
taxes and extraordinary //////////////////
items and other adjustments" (item 8 above)
..................................................... 1244
1,207 M.4.
5. Number of full-time equivalent employees on payroll at end
of
current period (round to //// Number
nearest whole number)
................................................................
.
.......... 4150 5,854 M.5.
</TABLE>
Schedule RI-A--Changes in Equity Capital
Indicate decreases and losses in parentheses.
<TABLE>
<CAPTION>
I483 <-
------------ --------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- ----------------------------------------------------------------
- -
- ------------------------------------- ----- -------------
<S>
<C> <C>
1. Total equity capital originally reported in the December 31,
1993, Reports of Condition //////////////////
and Income
................................................................
.
..................... 3215 1,131,626 1.
2. Equity capital adjustments from amended Reports of Income,
net* ................................. 3216 0
2.
3. Amended balance end of previous calendar year (sum of items
1
and 2) ............................ 3217 1,131,626 3.
4. Net income (loss) (must equal Schedule RI, item 12)
............................................. 4340
41,504 4.
5. Sale, conversion, acquisition, or retirement of capital
stock, net .............................. 4346 0
5.
6. Changes incident to business combinations, net
.................................................. 4356
94,072 6.
7. LESS: Cash dividends declared on preferred stock
................................................ 4470
0 7.
8. LESS: Cash dividends declared on common stock
................................................... 4460
43,150 8.
9. Cumulative effect of changes in accounting principles from
prior years* (see instructions //////////////////
for this schedule)
................................................................
.
............. 4411 0 9.
10. Corrections of material accounting errors from prior years*
(see instructions for this schedule) 4412 0 10.
11. Change in net unrealized holding gains (losses) on
available-for-sale securities ................ 8433
(20,830) 11.
12. Foreign currency translation adjustments
........................................................ 4414
0 12.
13. Other transactions with parent holding company* (not
included
in items 5, 7, or 8 above) ........ 4415 0 13.
14. Total equity capital end of current period (sum of items 3
through 13) (must equal Schedule RC, //////////////////
item 28)
................................................................
.
....................... 3210 1,203,222 14.
</TABLE>
- ------------
*Describe on Schedule RI-E--Explanations.
<PAGE>
<TABLE>
<S> <C>
<C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590
FFIEC 031
Address: 777 MAIN STREET
Page RI-4
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RI-B--Charge-offs and Recoveries and Changes
in Allowance for Loan and Lease Losses
Part I. Charge-offs and Recoveries on Loans and Leases
Part I excludes charge-offs and recoveries through
the allocated transfer risk reserve.
<TABLE>
<CAPTION>
I486 <-
-----------------------------------------
(Column A) (Column B)
Charge-offs Recoveries
-------------------- --------------------
calendar year-to-date
-----------------------------------------
Dollar Amounts
in Thousands RIAD Bil Mil Thou RIAD Bil Mil Thou
- ----------------------------------------------------------------
- -
- ------------- ----- ------------- ----- -------------
<S>
<C> <C> <C>
1. Loans secured by real estate:
////////////////// //////////////////
a. To U.S. addressees (domicile)
......................................... 4651 54,212
4661 3,354 1.a.
b. To non-U.S. addressees (domicile)
..................................... 4652 0
4662
0 1.b.
2. Loans to depository institutions and acceptances of other
banks: ////////////////// //////////////////
a. To U.S. banks and other U.S. depository institutions
.................. 4653 0 4663 0
2.a.
b. To foreign banks
...................................................... 4654
0 4664 0 2.b.
3. Loans to finance agricultural production and other loans to
farmers ...... 4655 0 4665 1 3.
4. Commercial and industrial loans:
////////////////// //////////////////
a. To U.S. addressees (domicile)
......................................... 4645 9,339
4617 3,474 4.a.
b. To non-U.S. addressees (domicile)
..................................... 4646 0
4618
0 4.b.
5. Loans to individuals for household, family, and other
personal
////////////////// //////////////////
expenditures:
////////////////// //////////////////
a. Credit cards and related plans
........................................ 4656 767
4666 330 5.a.
b. Other (includes single payment, installment, and all
student loans) ... 4657 1,268 4667 1,903
5.b.
6. Loans to foreign governments and official institutions
................... 4643 0 4627 0
6.
7. All other loans
..........................................................
4644
1,083 4628 164 7.
8. Lease financing receivables:
////////////////// //////////////////
a. Of U.S. addressees (domicile)
......................................... 4658 0
4668 0 8.a.
b. Of non-U.S. addressees (domicile)
..................................... 4659 0
4669
0 8.b.
9. Total (sum of items 1 through 8)
......................................... 4635 66,669
4605 9,226 9.
</TABLE>
<TABLE>
<CAPTION>
Cumulative Cumulative
Charge-offs Recoveries
Jan. 1, 1986 Jan. 1, 1986
Memoranda
through through
Dollar Amounts
in Thousands Dec. 31, 1989 Report Date
- ----------------------------------------------------------------
- -
- ------------- -------------------- --------------------
To be completed by national banks only.
RIAD Bil Mil Thou RIAD Bil Mil Thou
----- ------------- ----- -------------
<S>
<C> <C>
1. Charge-offs and recoveries of Special-Category Loans, as
defined for this ////////////////// //////////////////
Call Report by the Comptroller of the Currency
........................... ////////////////// 4784
645 M.1.
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------
(Column A) (Column B)
Memorandum items 2 and 3 are to be completed by all banks.
Charge-offs Recoveries
-------------------- --------------------
2. Loans to finance commercial real estate, construction, and
land calendar year-to-date
development activities (not secured by real estate) included
in RIAD Bil Mil Thou RIAD Bil Mil Thou
----- ------------- ----- -------------
<S>
<C> <C> <C>
Schedule RI-B, part I, items 4 and 7, above
.............................. 5409 761 5410
199 M.2.
3. Loans secured by real estate in domestic offices (included in
////////////////// //////////////////
Schedule RI-B, part I, item 1, above):
////////////////// //////////////////
a. Construction and land development
..................................... 3582 3,580
3583
463 M.3.a.
b. Secured by farmland
................................................... 3584
0 3585 13 M.3.b.
c. Secured by 1-4 family residential properties:
////////////////// //////////////////
(1) Revolving, open-end loans secured by 1-4 family
residential ////////////////// //////////////////
properties and extended under lines of credit
..................... 5411 1,307 5412 33
M.3.c.(1)
(2) All other loans secured by 1-4 family residential
properties ...... 5413 23,678 5414 848
M.3.c.(2)
d. Secured by multifamily (5 or more) residential properties
............. 3588 2,663 3589 75 M.3.d.
e. Secured by nonfarm nonresidential properties
.......................... 3590 22,984 3591
1,922 M.3.e.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
<C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590
FFIEC 031
Address: 777 MAIN STREET
Page RI-5
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RI-B--Continued
Part II. Changes in Allowance for Loan and
Lease Losses and in Allocated
Transfer Risk Reserve
<TABLE>
<CAPTION>
(Column A) (Column B)
Allowance for Allocated
Loan and Lease Transfer Risk
Losses Reserve
-------------------- --------------------
Dollar Amounts
in Thousands RIAD Bil Mil Thou RIAD Bil Mil Thou
- ----------------------------------------------------------------
- -
- ------------- ----- ------------- ----- -------------
<S>
<C> <C> <C>
1. Balance originally reported in the December 31, 1993, Reports
of ////////////////// //////////////////
Condition and Income
..................................................... 3124
350,900 3131 0 1.
2. Recoveries (column A must equal part I, item 9, column B
above) .......... 4605 9,226 3132 0 2.
3. LESS: Charge-offs (column A must equal part I, item 9, column
A above) ... 4635 66,669 3133 0 3.
4. Provision (column A must equal Schedule RI, item 4.a; column
B
must ////////////////// //////////////////
equal Schedule RI, item 4.b)
............................................. 4230
(1,933) 4243 0 4.
5. Adjustments* (see instructions for this schedule)
........................ 4815 18,265 3134
0 5.
6. Balance end of current period (sum of items 1 through 5)
(column A must ////////////////// //////////////////
equal Schedule RC, item 4.b; column B must equal Schedule RC,
////////////////// //////////////////
item 4.c)
................................................................
3123 309,789 3128 0 6.
</TABLE>
- ------------
*Describe on Schedule RI-E--Explanations.
Schedule RI-C--Applicable Income Taxes by Taxing Authority
Schedule RI-C is to be reported with the December Report of
Income.
<TABLE>
<CAPTION>
I489 <-
--------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- ----------------------------------------------------------------
- -
- ---------------------------------- ----- -------------
<S>
<C> <C>
1. Federal
................................................................
.
...................... 4780 N/A 1.
2. State and
local...........................................................
.
.................... 4790 N/A 2.
3. Foreign
................................................................
.
...................... 4795 N/A 3.
4. Total (sum of items 1 through 3) (must equal sum of Schedule
RI, items 9 and 11.b) ............ 4770 N/A 4.
5. Deferred portion of item 4
........................................ RIAD 4772
N/A ////////////////// 5.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
<C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590
FFIEC 031
Address: 777 MAIN STREET
Page RI-6
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RI-D--Income from International Operations
For all banks with foreign offices, Edge or Agreement
subsidiaries, or IBFs
where international operations account for more than 10 percent
of total
revenues, total assets, or net income.
Part I. Estimated Income from International Operations
<TABLE>
<CAPTION>
I492 <-
--------------
Year-to-date
------ --------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- ----------------------------------------------------------------
- -
- -------------------------------- ----- --------------
<S>
<C> <C>
1. Interest income and expense booked at foreign offices, Edge
and Agreement subsidiaries, //////////////////
and IBFs:
//////////////////
a. Interest income booked
................................................................
.
.. 4837 N/A 1.a.
b. Interest expense booked
................................................................
.
. 4838 N/A 1.b.
c. Net interest income booked at foreign offices, Edge and
Agreement subsidiaries, and IBFs //////////////////
(item 1.a minus 1.b)
................................................................
.
.... 4839 N/A 1.c.
2. Adjustments for booking location of international operations:
//////////////////
a. Net interest income attributable to international
operations booked at domestic offices .. 4840 N/A
2.a.
b. Net interest income attributable to domestic business
booked at foreign offices .......... 4841 N/A 2.b.
c. Net booking location adjustment (item 2.a minus 2.b)
..................................... 4842 N/A
2.c.
3. Noninterest income and expense attributable to international
operations: //////////////////
a. Noninterest income attributable to international
operations
.............................. 4097 N/A 3.a.
b. Provision for loan and lease losses attributable to
international operations ............. 4235 N/A
3.b.
c. Other noninterest expense attributable to international
operations ....................... 4239 N/A 3.c.
d. Net noninterest income (expense) attributable to
international operations (item 3.a //////////////////
minus 3.b and 3.c)
................................................................
.
...... 4843 N/A 3.d.
4. Estimated pretax income attributable to international
operations before capital allocation //////////////////
adjustment (sum of items 1.c, 2.c, and 3.d)
................................................. 4844
N/A 4.
5. Adjustment to pretax income for internal allocations to
international operations to reflect //////////////////
the effects of equity capital on overall bank funding costs
................................. 4845 N/A 5.
6. Estimated pretax income attributable to international
operations after capital allocation //////////////////
adjustment (sum of items 4 and 5)
...........................................................
4846 N/A 6.
7. Income taxes attributable to income from international
operations as estimated in item 6 .... 4797 N/A 7.
8. Estimated net income attributable to international operations
(item 6 minus 7) .............. 4341 N/A 8.
</TABLE>
<TABLE>
<CAPTION>
Memoranda
Dollar Amounts in Thousands RIAD Bil Mil Thou
- ----------------------------------------------------------------
- -
- -------------------------------- ----- -------------
<S>
<C> <C>
1. Intracompany interest income included in item 1.a above
..................................... 4847 N/A
M.1.
2. Intracompany interest expense included in item 1.b above
.................................... 4848 N/A M.2.
</TABLE>
Part II. Supplementary Details on Income from International
Operations Required
by the Departments of Commerce and Treasury for Purposes of the
U.S.
International Accounts and the U.S. National Income and Product
Accounts
<TABLE>
<CAPTION>
Year-to-date
------ --------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- ----------------------------------------------------------------
- -
- -------------------------------- ----- -------------
<S>
<C> <C>
1. Interest income booked at IBFs
..............................................................
4849 N/A 1.
2. Interest expense booked at IBFs
.............................................................
4850 N/A 2.
3. Noninterest income attributable to international operations
booked at domestic offices //////////////////
(excluding IBFs):
//////////////////
a. Gains (losses) and extraordinary items
................................................... 5491
N/A 3.a.
b. Fees and other noninterest income
........................................................ 5492
N/A 3.b.
4. Provision for loan and lease losses attributable to
international operations booked at //////////////////
domestic offices (excluding IBFs)
...........................................................
4852 N/A 4.
5. Other noninterest expense attributable to international
operations booked at domestic offices //////////////////
(excluding IBFs)
................................................................
.
........... 4853 N/A 5.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
<C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590
FFIEC 031
Address: 777 MAIN STREET
Page RI-7
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RI-E--Explanations
Schedule RI-E is to be completed each quarter on a calendar
year-to-date basis.
Detail all adjustments in Schedules RI-A and RI-B, all
extraordinary items and
other adjustments in Schedule RI, and all significant items of
other
noninterest income and other noninterest expense in Schedule RI.
(See
instructions for details.)
<TABLE>
<CAPTION>
I495 <-
------ --------
Year-to-date
------ --------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- ----------------------------------------------------------------
- -
- --------------------------------- --------------------
<S>
<C> <C>
1. All other noninterest income (from Schedule RI, item
5.f.(2))
//////////////////
Report amounts that exceed 10% of Schedule RI, item 5.f.(2):
//////////////////
a. Net gains on other real estate owned
..................................................... 5415
0 1.a.
b. Net gains on sales of loans
..............................................................
5416 0 1.b.
c. Net gains on sales of premises and fixed assets
.......................................... 5417 0
1.c.
Itemize and describe the three largest other amounts that
exceed 10% of //////////////////
Schedule RI, item 5.f.(2):
//////////////////
d. TEXT 4461
- ----------------------------------------------------------------
- -
- ------------- 4461 13,983 1.d.
REIMBURSEMENT FROM AFFILIATES
e. TEXT 4462
- ----------------------------------------------------------------
- -
- ------------- 4462 1.e.
f. TEXT 4463
- ----------------------------------------------------------------
- -
- ------------- 4463 1.f.
2. Other noninterest expense (from Schedule RI, item 7.c):
//////////////////
a. Amortization expense of intangible assets
................................................ 4531
4,862 2.a.
Report amounts that exceed 10% of Schedule RI, item 7.c:
//////////////////
b. Net losses on other real estate owned
.................................................... 5418
0 2.b.
c. Net losses on sales of loans
.............................................................
5419 0 2.c.
d. Net losses on sales of premises and fixed assets
......................................... 5420 0
2.d.
Itemize and describe the three largest other amounts that
exceed 10% of //////////////////
Schedule RI, item 7.c:
//////////////////
e. TEXT 4464
- ----------------------------------------------------------------
- -
- ------------- 4464 43,800 2.e.
ACQUISITION COSTS
f. TEXT 4467
- ----------------------------------------------------------------
- -
- ------------- 4467 19,800 2.f.
RESTRUCTURING CHARGES
g. TEXT 4468
- ----------------------------------------------------------------
- -
- ------------- 4468 2.g.
3. Extraordinary items and other adjustments (from Schedule RI,
item 11.a) and //////////////////
applicable income tax effect (from Schedule RI, item 11.b)
(itemize and describe //////////////////
all extraordinary items and other adjustments):
//////////////////
a. (1) TEXT 4469
- ----------------------------------------------------------------
- -
- --------- 4469 3.a.(1)
(2) Applicable income tax effect
RIAD 4486 ////////////////// 3.a.(2)
b. (1) TEXT 4487
- ----------------------------------------------------------------
- -
- --------- 4487 3.b.(1)
(2) Applicable income tax effect
RIAD 4488 ////////////////// 3.b.(2)
c. (1) TEXT 4489
- ----------------------------------------------------------------
- -
- --------- 4489 3.c.(1)
(2) Applicable income tax effect
RIAD 4491 ////////////////// 3.c.(2)
4. Equity capital adjustments from amended Reports of Income
(from Schedule RI-A, //////////////////
item 2) (itemize and describe all adjustments):
//////////////////
a. TEXT 4492
- ----------------------------------------------------------------
- -
- ------------- 4492 4.a.
b. TEXT 4493
- ----------------------------------------------------------------
- -
- ------------- 4493 4.b.
5. Cumulative effect of changes in accounting principles from
prior years (from //////////////////
Schedule RI-A, item 9) (itemize and describe all changes in
accounting principles): //////////////////
a. TEXT 4494
- ----------------------------------------------------------------
- -
- ------------- 4494 5.a.
b. TEXT 4495
- ----------------------------------------------------------------
- -
- ------------- 4495 5.b.
6. Corrections of material accounting errors from prior years
(from Schedule RI-A, //////////////////
item 10) (itemize and describe all corrections):
//////////////////
a. TEXT 4496
- ----------------------------------------------------------------
- -
- ------------- 4496 6.a.
b. TEXT 4497
- ----------------------------------------------------------------
- -
- ------------- 4497 6.b.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
<C> <C> <C> <C>
Legal Title of Bank: SHAWMUT BANK CONNECTICUT, NATIONAL
ASSOCIATION Call Date: 6/30/94 ST-BK: 09-0590
FFIEC 031
Address: 777 MAIN STREET
Page RI-8
City, State Zip: HARTFORD, CT 06115
FDIC Certificate No.: |0|2|4|9|9|
-----------
</TABLE>
Schedule RI-E--Continued
<TABLE>
<CAPTION>
Year-to-date
------ --------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- ----------------------------------------------------------------
- -
- --------------------------------- ----- --------------
<S>
<C> <C>
7. Other transactions with parent holding company (from
Schedule
RI-A, item 13) //////////////////
(itemize and describe all such transactions):
//////////////////
a. TEXT 4498
- ----------------------------------------------------------------
- -
- ------------- 4498 7.a.
b. TEXT 4499
- ----------------------------------------------------------------
- -
- ------------- 4499 7.b.
8. Adjustments to allowance for loan and lease losses (from
Schedule RI-B, part II, //////////////////
item 5) (itemize and describe all adjustments):
//////////////////
a. TEXT 4521
- ----------------------------------------------------------------
- -
- ------------- 4521 18,265 8.a.
GATEWAY SAVINGS BANK POOLING
b. TEXT 4522
- ----------------------------------------------------------------
- -
- ------------- 4522 8.b.
9. Other explanations (the space below is provided for the bank
to briefly describe, I498 I499 <-
at its option, any other significant items affecting the
Report of Income):
No comment /X/ (RIAD 4769)
Other explanations (please type or print clearly):
(TEXT 4769)
</TABLE>
<PAGE>
This form is for use by National Banks only. It should be used
for publication purposes only, and should not be returned to the
FDIC.
Comptroller of the Currency
Administrator of National Banks
R E P O R T O F C O N D I T I O N
Consolidating domestic and foreign subsidiaries of the
<TABLE>
<S>
<C>
------------------------------------------------------------
of -------------------------
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
HARTFORD
Name of Bank
City
in the state of --------------------------, at the close of
business on June 30, 1994,
Connecticut
published in response to call made by Comptroller of the
Currency, under title 12, United States Code, Section 161.
Charter Number --------------------- Comptroller of the
Currency ------------------------------------------- District
01338
Northeastern
</TABLE>
Statement of Resources and Liabilities
ASSETS
<TABLE>
<CAPTION>
Thousands of dollars
Cash and balances due from depository institutions:
---------------
<S>
<C>
Noninterest-bearing balances and currency and coin
...................................... 875,210
Interest-bearing balances
...............................................................
145,435
Held-to-maturity securities
...............................................................
3,906,126
Available-for-sale securities
.............................................................
779,309
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 IBFs: ///////////
Federal funds sold
................................................................
.
..... 233,300
Securities purchased under agreements to resell
......................................... 0
</TABLE>
<TABLE>
<S>
<C>
Loans and lease financing receivables:
Loans and leases, net of unearned income
........................ 9,146,312
LESS: Allowance for loan and lease losses
....................... 309,789
LESS: Allocated transfer risk reserve
........................... 0
</TABLE>
<TABLE>
<S>
<C>
Loans and leases, net of unearned income, allowance, and
reserve ........................ 8,836,523
Assets held in trading accounts
...........................................................
0
Premises and fixed assets (including capitalized leases)
.................................. 178,499
Other real estate owned
................................................................
.
.. 32,388
Investments in unconsolidated subsidiaries and associated
companies ....................... 0
Customers' liability to this bank on acceptances
outstanding
.............................. 31,941
Intangible assets
................................................................
.
........ 77,424
Other assets
................................................................
.
............. 644,600
Total assets
................................................................
.
............. 15,740,755
</TABLE>
FDIC 8040/54 (3-94)
CONTINUED ON NEXT PAGE
1
<PAGE>
LIABILITIES
<TABLE>
<S>
<C>
Deposits:
In domestic offices
................................................................
.
.... 9,763,814
Noninterest-bearing
........................................... 2,762,398
Interest-bearing
.............................................. 7,001,416
In foreign offices, Edge and Agreement subsidiaries, and
IBFs ........................... 196,619
Noninterest-bearing
........................................... 0
Interest-bearing
.............................................. 196,619
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 IBFs:
Federal funds purchased
................................................................
.
1,860,850
Securities sold under agreements to repurchase
.......................................... 1,284,572
Demand notes issued to the U.S. Treasury
.................................................. 447,595
Trading liabilities
................................................................
.
...... 6,575
Other borrowed money:
///////////
With original maturity of one year or less
.............................................. 497,414
With original maturity of more than one year
............................................ 260,803
Mortgage indebtedness and obligations under capitalized
leases ............................ 9,784
Bank's liability on acceptances executed and outstanding
.................................. 31,941
Subordinated notes and debentures
.........................................................
0
Other liabilities
................................................................
.
........ 177,566
Total liabilities
................................................................
.
........ 14,537,533
Limited-life preferred stock and related surplus
.......................................... 0
EQUITY CAPITAL
Perpetual preferred stock and related surplus
............................................. 0
Common stock
................................................................
.
............. 19,487
Surplus
................................................................
.
.................. 926,125
Undivided profits and capital reserves
....................................................
275,774
Net unrealized holding gains (losses) on available-for-sale
securities .................... (18,164)
Cumulative foreign currency translation adjustments
....................................... 0
Total equity capital
................................................................
.
..... 1,203,222
Total liabilities, limited-life preferred stock, and equity
capital ....................... 15,740,755
</TABLE>
<TABLE>
<S>
<C>
We, the undersigned directors, attest to the correctness
of I, ------------------------------------------------
this statement of resources and liabilities. We declare that
it SUSAN E. LESTER
has been examined by us, and to the best of our
knowledge Name
and belief has been prepared in conformance with
the
instructions and is true and correct.
------------------------------------------------
CHIEF FINANCIAL OFFICER
Title
of the above-named bank do hereby declare that this
Report of Condition is true and correct to the best
of my knowledge and belief.
------------------------------------------------------------
------------------------------------------------------------
Directors
------------------------------------------------------------
---------------------------------------------------
Signature
---------------------------------------------------
Date
</TABLE>
FDIC 8040/54 (Page 2)
PRINTER COPY
CERTIFICATE OF INCORPORATION
OF
SELLCO CORPORATION
The undersigned, a natural person, for the purpose of
organizing a corporation for conducting the business and
promoting the purposes hereinafter stated, under the provisions
and subject to the requirements of the laws of the State of
Delaware (particularly Chapter 1, Title 8 of the Delaware Code
and the acts amendatory thereof and supplemental thereto, and
known, identified and referred to as the "General Corporation
Law
of the State of Delaware") hereby certifies that:
FIRST: The name of this Corporation (hereinafter
called the "Corporation") is SellCo Corporation.
SECOND: The address, including street, number, city
and county, of the registered office of the Corporation in the
State of Delaware is 32 Loockerman Square, Suite L-100, City of
Dover, County of Kent; and the name of the registered agent of
the Corporation in the State of Delaware at such address is The
Prentice-Hall Corporation System, Inc.
THIRD: The nature of the business and of the purposes
to be conducted and promoted by the Corporation are to conduct
any lawful business, to promote any lawful purpose, and to
engage
in any lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of
Delaware.
FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is one thousand
(1,000)
shares, all of which are of a par value of one cent ($.01) each,
and all of which are of one class and are designated as Common
Stock.
FIFTH: The name and mailing address of the
incorporator is as follows: Maria Kuria Montgomery, Stroock &
Stroock & Lavan, 7 Hanover Square, New York, New York 10004.
SIXTH: Whenever a compromise or arrangement is
proposed between this Corporation and its creditors or any class
of them and/or between this Corporation and its stockholders or
any class of them, any court of equitable jurisdiction within
the
State of Delaware may, on the application in a summary way of
this Corporation or any creditor or stockholder thereof or on
the
application of any receiver or receivers appointed for this
Corporation under the provisions of Section 291 of Title 8 of
the
Delaware Code or on the application of trustees in dissolution
or
of any receiver or receivers appointed for this Corporation
under
the provisions of Section 279 of Title 8 of the Delaware Code,
order a meeting of the creditors or class of creditors, and/or
of
the stockholders or class of stockholders, of this Corporation,
as the case may be, to be summoned in such manner as the said
court directs. If a majority in number representing three-
fourths in value of the creditors or class of creditors, and/or
of the stockholders or class of stockholders, of this
Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this Corporation as a
consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if
sanctioned by the court to which the said application has been
made, be binding on all the creditors or class of creditors,
and/or on all the stockholders or class of stockholders, of this
Corporation, as the case may be, and also on this Corporation.
SEVENTH: The original By-Laws of the Corporation
shall
be adopted by the incorporator. Thereafter, the power to make,
alter, or repeal the By-Laws, and to adopt any new By-Law, shall
be vested in the Board of Directors.
EIGHTH: To the fullest extent that the General
Corporation Law of the State of Delaware, as it exists on the
date hereof or as it may hereafter be amended, permits the
limitation or elimination of the liability of directors, no
director of this Corporation shall be personally liable to this
Corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director. Notwithstanding the foregoing,
a director shall be liable to the extent provided by applicable
law (1) for any breach of the directors' duty of loyalty to the
Corporation or its stockholders, (2) for acts or omissions not
in
good faith or which involve intentional misconduct or a knowing
violation of law, (3) under Section 174 of the General
Corporation Law of the State of Delaware, or (4) for any
transaction from which the director derived any improper
personal
benefit. Neither the amendment or repeal of this Article, nor
the adoption of any provision of this Certificate of
Incorporation inconsistent with this Article shall adversely
affect any right or protection of a director of the Corporation
existing at the time of such amendment or repeal.
NINTH: The Corporation shall, to the fullest extent
permitted by Section 145 of the General Corporation Law of the
State of Delaware, as the same may be amended and supplemented,
or by any successor thereto, indemnify any and all persons whom
it shall have power to indemnify under said section from and
against any and all of the expenses, liabilities or other
matters
referred to in or covered by said section. The Corporation
shall
advance expenses to the fullest extent permitted by said
section.
Such right to indemnification and advancement of expenses shall
continue as to a person who has ceased to be a director,
officer,
employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person. The
indemnification and advancement of expenses provided for herein
shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be
entitled under any By-Law, agreement, vote of stockholders or
disinterested directors or otherwise.
TENTH: The Corporation reserves the right to amend,
alter, change or repeal any provision contained in this
Certificate of Incorporation, and any other provisions
authorized
by the laws of the State of Delaware at the time in force may be
added or inserted in the manner now or hereafter provided herein
or by statute, and all rights, preferences and privileges of
whatsoever nature conferred upon stockholders, directors or any
other persons whomsoever by and pursuant to this Certificate of
Incorporation in its present form or as amended are granted
subject to the rights reserved in this Article TENTH.
Executed at New York, New York on July 27, 1994.
/s/MARIA KURIA MONTGOMERY
______________________________
Incorporator
<PAGE>
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
SELLCO CORPORATION, a corporation organized and
existing under the laws of the State of Delaware, hereby
certifies as follows:
1. The name of the corporation is SellCo
Corporation.
The date of filing of its original Certificate of Incorporation
with the Secretary of State was July 27, 1994.
2. This Amended and Restated Certificate of
Incorporation restates and integrates and further amends the
Certificate of Incorporation of this corporation by adding a
second paragraph to Article Fourth of the Certificate of
Incorporation.
3. The text of the Certificate of Incorporation as
amended or supplemented heretofore is further amended hereby to
read as herein set forth in full:
The undersigned, a natural person, for the purpose of
organizing a corporation for conducting the business and
promoting the purposes hereinafter stated, under the provisions
and subject to the requirements of the laws of the State of
Delaware (particularly Chapter 1, Title 8 of the Delaware Code
and the acts amendatory thereof and supplemental thereto, and
known, identified and referred to as the "General Corporation
Law
of the State of Delaware") hereby certifies that:
FIRST: The name of this Corporation (hereinafter
called the "Corporation") is SellCo Corporation.
SECOND: The address, including street, number, city
and county, of the registered office of the Corporation in the
State of Delaware is 32 Loockerman Square, Suite L-100, City of
Dover, County of Kent; and the name of the registered agent of
the Corporation in the State of Delaware at such address is The
Prentice-Hall Corporation System, Inc.
THIRD: The nature of the business and of the purposes
to be conducted and promoted by the Corporation are to conduct
any lawful business, to promote any lawful purpose, and to
engage
in any lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of
Delaware.
FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is one thousand
(1,000)
shares, all of which are of a par value of one cent ($.01) each,
and all of which are of one class and are designated as Common
Stock.
Subject to the provisions of the laws of the State of
Delaware, the Corporation may issue its Common Stock from time
to
time for such consideration (not less than the par value
thereof)
as may be fixed by the Board of Directors, which is expressly
authorized to fix the same at its discretion. Shares so issued
for which the consideration has been paid or delivered to the
Corporation shall be deemed fully paid stock and shall not be
liable to any further call or assessment thereon, and the
holders
of such shares shall not be liable for any further payments in
respect of such shares. Notwithstanding anything to the
contrary
set forth in this Article Fourth, the Corporation shall not
issue
any non-voting equity securities; provided, however that this
provision, included in this Amended and Restated Certificate of
Incorporation in compliance with Section 1123(a)(6) of the
United
States Bankruptcy Code of 1978, as amended (the "Bankruptcy
Code"), shall have no force and effect beyond that required by
Section 1123(a)(6) of the Bankruptcy Code and shall be effective
only for so long as Section 1123(a)(6) of the Bankruptcy Code is
in effect and applicable to the Corporation.
FIFTH: The name and mailing address of the
incorporators is as follows: Maria Kuria Montgomery, Stroock &
Stroock & Lavan, 7 Hanover Square, New York, New York 10004.
SIXTH: Whenever a compromise or arrangement is
proposed between this Corporation and its creditors or any class
of them and/or between this Corporation and its stockholders or
any class of them, any court of equitable jurisdiction within
the
State of Delaware may, on the application in a summary way of
this Corporation or any creditor or stockholder thereof or on
the
application of any receiver or receivers appointed for this
Corporation under the provisions of Section 291 of Title 8 of
the
Delaware Code or on the application of trustees in dissolution
or
of any receiver or receivers appointed for this Corporation
under
the provisions of Section 279 of Title 8 of the Delaware Code,
order a meeting of the creditors or class of creditors, and/or
of
the stockholders or class of stockholders, of this Corporation,
as the case may be, to be summoned in such manner as the said
court directs. If a majority in number representing three-
fourths in value of the creditors or class of creditors, and/or
of the stockholders or class of stockholders, of this
Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this Corporation as a
consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if
sanctioned by the court to which the said application has been
made, be binding on all the creditors or class of creditors,
and/or on all the stockholders or class of stockholders, of this
Corporation, as the case may be, and also on this Corporation.
SEVENTH: The original By-Laws of the Corporation
shall
be adopted by the incorporator. Thereafter, the power to make,
alter, or repeal the By-Laws, and to adopt any new By-Law, shall
be vested in the Board of Directors.
EIGHTH: To the fullest extent that the General
Corporation Law of the State of Delaware, as it exists on the
date hereof or as it may hereafter be amended, permits the
limitation or elimination of the liability of directors, no
director of this Corporation shall be personally liable to this
Corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director. Notwithstanding the foregoing,
a director shall be liable to the extent provided by applicable
law (1) for any breach of the directors' duty of loyalty to the
Corporation or its stockholders, (2) for acts or omissions not
in
good faith or which involve intentional misconduct or a knowing
violation of law, (3) under Section 174 of the General
Corporation Law of the State of Delaware, or (4) for any
transaction from which the director derived any improper
personal
benefit. Neither the amendment or repeal of this Article, nor
the adoption of any provision of this Certificate of
Incorporation inconsistent with this Article shall adversely
affect any right or protection of a director of the Corporation
existing at the time of such amendment or repeal.
NINTH: The Corporation shall, to the fullest extent
permitted by Section 145 of the General Corporation Law of the
State of Delaware, as the same may be amended and supplemented,
or by any successor thereto, indemnify any and all persons whom
it shall have power to indemnify under said section from and
against any and all of the expenses, liabilities or other
matters
referred to in or covered by said section. The Corporation
shall
advance expenses to the fullest extent permitted by said
section.
Such right to indemnification and advancement of expenses shall
continue as to a person who has ceased to be a director,
officer,
employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person. The
indemnification and advancement of expenses provided for herein
shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be
entitled under any By-Law, agreement, vote of stockholders or
disinterested directors or otherwise.
TENTH: The Corporation reserves the right to amend,
alter, change or repeal any provision contained in this
Certificate of Incorporation, and any other provisions
authorized
by the laws of the State of Delaware at the time in force may be
added or inserted in the manner now or hereafter provided herein
or by statute, and all rights, preferences and privileges of
whatsoever nature conferred upon stockholders, directors or any
other persons whomsoever by and pursuant to this Certificate of
Incorporation in its present form or as amended are granted
subject to the rights reserved in this Article TENTH.
4. This Amended and Restated Certificate of
Incorporation was duly adopted by unanimous written consent of
the stockholders in accordance with the applicable provisions of
Sections 228, 242 and 245 of the General Corporation Law of the
State of Delaware.
IN WITNESS WHEREOF, said Corporation has caused this
Certificate to be signed by Frank T. MacInnis, its President,
and
attested by Joseph W. Barnett, its Secretary, this 29th day of
September, 1994.
By /s/ FRANK T. MACINNIS
_____________________________
President
ATTEST:
By /s/ JOSEPH W. BARNETT
___________________________
Secretary
<PAGE>
BY-LAWS
OF
SELLCO
(A Delaware Corporation)
ARTICLE I
STOCKHOLDERS
5. CERTIFICATES REPRESENTING STOCK.
(a) Every holder of stock in the Corporation shall be
entitled to have a certificate signed by, or in the name of, the
Corporation by the Chairman or Vice-Chairman of the Board of
Directors, if any, or by the President or a Vice-President and
by
the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary of the Corporation representing the number
of
shares owned by such person in the Corporation. If such
certificate is countersigned by a transfer agent other than the
Corporation or its employee or by a registrar other than the
Corporation or its employee, any other signature on the
certificate may be a facsimile. In case any officer, transfer
agent, or registrar who has signed or whose facsimile signature
has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is
issued, it may be issued by the Corporation with the same effect
as if such person were such officer, transfer agent or registrar
at the date of issue.
(b) Whenever the Corporation shall be authorized to issue
more than one class of stock or more than one series of any
class
of stock, and whenever the Corporation shall issue any shares of
its stock as partly paid stock, the certificates representing
shares of any such class or series or of any such partly paid
stock shall set forth thereon the statements prescribed by the
General Corporation Law. Any restrictions on the transfer or
registration of transfer of any shares of stock of any class or
series shall be noted conspicuously on the certificate
representing such shares.
(c) The Corporation may issue a new certificate of stock
in
place of any certificate theretofore issued by it, alleged to
have been lost, stolen or destroyed, and the Board of Directors
may require the owner of any lost, stolen or destroyed
certificate, or such person's legal representative, to give the
Corporation a bond sufficient to indemnify the Corporation
against any claim that may be made against it on account of the
alleged loss, theft or destruction of any such certificate or
the
issuance of any such new certificate.
6. FRACTIONAL SHARE INTERESTS.
The Corporation may, but shall not be required to, issue
fractions of a share.
7. STOCK TRANSFERS.
Upon compliance with provisions restricting the transfer or
registration of transfer of shares of stock, if any, transfers
or
registration of transfer of shares of stock of the Corporation
shall be made only on the stock ledger of the Corporation by the
registered holder thereof, or by such person's attorney
thereunto
authorized by power of attorney duly executed and filed with the
Secretary of the Corporation or with a transfer agent or a
registrar, if any, and on surrender of the certificate or
certificates for such shares of stock properly endorsed and the
payment of all taxes due thereon.
8. RECORD DATE FOR STOCKHOLDERS.
(a) In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, the Board of Directors
may fix a record date, which record date shall not precede the
date upon which the resolution fixing the record date is adopted
by the Board of Directors, and which record date shall not be
more than sixty nor less than ten days before the date of such
meeting. If no record date has been fixed by the Board of
Directors, the record date for determining stockholders entitled
to notice of or to vote at a meeting of stockholders shall be at
the close of business on the day next preceding the day on which
notice is given, or, if notice is waived, at the close of
business on the day next preceding the day on which the meeting
is held. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to
any adjournment of the meeting; provided, however, that the
Board
of Directors may fix a new record date for the adjourned
meeting.
(b) In order that the Corporation may determine the
stockholders entitled to receive payment of any dividend or
other
distribution or allotment of any rights or the stockholders
entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix a record date,
which record date shall not precede the date upon which the
resolution fixing the record date is adopted, and which record
date shall be not more than sixty days prior to such action. If
no record date has been fixed, the record date for determining
stockholders for any such purpose shall be at the close of
business on the day on which the Board of Directors adopts the
resolution relating thereto.
9. MEANING OF CERTAIN TERMS.
As used herein in respect of the right to notice of a
meeting of stockholders or a waiver thereof or to participate or
vote thereat or to consent or dissent in writing in lieu of a
meeting, as the case may be, the term "share" or "shares" or
"share of stock" or "shares of stock" or "stockholder" or
"stockholders" refers to an outstanding share or shares of stock
and to a holder or holders of record of outstanding shares of
stock when the Corporation is authorized to issue only one class
of shares of stock, and said reference is also intended to
include any outstanding share or shares of stock and any holder
or holders of record of outstanding shares of stock of any class
upon which or upon whom the Certificate of Incorporation confers
such rights where there are two or more classes or series of
shares of stock or upon which or upon whom the General Cor-
poration Law confers such rights notwithstanding that the
Certificate of Incorporation may provide for more than one class
or series of shares of stock, one or more of which are limited
or
denied such rights thereunder; provided, however, that no such
right shall vest in the event of an increase or a decrease in
the
authorized number of shares of stock of any class or series
which
is otherwise denied voting rights under the provisions of the
Certificate of Incorporation, including any preferred stock
which
is denied voting rights under the provisions of the resolution
or
resolutions adopted by the Board of Directors with respect to
the
issuance thereof.
10. STOCKHOLDER MEETINGS.
(a) TIME. The annual meeting shall be held on the date
and
at the time fixed, from time to time, by the Board of Directors.
A special meeting shall be held on the date and at the time
fixed
by the Board of Directors.
(b) PLACE. Annual meetings and special meetings shall be
held at such place, within or without the State of Delaware, as
the Board of Directors may, from time to time, fix. Whenever
the
Board of Directors shall fail to fix such place, the meeting
shall be held at the registered office of the Corporation in the
State of Delaware.
(c) CALL. Annual meetings and special meetings may be
called by the Board of Directors or by any officer instructed by
the Board of Directors to call the meeting.
(d) NOTICE OR WAIVER OF NOTICE. Written notice of all
meetings shall be given, stating the place, date and hour of the
meeting. The notice of an annual meeting shall state that the
meeting is called for the election of Directors and for the
transaction of other business which may properly come before the
meeting, and shall (if any other action which could be taken at
a
special meeting is to be taken at such annual meeting) state
such
other action or actions as are known at the time of such notice.
The notice of a special meeting shall in all instances state the
purpose or purposes for which the meeting is called. If any
action is proposed to be taken which would, if taken, entitle
stockholders to receive payment for their shares of stock, the
notice shall include a statement of that purpose and to that
effect. Except as otherwise provided by the General Corporation
Law, a copy of the notice of any meeting shall be given,
personally or by mail, not less than ten days nor more than
sixty
days before the date of the meeting, unless the lapse of the
prescribed period of time shall have been waived, and directed
to
each stockholder at such person's address as it appears on the
records of the Corporation. Notice by mail shall be deemed to
be
given when deposited, with postage thereon prepaid, in the
United
States mail. If a meeting is adjourned to another time, not
more
than thirty days hence, and/or to another place, and if an
announcement of the adjourned time and place is made at the
meeting, it shall not be necessary to give notice of the
adjourned meeting unless the Board of Directors, after
adjournment, fixes a new record date for the adjourned meeting.
Notice need not be given to any stockholder who submits a
written
waiver of notice before or after the time stated therein.
Attendance of a person at a meeting of stockholders shall
constitute a waiver of notice of such meeting, except when the
stockholder attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction
of
any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the stockholders
need be specified in any written waiver of notice.
(e) STOCKHOLDER LIST. There shall be prepared and made,
at
least ten days before every meeting of stockholders, a complete
list of the stockholders, arranged in alphabetical order, and
showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be
open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting either at a
place within the city where the meeting is to be held, which
place shall be specified in the notice of the meeting, or if not
so specified, at the place where the meeting is to be held. The
list shall also be produced and kept at the time and place of
the
meeting during the whole time thereof, and may be inspected by
any stockholder who is present. The stock ledger shall be the
only evidence as to who are the stockholders entitled to examine
the stock ledger, the list required by this section or the books
of the Corporation, or to vote at any meeting of stockholders.
(f) CONDUCT OF MEETING. Meetings of the stockholders
shall
be presided over by one of the following officers in the order
of
seniority and if present and acting: the Chairman of the Board,
if any, the Vice-Chairman of the Board, if any, the President, a
Vice President, a chairman for the meeting chosen by the Board
of
Directors or, if none of the foregoing is in office and present
and acting, by a chairman to be chosen by the stockholders. The
Secretary of the Corporation or, in such person's absence, an
Assistant Secretary, shall act as secretary of every meeting,
but
if neither the Secretary nor an Assistant Secretary is present
the chairman for the meeting shall appoint a secretary of the
meeting.
(g) PROXY REPRESENTATION. Every stockholder may authorize
another person or persons to act for such stockholder by proxy
in
all matters in which a stockholder is entitled to participate,
whether by waiving notice of any meeting, voting or
participating
at a meeting, or expressing consent or dissent without a
meeting.
Every proxy must be signed by the stockholder or by such
person's
attorney-in-fact. No proxy shall be voted or acted upon after
three years from its date unless such proxy provides for a
longer
period. A duly executed proxy shall be irrevocable if it states
that it is irrevocable and, if, and only as long as, it is
coupled with an interest sufficient in law to support an
irrevocable power. A proxy may be made irrevocable regardless
of
whether the interest with which it is coupled is an interest in
the stock itself or an interest in the Corporation generally.
(h) INSPECTORS AND JUDGES. The Board of Directors, in
advance of any meeting, may, but need not, appoint one or more
inspectors of election or judges of the vote, as the case may
be,
to act at the meeting or any adjournment thereof. If an
inspector or inspectors or judge or judges are not appointed by
the Board of Directors, the person presiding at the meeting may,
but need not, appoint one or more inspectors or judges. In case
any person who may be appointed as an inspector or judge fails
to
appear or act, the vacancy may be filled by appointment made by
the person presiding thereat. Each inspector or judge, if any,
before entering upon the discharge of such person's duties,
shall
take and sign an oath faithfully to execute the duties of
inspector or judge at such meeting with strict impartiality and
according to the best of his ability. The inspectors or judges,
if any, shall determine the number of shares of stock
outstanding
and the voting power of each, the shares of stock represented at
the meeting, the existence of a quorum and the validity and
effect of proxies, receive votes, ballots or consents, hear and
determine all challenges and questions arising in connection
with
the right to vote, count and tabulate all votes, ballots or
consents, determine the result, and do such other acts as are
proper to conduct the election or vote with fairness to all
stockholders. On request of the person presiding at the
meeting,
the inspector or inspectors or judge or judges, if any, shall
make a report in writing of any challenge, question or matter
determined by such person or persons and execute a certificate
of
any fact so found.
(i) QUORUM. Except as the General Corporation Law or
these
By-Laws may otherwise provide, the holders of a majority of the
outstanding shares of stock entitled to vote shall constitute a
quorum at a meeting of stockholders for the transaction of any
business. The stockholders present may adjourn the meeting
despite the absence of a quorum. When a quorum is once present
to organize a meeting, it is not broken by the subsequent
withdrawal of any stockholders.
(j) VOTING. Each stockholder entitled to vote in
accordance with the terms of the Certificate of Incorporation
and
of these By-Laws, or, with respect to the issuance of preferred
stock, in accordance with the terms of a resolution or
resolutions of the Board of Directors, shall be entitled to one
vote, in person or by proxy, for each share of stock entitled to
vote held by such stockholder. In the election of Directors, a
plurality of the votes present at the meeting shall elect. Any
other action shall be authorized by a majority of the votes cast
except where the Certificate of Incorporation or the General
Corporation Law prescribes a different percentage of votes
and/or
a different exercise of voting power.
Voting by ballot shall not be required for corporate action
except as otherwise provided by the General Corporation Law.
11. STOCKHOLDER ACTION WITHOUT MEETINGS.
Any action required to be taken, or any action which may be
taken, at any annual or special meeting of stockholders, may be
taken without a meeting, without prior notice and without a
vote,
if a consent or consents in writing, setting forth the action so
taken, shall be signed by the holders of the outstanding stock
having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted.
Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to
those stockholders who have not consented in writing and shall
be
delivered to the Corporation by delivery to its registered
office
in Delaware, its principal place of business or an officer or
agent of the Corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery
made to the Corporation's registered office shall be by hand or
by certified or registered mail, return receipt requested.
ARTICLE II
DIRECTORS
1. FUNCTIONS AND DEFINITION.
The business and affairs of the Corporation shall be
managed
by or under the direction of the Board of Directors of the
Corporation. The use of the phrase "whole Board" herein refers
to the total number of Directors which the Corporation would
have
if there were no vacancies.
2. QUALIFICATIONS AND NUMBER.
A Director need not be a stockholder, a citizen of the
United States, or a resident of the State of Delaware. The
initial Board of Directors shall consist of three (3) persons.
Thereafter the number of Directors constituting the whole board
shall be at least one. Subject to the foregoing limitation and
except for the first Board of Directors, such number may be
fixed
from time to time by action of the stockholders or of the Board
of Directors, or, if the number is not fixed, the number shall
be
three. The number of Directors may be increased or decreased by
action of the stockholders or of the Board of Directors.
3. ELECTION AND TERM.
The first Board of Directors, unless the members thereof
shall have been named in the Certificate of Incorporation, shall
be elected by the incorporator or incorporators and shall hold
office until the first annual meeting of stockholders and until
their successors have been elected and qualified or until their
earlier resignation or removal. Any Director may resign at any
time upon written notice to the Corporation. Thereafter,
Directors who are elected at an annual meeting of stockholders,
and Directors who are elected in the interim to fill vacancies
and newly created Directorships, shall hold office until the
next
annual meeting of stockholders and until their successors have
been elected and qualified or until their earlier resignation or
removal. In the interim between annual meetings of stockholders
or of special meetings of stockholders called for the election
of
Directors and/or for the removal of one or more Directors and
for
the filling of any vacancies in the Board of Directors,
including
vacancies resulting from the removal of Directors for cause or
without cause, any vacancy in the Board of Directors may be
filled by the vote of a majority of the remaining Directors then
in office, although less than a quorum, or by the sole remaining
Director.
4. MEETINGS.
(a) TIME. Regular meetings shall be held at such time as
the Board shall fix. Special meetings may be called upon
notice.
(b) FIRST MEETING. The first meeting of each newly
elected
Board may be held immediately after each annual meeting of the
stockholders at the same place at which the meeting is held, and
no notice of such meeting shall be necessary to call the
meeting,
provided a quorum shall be present. In the event such first
meeting is not so held immediately after the annual meeting of
the stockholders, it may be held at such time and place as shall
be specified in the notice given as provided for special
meetings
of the Board of Directors, or at such time and place as shall be
fixed by the consent in writing of all of the Directors.
(c) PLACE. Meetings, both regular and special, shall be
held at such place within or without the State of Delaware as
shall be fixed by the Board.
(d) CALL. No call shall be required for regular meetings
for which the time and place have been fixed. Special meetings
may be called by or at the direction of the Chairman of the
Board, if any, the Vice-Chairman of the Board, if any, or the
President, or of a majority of the Directors.
(e) NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice
shall be required for regular meetings for which the time and
place have been fixed. Written, oral or any other mode of
notice
of the time and place shall be given for special meetings at
least twenty-four hours prior to the meeting; notice may be
given
by telephone of telefax (in which case it is effective when
given) or by mail (in which case it is effective seventy-two
hours after mailing by prepaid first class mail). The notice of
any meeting need not specify the purpose of the meeting. Any
requirement of furnishing a notice shall be waived by any
Director who signs a written waiver of such notice before or
after the time stated therein. Attendance of a Director at a
meeting of the Board shall constitute a waiver of notice of such
meeting, except when the Director attends a meeting for the
express purpose of objecting, at the beginning of the meeting,
to
the transaction of any business because the meeting is not
lawfully called or convened.
(f) QUORUM AND ACTION. A majority of the whole Board
shall
constitute a quorum except when a vacancy or vacancies prevents
such majority, whereupon a majority of the Directors in office
shall constitute a quorum, provided that such majority shall
constitute at least one-third (1/3) of the whole Board. Any
Director may participate in a meeting of the Board by means of a
conference telephone or similar communications equipment by
means
of which all Directors participating in the meeting can hear
each
other, and such participation in a meeting of the Board shall
constitute presence in person at such meeting. A majority of
the
Directors present, whether or not a quorum is present, may
adjourn a meeting to another time and place. Except as herein
otherwise provided, and except as otherwise provided by the
General Corporation Law, the act of the Board shall be the act
by
vote of a majority of the Directors present at a meeting, a
quorum being present. The quorum and voting provisions herein
stated shall not be construed as conflicting with any provisions
of the General Corporation Law and these By-Laws which govern a
meeting of Directors held to fill vacancies and newly created
Directorships in the Board.
(g) CHAIRMAN OF THE MEETING. The Chairman of the Board,
if
any and if present and acting, shall preside at all meetings.
Otherwise, the Vice-Chairman of the Board, if any and if present
and acting, or the President, if present and acting, or any
other
Director chosen by the Board, shall preside.
5. REMOVAL OF DIRECTORS.
Any or all of the Directors may be removed for cause or
without cause by the stockholders.
6. COMMITTEES.
The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees,
each committee to consist of one or more of the Directors of the
Corporation. The Board may designate one or more Directors as
alternate members of any committee, who may replace any absent
or
disqualified member at any meeting of the committee. Any such
committee, to the extent provided in the resolution of the
Board,
shall have and may exercise the powers of the Board of Directors
in the management of the business and affairs of the
Corporation,
and may authorize the seal of the Corporation to be affixed to
all papers which may require it. In the absence or
disqualification of any member of any such committee or
committees, the members thereof present at any meeting and not
disqualified from voting, whether or not they constitute a
quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent
or disqualified member.
7. ACTION IN WRITING.
Any action required or permitted to be taken at any meeting
of the Board of Directors or any committee thereof may be taken
without a meeting if all members of the Board or committee, as
the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board
or committee.
ARTICLE III
OFFICERS
1. EXECUTIVE OFFICERS.
The Board of Directors may elect or appoint a Chairman of
the Board of Directors, a President, one or more Vice Presidents
(which may be denominated with additional descriptive titles), a
Secretary, one or more Assistant Secretaries, a Treasurer, one
or
more Assistant Treasurers and such other officers as it may
determine. Any number of offices may be held by the same
person.
2. TERM OF OFFICE: REMOVAL.
Unless otherwise provided in the resolution of election or
appointment, each officer shall hold office until the meeting of
the Board of Directors following the next annual meeting of
stockholders and until such officer's successor has been elected
and qualified or until the earlier resignation or removal of
such
officer. The Board of Directors may remove any officer for
cause
or without cause.
3. AUTHORITY AND DUTIES.
All officers, as between themselves and the Corporation,
shall have such authority and perform such duties in the
management of the Corporation as may be provided in these By-
Laws, or, to the extent not so provided, by the Board of
Directors.
4. THE CHAIRMAN OF THE BOARD OF DIRECTORS.
The Chairman of the Board of Directors, if present and
acting, shall preside at all meetings of the Board of Directors,
otherwise, the President, if present, shall preside, or if the
President does not so preside, any other Director chosen by the
Board shall preside.
5. THE PRESIDENT.
The President shall be the chief executive officer of the
Corporation unless otherwise determined by a resolution adopted
by the Board of Directors.
6. VICE PRESIDENTS.
Any Vice President that may have been appointed, in the
absence or disability of the President, shall perform the duties
and exercise the powers of the President, in the order of their
seniority, and shall perform such other duties as the Board of
Directors shall prescribe.
7. THE SECRETARY.
The Secretary shall keep in safe custody the seal of the
Corporation and affix it to any instrument when authorized by
the
Board of Directors, and shall perform such other duties as may
be
prescribed by the Board of Directors. The Secretary (or in such
officer's absence, an Assistant Secretary, but if neither is
present another person selected by the Chairman for the meeting)
shall have the duty to record the proceedings of the meetings of
the stockholders and Directors in a book to be kept for that
purpose.
8. THE TREASURER.
The Treasurer shall have the care and custody of the
corporate funds, and other valuable effects, including
securities, and shall keep full and accurate accounts of
receipts
and disbursements in books belonging to the Corporation, and
shall deposit all moneys and other valuable effects in the name
and to the credit of the Corporation in such depositories as may
be designated by the Board of Directors and shall perform such
other functions as might be given to him by the President of the
Corporation.
ARTICLE IV
CORPORATE SEAL
AND
CORPORATE BOOKS
The corporate seal shall be in such form as the Board of
Directors shall prescribe. The books of the Corporation may be
kept within or without the State of Delaware, at such place or
places as the Board of Directors may, from time to time,
determine.
ARTICLE V
FISCAL YEAR
The fiscal year of the Corporation shall be fixed, and
shall
be subject to change, by the Board of Directors.
ARTICLE VI
INDEMNITY
(a) Any person who was or is a party or threatened to be
made a party to any threatened, pending or completed action,
suit
or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the
Corporation) by reason of the fact that he or she is or was a
Director, officer, employee or agent of the Corporation or is or
was serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise (including employee
benefit plans) (hereinafter an "indemnitee"), shall be
indemnified and held harmless by the Corporation to the fullest
extent authorized by the General Corporation Law, as the same
exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification than permitted
prior thereto), against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and
reasonably incurred by such indemnitee in connection with such
action, suit or proceeding, if the indemnitee acted in good
faith
and in a manner he or she reasonably believed to be in or not
opposed to the best interests of the Corporation, and with
respect to any criminal action or proceeding, had no reasonable
cause to believe such conduct was unlawful. The termination of
the proceeding, whether by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he or she reasonably
believed to be in or not opposed to the best interests of the
Corporation and, with respect to any criminal action or
proceeding, had reasonable cause to believe such conduct was
unlawful.
(b) Any indemnitee shall be indemnified and held harmless
by the Corporation to the fullest extent authorized by the
General Corporation Law, as the same exists or may hereafter be
amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide
broader indemnification than permitted prior thereto), against
expenses (including attorneys' fees) actually and reasonably
incurred by such indemnitee in connection with the defense or
settlement of such action, suit or proceeding if such indemnitee
acted in good faith and in a manner he or she reasonably
believed
to be in or not opposed to the best interests of the Corporation
and except that no indemnification shall be made in respect of
any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Corporation unless and only to
the extent that the Court in which such suit, action or
proceeding was brought, shall determine, upon application, that,
despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such court shall
deem proper.
(c) All reasonable expenses incurred by or on behalf of
the
indemnitee in connection with any suit, action or proceeding,
may
be advanced to the indemnitee by the Corporation.
(d) The rights to indemnification and to advancement of
expenses conferred in this article shall not be exclusive of any
other right which any person may have or hereafter acquire under
any statute, the Certificate of Incorporation, a By-Law of the
Corporation, agreement, vote of stockholders or disinterested
Directors or otherwise.
(e) The indemnification and advancement of expenses
provided by this article shall continue as to a person who has
ceased to be a Director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators
of such person.
ARTICLE VII
AMENDMENTS
The By-Laws may be amended, added to, rescinded or repealed
at any meeting of the Board of Directors or of the stockholders,
provided that notice of the proposed change was given in the
notice of the meeting.
<PAGE>
SELLCO CORPORATION,
as Issuer,
and
SHAWMUT BANK CONNECTICUT NATIONAL ASSOCIATION,
as Trustee
INDENTURE
Dated as of [__________ __], 1994
$46,000,000
12% Subordinated Contingent Payment Notes Due 2004
<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) 2.06
(b) 11.04
(c) 11.04
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) 11.02
(c)(1) 12.04
(c)(2) 12.04
(c)(3) N.A.
(d) 11.02
(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) . . . . . . . . . . . . . . . . 2.10
(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) 2.05
318(a) 12.02
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
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions. . . . . . . . . . . . . . . . . .
1
Section 1.02. Incorporation by Reference of Trust Indenture
Act . . . . . . . . . . . . . . . . . . . . .
9
Section 1.03. Rules of Construction. . . . . . . . . . . . .
9
ARTICLE 2
THE SECURITIES
Section 2.01. Form and Dating. . . . . . . . . . . . . . . .
9
Section 2.02. Execution and Authentication . . . . . . . . .
10
Section 2.03. Registrar and Paying Agent . . . . . . . . . .
11
Section 2.04. Paying Agent to Hold Money in Trust. . . . . .
11
Section 2.05. Holder Lists . . . . . . . . . . . . . . . . .
11
Section 2.06. Transfer and Exchange. . . . . . . . . . . . .
12
Section 2.07. Replacement Securities . . . . . . . . . . . .
12
Section 2.08. Outstanding Securities . . . . . . . . . . . .
13
Section 2.09. Treasury Securities. . . . . . . . . . . . . .
13
Section 2.10. Temporary Securities.. . . . . . . . . . . . .
14
Section 2.11. Cancellation . . . . . . . . . . . . . . . . .
14
Section 2.12. Defaulted Interest . . . . . . . . . . . . . .
14
ARTICLE 3
REDEMPTION
Section 3.01. Notices to Trustee.. . . . . . . . . . . . . .
14
Section 3.02. Selection of Securities to Be Redeemed . . . .
15
Section 3.03. Notice of Redemption . . . . . . . . . . . . .
15
Section 3.04. Effect of Notice of Redemption . . . . . . . .
16
Section 3.05. Deposit of Redemption Price. . . . . . . . . .
16
Section 3.06. Securities Redeemed in Part. . . . . . . . . .
16
Section 3.07. Optional Redemption. . . . . . . . . . . . . .
17
Section 3.08. Mandatory Redemption.. . . . . . . . . . . . .
17
Section 3.09. Automatic Redemption and Cancellation. . . . .
18
ARTICLE 4
COVENANTS
Section 4.01. Payment of Securities. . . . . . . . . . . . .
18
Section 4.02. Maintenance of Office or Agency. . . . . . . .
18
Section 4.03. SEC Reports; Reports to Securityholders. . . .
19
Section 4.04. Compliance Certificate . . . . . . . . . . . .
19
Section 4.05. Stay, Extension and Usury Laws . . . . . . . .
20
Section 4.06. Limitation on Sales of Assets. . . . . . . . .
21
Section 4.07. Corporate Existence. . . . . . . . . . . . . .
21
Section 4.08. Limitation on Liens. . . . . . . . . . . . . .
21
Section 4.09. Limitation on Additional Indebtedness and Capital
Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . .
22
ARTICLE 5
MERGERS
Section 5.01. Mergers. . . . . . . . . . . . . . . . . . . .
23
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default. . . . . . . . . . . . . . .
24
Section 6.02. Acceleration . . . . . . . . . . . . . . . . .
25
Section 6.03. Other Remedies . . . . . . . . . . . . . . . .
26
Section 6.04. Waiver of Past Defaults. . . . . . . . . . . .
26
Section 6.05. Control by Majority. . . . . . . . . . . . . .
26
Section 6.06. Limitation on Suits. . . . . . . . . . . . . .
27
Section 6.07. Rights of Holders to Receive Payment . . . . .
27
Section 6.08. Collection Suit by Trustee . . . . . . . . . .
27
Section 6.09. Trustee May File Proofs of Claim . . . . . . .
27
Section 6.10. Priorities . . . . . . . . . . . . . . . . . .
28
Section 6.11. Undertaking for Costs. . . . . . . . . . . . .
29
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee. . . . . . . . . . . . . . .
29
Section 7.02. Rights of Trustee. . . . . . . . . . . . . . .
30
Section 7.03. Individual Rights of Trustee . . . . . . . . .
30
Section 7.04. Trustee's Disclaimer . . . . . . . . . . . . .
31
Section 7.05. Notice of Defaults . . . . . . . . . . . . . .
31
Section 7.06. Reports by Trustee to Holders. . . . . . . . .
31
Section 7.07. Compensation and Indemnity . . . . . . . . . .
31
Section 7.08. Replacement of Trustee . . . . . . . . . . . .
32
Section 7.09. Successor Trustee by Merger, Etc.. . . . . . .
33
Section 7.10. Eligibility; Disqualification. . . . . . . . .
33
Section 7.11. Preferential Collection of Claims Against
Company . . . . . . . . . . . . . . . . . . .
34
ARTICLE 8
DISCHARGE OF INDENTURE
Section 8.01. Termination of Company's Obligations . . . . .
34
Section 8.02. Repayment to Company . . . . . . . . . . . . .
34
ARTICLE 9
AMENDMENTS
Section 9.01. Without Consent of Holders . . . . . . . . . .
35
Section 9.02. With Consent of Holders. . . . . . . . . . . .
35
Section 9.03. Compliance with Trust Indenture Act. . . . . .
37
Section 9.04. Revocation and Effect of Consents. . . . . . .
37
Section 9.05. Notation on or Exchange of Securities. . . . .
37
Section 9.06. Trustee to Sign Amendments, Etc. . . . . . . .
37
ARTICLE 10
SUBORDINATION
Section 10.01. Agreement to Subordinate. . . . . . . . . . .
38
Section 10.02. Liquidation; Dissolution; Bankruptcy. . . . .
38
Section 10.03. Default on Senior Indebtedness. . . . . . . .
39
Section 10.04. Acceleration of Securities. . . . . . . . . .
40
Section 10.05. When Distribution Must Be Paid Over.. . . . .
40
Section 10.06. Notice by Company.. . . . . . . . . . . . . .
41
Section 10.07. Subrogation.. . . . . . . . . . . . . . . . .
41
Section 10.08. Relative Rights.. . . . . . . . . . . . . . .
41
Section 10.09. Subordination May Not Be Impaired.. . . . . .
42
Section 10.10. Distribution or Notice to Representative. . .
43
Section 10.11. Rights of Trustee and Paying Agent. . . . . .
43
Section 10.12. Authorization to Effect Subordination.. . . .
44
Section 10.13. Miscellaneous.. . . . . . . . . . . . . . . .
44
ARTICLE 11
COLLATERAL
Section 11.01. Pledge of Collateral. . . . . . . . . . . . .
45
Section 11.02. Recording, Etc. . . . . . . . . . . . . . . .
46
Section 11.03. Suits to Protect the Collateral . . . . . . .
47
Section 11.04. Authorization of Receipt of Funds by the Trustee
Under the Collateral
Documents and the Intercreditor Agreement. . . . . . .
47
ARTICLE 12
MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls. . . . . . . . .
47
Section 12.02. Notices . . . . . . . . . . . . . . . . . . .
48
Section 12.03. Communication by Holders with Other Holders.
48
Section 12.04. Certificate and Opinion as to Conditions
Precedent . . . . . . . . . . . . . . . . . .
48
Section 12.05. Statements Required in Certificate or Opinion
49
Section 12.06. Rules by Trustee and Agents . . . . . . . . .
49
Section 12.07. Legal Holidays. . . . . . . . . . . . . . . .
49
Section 12.08. Duplicate Originals . . . . . . . . . . . . .
50
Section 12.09. Governing Law . . . . . . . . . . . . . . . .
50
Section 12.10. No Adverse Interpretation of Other Agreements
50
Section 12.11. Successors. . . . . . . . . . . . . . . . . .
50
Section 12.12. Severability. . . . . . . . . . . . . . . . .
50
Section 12.13. Counterpart Originals . . . . . . . . . . . .
50
Section 12.14. Table of Contents, Headings, Etc. . . . . . .
50
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . .
51
Exhibit A Form of Security
Exhibit B Form of Pledge Agreement
Exhibit C Form of Intercreditor Agreement
<PAGE>
INDENTURE, dated as of [__________ __], 1994, among SellCo
Corporation, a Delaware corporation (the "Company") and Shawmut
Bank Connecticut National Association, 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 12% Subordinated Contingent Payment Notes Due 2004
(the
"Securities"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions.
"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 4.06.
"Bankruptcy Law" has the meaning set forth in Section 6.01.
"Bankruptcy Plan" means the Amended Joint Plan of
Reorganization
of JWP and the Company 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 directors
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 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, participa-
tions, rights or other equivalents (however designated) of any
Person.
"Claim" means any claim arising from the rescission of the
purchase of the Securities, for damages arising from the
purchase
of the Securities or for reimbursement or contribution on
account
of such claim.
"Collateral" means the "Pledged Collateral," as defined in the
Pledge Agreement, and any and all other collateral securing the
obligations of the Company or any other obligor under the
Securities or under this Indenture pursuant to any other
Collateral
Document.
"Collateral Documents" means the Pledge Agreement and any other
document executed and delivered by the Company 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
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 SellCo Corporation, a Delaware corporation, and
its successors.
"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 to the Company.
"Custodian" has the meaning set forth in Section 6.01.
"Default" means any event that is, or after notice or passage
of
time or both would be, an Event of Default.
"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.
"Event of Default" has the meaning set forth in Section 6.01.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"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.
"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, 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.
"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 the Company (a) that 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.
"Intercreditor Agreement" means the Intercreditor Agreement,
dated
as of the Issue Date and substantially in the form of Exhibit C
hereto, among the Trustee, the Series A Indenture Trustee, the
Software House Indenture Trustee, JWP, MES and the Company, 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.
"Issue Date" means [___________ __], 1994.
"JWP" means JWP INC., a Delaware corporation, and its
successors.
"JWS" means Jamaica Water Supply Company, a New York
corporation,
and its successors.
"JWSC" means, so long as it is a Subsidiary of the Company,
Jamaica Water Securities Corp., a New York corporation, 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 interest, 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).
"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 Company and its Subsidiaries 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.
"MES" means MES Corporation, a Delaware corporation, and its
successors.
"Net Cash Proceeds" means, when used with reference to any
Asset
Sale or series of related Asset Sales effected on or after
December
31, 1993, 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, 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 JWP or any disbursing
agent
therefor, in respect of disputed unsecured claims against JWP.
"Obligations" means, with respect to any Indebtedness, any
principal, premium, interest (including without limitation,
interest, whether or not allowed, after the filing of a petition
initiating any proceeding referred to in Section 6.01(a)(v) or
(vi)), penalties, commissions, charges, expenses, fees,
indemnifications, reimbursements, and other liabilities or
amounts
payable under or in respect of the documentation governing such
Indebtedness.
"Officer" means the Chairman of the Board, the President, the
Chief Financial Officer, the Treasurer 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.
"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.
"Payment Securities" means the Securities issued under this
Indenture on the Issue Date.
"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
or similar agreements in the ordinary course of business in
respect
of the contracts (other than for borrowed money) of the Company
or
any of its Subsidiaries 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 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 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
organi-
zation or government or any agency or political subdivision
there-
of.
"Pledge Agreement" means the SellCo Subordinated Pledge
Agreement,
dated the Issue Date and substantially in the form of Exhibit B
hereto, pursuant to which the Collateral shall be pledged by the
Company to secure the payment of the Company's obligations under
the Securities and this Indenture, as the same may be amended,
supplemented or otherwise modified from time to time.
The "principal" of a debt security means the principal of the
security plus the premium, if any, on the security.
"Registrar" has the meaning set forth in Section 2.03.
"Representative" means the indenture trustee or other trustee,
agent or representative for any Senior Indebtedness.
"SEC" means the Securities and Exchange Commission.
"Security" means any Payment Security or any Interest Deferral
Security.
"Senior Indebtedness" means (a) the Indebtedness of the Company
arising under its Guaranty of the Indebtedness of JWP under the
Series A Notes and the Series A Indenture and all Obligations
with
respect thereto (including, without limitation, all principal
and
interest thereon to the date of payment (including interest
accruing after the commencement of any bankruptcy,
reorganization,
insolvency, receivership or similar proceeding relating to the
Company or its property at the contract rate, whether or not
allowed or allowable in such proceeding)), and (b) the
Indebtedness
of the Company arising under its Guaranty of the Indebtedness of
JWP under the Software House Notes and the Software House
Indenture
and all Obligations with respect thereto (including, without
limitation, all principal and interest thereon to the date of
payment (including interest accruing after the commencement of
any
bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to the Company or its property at the
contract
rate, whether or not allowed or allowable in such proceeding)).
The Senior Indebtedness described in clauses (a) and (b) above
shall continue to constitute Senior Indebtedness for all
purposes
of this Indenture, and the provisions of Article 10 hereof shall
continue to apply to such Senior Indebtedness, notwithstanding
that
such Senior Indebtedness or any claim in respect thereof may be
disallowed, avoided or subordinated pursuant to any Bankruptcy
Law
or other applicable insolvency law or equitable principles (i)
as
a claim for unmatured interest, or (ii) as a fraudulent transfer
or
conveyance.
"Series A Indenture" means the Indenture, dated the Issue Date,
among JWP, as issuer, the Company and MES as guarantors, and IBJ
Schroder Bank & Trust Company, as trustee, pursuant to which JWP
issued the Series A Notes, as the same may be amended,
supplemented
or otherwise modified from time to time.
"Series A Indenture Trustee" means the "Trustee," as defined in
the Series A Indenture.
"Series A Notes" means JWP's 7% Senior Secured Notes, Series A,
Due 1997, issued by JWP 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, 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, pursuant to which the "Pledged
Collateral,"
as defined therein, shall be pledged by the Company to secure
the
payment of the Company's Guaranty 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 Indenture" means the Indenture, dated the Issue
Date, between JWP, as issuer, the Company and MES as guarantors,
and U.S. Trust Company of New York, as trustee, pursuant to
which
JWP issued the Software House Notes, as the same may be amended,
supplemented or otherwise modified from time to time.
"Software House Indenture Trustee" means the "Trustee," as
defined
in the Software House Indenture.
"Software House Notes" means JWP's 7% Senior Secured Notes,
Series
B, Due 1997, issued by JWP pursuant to the Software House
Indenture
in an aggregate principal amount not exceeding the sum of
$11,357,000 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, 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 the Company
to
secure the payment of the Company's Guaranty 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.
"Specified Holder" means a Holder to which one or more
Securities
is issued on the Issue Date.
"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 the
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.
"Tax Reserve" means a reserve to be established by the Company
after the payment in full of all Indebtedness outstanding under
the
Series A Notes, the Series A Indenture, the Software House
Notes,
and the Software House Indenture, consisting of cash
constituting
Net Cash Proceeds, such reserve not to exceed at any time an
amount
equal to the capital gains tax arising from an Asset Sale in
respect of one or more Subsidiaries of JWP.
"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.
"Trustee" means Shawmut Bank Connecticut National Association
until a successor replaces it in accordance with the applicable
provisions of this Indenture and thereafter means the successor
serving hereunder.
"Trust Officer" means any officer within the [corporate trust
group] (or any successor group of the Trustee) including any
Vice
President, Assistant Vice President, Secretary, Assistant
Secretary
or any other officer or assistant officer of the Trustee
customarily performing functions similar to those performed by
the
persons who at the time shall be such officers, respectively, or
to
whom any corporate trust matter is referred at the Trustee's
Corpo-
rate Trust Office because of his/her knowledge of and
familiarity
with the particular subject.
"Water Company" means each of JWS, Jamaica Water Securities
Corp.,
a New York corporation, and their respective successors.
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;
"obligor" on the Securities means the Company or any other
obligor
on the Securities.
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 Generally Accepted Accounting
Principles;
(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
$1,000, in the case of Payment Securities, and $100, in the case
of
Interest Deferral Securities, 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. The Company's seal
shall
be reproduced on the Securities. If an Officer whose signature
is
on a Security no longer holds that office at the time the
Security
is authenticated, the Security shall nevertheless be valid.
(b) A Security shall not be valid until authenticated by the
manual signature of the Trustee. The signature of the Trustee
shall be conclusive 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 the amount set forth herein 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 may, at its option, 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 the Company or an Affiliate of the Company.
Section 2.03. Registrar and Paying Agent.
(a) The Company shall maintain 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 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
Hold-
er. 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
en-
titled to appropriate compensation in accordance with Section
7.07
hereof.
(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 shall deposit with the Paying
Agent, in immediately available funds, money sufficient to pay
such
principal and interest. The Company 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, and shall notify the Trustee of
any
default by the Company 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 de-
livered 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 seven Business
Days
before each interest payment date and at such other times as the
Trustee may request in writing a list in such form and as of
such
date as the Trustee may reasonably require of the names and ad-
dresses 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 denominations,
the
Registrar shall register the transfer or make the exchange if
its
requirements for such transactions 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 at the Registrar's 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
end-
ing 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 exchanges (without a
transfer to another Person) pursuant to Section 2.10, 3.06 or
9.05
hereof 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, the Company
shall issue and the Trustee, upon the written order of the
Company
signed by two Officers, shall authenticate a replacement
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 shall be entitled to the benefits of this
Indenture.
(c) The provisions of this Section 2.07 are exclusive and
shall
preclude 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 and those described in this
Section as not outstanding. If a Security is replaced pursuant
to
Section 2.07 hereof, 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 (i) considered
paid under Section 4.01 hereof, or (ii) deemed to have been
redeemed and cancelled under Section 3.09 hereof, 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 the Trustee shall authenticate temporary
Securities. Temporary Securities shall be substantially in the
form of definitive Securities but may have 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 to the Trustee
for
cancellation. The Registrar and Paying Agent shall forward to
the
Trustee any Securities surrendered to them for registration of
transfer, exchange or payment. The Trustee shall cancel all
Securities surrendered for registration of transfer, exchange,
payment, replacement 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
issue
new Securities to replace Securities that it has redeemed or
paid
or that have been delivered to the Trustee for cancellation.
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 hereof (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 a notice that
states the special record date, the related payment date and the
amount of such interest to be paid.
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 hereof, 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.
Section 3.02. Selection of Securities to Be Redeemed.
(a) If less than all of the Securities are to be redeemed, the
Trustee shall select the Securities to be redeemed pro rata 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 or more than 60 days prior to the redemption date by the
Trustee
from the outstanding Securities not previously called for
redemption.
(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 a notice of redemption
to
each Holder whose Securities are to be redeemed.
(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 surrender 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 to accrue on and after the redemption 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, 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
information to be stated in such notice as provided in this
Section
3.03(b).
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
with the Trustee or with the Paying Agent 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 hereof.
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 and the Software House 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.
Any redemption pursuant to this Section 3.07 shall be made
pursuant
to the provisions of Sections 3.01 through 3.06 hereof.
Section 3.08. Mandatory Redemption.
(a) After (i) the payment in full of all Indebtedness
outstanding
under the Series A Notes and the Software House Notes, and (ii)
the
establishment of the Tax Reserve, 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, 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.
(b) After (i) the payment in full of all Indebtedness
outstanding
under the Series A Notes and the Software House Notes, and (ii)
the
establishment of the Tax Reserve, concurrently with the receipt
by
any Subsidiary of the Company 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;
provided, however, that the Company shall only be required to
redeem Securities in respect of an Asset Sale by JWS or Sea
Cliff
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 or any rule or regulation of any governmental
authority
binding upon JWS or Sea Cliff.
(c) No less frequently than annually, the Company shall make a
good faith determination as to whether any portion of the Net
Cash
Proceeds held in the Tax Reserve exceeds the amount (if any) of
capital gains taxes which have been paid or finally determined
to
be payable in respect of the Asset Sale or Asset Sales giving
rise
to such Net Cash Proceeds. Concurrently with such a
determination,
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. Until used by the
Company to redeem Securities pursuant to this Section 3.08(c),
all
Net Cash Proceeds maintained in the Tax Reserve shall be held in
a
separate interest-bearing account of the Company at a financial
institution acceptable to the Trustee, and shall be segregated
from
all other assets of the Company.
(d) 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 hereof.
Section 3.09. Automatic Redemption and Cancellation.
If any Securities remain outstanding at any time at which the
total assets of the Company and its Subsidiaries, on a
consolidated
basis, are less than $250,000 (as determined by an independent
appraiser selected by JWP), then, upon written notice to the
Trustee by the Company to such effect, such Securities shall,
without any payment or further action on the part of the
Company,
any of its Subsidiaries, or any other Person, be deemed to have
been redeemed and cancelled and no longer an obligation of the
Company.
ARTICLE 4
COVENANTS
Section 4.01. Payment of Securities.
(a) Subject always to the provisions of Section 3.09 hereof,
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 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 pro-
ceeding under any Bankruptcy Law) on overdue installments 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 Manhattan,
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
designa-
tion 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 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, if the Company is
not required to furnish annual or quarterly reports pursuant to
the
Exchange Act, the Company shall cause its financial statements,
including any notes thereto and, with respect to annual reports,
an
auditors' report by an accounting firm of established national
reputation and a "Management's Discussion and Analysis of
Financial
Condition and Results of Operations," comparable to that which
would have been required to appear in annual or quarterly
reports
filed under the Section 13 or 15(d) of the Exchange Act, 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 fiscal
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
fiscal quarter of the Company 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 each such
Officer
signing such certificate, that to the best of his knowledge no
Default or Event of Default has occurred, 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) 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
fiscal quarter of the Company 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 setting forth in reasonable
detail the assets of the Company and its Subsidiaries sold
during
the previous fiscal quarter and the amount, type and disposition
of
all proceeds received in connection therewith.
(c) 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.
(d) The Company shall deliver to the Trustee, immediately upon
an
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 $500,000 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' Certificate 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.
The Company covenants (to the extent that it may lawfully do
so)
that it shall not at any time insist upon, or 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 the Company 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) the Company 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 Sales of Assets.
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 which 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
hereof), 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, and (iv) any notes, bonds, securities,
instruments,
properties or other non-cash assets constituting proceeds of any
such Asset Sale are pledged to the Trustee pursuant to the terms
of
the Pledge Agreement or another Collateral Document.
Section 4.07. Corporate Existence.
Except as permitted under Article 5 hereof, 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
Subsid-
iaries; 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
4.07 shall prohibit the dissolution of any such Subsidiary of
the
Company if such dissolution would not have a Material Adverse
Effect.
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 securing the Company's Guaranties of
Indebtedness
outstanding under the Series A Notes, the Series A Indenture,
the
Software House Notes, and the Software House Indenture;
(b) Liens arising under the Collateral Documents;
(c) Permitted Liens;
(d) 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
ac-
quisition 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 outstanding at any time
not
in excess of $1,500,000.
(e) Liens existing on the Issue Date;
(f) Liens (including purchase money mortgages or pledges
or
other purchase money Liens) on the assets of the Water
Companies,
securing Indebtedness permitted under Section 4.09(vi);
(g) Liens pursuant to Capital Lease Obligations permitted
under Section 4.09(viii); and
(h) 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) the Guaranties of the Company in respect of the
Indebtedness of the JWP under the Series A Notes, the
Series
A Indenture, the Software House Notes and the Software
House
Indenture;
(iii) Indebtedness incurred after the Issue Date arising
from
loans or advances to the Company or its Subsidiaries made
in
the ordinary course of business in connection with the
Company's cash management system in an aggregate principal
amount at any time outstanding not in excess of $7,000,000;
(iv) Capital Stock issued by the Company (other than
Disqualified Stock or Capital Stock having a preference in
liquidation or with respect to the payment of dividends);
(v) Indebtedness outstanding on the Issue Date;
(vi) 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;
(vii) Indebtedness of the Company or any of its Subsidiaries
(other than the Water Companies) secured by Liens permitted
by
Section 4.08(d);
(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 by the Company or such Subsidiaries shall not
exceed $3,000,000 at any time outstanding; and
(ix) 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 Indebtedness, the
issuance of such Capital Stock, or immediately thereafter.
ARTICLE 5
MERGERS
Section 5.01. Mergers.
The Company shall not and shall not permit any of its
Subsidiaries to (a) merge with any Person, (b) consolidate with
any
Person, (c) acquire all or substantially all of the Capital
Stock
or stock equivalents or any Person, (d) acquire all or
substantially all of the assets constituting the business of a
division, branch other unit operation of any Person, or (e)
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:
(i) the merger of a wholly-owned Subsidiary of the Company
with and into, or sale or transfer of all or substantially all
of
the assets or Capital Stock of a wholly-owned Subsidiary of the
Company to, the Company or another wholly-owned Subsidiary of
the
Company; and
(ii) one or more Asset Sales in respect of all or
substantially all of the assets of the Company or any of its
Subsidiaries, subject to compliance with Section 4.06.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
(a) An "Event of Default" occurs if:
(i) the Company 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;
or
(ii) the Company defaults in the payment of the
principal
of any Security when the same becomes due and payable at
maturity, upon redemption or otherwise; or
(iii) the Company fails to observe or perform any
covenant, condition or agreement on the part of the Company
to
be observed or performed pursuant to Section 4.06 hereof or
pursuant to Article 3 or Article 5 hereof; or
(iv) the Company 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); or
(v) 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
(vi) 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
(vii) the Liens on any of the Collateral granted or
purported to be granted pursuant to the Pledge Agreement
shall
be or become unenforceable or invalid, or the priority
thereof
shall become diminished.
(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) is not an Event of
Default until 30 days after the Trustee notifies the Company, or
until 30 days after the Holders of at least 25% in principal
amount
of the then outstanding Securities notify the Company (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 (v) or (vi) 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 principal amount of the then
outstanding Securities may, by written notice to the Company 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; provided,
however, that if any Senior Indebtedness is outstanding, upon a
declaration of acceleration pursuant to this Section 6.02, such
principal and interest shall be payable upon the earlier of (x)
the
day which is five business days after the provision to the
Company,
the Series A Indenture Trustee and the Software House Indenture
Trustee of such written notice, and (y) one business day after
the
first date on which the Indebtedness under each of the Series A
Indenture and the Software House Indenture shall have been
accelerated. If an Event of Default specified in clause (v) or
(vi) 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 principal amount of the then
outstand-
ing 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.
(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. Except as set forth in
Section 2.07 hereof, all remedies are cumulative to the extent
permitted by law.
Section 6.04. Waiver of Past Defaults.
Subject to Section 9.02 hereof, the Holders of at least a
majority in 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 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.
However,
the Trustee may refuse to follow any direction that conflicts
with
law or this Indenture or that may be unduly prejudicial to the
rights of other Holders. 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 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
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
the Company 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
com-
pensation, 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 the Company (or any other
obligor
upon the Securities), its creditors or its property and shall be
entitled and empowered to collect, receive and distribute 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 hereof. 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 hereof 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 which the Holders may be entitled to receive in such
proceeding whether in liquidation or under any plan of
reorganiza-
tion 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.
Section 6.10. Priorities.
(a) If the Trustee collects any money pursuant to this
Article, any Collateral Document, or the Intercreditor
Agreement,
it shall, subject to the provisions of Article 10, 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 Company or as otherwise provided in the
Intercreditor Agreement.
(b) The Trustee may fix a record date and payment date for
any payment to Holders.
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
under-
taking 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 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. However,
the Trustee shall 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.
(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 which 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.
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 or an Affiliate of the Company with the same rights it
would have if it were not Trustee. Any Agent may do the same
with
like rights. However, the Trustee is subject to Sections 7.10
and
7.11 hereof.
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 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 a brief report dated as of such reporting date that
complies with TIA Section 313(a). The Trustee also shall 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 Company agrees that it 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 Company agrees that it shall reimburse the
Trustee promptly upon request for all reasonable disbursements,
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 Company shall indemnify the Trustee against any
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 the Company promptly of any claim for which it may
seek indemnity. Failure by the Trustee to so notify the Company
shall not relieve the Company of its obligations hereunder. The
Company shall defend the claim and the Trustee shall cooperate
in
the defense. The Trustee may have separate counsel and the
Company
shall pay the reasonable fees and expenses of such counsel. The
Company need not pay for any settlement made without its
consent,
which consent shall not be unreasonably withheld. The
obligation
of the Company under this Section 7.07 shall survive the
satisfaction and discharge of this Indenture.
(c) The Company 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 Company's payment obligations in
this Section, the Trustee shall have a 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)(v) or
(vi)
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. The
Holders
of a majority in principal amount of the then outstanding
Securities may remove the Trustee by so notifying the Trustee
and
the Company. The Company may remove the Trustee if:
(i) the Trustee fails to comply with Section 7.10
hereof;
(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
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 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 hereof, 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 succession 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 hereof. Notwithstanding
replace-
ment of the Trustee pursuant to this Section 7.08 hereof, the
Company's obligations under Section 7.07 hereof 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 hereof.
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.
This Indenture shall cease to be of further effect (except
that the Company's obligations under Section 7.07 hereof and the
Company's, Trustee's and Paying Agent's obligations under
Section
8.02 hereof shall survive) (a) 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 the Company has
paid
all sums payable hereunder, or (b) upon the occurrence of an
automatic redemption of all outstanding Securities pursuant to
Section 3.09.
Section 8.02. Repayment to 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.
(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.
ARTICLE 9
AMENDMENTS
Section 9.01. Without Consent of Holders.
(a) Subject to the provisions of Section 9.02(b), the
Company
and the Trustee may amend 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 Security.
(b) Upon the request of the Company, accompanied by a
resolution of the Board of Directors authorizing the execution
of
any such supplemental Indenture, and upon receipt by the Trustee
of
the documents described in Section 9.06 hereof, the Trustee
shall
join with the Company 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
which may be therein contained, but the Trustee shall not be
obligated to enter into any such supplemental Indenture which
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) Subject to the provisions of Section 9.02(b), the
Company
and the Trustee may amend any of the provisions of this
Indenture
or the Securities or waive compliance in a particular instance
by
the Company of any provision of this Indenture, or the
Securities
with the written consent of the Holders of at least a majority
in
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 hereof 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; or
(viii) modify any of the provisions of this Indenture
relating to the subordination of the Securities in a manner
adverse to the Holders.
(b) No amendment or waiver under this Section 9.02 or
under
Section 9.01 shall make any change to Article 10 or that
adversely
affects the rights of any holder of Senior Indebtedness without
the
consent of such holder.
(c) Upon the request of the Company, accompanied by a
resolution of the Company's Board of Directors 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 hereof, the
Trustee shall join with the Company 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.
(d) 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.
(e) 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.
(f) 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. However, any such Holder or subsequent Holder may
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 hereof, shall be fully protected in
relying
upon, an Officers' Certificate and an Opinion of Counsel as
conclusive evidence that such amendment or supplemental
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
SUBORDINATION
Section 10.01. Agreement to Subordinate.
(a) The Company agrees, and each Holder by accepting a
Security consents and agrees, that the Indebtedness evidenced by
the Securities, all Obligations of the Company under this
Indenture
and the payment of any Claims are subordinated in right of
payment,
to the extent and in the manner provided in this Article 10, to
the
prior payment in full of all Senior Indebtedness, and that the
subordination is for the benefit of the holders of Senior
Indebtedness and they and/or each of them may enforce such
subordination.
(b) A distribution may consist of cash, securities or
other
property, by set-off or otherwise, and a payment or distribution
on
account of any Obligations with respect to the Securities shall
include any redemption, purchase or other acquisition of the
Securities, whether pursuant to an Asset Sale or otherwise;
provided, however, that a payment or distribution shall not
include
the issuance of Interest Deferral Securities pursuant to the
terms
hereof and of the Securities.
(c) For the purposes of this Article 10, no Indebtedness
now
or hereafter existing under the Series A Notes, the Series A
Indenture, the Software House Notes or the Software House
Indenture
shall be deemed to have been paid in full unless the holders or
owners thereof shall have received payment in full in cash.
Section 10.02. Liquidation; Dissolution; Bankruptcy.
Upon any distribution to creditors of the Company in a
total
or partial liquidation or dissolution of the Company or in a
bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to the Company or its property or in an
assignment for the benefit of creditors, or an arrangement,
adjustment, composition or relief of the company or its debts or
any marshalling of the assets and liabilities of the Company:
(a) holders of Senior Indebtedness shall be entitled to
receive payment in full of all Obligations due or to become due
with respect to the Senior Indebtedness (including interest
after
the commencement of any such proceeding at the rate specified in
the applicable Senior Indebtedness) before Holders shall be
entitled to receive any payment or distribution on account of
any
Obligations with respect to the Securities or on account of any
Claim; and
(b) until all Obligations with respect to Senior
Indebtedness
(as provided in subsection (a) above) are paid in full, any
payment
or distribution, including, without limitation, any payment or
distribution which may be payable or deliverable by reason of
the
payment of any other indebtedness of the Company being
subordinated
to the payment of the Securities, to which Holders would be
entitled but for this Article shall be made to holders of Senior
Indebtedness, as their interest may appear, for application (in
the
case of cash) to, or as collateral (in the case of non-cash
property or securities) for the payment or prepayment of, the
Senior Indebtedness to the extent necessary to pay all such
Senior
Indebtedness in full after giving effect to any concurrent
payment
or distribution to or for the holders of such Senior
Indebtedness,
except that pursuant to a plan of reorganization under
applicable
Bankruptcy Law approved by the Series A Indenture Trustee (if
any
Indebtedness is outstanding pursuant to the Series A Indenture)
or
the Software House Indenture Trustee (if any Indebtedness is
outstanding pursuant to the Software House Indenture), Holders
may
receive securities that are subordinated to at least the same
extent as the Securities to (a) Senior Indebtedness and (b) any
securities issued in exchange for Senior Indebtedness; provided,
however, that if any Indebtedness is outstanding pursuant to the
Series A Indenture or the Software House Indenture, the terms
(including, without limitation, terms in respect of maturities,
covenants, defaults, acceleration and remedies) of any
securities
issued to Holders pursuant to this Section 10.02 must be
satisfactory to the Series A Indenture Trustee or the Software
House Indenture Trustee, as the case may be.
Section 10.03. Default on Senior Indebtedness.
In the event that (i) any default in the payment of any
Obligation with respect to any Senior Indebtedness shall have
occurred and be continuing, whether at maturity, upon redemption
or
otherwise (a "Payment Default"), unless and until such Payment
Default shall have been cured or waived in writing by the
holders
of such Senior Indebtedness, or (ii) any judicial proceedings
shall
be pending with respect to any default under the Series A
Indenture
or the Software House Indenture, or (iii) the Securities mature
on
any date prior to [____________], 2004, no direct or indirect
payment or distribution (including, without limitation, any
payment
or distribution which may be payable or deliverable by reason of
the payment of any other Indebtedness of the Company being
subordinated to payment of the Securities) shall be made by or
on
behalf of the Company, or any other Person, for or on account of
any Obligations with respect to the Securities or on account of
any
Claim, and neither the Trustee nor any Holder shall receive from
the Company, or any other Person, directly or indirectly, any
payment or distribution, including, without limitation, from or
by
way of collateral, on account of any Obligations with resect to
the
Securities or on account of any Claim, except that Holders may
receive other Indebtedness which is subordinated to at least the
same extent as the Securities to (i) Senior Indebtedness or (ii)
any securities issued in exchange for Senior Indebtedness;
provided, however, that if any Indebtedness is outstanding
pursuant
to the Series A Indenture or the Software House Indenture, the
terms (including, without limitation, terms in respect of
maturities, covenants, defaults, acceleration and remedies) of
any
Indebtedness issued to Securityholders pursuant to this Section
10.03 must be reasonably satisfactory to the Series A Indenture
Trustee or the Software House Indenture Trustee.
(b) Upon the maturity of all or any part of any Senior
Indebtedness by lapse of time, redemption, acceleration (unless
waived in writing) or otherwise, all amounts due to become due
in
respect of all Senior Indebtedness shall first be paid in full
before any direct or indirect payment or distribution
(including,
without limitation, any payment or distribution which may be
payable or deliverable by reason of the payment of any other
Indebtedness of the Company being subordinated to the payment of
the Securities) to which Holders would be entitled but for this
Article, may be made by or on behalf of the Company or any other
Person on account of any Obligations with respect to the
Securities
or on account of any Claim, except that Holders may receive
other
Indebtedness which is subordinated to at least the same extent
as
the Securities to (i) Senior Indebtedness or (ii) any securities
issued in exchange for Senior Indebtedness; provided, however,
that
if any Indebtedness is outstanding pursuant to the Series A
Indenture or the Software House Indenture, the terms (including,
without limitation, terms in respect of maturities, covenants,
defaults, acceleration and remedies) of any Indebtedness issued
to
Securityholders pursuant to this Section 10.03 must be
reasonably
satisfactory to the Series A Indenture Trustee or the Software
House Indenture Trustee, as the case may be.
(c) Upon receipt by the Company and the Trustee of written
notice from the Series A Indenture Trustee or the Software House
Indenture Trustee of any default (including an unmatured event
of
default) under the Series A Indenture or the Software House
Indenture, as the case may be, other than a Payment Default, or
that a payment or distribution by the Company with respect to
any
Security would, immediately after giving effect thereto, result
in
such a default, and unless such default shall have been cured or
waived in writing in accordance with the terms of the Series A
Indenture or the Software House Indenture, as the case may be,
no
direct or indirect payment or distribution (including, without
limitation, any payment or distribution which may be payable or
deliverable by reason of the payment of any other Indebtedness
of
the Company being subordinated to payment of the Securities) may
be
made by or on behalf of the Company or any other Person for or
on
account of the Obligations with respect to the Securities or on
account of any Claim and neither the Trustee nor any Holder
shall
receive from the Company or any other Person, directly or
indirectly, any payment or distribution, including, without
limitation, from or by way of collateral, in respect of the
Obligations with respect to the Securities or on account of any
Claim during a period (the "Payment Blockage Period") commencing
on
the receipt of such notice and ending 179 days thereafter. Any
number of such notices of default may be given; provided,
however,
that during any 360-day period the aggregate number of days
during
which a Payment Blockage Period shall be in effect shall not
exceed
179 days and there shall be a period of at least 181 consecutive
days in each 360-day period when no Payment Blockage period
exists.
For all purposes of this Section 10.03(c), no default which, to
the
knowledge of the Series A Indenture Trustee or the Software
House
Indenture Trustee, existed or was continuing on the date of the
commencement of any Payment Blockage Period shall be, or be
made,
the basis for the commencement of a second Payment Blockage
Period
by it, whether or not within a period of 360 consecutive days,
unless such default shall have been cured or waived for a period
of
not less than 90 consecutive days.
Section 10.04. Acceleration of Securities.
If payment of the Securities is accelerated because of an
Event of Default, the Company shall promptly notify the Series A
Indenture Trustee and the Software House Indenture Trustee of
the
acceleration.
Section 10.05. When Distribution Must Be Paid Over.
(a) If a distribution is made to the Trustee, any Paying
Agent or any Holder that because of this Article 10 should not
have
been made to it, the Trustee, such paying Agent or such Holder
who
receives the distribution shall segregate such distribution from
its other funds and property and hold it in trust for the
benefit
of, and pay it over (in the same form as received, with any
necessary endorsement) to, the holders of Senior Indebtedness as
their interests may appear, or their agent or representative or
the
trustee under the indenture or other agreement (if any) pursuant
to
which Senior Indebtedness remaining unpaid to the extent
necessary
to pay such Obligations in full in accordance with their terms,
after giving effect to any concurrent payment or distribution to
or
for the holders of Senior Indebtedness.
(b) With respect to the holders of Senior Indebtedness,
the
Trustee undertakes to perform only such obligations on the part
of
the Trustee as are specifically set forth in this Article 10,
and
no implied covenants or obligations with respect to the holders
of
Senior Indebtedness shall be read into this Indenture against
the
Trustee. The Trustee shall not be deemed to owe any fiduciary
duty
to the holders of Senior Indebtedness.
Section 10.06. Notice by Company.
The Company shall promptly notify the Trustee and the
Paying
Agent of any facts known to the Company that would cause a
payment
of any obligations with respect to the Securities or of any
Claim
to violate this Article, but failure to give such notice shall
not
affect the subordination of the Securities and all Claims to the
Senior Indebtedness provided in this Article.
Section 10.07. Subrogation.
After all Senior Indebtedness is paid in full and until the
Securities are paid in full, Holders shall be subrogated
(equally
and ratably with all other Indebtedness pari passu with the
Securities) to the rights of holders of Senior Indebtedness to
receive distributions applicable to Senior Indebtedness to the
extent that distributions otherwise payable to the Holders have
been applied to the payment of Senior Indebtedness. A
distribution
made under this Article to holders of Senior Indebtedness which
otherwise would have been made to Holders is not, as between the
Company and Holders, a payment by the Company on the Securities.
Section 10.08. Relative Rights.
(a) This Article 10 defines the relative rights of Holders
and holders of Senior Indebtedness. Nothing in this Indenture
shall:
(i) impair, as between the Company and Holders, the
obligation of the Company, which is absolute and
unconditional, to pay principal of and interest on the
Securities in accordance with their terms;
(ii) affect the relative rights of Holders and creditors
of the Company other than their rights in relation to
holders
of Senior Indebtedness; or
(iii) prevent the Trustee or any Holder from exercising
its available remedies upon a Default or Event of Default,
subject to the rights of holders and owners of Senior
Indebtedness to receive distribution and payments otherwise
payable to Holders.
(b) If the Company fails because of this Article to pay
principal of or interest on a Security on the due date, the
failure
is still a Default or Event of Default.
Section 10.09. Subordination May Not Be Impaired.
(a) No right of any present or future holder of any Senior
Indebtedness to enforce subordination as herein provided shall
at
any time in any way be prejudiced or impaired by any act or
failure
to act in good faith by any such holder, or by any noncompliance
by
the Company, the Trustee or any Agent with the terms and
provisions
and covenants herein, regardless of any knowledge thereof any
such
holder may have or otherwise be charged with.
(b) Without in any way limiting the generality of the
foregoing paragraph, the holders or owners of Senior
Indebtedness
may at any time and from time to time, without the consent of or
notice to the Trustee or any Holder, without incurring
responsibility to any Holder and without impairing or releasing
the
subordination provided in this Article 10 or the obligations
hereunder of the Holders to the holders of Senior Indebtedness,
do
any one or more of the following: (i) change the manner, place
or
terms of payment or extend the time of payment of, or renew or
alter, all or any of the Senior Indebtedness (including any
change
in the rate of interest thereon), or otherwise amend or
supplement
in any manner, or grant any waiver or release with respect to,
Senior Indebtedness or any instrument evidencing the same or any
agreement under which Senior Indebtedness is outstanding; (ii)
sell, exchange, release, not perfect or otherwise deal with any
property at any time pledged, assigned or mortgaged to secure or
otherwise securing, Senior Indebtedness, or amend, or grant any
waiver or release with respect to, or consent to any departure
from
any guaranty for all or any of the Senior Indebtedness; (iii)
release any person liable in any manner under or in respect of
Senior Indebtedness; (iv) exercise or refrain from exercising
any
rights against, and release from obligations of any type, the
Company and any other Person; and (v) apply any sums from time
to
time received to the Senior Indebtedness.
(c) All rights and interests under this Indenture of the
Series A Indenture Trustee, the Software House Indenture Trustee
and the other holders of Senior Indebtedness, and all agreements
and obligations of the Trustee, the Holders, and the Company
under
Section 6.02 and under this Article 10 shall remain in full
force
and effect irrespective of (i) any lack of validity or
enforceability of the Series A Indenture, the Series A Notes,
the
Software House Indenture, the Software House Notes, or any other
agreement or instrument relating thereto or to any other Senior
Indebtedness, or (ii) any other circumstance that might
otherwise
constitute a defense available to, or a discharge of, the
Trustee,
any Holder, or the Company.
(d) The provisions set forth in Section 6.02 and in this
Article 10 constitute a continuing agreement and shall (i) be
and
remain in full force and effect until payment in full of all
Indebtedness under the Series A Indenture and the Software House
Indenture, (ii) be binding upon the Trustee, the Holders and the
Company and their respective successors transferees and assigns,
and (iii) inure to the benefit of, and be enforceable directly
by,
each of the holders of Senior Indebtedness and their respective
successors, transferees and assigns.
(e) Each of the Series A Indenture Trustee and the
Software
House Indenture Trustee is hereby authorized to demand specific
performance of the provisions of this Article 10, whether or not
the Company shall have complied with any of the provisions of
Article 10 applicable to it, at any time when the Trustee or any
Holder shall have failed to comply with any of these provisions.
The Trustee and the Holders hereby irrevocably waive any defense
based on the adequacy of a remedy at law that might be asserted
as
a bar to such remedy of specific performance.
Section 10.10. Distribution or Notice to Representative.
(a) Whenever a distribution is to be made or a notice
given
to holders of Senior Indebtedness, the distribution may be made
and
the notice given to their Representative.
(b) Upon any payment or distribution of assets of the
Company
referred to in this Article 10, the Trustee and the Holders
shall
be entitled to rely in good faith upon any order or decree made
by
any court of competent jurisdiction or upon any certificate of
such
Representative or of the liquidating trustee or agent or other
person making any distribution to the Trustee or to the Holders
for
the purpose of ascertaining the persons entitled to participate
in
such distribution, the holders of the Senior Indebtedness and
other
Indebtedness of the Company, the amount thereof or payable
thereon,
the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article 10.
Section 10.11. Rights of Trustee and Paying Agent.
(a) Notwithstanding the provisions of this Article 10 or
any
other provision of this Indenture, the Trustee shall not be
charged
with knowledge of the existence of any facts which would
prohibit
the making of any payment or distribution by the Trustee, or the
taking of any action by the Trustee, and the Trustee or Paying
Agent may continue to make payments on the Securities unless it
shall have received at its Corporate Trust Office at least two
Business Days prior to the date of such payment written notice
of
facts that would cause the payment of any Obligations with
respect
to the Securities to violate this Article. Only the Company, a
Representative or a holder of an issue of Senior Indebtedness
that
has no Representative may give the notice. Nothing in this
Article
10 shall impair the claims of, or payments to, the Trustee under
or
pursuant to Section 7.07 hereof.
(b) The Trustee in its individual or any other capacity
may
hold Senior Indebtedness with the same rights it would have if
it
were not Trustee. Any Agent may do the same with like rights.
Section 10.12. Authorization to Effect Subordination.
Each Holder of a Security by his acceptance thereof
authorizes
and directs the Trustee on his behalf to take such action as may
be
necessary or appropriate to effectuate the subordination as
provided in this Article 10, and appoints the Trustee his
attorney-
in-fact for any and all such purposes.
Section 10.13. Miscellaneous.
(a) Each Holder and the Company hereby waives promptness,
diligence, notice of acceptance and any other notice with
respect
to any of the Senior Indebtedness, and any requirement that the
Series A Indenture Trustee, the Software House Indenture Trustee
or
any other holder of Senior Indebtedness protect, secure, perfect
or
insure any security interest or Lien on any property subject
thereto or exhaust any right or take any action against the
Company
or any other Person or any collateral.
(b) The agreement contained in this Article 10 shall
continue
to be effective or be reinstated, as the case may be, if at any
time any payment of any of the Senior Indebtedness is rescinded
or
must otherwise by returned by any holder of Senior Indebtedness
upon the insolvency, bankruptcy or reorganization of the Company
or
otherwise, all as though such payment had not been made.
(c) The Trustee shall notify the Series A Indenture
Trustee
and the Software House Indenture Trustee of the existence of any
Default or Event of Default under Section 6.01, promptly after
becoming aware thereof.
(d) Each Holder by accepting a Security agrees, so long as
Indebtedness is outstanding under either the Series A Indenture
or
the Software House Indenture, not to compromise, release,
forgive
or otherwise discharge the obligations of the Company with
respect
to his Security without the prior written consent of the Series
A
Indenture Trustee or the Software House Indenture Trustee, as
the
case may be.
(e) Unless and until written notice shall be given by the
Company and the Series A Indenture Trustee, or by the Company
and
the Software House Indenture Trustee, to the Trustee at its
Corporate Trust Office notifying the Trustee that Indebtedness
is
no longer outstanding under the Series A Indenture or the
Software
House Indenture, as the case may be, the Trustee shall assume
that
such Indebtedness is outstanding. The Company agrees to give,
and
to cause each of the Series A Indenture Trustee and the Software
House Indenture Trustee to give, such notice to the Trustee
promptly after the first date on which no Indebtedness shall be
outstanding under the Series A Indenture or the Software House
Indenture, as the case may be. For the purposes of this
Indenture,
Indebtedness shall be outstanding under the Series A Indenture
or
the Software House Indenture whenever such Indebtedness shall
not
have been paid in full.
ARTICLE 11
COLLATERAL
Section 11.01. Pledge of Collateral.
(a) The Company 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 Agreement
for the benefit of the Holders of Securities and the Trustee,
subject to the terms of the Intercreditor Agreement. Subject
always to the provisions of Section 3.09, 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 according to the terms
hereunder or thereunder (and at the rate set forth therein), and
payment of all other obligations of the Company 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 Agreement, subject to the terms of the Intercreditor
Agreement. At the time the Pledge Agreement was executed, the
Company 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 Agreement, free and clear
of
all liens, pledges, charges and encumbrances whatsoever, except
the
liens created by the Pledge Agreement, the Series A SellCo
Pledge
Agreement, and the Software House SellCo Pledge Agreement, and
except to the extent otherwise provided therein, (a) shall
forever
warrant and defend the 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 Agreement 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
Agreement creates a direct and valid lien on the property
constituting the Collateral, as set forth therein. To the
extent
applicable, the Pledge Agreement 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 its
Subsidiaries of any proceeds from an Asset Sale (other than (i)
Net
Cash Proceeds used for the redemption of (A) Securities pursuant
to
Section 3.08, or (B) Series A Notes or Software House Notes
pursuant to the Series A Indenture or the Software House
Indenture,
respectively, 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 Senior Lienor (as defined in the Intercreditor Agreement),
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
11.01(b) shall be subject to any Lien in such Collateral granted
to
the Series A Indenture Trustee and the Software House Indenture
Trustee pursuant to any "Collateral Document" (as defined in the
Series A Indenture and the Software House Indenture).
Section 11.02. Recording, Etc.
(a) The Company has duly delivered the Collateral to the
Series A Indenture Trustee, as bailee, together with appropriate
stock powers therefor and assignments thereof, duly executed in
blank. In addition, the Company has caused, at its own expense,
the Pledge Agreement, 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 Agreement 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 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
Agreement, 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 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 shall furnish to the Trustee, within 30
days
after [________] in each year beginning with [________], 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,
filing,
re-recording, re-registering and refiling of the Indenture, all
supplemental indentures, financing statements, continuation
statements and all other instruments of further assurance as is
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 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
to
so 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 11.03. Suits to Protect the Collateral.
Subject to the terms of the Intercreditor Agreement, the
Trustee shall have power to institute and to maintain such suits
and proceedings as it may deem expedient to prevent any
impairment
of the Collateral by any acts which may be unlawful or in
violation
of the any Collateral Document 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 Holders 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 11.04. 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,
subject to the terms of the Intercreditor Agreement.
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 the Company or the
Trustee
to the other is duly given if in writing and delivered in person
or
mailed by first-class mail (registered or certified, return
receipt
requested), telex, telecopier or overnight air courier
guarantying
next day delivery, to the other's address:
If to the Company:
SellCo Corporation
c/o JWP INC.
Six International Drive
Rye Brook, New York 10573-1058
Attention: President
Telecopier No.: (914) 935-4177
If to the Trustee:
Shawmut Bank Connecticut
National Association
777 Main Street
Hartford, Connecticut 06115
Attention: [_________________]
Telecopier No.: [____________]
(b) The Company or the Trustee by notice to the other 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).
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 hereof) 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
ac-
tion 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 hereof) 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 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, a Sunday or a 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. 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
SELLCO CORPORATION
By:______________________________
Title:
Attest:
(SEAL)
SHAWMUT BANK CONNECTICUT NATIONAL
ASSOCIATION
as Trustee
By:______________________________
Title:
Attest:
(SEAL)
<PAGE>
EXHIBIT A
(Face of Securities)
No.
SELLCO CORPORATION
12% Subordinated Contingent Payment Notes Due 2004
SELLCO CORPORATION, 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 [___________ __], 2004 as set forth
herein, subject always to the provisions of paragraph 7
herein.
Interest Payment Dates: March __ and September __
Record Dates: March __ and September __
SELLCO CORPORATION
By:
Title:
[SEAL]
By:
Title:
Dated:
Certificate of Authentication: This is one
of the Securities referred to in the
within-mentioned Indenture.
SHAWMUT BANK CONNECTICUT NATIONAL ASSOCIATION,
as Trustee
By:
Authorized Officer
<PAGE>
(Back of Securities)
SELLCO CORPORATION
12% Subordinated Contingent Payment Notes Due 2004
1. Interest. SellCo Corporation, 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 12.0% 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
semi-
annually in arrears on each [_______] and [_______] to the
holders
of record of this Security ("Holders") at the close of business
on
the [_______] and [_______] next preceding the interest payment
date, commencing [_______], 1994. Interest shall initially
accrue
from the date of issuance of this Security, and the first
interest
payment date will be [_______], 1994. 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.
However, the Company may 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 may, at its option, pay cash to any
Holder
to the extent necessary to avoid issuing Interest Deferral
Securities in denominations which are not integral multiples of
$1,000. 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. Shawmut Bank Connecticut
National Association, 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 [_____________ __], 1994 (the "Indenture")
between the Company 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 $50,000,000 in initial aggregate principal amount.
5. Optional Redemption. After the payment in full of all
Indebtedness outstanding under the Series A Notes and the
Software
House Notes, the Company may redeem all or any of the
Securities,
at the redemption price of 100% of the principal amount thereof
plus accrued but unpaid interest to the redemption date.
6. Mandatory Redemption in Certain Instances. After (i)
the
payment in full of all Indebtedness outstanding under the Series
A
Notes and the Software House Notes, and (ii) the establishment
of
the Tax Reserve, 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, 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.
Subject to certain exceptions set forth in the Indenture,
after (i) the payment in full of all Indebtedness outstanding
under
the Series A Notes and the Software House Notes, and (ii) the
establishment of the Tax Reserve, concurrently with the receipt
by
any Subsidiary of the Company 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 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.
7. Automatic Redemption. If any Securities remain
outstanding at any time at which the total assets of the Company
and its Subsidiaries, on a consolidated basis, are less than
$250,000, then, upon written notice to the Trustee by the
Company
to such effect, such Securities shall, without any payment or
further action on the part of the Company, any of its
Subsidiaries,
or any other Person, be deemed to have been redeemed and
cancelled
and no longer an obligation of the Company.
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. Securities in
denominations
larger than $1,000 may be redeemed in part but only in whole
multi-
ples 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 $1,000, in
the
case of Payment Securities, and $100, in the case of Interest
Deferral Securities, 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 documents 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 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 provide 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 the Company
after notice to it to comply with certain of its agreements in
the
Indenture, the Securities or the Intercreditor Agreement;
failure
by the Company for 30 days after notice to it to comply with any
of
its other agreements in the Indenture, the Securities or certain
other agreements; certain events of bankruptcy or insolvency;
and
the invalidity, unenforceability or diminished priority of the
Liens on the Collateral under the any Collateral Document. 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. Subordination. The Securities are subordinated to
Senior
Indebtedness (as defined in the Indenture), which includes (a)
the
Indebtedness of the Company arising under its guaranty of the
Indebtedness of JWP under the Series A Notes and the Series A
Indenture and all Obligations with respect thereto, and (b) the
Indebtedness of the Company arising under its guaranty of the
Indebtedness of JWP under the Software House Notes and the
Software
House Indenture and all Obligations with respect thereto, and
all
renewals, extensions or refundings thereof, except any
Indebtedness
of the Company to any of its Subsidiaries. To the extent
provided
in the Indenture, Senior Indebtedness must be paid in full
before
any payment on the Securities may be made. The Company agrees,
and
each Holder by accepting a Security agrees, to the subordination
provided in the Indenture and authorizes the Trustee to give it
effect.
14. Collateral. The obligations of the Company 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.
15. 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.
16. Trustee Dealings with Company. The Trustee, in its
individual or any other capacity, may make loans to, accept
deposits from, and perform services for the Company or its
Affiliates, and may otherwise deal with the Company or its
Affiliates, as if it were not Trustee.
17. Authentication. This Security shall not be valid
until
authenticated by the manual signature of the Trustee or an
authenticating agent.
18. 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.)
19. 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.
20. 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 representation is
made
as to the accuracy of such numbers either as printed on the
Securities or as contained in any notice of redemption and
reliance
may be placed only on the other identification numbers placed
here-
on.
The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture. Request may be made
to: SellCo Corporation, c/o JWP INC., Six International Drive,
Rye
Brook, New York 10573-1058, Attention: Secretary.
<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>
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 Deemed 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.*
</TABLE>
- ------
* 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.
<TABLE>
Class 3 - Old Credit Agreement Holders Claims
<CAPTION>
Treatment
(Impaired)
Class 3 Vote
Solicited
- ---------------------------------------------------
- ---------------------------------------------------
<S> <C>
(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.*
</TABLE>
- ------
* 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.
<TABLE>
<CAPTION>
Class 4 - General Unsecured Claims
Class 4 Treatment
- -------------------------------------------------
- ----------------------
<S> <C>
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.
</TABLE>
<TABLE>
<CAPTION>
Class 6 - Subordinated Debt Claims
Treatment
(Impaired)
Class 6 Vote
Solicited
- --------------------------------------------------
- --------------------------------------------------------
<S> <C>
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."
</TABLE>
<TABLE>
<CAPTION>
Class 9 - Old Common Stock and Certain Related Interests
Treatment
<S> <C>
(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 $17.31
=========== =========== =============== ===============
=========
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 Accrued
Accrued 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
400.5 428.7 435.7
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 $713.4
========= ========
======== ======== ========
</TABLE>
See accompanying "Notes To Estimated Pro Forma Consolidated
Balance Sheet" and "Projected Financial Information: 1994-1997
Assumptions."
JWP INC.
PROJECTED CONSOLIDATED INCOME STATEMENTS
(unaudited)
<TABLE>
<CAPTION>
(for the
twelve
months ended)
- ---------------------------------------
12/31/94 12/31/95
12/31/96 12/31/97
--------- ---------
- --------- ---------
($
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 $28.1
========= =========
========= =========
</TABLE>
JWP INC.
PROJECTED CONSOLIDATED STATEMENTS OF CASH
FLOW
(unaudited)
<TABLE>
<CAPTION>
(for the
twelve
months ended)
- ---------------------------------------
12/31/94 12/31/95
12/31/96 12/31/97
--------- ---------
- --------- ---------
($
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 Market
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
United
Kingdom/
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
1-7
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.
1-8
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
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>
1-25
<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
3-1
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.
4-10
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.
4-11
<TABLE>
<CAPTION>
JWP INC. and Subsidiaries Consolidated Statements of Operations
(unaudited) (In
thousands, except per share data)
<S> <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.
4-12
<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.
4-13
<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.
4-14JWP 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.
4-17
<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
======= ========
4-18
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>
4-22
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>
4-23
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
deducted 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.
4-31
(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>
4-32
<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
4-33
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.
4-45
<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.
4-46
<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.
4-47
<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.
4-48
</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 Retained
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.
4-49
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>
4-51
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.
4-52
<TABLE>
<CAPTION>
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.
<S> <C> <C>
<C> <C> <C>
Other Accrued Other Long-
Accounts Debt in
Expenses and term
Payable Default
Liabilities Obligations Total
-------- --------
- ------------- ----------- --------
(In Thousands)
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.
4-53
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>
<S> <C> <C>
Year Ended
December 31,
- ---------------------
1993 1992
---------
- -----------
(In thousands)
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.
4-58
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 outstand-
ing, 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.
4-59
<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.
4-61
<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.
4-62
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
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 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.
4-64
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% 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>
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
=============
5-1
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.
5-2
<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.
