SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM T-3
FOR APPLICATIONS FOR QUALIFICATION OF INDENTURES UNDER THE
TRUST INDENTURE ACT OF 1939
Reeves, Inc.
(Name of applicant)
101 Merritt, 7 Corporation Park, 2nd Floor, Norwalk, CT 06586
(Address of principal executive offices)
SECURITIES TO BE ISSUED UNDER THE INDENTURE TO BE QUALIFIED
TITLE OF CLASS AMOUNT
13% Senior Notes due November 15, 2004 $73,004,723
Approximate date of issuance: March 23, 1998
Name and address of agent for service: Robert F. Ivey, Esq.
Reeves, Inc.
101 Merritt, 7
Corporation Park
2nd Floor
Norwalk, Connecticut
06586
(203) 846-9988
With a copy to:
Alan B. Hyman, Esq.
Proskauer Rose LLP
1585 Broadway
New York, New York
10036-8299
(212) 969-3000
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 Trust Indenture Act of 1939, as amended (the
"Act"), may determine upon the written request of the applicant.
GENERAL
1. General information. Furnish the following as to the
applicant:
(a) Form or 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.
Reeves, Inc., a Delaware corporation (the "Company"),
proposes to issue, as part of the Amended Joint Plan of
Reorganization of Reeves Industries, Inc. (the "Debtor") and the
Company, dated January 12, 1998, as modified (the "Plan of
Reorganization"), its Senior Notes due November 15, 2004 (the
"Senior Notes"). The Plan of Reorganization also provides for
the issuance of New Senior Notes by the Debtor due November 15,
2002 (the "Debtor Notes"). Pursuant to the Plan of
Reorganization, Old Senior Notes ("Old Senior Notes") and Old
Subordinated Debentures ("Old Subordinated Debentures") will be
exchanged for the Senior Notes, Debtor Notes and common stock of
the Company. The United States Bankruptcy Court for the Southern
District of New York (the "Bankruptcy Court") approved a Second
Amended Disclosure Statement (the "Disclosure Statement") as
containing "adequate information" for the purpose of soliciting
votes of holders of claims or stock interests in the Debtor for
acceptance or rejection of the Plan of Reorganization (Case No.
97 B 47727 (PCB)). At a hearing held on March 10, 1998, the
Bankruptcy Court confirmed the Plan of Reorganization. A copy of
the Disclosure Statement, with the Plan of Reorganization annexed
thereto as an exhibit, is attached hereto as Exhibit T3E. The
Senior Notes are to be issued under an indenture (the "Senior
Note Indenture") between the Company, the hypothecators named
therein and First Trust National Association, a form of which is
attached hereto as Exhibit T3C.
The Company believes that the issuance of the Senior Notes
is exempt from the registration requirements of the Securities
Act of 1933 (the "Securities Act") pursuant to Section 1145(a)(1)
of the United States Bankruptcy Code (the "Bankruptcy Code").
Generally, Section 1145(a)(1) of the Bankruptcy Code exempts the
issuance of securities from the registration requirements of the
Securities Act and equivalent state securities and "blue sky"
laws if the following conditions are satisfied: (i) the
securities are issued by a debtor, an affiliate participating in
a joint plan of reorganization with the debtor, or a successor of
the debtor under a plan of reorganization, (ii) the recipients of
the securities hold a claim against, an interest in, or a claim
for an administrative expense against, the debtor, and (iii) the
securities are issued entirely in exchange for the recipient's
claim against or interest in the debtor, or are issued
"principally" in such exchange and "partly" for cash or property.
The Company believes that the issuance of securities contemplated
by the Plan of Reorganization will satisfy the aforementioned
requirements.
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.
The following diagram sets forth the relationship among the
Company and all of its affiliates, including their respective
percentages of voting securities, as of March 10, 1998.
Harts1,2
(100%)
The Company
(100%)
Reeves Industries
Inc.
(100%)
Europe Reeves B.V. (100%)
Reeves Brothers, Inc.
(100%) (100%)
ARA Manufacturing
Reeves Penna, Inc. Company, Inc.
(99%) (1%)
The Reeves Company
LLC
(99.998%) (.002%)
(Reeves S.p.A.)
The following diagram sets forth the relationship among the
Company and all of its affiliates, including their respective
percentages of voting securities, upon the effectiveness of the
Plan of Reorganization (the "Effective Date).
Harts3,4 Bondholders5
(75%) 25%
The Company
(100%)
Reeves Industries
Inc.
(100%)
Europe Reeves B.V. (100%)
Reeves Brothers, Inc.
(100%) (100%)
ARA Manufacturing
Reeves Penna, Inc. Company, Inc.
(99%) (1%)
The Reeves Company
LLC
(99.998%) (.002%)
(Reeves S.p.A.)
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.
Except as otherwise noted below, the address for each
director and executive officer listed below is 101 Merritt, 7
Corporation Park, 2nd Floor, Norwalk, CT 06586.
NAME OFFICE
James W. Hart Chairman and Director
James W. Hart, Jr. Director, President and
Chief Executive Officer
Douglas B. Hart Director, Executive Vice
President and Chief
Operating Officer
Robert F. Ivey Vice President, General
Counsel and Secretary
Gary Linduff Vice President and Chief
Financial Officer
Donald R. Miller Senior Vice President
Patrick M. Walsh Vice President-
Administration
Brian Berman6 Director
5. Principal owners of voting securities. Furnish the
following information as to each person owning 10 percent or more
of the voting securities of the applicant.
As of March 10, 1998 (Insert date within 31 days)
NAME AND PERCENTAGE
COMPLETE TITLE OF OF VOTING
MAILING CLASS AMOUNT SECURITIES
ADDRESS OWNED OWNED OWNED
James W. Hart, Jr. Common Stock 312,750 sh 41.70%
101 Merritt
7 Corporation Park
2nd Floor
Norwalk, CT 06586
Douglas B. Hart Common Stock 272,250 sh 36.70%
101 Merritt
7 Corporation Park
2nd Floor
Norwalk, CT 06586
Jennifer Fray Common Stock 154,500 sh 20.60%
16 Spicewood Road
Wilton, CT 06897
As of the effectiveness of the Plan of Reorganization
NAME AND PERCENTAGE
COMPLETE TITLE OF OF VOTING
MAILING CLASS AMOUNT SECURITIES
ADDRESS OWNED OWNED OWNED
James W. Hart, Jr. Class A
101 Merritt Common Stock 312,750 sh 31.30%
7 Corporation Park
2nd Floor
Norwalk, CT 06586
Douglas B. Hart Class A
101 Merritt Common Stock 272,250 sh 27.50%
7 Corporation Park
2nd Floor
Norwalk, CT 06586
Class A Common Stock
Jennifer Fray Class A
16 Spicewood Road Common Stock 154,500 sh 15.40%
Wilton, CT 06897
Oaktree Capital Class B
Management LLC Common Stock 158,898 sh 15.90%
550 South Hope Street
22nd Floor
Los Angeles, CA 90071
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) None.
(b) None.
CAPITAL SECURITIES
7. Capitalization. (a) Furnish the following information
as to each authorized class of securities of the applicant.
As of March 10, 1998 (Insert date within 31 days)
TITLE OF CLASS AMOUNT AUTHORIZED AMOUNT OUTSTANDING
Common Stock, par value
.001 per share 1,000,000 sh 750,000 sh
As of the Effective Date of the Plan of Reorganization
TITLE OF CLASS AMOUNT AUTHORIZED AMOUNT OUTSTANDING
Class A Common Stock,
par value $.01 per share 1,000,000 sh 750,000 sh
Class B Common Stock,
par value $.01 per share 2,000,000 sh 250,000 sh
Senior Notes due 2002 $73,004,723 $73,004,723
(b) Give a brief outline of the voting rights of each class
of voting securities referred to in paragraph (a) above.
Each outstanding share of the Company's existing Common
Stock and new Class A and Class B Common Stock has or will have,
as applicable, one vote with respect to all matters subject to
common stockholder vote.
Holders of the Senior Notes due 2004 do not have any voting
rights by reason of ownership of those securities.
INDENTURE SECURITIES
8. Analysis of indenture provisions. Insert at this point
the analysis of indenture provisions required under section
305(a)(2) of the Act.7
(A) Events of Default and Notice of Default.
The following are Events of Default under the Indenture:
(i) failure by the Company to pay interest on the
Notes for 30 days after becoming due;
(ii) failure by the Company to pay the principal of or
premium (if any) on the Notes, whether at maturity or upon
acceleration, redemption or otherwise (including the failure to
repurchase the Notes tendered pursuant to a Change of Control
Offer or an Asset Sale Offer);
(iii) failure by the Company or any of its
Subsidiaries to comply with the provisions of Section 4.8, 4.9 or
5.1 of the Indenture;
(iv) the failure of the Company to comply with any of
its covenants or the breach by the Company of any of its
representations or warranties in any material respect under the
Restructuring Agreement as of the Additional Interest Calculation
Date or failure by the Company or any of its Subsidiaries to
comply with any of its covenants or the breach by the Company or
any of its Subsidiaries of any of its representations or
warranties in any material respect under the Indenture (other
than a breach of a covenant, representation or warranty which is
specifically provided for elsewhere in Section 6.1 of the
Indenture) for 30 days after written notice specifying the
failure and that the same is a Default shall have been given to
the Company by the Trustee or Holders of 25% in principal amount
of the Notes outstanding;
(v) default or defaults, including a payment default
(after giving effect to all applicable grace periods), under one
or more agreements, instruments, mortgages, bonds, debentures or
other evidences of Indebtedness under which the Company or any of
its Subsidiaries has an aggregate outstanding principal amount of
Indebtedness in excess of $5 million for all such issues of all
such Persons and either (x) such Indebtedness is already due and
payable in full or (y) such default or defaults have resulted in
the acceleration of the maturity of such Indebtedness;
(vi) any final judgment or order (not covered by
insurance) is entered against the Company or any Subsidiary in
excess of $5 million either individually or in the aggregate for
all such final judgments or orders against all such Persons and
remains undischarged or unstayed for 60 days;
(vii) the Company or any of its Subsidiaries
pursuant to or within the meaning of any Bankruptcy Law:
(a) commences a voluntary case or proceeding,
(b) consents to the entry of a judgment, decree
or order for relief against it in an involuntary case or
proceeding,
(c) consents to the appointment of a Custodian of
it or for all or substantially all of its property,
(d) consents to the institution of a bankruptcy
or an insolvency proceeding against it,
(e) makes a general assignment for the benefit of
its creditors,
(f) takes any corporate action to authorize or
effect any of the foregoing, or
(g) generally is not able to pay its debts as
they become due;
(viii) a court of competent jurisdiction enters a
judgment, decree or order under any Bankruptcy Law that is for
relief against the Company or any Significant Subsidiary of the
Company, in an involuntary case or proceeding which shall:
(a) approve a petition seeking reorganization,
arrangement, adjustment or composition in respect of the Company
or any Subsidiary of the Company,
(b) appoint a Custodian for the Company or any
Subsidiary of the Company or for all or substantially all of the
property of any of them, or
(c) order the winding-up or liquidation of the
Company or any Subsidiary of the Company, and in each case the
judgment, order or decree remains unstayed and in effect for 60
days;
(ix) failure by an Hypothecator to comply
with any of its covenants or the breach by any Hypothecator of
any of its representations or warranties under the Non-Recourse
Pledge Agreement for 30 days (or for six months only with respect
to Section 4(b) of the Non-Recourse Pledge Agreement) after
written notice specifying the failure and that the same is a
Default shall have been given to the Company by the Trustee or
Holders of 25% in principal amount of the Notes outstanding; or
(x) any Lien granted or purported to be
granted pursuant to the Non-Recourse Pledge Agreement shall be or
become unenforceable or invalid, or the priority thereof shall
become diminished, or any Hypothecator shall contest or disaffirm
any such Lien.
If a Default or an Event of Default occurs and is continuing
and if it is known to a Responsible Officer of the Trustee, the
Trustee shall mail to Holders a notice of the Default or Event of
Default within 90 days after it occurs. Except in the case of a
Default or Event of Default in the payment of principal, premium,
if any, or interest on a Note, the Trustee may withhold the
notice if and so long as a committee of its Responsible Officers
in good faith determines that withholding the notice is in the
interests of the Holders.
(B) Authentication and Delivery of the Notes and the
Application of Proceeds Thereof.
A Note shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive
evidence that the Note has been authenticated under the
Indenture. The Trustee shall, upon receipt of a Company Order,
authenticate Notes for original issue in the aggregate principal
amount of $73,004,723. The Trustee may appoint an authenticating
agent acceptable to the Company to authenticate the Notes. An
authenticating agent may authenticate the Notes whenever the
Trustee may do so. Each reference in the 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.
On the Issue Date, the Notes shall be initially issued in
the form of one or more permanent global Notes, in registered
form, deposited with the Trustee, as custodian for the
Depository.
There will be no proceeds from the issuance of the Notes
because the Notes will be issued, as part of an exchange, as
provided in the Plan.
(C) Release of Property Subject to the Lien of the
Indenture.
The Company's obligations under the Notes issued under the
Indenture are not secured by any liens or security interests on
any assets of the Company. The obligations of the Company to pay
Additional Interest are secured by the non-recourse pledge by the
Hypothecators of the Pledged Collateral.
(D) Satisfaction and Discharge of Indenture.
The Indenture shall cease to be of further effect (except
that the Company's obligations under Section 7.7 and the
Company's, the Trustee's and any Paying Agent's obligations under
Section 8.6 of the Indenture shall survive) when all outstanding
Notes theretofore authenticated and issued have been delivered
(other than destroyed, lost or stolen Notes that have been
replaced or paid) to the Trustee for cancellation and the Company
has paid all sums payable under the Indenture.
In addition, the Company shall be deemed to have been
discharged from its obligations, with certain specified
exceptions, with respect to all outstanding Notes under the
following circumstances:
(i) the Company must irrevocably deposit or cause to
be deposited with the Trustee or with a trustee satisfactory to
the Trustee and the Company under the terms of an irrevocable
trust agreement in form and substance reasonably satisfactory to
the Trustee, in trust, for the benefit of the Holders of the
Notes, (A) cash in United States dollars or (B) Government
Securities maturing as to principal and interest in such amounts
and at such times, or (C) a combination thereof, in each case, in
such amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants, to
pay the principal of, premium, if any, and interest on the
outstanding Notes on the stated date for payment thereof or on
the applicable redemption date, as the case may be, of such
principal or installment of principal of, premium, if any, or
interest on the outstanding Notes;
(ii) in the case of an election under Section 8.2 of
the Indenture, the Company shall have delivered to the Trustee an
Opinion of Counsel in the United States acceptable to the Trustee
confirming that (A) the Company has received from, or there has
been published by, the Internal Revenue Service a ruling or (B)
since the date of the Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect
that the Holders of the outstanding Notes will not recognize
income, gain or loss for federal income tax purposes as a result
of such Legal Defeasance and will be subject to federal income
tax on the same amounts, in the same manner and at the same times
as would have been the case if such Legal Defeasance had not
occurred;
(iii) in the case of an election under Section 8.3
of the Indenture, the Company shall have delivered to the Trustee
an Opinion of Counsel in the United States acceptable to the
Trustee confirming that the Holders of the outstanding Notes will
not recognize income, gain or loss for federal income tax
purposes as a result of such Covenant Defeasance and will be
subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such
Covenant Defeasance had not occurred;
(iv) no Default or Event of Default shall have occurred
and be continuing (1) on the date of such deposit (other than a
Default or Event of Default resulting from the incurrence of
Indebtedness all or a portion of the proceeds of which will be
used to defease the Notes pursuant to Article Eight of the
Indenture concurrently with such incurrence) or (2) insofar as
Section 6.1(vii) or Section 6.1(viii) of the Indenture is
concerned, at any time during the period ending on the 91st day
after the date of deposit (it being understood that the condition
in this clause (2) is a condition subsequent and shall not be
deemed satisfied until the expiration of such period);
(v) such Legal Defeasance or Covenant Defeasance shall
not result in a breach or violation of, or constitute a default
under, the Indenture or any other material agreement or
instrument to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries is
bound;
(vi) 123 days pass after the deposit is made and during
the 123-day period no Event of Default specified in Section
6.1(vii) or (viii) with respect to the Company occurs which is
continuing at the end of the period;
(vii) the Company shall have delivered to the
Trustee an Officers' Certificate stating that the deposit was not
made by the Company with the intent of defeating, hindering,
delaying or defrauding any actual creditors of the Company;
(viii) the Company shall deliver to the Trustee an
Opinion of Counsel stating that, as a result of such Legal
Defeasance or Covenant Defeasance the trust created hereunder
shall not be required to register as an investment company under,
or otherwise be subject to, the Investment Company Act of 1940,
as amended; and
(ix) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating
that all conditions precedent provided for relating to the Legal
Defeasance or the Covenant Defeasance have been complied with.
(E) Evidence as to Compliance with Conditions and
Covenants.
(i) The Company shall deliver to the Trustee, within
120 days after the end of each fiscal year, a certificate of the
principal executive officer, the principal financial officer or
the principal accounting officer of the Company stating that a
review of the activities of the Company and its Subsidiaries
during the preceding fiscal year has been made under the
supervision of the signing officer with a view to determining
whether the Company has kept, observed, performed and fulfilled
its obligations under the Indenture, and further stating, as to
such officer signing such certificate, that to the best of his or
her knowledge the Company has kept, observed, performed and
fulfilled each and every covenant contained in the Indenture and
is not in default in the performance or observance of any of the
terms, provisions and conditions of the Indenture (or, if a
Default or Event of Default shall have occurred and is pending,
describing all such Defaults or Events of Default of which he or
she may have knowledge and what action the Company is taking or
proposes to take with respect thereto) and that to the best of
his or her knowledge no event has occurred and remains in
existence by reason of which payments on account of the principal
of or interest, if any, on the Notes is prohibited or, if such
event has occurred, a description of the event and what action,
if any, the Company is taking or proposes to take with respect
thereto and listing all redemptions of Notes and Restricted
Payments made during the period covered by the certificate, if
any. For purposes of Section 4.4(a) of the Indenture, such
compliance shall be determined without regard to any grace period
or requirement of notice provided pursuant to the terms of the
Indenture.
(ii) So long as not contrary to the then generally
accepted auditing and accounting standards, the year-end
financial statements delivered pursuant to Section 4.3 (a) above
shall be accompanied by a written statement of the Company's
independent public accountants (who shall be a firm of
established national reputation) that in making the examination
necessary for certification of such financial statements, nothing
has come to their attention that would lead them to believe that
the Company has violated any provisions of Sections 4.1, 4.5,
4.9, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.17, 4.18 or 5.1 of the
Indenture as they relate solely to accounting matters or, if any
such violation has occurred and has come to their attention,
specifying the nature and period of existence 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 such violation. It is specifically understood by all parties
that the accountant's examination is not designed primarily
toward obtaining such knowledge.
(iii) The Company shall, so long as any of the
Notes are outstanding, deliver to the Trustee, promptly, but in
any case within 3 Business Days of any Officer becoming aware of
any Default or Event of Default, an Officers' Certificate
specifying such Default or Event of Default and what action, if
any, the Company is taking or proposes to take with respect
thereto.
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.
See Item 8(C) generally and also Items 4 and 5 for the
addresses of the Hypothecators.
Contents of application for qualification. This application
for qualification comprises
(a) Pages numbered 1 to 11, consecutively.
(b) The statement of eligibility and qualification of each
trustee under the indenture or 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 the Company. The
Certificate of Incorporation will be amended in
connection with the Plan of Reorganization. The
form of Amended and Restated Certificate of
Incorporation of the Company is attached as
Exhibit H to the Disclosure Statement (Exhibit
T3E).
Exhibit T3B. By-Laws of the Company. The By-Laws will be
amended in connection with the Plan of
Reorganization. The form of Restated By-Laws of
the Company is attached as Exhibit H to the
Disclosure Statement (Exhibit T3E).
Exhibit T3C. Form of the Senior Note Indenture between the
Company, the Hypothecators named therein and First
Trust National Association.
Exhibit T3D. Not applicable.
Exhibit T3E. A copy of the Second Amended Disclosure Statement
regarding the Amended Joint Plan of
Reorganization, with certain exhibits thereto.
Exhibit T3F. A cross reference sheet showing the location in
the Senior Note Indenture of the provisions
inserted therein pursuant to Sections 310 through
318(a), inclusive, of the Trust Indenture Act of
1939, included in Exhibit T3C.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of
1939, the applicant, Reeves, Inc., a corporation organized and
existing under the laws of Delaware, has duly caused this
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 city of New York, and State of New York,
on the day of March, 1998.
REEVES, INC.
Attest By /s/ James W. Hart, Jr.
James W. Hart, Jr.
President and Chief Executive
Officer
EXHIBIT T3F
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
(c). . . . . . . . . . . . . . . . . N.A.
311(a) . . . . . . . . . . . . . . . . 7.11
(b). . . . . . . . . . . . . . . . . 7.11
(c). . . . . . . . . . . . . . . . . N.A.
312(a) . . . . . . . . . . . . . . . . 2.05
(b). . . . . . . . . . . . . . . . . 12.03
(c). . . . . . . . . . . . . . . . . 12.03
313(a) . . . . . . . . . . . . . . . . 7.06
(b)(1) . . . . . . . . . . . . . . . N.A.
(b)(2) . . . . . . . . . . . . . . . 7.06
(c). . . . . . . . . . . . . . . . . 7.06, 12.02
(d). . . . . . . . . . . . . . . . . 7.06
314(a) . . . . . . . . . . . . . . . . 4.03, 4.04, 12.02
(b) . . . . . . . . . . . . . . . . 10.02
(c)(1) . . . . . . . . . . . . . . . 12.04
(c)(2) . . . . . . . . . . . . . . . 12.04
(c)(3) . . . . . . . . . . . . . . . N.A.
(d) . . . . . . . . . . . . . . . . 10.02
(e). . . . . . . . . . . . . . . . . . 12.05
(f). . . . . . . . . . . . . . . . . N.A.
315(a) . . . . . . . . . . . . . . . . 7.01
(b). . . . . . . . . . . . . . . . . 7.05, 12.02
(c). . . . . . . . . . . . . . . . . 7.01
(d). . . . . . . . . . . . . . . . . 7.01
(e). . . . . . . . . . . . . . . . . 6.11
316(a)(last sentence). . . . . . . . . 2.09
(a)(1)(A). . . . . . . . . . . . . . 6.05
(a)(1)(B). . . . . . . . . . . . . . 6.04
(a)(2) . . . . . . . . . . . . . . . N.A.
(b). . . . . . . . . . . . . . . . . 6.07
(c). . . . . . . . . . . . . . . . . 2.12
317(a)(1). . . . . . . . . . . . . . . 6.08
(a)(2) . . . . . . . . . . . . . . . 6.09
(b). . . . . . . . . . . . . . . . . 2.04
318(a) . . . . . . . . . . . . . . . . 12.01
(b). . . . . . . . . . . . . . . . . N.A.
(c). . . . . . . . . . . . . . . . . 12.01
"N.A." means not applicable.
*This Cross-Reference Table is not part of the Indenture.
FOOTNOTE
1. The term "Harts" refers to James W. Hart, James W. Hart, Jr.,
Douglas B. Hart and Jennifer Fray, who own approximately 1%,
41.7%, 36.7% and 20.6%, respectively, of the Company.
2. James W. Hart owns a controlling interest in Fenchurch, Inc.,
a Delaware corporation, which was the parent corporation of the
Company prior to March 10, 1998.
3. The term "Harts" refers to James W. Hart, James W. Hart, Jr.,
Douglas B. Hart and Jennifer Fray, who will own approximately
.8%, 31.3%, 27.5% and 15.4%, respectively, of the Company upon
the effectiveness of the Plan of Reorganization.
4. James W. Hart owns a controlling interest in Fenchurch, Inc.,
a Delaware corporation, which was the parent corporation of the
Company prior to March 10, 1998.
5. The term "Bondholders" refers to the holders of Old Senior
Notes, Old Subordinated Debentures, Senior Notes, and Debtor
Notes.
6. Mr. Berman's address is c/o Oaktree Capital Management LLC,
550 South Hope Street, 22nd Floor, Los Angeles, CA 90071.
7. All capitalized terms used in this Item 8 shall have the same
meaning, unless otherwise defined, as that provided in the Senior
Note Indenture.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
FIRST TRUST NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
36-4046888
(I.R.S. Employer
Identification No.)
111 East Wacker Drive 60601
Suite 3000 (Zip code)
Chicago, Illinois
(Address of principal executive offices)
H. H. HALL, JR.
FIRST TRUST NATIONAL ASSOCIATION
111 East Wacker Drive, Suite 3000
Chicago, Illinois 60601
Telephone (312) 228-9448
(Name, address, and telephone number of agent for service)
REEVES, INC.
(Exact name of obligor as specified in its charter)
Delaware (I.R.S. Employer
(State or other jurisdiction of Identification No.)
incorporation or organization)
401 Merritt 7 Corporation Park 06586
Norwalk, CT (Zip code)
(Address of principal executive offices)
Debt Securities
(Title of 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.
Comptroller of the Currency, Washington, D.C.
(B) Whether it is authorized to exercise corporate trust
powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the Trustee, describe each
such affiliation.
The obligor is not an affiliate of the trustee.
Item 3. Voting Securities of the Trustee.
Furnish the following information as to each class of voting
securities of the Trustee:
As of March 12, 1998
Col. A Col. B
Amount
Title of Class Outstanding
Not applicable by virtue of response to Item 13.
Item 4. Trusteeships under other Indentures.
If the Trustee is a Trustee under another indenture under
which any other securities, or certificates of interest or
participation in any other securities, of the obligor are
outstanding, furnish the following information:
(A) Title of the securities outstanding under each such
other indenture.
Not applicable by virtue of response to Item 13.
(B) A brief statement of the facts relied upon as a basis
for the claim that no conflicting interest within the
meaning of Section 310(b)(1) of the act arises as a
result of the Trusteeship under any such other
indenture, including a statement as to how the
indenture securities will rank as compared with the
securities issued under such other indenture.
Not applicable by virtue of response to Item 13.
Item 5. Interlocking Directorates and Similar Relationships
with the Obligor or Underwriters.
If the Trustee or any of the directors or executive officers
of the Trustee is a director, officer, partner, employee,
appointee, or representative of the obligor or of any underwriter
for the obligor, identify each such person having any such
connection and state the nature of each such connection.
Not applicable by virtue of response to Item 13.
Item 6. Voting Securities of the Trustee owned by the Obligor
or its Officials.
Furnish the following information as to the voting
securities of the Trustee owned beneficially by the obligor and
each director, partner and executive officer of the obligor.
As of March 12, 1998
Col. A Col. B Col. C Col. D
Percentage
Of Voting
Securities
Represented
by Amount
Title of Amount Owned Given in
Name of Owner Class Beneficially Col. C
Not applicable by virtue of response to Item 13.
Item 7. Voting Securities of the Trustee Owned by Underwriters
or Their Officials.
Furnish the following information as to the voting
securiries of the Trustee owned
beneficially by each underwriter for the obligor and each
director, partner, and executive officer
of each such underwriter.
As of March 12, 1998
Col. A Col. B Col. C Col. D
Percentage
Of Voting
Securities
Represented
by Amount
Title of Amount Owned Given in
Name of Owner Class Beneficially Col. C
Not applicable by virtue of response to Item 13.
Item 8. Securities of the Obligor Owned or Held by the Trustee.
Furnish the following information as to securities of the
obligor owned beneficially or held as collateral security for
obligations in default by the Trustee:
As of March 12, 1998
Col. A Col. B Col. C Col. D
Percentage
Of Voting
Securities
Represented
by Amount
Title of Amount Owned Given in
Name of Owner Class Beneficially Col. C
Not applicable by virtue of response to Item 13.
Item 9 Securities of Underwriters owned or held by the
Trustees.
If the Trustee owns beneficially or holds as collateral
security for obligations in default
any securities of an underwriter for the obligor, furnish the
following information as to each class
of securities of such underwriter any of which are so owned or
held by the Trustee.
As of March 12, 1998
Col. A Col. B Col. C Col. D
Percentage
Of Voting
Securities
Represented
by Amount
Title of Amount Owned Given in
Name of Owner Class Beneficially Col. C
Not applicable by virtue of response to Item 13.
Item 10. Ownership or Holdings by the Trustee of Voting
Securities of certain
Affiliates or Security Holders of the Obligor.
If the Trustee owns beneficially or holds as collateral
security for obligations in default voting securities of a person
who, to the knowledge of the Trustee (1) owns 10 percent or more
of the voting securities of the obligor or (2) is an affiliate,
other than a subsidiary, of the obligor, furnish the following
information as to the voting securities of such person.
As of March 12, 1998
Col. A Col. B Col. C Col. D
Percentage
Of Voting
Securities
Represented
by Amount
Title of Amount Owned Given in
Name of Owner Class Beneficially Col. C
Not applicable by virtue of response to Item 13.
Item 11. Ownership of Holdings by the Trustee of any securities
of a Person Owning 50 Percent or more of the Voting
Securities of the Obligor.
If the Trustee owns beneficially or holds as collateral
security for obligations in default any securities of a person
who, to the knowledge of the Trustee, owns 50 percent or more of
the voting securities of the obligor, furnish the following
information as to each class of securities of such person any of
which are so owned or held by the Trustee.
As of March 12, 1998
Col. A Col. B Col. C Col. D
Percentage
Of Voting
Securities
Represented
by Amount
Title of Amount Owned Given in
Name of Owner Class Beneficially Col. C
Not applicable by virtue of response to Item 13.
Item 12. Indebtedness of the Obligor to the Trustee.
Except as noted in the instructions, if the obligor is
indebted to the Trustee, furnish the
following information:
As of March 12, 1998
Col. A Col. B Col. C Col. D
Percentage
Of Voting
Securities
Represented
by Amount
Title of Amount Owned Given in
Name of Owner Class Beneficially Col. C
Item 13. Defaults by the Obligor.
(A) State whether there is or has been a default with
respect to the securities under this indenture. Explain the
nature of any such default.
There is not nor has there been a default with respect to
the securities under this
indenture.
(B) If the Trustee is a Trustee under another indenture
under which any other securities, or certificates of interest or
participation in any other securities, of the obligor are
outstanding, or is trustee for more than one outstanding series
of securities under the indenture, state whether there has been a
default under any such indenture or series, identify the
indenture or series affected, and explain the nature of any such
default.
There is not nor has there been a default with respect to
the securities under this indenture. The trustee is not a
trustee under another indenture under which securities are
outstanding.
Item 14. Affiliations with the Underwriters.
If any underwriter is an affiliate of the Trustees, describe
each such affiliation.
Not applicable by virtue of response to Item 13.
Item 15. Foreign Trustee.
Identify the order or rule pursuant to which the foreign
trustee is authorized to act as sole trustee under indentures
qualified or to be qualified under the act.
Not applicable.
Item 16. List of Exhibits.
List below all exhibits filed as a part of this statement of
eligibility.
1. A copy of the Articles of Association of First Trust
National Association as now in effect, incorporated herein by
reference to Exhibit 1 to T-1, Registration No. 333-19025.
2. A copy of the certificate of authority to commence
business, incorporated herein by reference to Exhibit 2 to T-1;
Registration No. 33-64175.
3. A copy of the certificate of authority to exercise
corporate trust powers, incorporated herein by reference to
Exhibit 3 to T-1; Registration No. 33-64175.
4. A copy of the existing By-Laws of First Trust National
Association as now in effect, incorporated herein by reference to
Exhibit 4 to T-1; Registration No. 333-29571.
5. Not applicable by virtue of response to Item 13.
6. The consent of the trustee required by Section 321(b)
of the Trust Indenture Act of 1939, incorporated herein by
reference to Exhibit 6 to T-1; Registration No. 33-64175.
7. A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its supervising
or examining authority, filed herewith.
8. No applicable.
9. Not applicable.<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of
1939, the Trustee, First Trust National Association, a National
Banking Association organized and existing under the laws of the
United States of America, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned
thereunto duly authorized, all in the City of Chicago, and State
of Illinois, as of the 12th day of March, 1998.
First Trust National Association
By: /s/ H. H. HALL, JR.
H. H. Hall, Jr.
Vice President and Assistant
Secretary
Consolidated Report of Condition for Insured Commercial and
State-Chartered Savings Banks for December 31, 1997
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
Dollar Amounts in Thousands
ASSETS
1. Cash and balances due
from depository institutions
(from Schedule RC-A): RCON
a. Noninterest-bearing balances
and currency and coin (1) 0081 55,536 l.a
b. Interest-bearing balances (2) 0071 0 l.b
2. Securities:
a. Held-to-maturity securities
(from Schedule RC-B, column A) 1754 0 2.a
b. Available-for-sale securities 1773 3,216 2.b
(from Schedule RC-B, column D) 1773
3. Federal funds sold and securities
purchased under agreements to
resell 1350 0 4.d
4. Loans and lease financing receivables:
a. Loans and leases, net of
unearned income RCON
(from Schedule RC-C) 2122 0 4.a
b. LESS: Allowance for loan
and lease losses 3123 0 4.b
c. LESS: Allocated transfer
risk reserve 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 0 4.d
5. Trading assets 3545 0 5
6. Premises and fixed assets
(including capitalized leases) 2145 95 6
7. Other real estate owned
(from Schedule RC-M) 2150 0 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 0 9
10. Intangible assets
(from Schedule RC-M) 2143 48,072 10
11. Other assets (from
Schedule RC-F) 2160 2,435 11
12. Total assets
(sum of items 1 through 11) 2170 109,354 12
__________________
(1) Includes cash items in process of collection and unposted
debits.
(2) Includes time certificates of deposit not held for trading.
Schedule RC - Continued Dollar Amounts in Thousands
LIABILITIES
13. Deposits:
a. In domestic offices
(sum of totals of columns
A and C from Schedule RC-E)
RCON
(1) Noninterest-bearing (1) 6631 0
(2) Interest-bearing 6636 0
b. In foreign offices, Edge and Agreement subsidiaries,
and IBFs
(1) Noninterest-bearing
(2) Interest-bearing
14. Federal funds purchased and
securities sold under
agreements to repurchase 2800 0
15. a. Demand notes issued
to the U.S. Treasury 2840 0
b. Trading liabilities 3548 0
16. Other borrowed money
(includes mortgage
indebtedness and obligations
under
capitalized leases):
a. With a remaining
maturity of one year or less 2332 0
b. With a remaining maturity
of more than one year through
three years A548 0
c. With a remaining maturity
of more than three years A48 0
17. Not applicable
18. Bank's liability on
acceptances executed
and outstanding 2920 0
19. Subordinated notes
and debentures (2) 3200 0
20. Other liabilities
(from Schedule RC-G) 2930 0
21. Total liabilities
(sum of items 13 through 20) 2948 2,072
22. Not applicable
EQUITY CAPITAL
23. Perpetual preferred stock
and related surplus 3838 0
24. Common stock 3230 1,000
25. Surplus (exclude all surplus
related to preferred stock) 3839 106,712
26. a. Undivided profits and
capital reserves 3632 (430)
b. Net unrealized holding
gains (losses) on available-
for-sale securities 8434 0
27. Cumulative foreign currency
translation adjustments
28. Total equity capital (sum of
items 23 through 27) 3210 107,282
29. Total liabilities and equity
capital (sum of items 21 and 28) 3300 109,354
Memorandum
To be reported only with the March Report of Condition.
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 auditors as of any date during 1996
6724 . . . . . N/A M.1
1 = Independent audit of the bank conducted 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)<PAGE>
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<PAGE>
__________________
(1) Includes total demand deposits and noninterest-bearing time
and savings deposits.
(2) Includes limited life preferred stock and related surplus.
Schedule RC-A - Cash and Balances Due From Depository
Institutions
Exclude assets held for trading.
Dollar Amounts in Thousands
1. Cash items in process of ROCN
collection, unposted debits,
and currency and coin:
a. Cash items in process of
collection and unposted debits 0020 0 1.a
b. Currency and coin 0080 0 1.b
2. Balances due from depository
institutions in the U.S.:
a. U.S. branches and agencies
of foreign banks 0083 0 2.a
b. Other commercial banks in
the U.S. and other depository
institutions in the U.S. 0085 55,536 2.b
3. Balances due from banks in
foreign countries and foreign
central banks:
a. Foreign branches of other
U.S. banks 0073 0 3.a
b. Other banks in foreign
countries and foreign
central banks 0074 0 3.b
4. Balances due from Federal
Reserve Banks 0090 0 4
5. Total (sum of items 1 through 4)
(must equal Schedule RC, sum of
items 1.a and 1.b) 0010 55,536 5
Memorandum
Dollar Amounts in Thousands
1. Noninterest-bearing balances ROCN
due from commercial banks in
the U.S. (included in items 2.a
and 2.b above) 0050 55,536 M.1
Exhibit T3A
CERTIFICATE OF INCORPORATION
OF
REEVES HOLDINGS, INC.
I, the undersigned, for the purposes of incorporating and
organizing a corporation under the General Corporation Law of the
State of Delaware, do execute this Certificate of Incorporation
and do hereby certify, as follows:
FIRST. The name of the corporation is REEVES HOLDINGS, INC.
SECOND. The address of the corporation's registered office
in the State of Delaware is Corporation Trust Center, 1209 Orange
Street, in the City of Wilmington, County of New Castle. The
name of its registered agent at such address is The Corporation
Trust Company.
THIRD. The purpose of the corporation is 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 such shares are to be Common Stock, par value of
one-tenth of one cent ($0.001) per share and are to be of one
class.
FIFTH. The incorporator of the corporation is Robert F.
Ivey, whose mailing address is c/o Reeves Industries, Inc., 401
Merritt 7, P.O. Box 5063, Norwalk, Connecticut 06856-5063.
SIXTH. Unless and except to the extent that the by-laws
of the corporation shall so require, the election of directors of
the corporation need not be by written ballot.
SEVENTH. In furtherance and not in limitation of the powers
conferred by the laws of the State of Delaware, the Board of
Directors of the corporation is expressly authorized to make,
alter and repeal the by-laws of the corporation, subject to the
power of the stockholders of the corporation to alter or repeal
any by-law whether adopted by them or otherwise.
EIGHTH. A director of the corporation shall not be liable
to the corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, except to the extent
such exemption from liability or limitation thereof is not
permitted under the General Corporation Law of the State of
Delaware as the same exists or may hereafter be amended. Any
amendment, modification or repeal of the foregoing sentence shall
not adversely affect any right or protection of a director of the
corporation hereunder in respect of any act or omission occurring
prior to the time of such amendment, modification or repeal.
NINTH. The corporation reserves the right at any time,
and from time to time, to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, and
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 prescribed by law; 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 hereafter
amended are granted subject to the rights reserved in this
article.
TENTH. The powers of the incorporator are to terminate
upon filing of this Certificate of Incorporation. The name and
mailing address of the person who is to serve as the initial
director of the corporation until the first annual meeting of the
stockholders of the corporation, or until his successor is
elected and qualified is: James W. Hart, c/ Reeves Industries,
Inc., 401 Merritt 7, P.O. Box 5063, Norwalk, Connecticut
06856-5063.
The undersigned incorporator hereby acknowledges that the
foregoing certificate of incorporation is his act and deed on
this 16th day of July, 1997.
Robert F. Ivey
Incorporator
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
* * * * * * * * * * * * * *
REEVES HOLDINGS, INC., a corporation organized and existing
under and by virtue of the General Corporation Law of the State
of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation adopted
a resolution proposing and declaring it advisable that
ARTICLE FIRST of the Certificate of Incorporation of
said corporation be amended to read in full as follows:
"FIRST: The name of the corporation is Reeves, Inc."
SECOND: That in lieu of a meeting and vote of stockholders, the
holder of all of the common stock entitled to vote
thereon has given written consent to said amendment in
accordance with the provisions of Section 228 of the
General Corporation Law of the State of Delaware.
THIRD: That the aforesaid amendment was duly adopted in
accordance with the applicable provisions of Sections
242 and 228 of the General Corporation Law of the State
of Delaware.
IN WITNESS WHEREOF, said Reeves Holdings, Inc. has caused
this Certificate to be signed by Robert F. Ivey, its Secretary,
this 25th day of September, 1997.
Reeves Holdings, Inc.
By:
Robert F. Ivey
Secretary
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
* * * * * * * * * * * * * *
REEVES, INC., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation adopted
a resolution proposing and declaring it advisable that
ARTICLE FOURTH of the Certificate of Incorporation of
said corporation be amended to read in full as follows:
"FOURTH: The total number of shares of stock which the
corporation shall have authority to issue is one
million (1,000,000) shares. All of such shares are to
be Common Stock; par value of one-tenth on one cent
($0.001) per share, and are to be of one class."
SECOND: That in lieu of a meeting and vote of stockholders, the
holders of a majority of the common stock entitled to
vote thereon have given written consent to said
amendment in accordance with the provisions of Section
228 of the General Corporation Law of the State of
Delaware.
THIRD: That the aforesaid amendment was duly adopted in
accordance with the applicable provisions of Sections
242 and 228 of the General Corporation Law of the State
of Delaware.
IN WITNESS WHEREOF, said Reeves, Inc. has caused this
Certificate to be signed by Robert F. Ivey, its Secretary, this
2nd of February, 1998.
Reeves, Inc.
By: /s/
Robert F. Ivey
Secretary
Exhibit T3B
BY-LAWS
OF
REEVES HOLDINGS, INC.
ARTICLE I
Offices
The registered office of the Corporation in the State of
Delaware is located in the City of Wilmington, State of Delaware,
and the name of the registered agent of the Corporation at such
office is The Corporation Trust Company. The Corporation may
also have offices at such other places, within or without the
State of Delaware, as the Board of Directors (the "Board") may
from time to time determine.
ARTICLE II
Meetings of Stockholders
Section 1. Annual Meeting. The annual meeting of the
stockholders of the Corporation for the election of directors and
for the transaction of such other business as may property come
before the meeting shall be held in such place within or without
the State of Delaware as may be specified in the notice of
meeting or the waiver thereof on the third Wednesday in May of
each year at 9:00 a.m. or at such other time as shall be fixed by
the Board. If the date so designated shall fall on a legal
holiday, then such meeting shall be held at such place at the
same hour on the next day thereafter not a Saturday, Sunday or
legal holiday.
Section 2. Special Meeting. A special meeting of the
stockholders of the Corporation may be called by the President
and shall be called by the President, the Secretary or an
Assistant Secretary when directed to do so by resolution of the
Board at a duly convened meeting of the Board, or at the request
in writing of a majority of the Board. Such request shall state
the purpose or purposes of the proposed meeting. Special
meetings shall be held at such place within or without the State
of Delaware as may be specified in the notice of meeting or
waiver thereof. Business transacted at all special meetings
shall be confined to the purposes stated in the notice of
meeting.
Section 3. Notice of Meetings. Written notice of
every meeting of the stockholders shall be given by or under the
direction of the Secretary or an Assistant Secretary, either
personally or by mail, upon each stockholder of record entitled
to vote at such meeting, not less than 10 nor more than 60 days
before the meeting. In the event of the death, absence,
incapacity or refusal of the specified officer, notice of a
meeting may be given by a person designated by either the
Secretary, the person or persons requesting the meeting or the
Board. If mailed, the notice of a meeting shall be directed to a
stockholder at his address as it appears on the records of the
Corporation. The notice of every meeting of the stockholders
shall state the place, date and hour of the meeting, and the
purpose or purposes for which the meeting is called.
Section 4. Quorum. At all meetings of stockholders,
the holders of issued and outstanding stock entitled to vote
present in person or by proxy having a majority of the votes of
such stock shall constitute a quorum. If such quorum is not
present, the stockholders present thereat may adjourn the meeting
from time to time without notice, other than the announcement at
the meeting of the date, time and place of the adjourned meeting
until a quorum is present, and thereupon any business may be
transacted at the adjourned meeting which might have been
transacted at the meeting as originally called. If the
adjournment is for more than 30 days, or if after the adjournment
a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting.
Section 5. Voting. At every meeting of the
stockholders, except as may be otherwise provided in the
Certificate of Incorporation, every stockholder of the
Corporation entitled to vote thereat shall be entitled to one
vote for each share of stock entitled to vote standing in his
name on the books of the Corporation on the record date as
determined in accordance with Article V, Section 4 of theses
By-Laws. Directors shall be elected by a plurality of the votes
cast at a meeting of stockholders (at which a quorum is present)
by the holders of shares entitled to vote in the election, except
as otherwise required by law or by the Certificate of
Incorporation of the Corporation. Whenever any corporate action,
other than the election of directors, is to be taken by vote of
the stockholders, it shall be authorized by a majority of the
votes cast at a meeting of stockholders (at which a quorum is
present) by the holders of shares entitled to vote thereon
(except as otherwise required by law, the Certificate of
Incorporation of the Corporation, these By-Laws, or an
regulations of any security exchange). The stock ledger of the
Corporation shall be the only evidence as to who are the
stockholders entitled to examine such stock ledger, the list
required by Article II, Section 9 of these By-Laws, or the books
of the Corporation, or to vote in person or by proxy at any
meeting of stockholders. Upon the demand of any stockholder
entitled to vote, the vote at any election of directors, or the
vote upon any question before a meeting, shall be by ballot; but
otherwise the method of voting shall be discretionary with the
presiding officer at the meeting.
Section 6. Presiding Officer and Secretary. At all
meetings of the stockholders, the Chairman of the Board, or if
such position be vacant or he be absent, the President of the
Corporation, or in his absence a Vice President, or if none be
present the appointee of the meeting, shall preside. The
Secretary of the Corporation, or in the Secretary's absence an
Assistant Secretary, or if none be present the appointee of the
presiding officer of the meeting, shall act as Secretary of the
meeting.
Section 7. Proxies. Any stockholder entitled to vote
at any meeting of stockholders may vote either in person or by
proxy, but no proxy shall be voted on after 3 years from its
date, unless such proxy provides for a longer period. Every
proxy must be executed in writing by the stockholder himself, or
by his duly authorized attorney, and dated, but need not be
sealed, witnessed or acknowledged. Proxies shall be delivered to
the Secretary of the meeting begins. 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.
Section 8. List of Stockholders. At least 10 days
prior to every meeting of stockholders, a complete list of the
stockholders entitled to vote at such meeting, arranged in
alphabetical order and showing the address of each stockholder
and the number of shares registered in the name of each, shall be
prepared by the Secretary or an Assistant Secretary. Such list
shall be open to examination a place within the city where the
meeting is to be held, which place shall be specified in the
notice of meeting, or, if not so specified, at a place where the
meeting is held and shall be open during normal business hours
for a period of 10 days prior to the meeting, to the examination
of any stockholder for any purpose germane to the meeting. 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.
Section 9. Consent of Stockholders in Lieu of Meeting.
Except as may be otherwise provided in the Certificate of
Incorporation, any action required by statute to be taken at any
meeting of stockholders, or any action which may be taken at any
meeting of stockholders, may be taken without a meeting, without
prior notice and without a vote, if a consent in writing, setting
forth the action so taken, shall be signed by the holders of
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.
ARTICLE II
Directors
Section 1. Number and Election of Directors. The
number of directors shall be fixed initially by the incorporator
and thereafter such number may be increased from time to time by
the stockholders or by the Board or may be decreased by the
stockholders. Any such decrease shall have the effect of
terminating the term of office of all directors. If such
decrease is effected at a meeting of stockholders, a new Board
shall be elected at a such meeting or, if effected by written
consent of stockholders, a new Board shall be elected by the same
written consent. Except as provided by law or these By-Laws, the
members of the Board shall be elected at each annual meeting of
the stockholders. If for any reason any annual election of
directors shall not be held on the day designated by these
By-Laws, the directors shall cause such election to be held as
soon thereafter as convenient. Except as otherwise provided in
the Certificate of Incorporation or these By-Laws, at each
meeting of the stockholders for the election of directors at
which a quorum shall be present, the persons (not exceeding the
then authorized number of directors) receiving a plurality of the
votes cast shall be elected directors. Except as otherwise
provided by law, the term of office of each director shall be
from the time of his election and qualification until the annual
meeting of stockholders next succeeding his election and until
his successor shall have been duly elected and shall have
qualified; provided, however, that any director may be removed
with or without cause before the expiration of his term by the
vote the holders of issued and outstanding stock entitled to vote
at any special meeting called for the purpose having a majority
of the votes of such stock. A director need not be a
stockholder. As used herein, the term "Whole Board" shall mean
the total number of directors authorized at the time, whether or
not any vacancies exist.<PAGE>
Section 2. Vacancies. Any vacancy in the Board caused
by death, resignation, disqualification, removal, an increase in
the number of directors (caused by the Board or otherwise) or any
other cause may be filled by a majority of the directors then in
office although less than a quorum or by a sole remaining
director, or by the stockholders. When one or more directors
shall resign from the board, effective at a future date, a
majority of the directors then in office, including those who
have so resigned, shall have power to fill such vacancy or
vacancies, the vote thereof to take effect when such resignation
or resignations shall become effective.
Section 3. Resignations. Any director may resign from
his office at any time by delivering his resignation in writing
to the Corporation, and the acceptance of such resignation,
unless required by the terms thereof, shall not be necessary to
make such resignation effective.
Section 4. Meetings. The Board may hold its meetings
in such place or places within or without the State of Delaware
as the Board from time to time by resolution may determine or as
shall be specified in the respective notices or waivers of notice
thereof, and the directors may adopt such rules and regulations
for the conduct of their meetings and the management of the
Corporation not inconsistent with these By-Laws as they may deem
proper. The Board from time to time by resolution may fix a time
and place (or varying times and places) for the annual and other
regular meetings of the Board, provided that unless a time and
place is so fixed for any annual meeting of the Board, the same
shall be held immediately following the annual meeting of the
stockholders at the same place at which such meeting shall have
been held. No notice of the annual or other regular meetings of
the Board need give. Other meetings of the Board shall be held
whenever called by the Chairman of the Board or by the President
or by one-third of the directors then in office; and the
Secretary or an Assistant Secretary shall give notice of each
such meeting to each director not later than the day before the
day of the meeting, personally or by mailing, telegraphing,
cabling or telephoning such notice to him at his address as it
appears on the books of the Corporation or by leaving such notice
at his residence or usual place of business. No notice of a
meeting need be given if all the directors are present in person.
Any business may be transacted at any meeting of the Board,
whether or not specified in a notice of the meeting.
Section 5. Meeting by Conference Telephone. Members of
the Board, or any committee designated by the Board, may
participate in a meeting, of the Board or such committee by means
of conference telephones or similar communications equipment by
which all persons participating in the meeting can hear each
other. Participation in a meeting pursuant to this paragraph
shall constitute presence in person at such meeting. The
Chairman or the Secretary of the meeting shall make sure that all
persons participating in the meeting (i) can hear each other
and(ii) understand that their participation will constitute a
meeting of the Board or such committee.
Section 6. Unanimous Consent of Directors in Lieu of
Meeting. Any action required or permitted to be taken at any
meeting of the Board may be taken without a meeting, if a written
consent thereto is signed by all members of the Board, and such
written consent is filed with the minutes of proceedings of the
Board.
Section 7. Quorum. One-third of the Whole Board shall
constitute a quorum for the transaction of business. If there be
less than a quorum at any meeting of the Board, a majority of
those present (or if only one be present, then that one) may
adjourn the meeting from time to time, and no further notice
thereof need be given other than announcement at the meeting
which shall be so adjourned of the time of, and the place to
which, the meeting is adjourned. The act of a majority of the
directors present at any meeting at which there is a quorum shall
be the act of the Board, except as may be otherwise specifically
provided by law or by the Certificate of Incorporation or by
these By-Laws.
Section 8. Compensation of Directors. The Board shall
have authority to fix the compensation of directors for acting in
either that capacity or any other capacity.
Section 9. Committees. The Board may, by resolution
passed by a majority of the Whole Board, from time to time
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. To the extent provided in any such
resolution, any such committee shall have and may exercise all
the powers and authority of the Board in the management of the
business and affairs of the Corporation, including the power to
authorize the seal of the Corporation to be affixed to all papers
which may require it, and the power and authority to declare
dividends and to authorize the issuance of stock; provided,
however, that no such committee shall have any authority to amend
the Certificate of Incorporation, to adopt any agreement of
merger or consolidation, to recommend to the stockholders the
sale, lease or exchange or all or substantially all of the assets
and properties of the Corporation, to recommend to the
stockholders a dissolution of the Corporation or revocation of a
dissolution or to amend these By-Laws. Any action required or
permitted to be taken at any meeting of a committee may be taken
without a meeting, if a written consent thereto is signed by all
members of such committee, and such written consent is filed with
the minutes of proceedings of the committee.
ARTICLE IV
Officers and Agents
Section 1. General Provisions. The officers of the
Corporation shall be a President, a Treasurer and a Secretary,
one or more Vice-Presidents, one or more Assistant
Vice-Presidents, one or more Assistant Treasurers and one or more
Assistant Secretaries, all of whom shall be appointed by the
Board as soon as may be practicable after the election of
directors in each year. Any two offices may be held by the same
person, but no officer shall execute, acknowledge or verify any
instrument in more than one capacity if such instrument is
required by law or by these By-Laws to be executed, acknowledged
or verified by any two or more officers. Each of such officers
shall serve until the annual meeting of the Board next succeeding
his appointment and until his successor shall have been chosen
and shall have qualified. The Board may appoint such officers,
agents and employees as it may deem necessary or proper, who
shall respectively have such authority and perform such duties as
may from time to time be prescribed by the Board. All officers,
agents and employees appointed by the Board shall be subject to
removal at any time by the affirmative vote of a majority of the
Whole Board. Other agents and employees may be removed at
anytime by the Board, by the officer appointing them, or by any
other superior officer upon whom such power of removal may be
conferred by the Board. The salaries of the officers of the
Corporation shall be fixed by the Board, but this power may be
delegated to any officer. The Corporation may secure the
fidelity of any or all of its officers or agents by bond or
otherwise.
Section 2. The Chairman of the Board. The Chairman of
the Board of Directors, who shall be a director, shall preside at
all meetings of the stockholders and at all meetings of the Board
of Directors. He shall perform such other duties as he may be
assigned from time to time by the Board of Directors but shall
not solely by reason of being such Chairman, be an Officer of the
Company.
Section 3. The Chief Executive Officer. The Chief
Executive Officer shall have general charge of, and shall direct
and supervise, the business and affairs of the Corporation
whenever the Board of Directors is not in session.
Section 4. The President. The President, who may be a
director, shall perform such duties as may be assigned to him by
the Board of Directors. In the event that the President is a
director and in the event of disability or absence of the
Chairman of the Board, the President shall perform the duties of
the Chairman of the Board, including presiding at meetings of
stockholders and directors. The President may be Chief
Administrative Officer of the Corporation. The Chief
Administrative Officer shall have general charge of, and shall
direct and supervise, the operation of its business, subject to
the control and direction of the Chairman of the Board and the
Board of Directors. He shall see that all orders and resolutions
of the Board of Directors are carried into effect and shall
perform such other duties as he may be assigned from time to time
by the Board of Directors. When elected by the Board of
Directors as Chief Executive Officer, he shall perform the duties
of the Chief Executive Officer as stated in Section 3 above. In
the event the President is elected as Chief Executive Officer,
the Board of Directors may elect another Executive Officer as the
Chief Administrative Officer.
Section 5. Vice-Presidents. Each Vice-President shall
have such powers and perform such duties as the Board, the
Chairman of the Board or the President may from time to time
prescribe, and shall perform such other duties as may be
prescribed in these By-Laws. In the absence or inability to act
of the President, the Vice-President next in order as designated
by the Board or, in the absence of such designation, senior in
length of service in such capacity, who shall be present and able
to act, shall perform all the duties and may exercise any of the
powers of the President, subject to the control of the Board. The
performance of any duty by a Vice-President shall be conclusive
evidence of his power to act.
Section 6. The Treasurer. The Treasurer shall have
the care and custody of all funds and securities of the
Corporation which may come into his hands and shall deposit the
same to the credit of the Corporation in such bank or banks or
other depository or depositories as the Board may designate. He
may endorse all commercial documents requiring endorsements for
or on behalf of the Corporation and may sign all receipts and
vouchers for payments made to the Corporation. He shall render
an account of his transactions to the Board as often as it shall
require the same, shall at all reasonable times exhibit his books
and accounts to any director and shall cause to be entered
regularly in books kept for that purpose full and accurate
account of all moneys received and disbursed by him on account of
the Corporation. He shall, if required by the Board, give the
Corporation a bond in such sums and with such sureties as shall
be satisfactory to the Board, conditioned upon the faithful
performance of his duties and for the restoration to the
Corporation in case of his death, resignation, retirement or
removal from office of all books, papers, vouchers, money and
other property of whatever kind in his possession, or under his
control, belonging to the Corporation. He shall have such
further powers and duties as are incident to the position of
Treasurer, subject to the controls of the Board.
Section 7. The Secretary. The Secretary shall record
the proceedings of meetings of the Board and of the stockholders
in a book kept for that purpose and shall attend to the giving
and serving of all notices of the Corporation. He shall have
custody of the seal of the Corporation and shall affix the seal
to all certificates of shares of stock of the Corporation (if
required by the form of such certificates) and to such other
papers or documents as may be proper and, when the seal is so
affixed, he shall attest the same by his signature wherever
required. He shall have charge of the stock certificate book,
transfer book and stock ledger, and such other books and papers
as the Board may direct. He shall, in general perform all duties
of Secretary, subject to the control of the Board.
Section 8. Assistant Treasurer. In the absence or
inability of the Treasurer to act, any Assistant Treasurer may
perform all the duties and exercise all of the powers of the
Treasurer, subject to the control of the Board. The performance
of any such duty shall be conclusive evidence of this power to
act. An Assistant Treasurer shall also perform such other duties
as the Treasurer or the Board may from time to time assign to
him.
Section 9. Assistant Secretaries. In the absence or
inability of the Secretary to act, any Assistant Secretary may
perform all the duties and exercise all the powers of the
Secretary, subject to the control of the Board. The performance
of any such duty shall be conclusive evidence of his power to
act. An Assistant Secretary shall also perform such other duties
as the Secretary or the Board may from time to time assign to
him.
Section 10. Other Officers. Other officers shall
perform such duties and have such powers as may from time to time
be assigned to them by the Board.
Section 11. Delegation of Duties. In case of the
absence of any officer of the Corporation, or for any other
reason that the Board may deem sufficient, the Board may confer,
for the time being, the powers or duties, or any of them, of such
officer upon any other officer, or upon any director.
Section 12. Proxies in Respect of Securities of Other
Corporations. Unless otherwise provided by resolution adopted by
the Board, the President or any Vice-President may from time to
time appoint an attorney or attorneys or an agent or agents to
exercise in the name and on behalf of the Corporation the powers
and rights which the Corporation may have as the holder of stock
or other securities in any other corporation to vote or to
consent in respect of such stock or other securities, and the
President or any Vice-President may instruct the person or
persons so appointed as to the manner of exercising such powers
and rights, and the President or any Vice-President may execute
or cause to be executed in the name and on behalf of the
Corporation and under its corporate seal, or otherwise, all such
written proxies, powers of attorney or other written instruments
as he may deem necessary in order that the Corporation may
exercise such powers and rights.
ARTICLE V
Capital Stock
Section 1. Certificate for Shares. Certificates for
shares of stock of the Corporation certifying the number and
class of shares owned shall be issued to each stockholder in such
form, not inconsistent with the Certificate of Incorporation and
these By-Laws, as shall be approved by the Board. The
certificates for the shares of each class shall be numbered and
registered in the order in which they are issued and shall be
signed by the Chairman of the Board President or a Vice-President
and by the Secretary or an Assistant Secretary or the Treasurer
or an Assistant Treasurer. Any or all of the signatures on a
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 he were such officer, transfer agent or registrar at the
date of issue. All certificates exchanged or returned to the
Corporation shall be cancelled.
Section 2. Transfer of Shares of Stock. Transfers of
shares shall be made only upon the books of the Corporation by
the holder, in person or by his attorney lawfully constituted in
writing, and on the surrender of the certificate or certificates
for such shares properly assigned. The Board shall have the
power to make all such rules and regulations, not inconsistent
with the Certificate of Incorporation and these By-Laws, as it
may deem expedient concerning the issue, transfer and
registration of certificates for shares of stock of the
Corporation.
Section 3. Lost, Stolen or Destroyed Certificates. The
Board, in its discretion, may issue a new certificate of stock in
place of any certificate theretofore issued and alleged to have
been lost, stolen or destroyed, and may require the owner of any
certificate of stock alleged to have been lost, stolen or
destroyed, or his legal representatives, to give the Corporation
a bond in such sum as the Board may direct, to indemnify the
Corporation against any claim that may be made against it on
account of the alleged loss, theft or destruction of any
certificate or the issuance of such new certificate. Proper
evidence of such loss, theft or destruction shall be procured, if
required, by the Board. The Board in its discretion may refuse
to issue such new certificate, save upon the order of some court
having jurisdiction in such matters.
Section 4. Record Date. 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, or to
express consent to corporate action in writing without a meeting
or entitled to receive payment of any dividend or other
distribution of allotment of any rights, or 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
may fix, in advance, a record date, which shall not be more than
60 nor less than 10 days before the date of such meeting, nor
more than 60 days prior to any other action. If no record date
is fixed:
(a) 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 date
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.
(b) The record date for determining stockholders
entitled to express consent to corporate action in writing
without a meeting, when no prior action by the Board is
necessary, shall be the day on which the first written
consent is expressed.
(c) The record date for determining stockholders for
any other purpose shall be at the close of business on the
day on which the Board adopts the resolution relating
thereto.
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 may
fix a new record date for the adjourned meeting.
ARTICLE VI
Interested Directors and Officers
No contract or transaction between the Corporation and
one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association,
or other organization in which one or more of its directors or
officers are directors or officers, or have a financial interest,
shall be void or voidable solely for this reason, or solely
because the director or officer is present at or participates in
the meeting of the Board or committee thereof which authorizes
the contract or transaction, or solely because his or their votes
are counted for such purpose, if
(a) The material facts as to his relationship or
interest and as to the contract or transaction are
disclosed or are known to the Board or the committee, and
the Board or committee in good faith authorizes the
contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or
(b) The material facts as to his relationship or
interest and as to the contract or transaction are
disclosed or are known to the stockholders entitled to
vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the
stockholders; or
(c) The contract or transaction is fair as to the
Corporation as of the time it is authorized, approved or
ratified by the Board, a committee thereof or the
stockholders.
Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board or
of a committee which authorizes the contract or transaction.
ARTICLE VII
Indemnification of Directors, Officers and Others
Section 1. The Corporation shall, to the fullest
extent permitted by applicable law, indemnify any person (and the
heirs, executors and administrators thereof) who was or is made,
or threatened to be made, a party to an action, suit or
proceeding, whether civil, criminal administrative or
investigative, whether involving any actual or alleged breach of
duty, neglect or error, any accountability, or any actual or
alleged misstatement, misleading statement or other act or
omission and whether brought or threatened in any court or
administrative or legislative body or agency, including an action
by or in the right of the Corporation to procure a judgment in
its favor an action by or in the right of any other corporation
of any type or kind, domestic or foreign, or any partnership,
joint venture, trust, employee benefit plan or other enterprise,
which any director or officer of the Corporation is serving or
served in any capacity at the request of the Corporation, by
reason of the fact that he, his testator or intestate is or was a
director or officer of the Corporation, or is serving or served
such other corporation, partnership joint venture, trust,
employee benefit plan or other enterprise in any capacity,
against judgments, fines, amounts paid in settlement, and costs,
charges and expenses, including attorneys' fees, incurred there
in or in any appeal thereof.
Section 2. The Corporation shall indemnify other
persons and reimburse the expenses thereof, to the extent
required by applicable law, and may indemnify any other person to
whom the Corporation is permitted to provide indemnification or
the advancement of expenses, whether pursuant to rights granted
pursuant to, or provided by, the Delaware General Corporation Law
or otherwise.
Section 3. The Corporation shall, from time to time,
reimburse or advance to any person referred to in Section 1 the
funds necessary for payment of expenses, including attorney's
fees, incurred in connection with any action, suit or proceeding
referred to in Section 1, upon receipt of a written undertaking
by or on behalf of such person to repay such amount(s) if a
judgment or other final adjudication adverse to the director or
officer establishes that (i) his acts were committed in bad faith
or were the result of active and deliberate dishonesty and, in
either case, were material to the cause of action so
adjudicated,(ii) he personally gained in fact a financial profit
or other advantage to which he was not legally entitled, or (iii)
his conduct was otherwise of a character such that Delaware law
would require that such amount(s) be repaid.
Section 4. Any director or officer of the Corporation
serving (i) another corporation, of which a majority of the
shares entitled to vote in the election of its directors is held
by the Corporation, or (ii) any employee benefit plan of the
Corporation or any corporation referred in clause (i), in any
capacity shall be deemed to doing so at the request of the
Corporation.
Section 5. Any person entitled to be indemnified or to
the reimbursement or advancement of expenses as a matter of right
pursuant to this Article may elect to have the right to
indemnification (or advancement of expenses) interpreted on the
basis of the applicable law in effect at the time of the
occurrence of the event or events giving rise to the action,
suitor proceeding, to the extent permitted by applicable law, or
on the basis of the applicable law in effect at the time
indemnification is sought.
Section 6. The right to be indemnified or to the
reimbursement or advancement of expenses pursuant to this
Article(i) is a contract right pursuant to which the person
entitled thereto may bring suit as if the provisions hereof were
set forth in a separate written contract between the Corporation
and the director or officer, (ii) is intended to be retroactive
and shall be available with respect to events occurring prior to
the adoption hereof, and (iii) shall continue to exist after the
rescission or restrictive modification hereof with respect to
events occurring prior thereto.
Section 7. If a request to be indemnified or for the
reimbursement or advancement of expenses pursuant hereto is not
paid in full by the Corporation within thirty days after a
written claim has been received by the Corporation, the claimant
may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled also to be paid
the expenses of prosecuting such claim. Neither the failure of
the Corporation (including its Board of Directors, independent
legal counsel, or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of
or reimbursement or advancement of expenses to the claimant is
proper in the circumstances, nor an actual determination by the
Corporation (including its Board of Directors, independent legal
counsel, or its stockholders) that the claimant is not entitled
to indemnification or to the reimbursement or advancement of
expenses, shall be a defense to the action or create a
presumption that the claimant is not so entitled.
ARTICLE VIII
Seal
The seal of the Corporation shall be circular in form
and shall contain the name of the Corporation, the year of its
incorporation and the words "Corporate Seal" and "Delaware"
inscribed thereon. The seal may be affixed to any instrument by
causing it, or a facsimile thereof, to be impressed or otherwise
reproduced thereon.
ARTICLE IX
Waiver
Whenever any notice whatsoever is required to be given
by statute, or under the provisions of the Certificate of
Incorporation or these By-Laws, a waiver thereof in writing,
signed by the person or persons entitled to said notice, whether
before or after the time stated therein, shall be deemed
equivalent thereto.
Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person 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, directors or members of a committee
of directors need be specified in any written waiver of notice.
ARTICLE X
Checks, Notes Drafts, etc.
Checks, notes, drafts, acceptances, bills of exchange
and other orders or obligations for the payment of money shall be
signed by such officer or officers or person or persons as the
Board shall from time to time determine.
ARTICLE XI
Amendments
These By-Laws or any of them may be amended or
repealed, and new By-Laws may be adopted (a) by the stockholders,
at any annual meeting, or at any special meeting called for that
purpose, by the vote of the holders of issued and outstanding
stock entitled to vote thereat having a majority of the votes of
such stock, or (b) by the Board at any duly convened meeting by a
majority vote of the Whole Board, but any such action of the
Board may be amended or repealed by the stockholders at any
annual meeting or special meeting called for that purpose;
provided, however, that no amendment may be made which will
conflict with any provision of law or of the Certificate of
Incorporation.
ARTICLE XII
Rights of Stockholders under Certificate of Incorporation
All provisions of these By-Laws are subject to the
provisions of the Certificate of Incorporation and in the event
of any inconsistency, the provisions of the Certificate of
Incorporation shall prevail. Without limiting the foregoing,
nothing in these By-Laws shall affect or limit the rights of any
stockholder provided for in the Certificate of Incorporation.
Exhibit T3C
INDENTURE dated as of _________ __, 1998 between
REEVES, INC., a Delaware corporation (the "Company"), THE
HYPOTHECATORS (as defined herein), and FIRST TRUST NATIONAL
ASSOCIATION, a national banking association, as trustee (the
"Trustee").
The Company and the Trustee agree as follows for the
benefit of each other and for the equal and ratable benefit of
the Holders of the Company's 13% Senior Notes due November 15,
2004 (the "Notes"):
ARTICLE I
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.1 Definitions.
"Accountants' Certificate" means a certificate from a
firm of independent certified public accountants of national
standing designated by the Company.
"Accrued Interest Notes" means any Notes issued in
payment of accrued interest on the Notes pursuant to the second
paragraph of Section 2 of the Notes and the last paragraph of
Section 2.1 of this Indenture, as the same may be amended or
supplemented from time to time in accordance with their terms.
"Acquired Indebtedness" means Indebtedness of a Person
existing at the time such Person becomes a Subsidiary of the
Company (or such Person is merged with the Company or one of its
Subsidiaries) or assumed in connection with the acquisition of
assets from any such Person and not incurred in connection with,
or in the contemplation of, such Person becoming a Subsidiary or
such acquisition.
"Additional Interest Calculation Date" means November
15, 1997.
"Adjusted Net Income" means Consolidated Net Income
plus (i) the amount of income taxes deducted in determining
Consolidated Net Income to the extent such taxes were not
actually paid as the result of the utilization of net operating
loss carryforwards and (ii) amortization expense deducted in
determining Consolidated Net Income to the extent such
amortization expense relates to the amortization of goodwill
created in connection with the Consensual Plan.
"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 purposes of this definition, "control" (including,
with correlative meanings, the terms "controlling," "controlled
by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting
securities, by agreement or otherwise.
"Agent" means any Registrar, Paying Agent or
co-registrar of the Notes.
"Arrangement Fee Note" means the $500,000 aggregate
principal amount RII Note issued to Oaktree Capital Management
LLC pursuant to the Consensual Plan.
"Asset Acquisition" means (a) an Investment by the
Company or any Subsidiary of the Company in any other Person
pursuant to which such Person shall become a Subsidiary of the
Company, or shall be merged with or into the Company or any
Subsidiary of the Company, (b) the acquisition by the Company or
any Subsidiary of the Company of the assets of any Person (other
than a Subsidiary of the Company) which constitute all or
substantially all of the assets of such Person or (c) the
acquisition by the Company or any Subsidiary of the Company of
any division or line of business of any Person (other than a
Subsidiary of the Company).
"Asset Sale" means any direct or indirect sale, lease,
transfer or other disposition or series of related sales, leases,
transfers or other dispositions, including, without limitation,
by merger or consolidation, made by the Company or any of its
Subsidiaries (whether pursuant to any sale and leaseback
transaction (other than to the extent included in clause (vii) of
the definition of Permitted Indebtedness), by exchange of assets
or otherwise and whether by operation of law or otherwise,) to
any Person other than the Company or one of its Wholly Owned
Subsidiaries, in one transaction or a series of related
transactions, of any assets of the Company or any of its
Subsidiaries including, without limitation, assets consisting of
any Capital Stock or other securities held by the Company or any
of its Subsidiaries (including by way of issuance of Capital
Stock of such Subsidiary); provided, however, that an "Asset
Sale" shall not include (i) the sale of inventory in the ordinary
course of business, (ii) the sale by Reeves Brothers, Inc. of
the ATG Assets or (iii) a "like-kind exchange" of an asset in
exchange for an asset of a third party, so long as, in the
judgment of the Company's Board of Directors, the asset received
by the Company or such Subsidiary in such exchange (x) has a Fair
Market Value at least equal to the Fair Market Value of the asset
transferred by the Company or such Subsidiary and (y) is usable
in a Related Business to at least the same extent as the asset
transferred by the Company or such Subsidiary.
"ATG Assets" means the assets of the Apparel Textile
Group division of Reeves Brothers, Inc. a wholly-owned subsidiary
of RII as of the date hereof.
"Attributable Debt" means, in respect of a sale and
leaseback transaction, at the time of determination, the greater
of (a) the Fair Market Value of the property subject to such
transaction and (b) the present value (discounted at the actual
rate of interest implicit in such transaction) of the obligation
of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction
(including any period for which such lease has been extended or
may, at the option of the lessor, be extended).
"Authorized Denominations" shall mean denominations of
$1,000, or integral multiples thereof, except in the case of
Accrued Interest Notes, in which case Authorized Denominations
shall mean any denomination.
"Bank Revolving Credit Facility" means that certain
Credit Agreement dated as of November 6, 1997 (as amended,
modified or supplemented from time to time) together with all
other "Loan Documents" (as defined therein) among RII, Reeves
Brothers, Inc., the other "Credit Parties" and "Lenders" (each as
defined therein) now or hereafter parties thereto and General
Electric Capital Corporation, as agent, and any agreement
governing Indebtedness incurred to refinance or refund the
borrowings and commitments then outstanding or permitted to be
outstanding under the Bank Revolving Credit Facility.
"Bankruptcy Code" means Title 11 U.S. Code, as amended.
"Bankruptcy Law" means the Bankruptcy Code or any
similar federal, state or foreign law for the relief of debtors.
"Board of Directors" means the Board of Directors of
the Company, or any authorized committee of the Board of
Directors of the Company.
"Business Day" means any day other than a Legal
Holiday.
"Capital Lease Obligation" means, at the time any
determination thereof is to be made, the amount of the liability
in respect of a capital lease that would at such time be required
to be capitalized on a balance sheet in accordance with GAAP.
"Capital Stock" means, with respect to any Person, any
and all shares, interests, participations or other equivalents
(however designated) of such Person's capital stock whether now
outstanding or issued after the Issue Date, including, without
limitation, all Preferred Stock, and any warrants, options or
rights to purchase any of the foregoing.
"Cash Equivalents" means (i) securities issued directly
or fully Guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not
more than one (1) year from the date of acquisition, (ii)
certificates of deposit and Eurodollar time deposits with
maturities of one (1) year or less from the date of acquisition,
bankers' acceptances with maturities not exceeding one (1) year
and overnight bank deposits, in each case with any domestic
commercial bank having capital and surplus in excess of $500
million or domestic branch office or agency of a foreign
commercial bank of recognized international standing having
capital and surplus in excess of $500 million and, in either
case, whose long-term debt is rated at least "A" by either
Standard and Poor's Corporation (or any successor thereto) or
Moody's Investors Service, Inc. (or any successor thereto), (iii)
repurchase obligations with a term of not more than seven days
for underlying securities of the types described in clauses (i)
and (ii) entered into with any financial institution meeting the
qualifications specified in clause (ii) above, (iv) any security
maturing not more than one (1) year after the date of
acquisition, backed by standby or direct-pay letters of credit
issued by a bank meeting the qualifications described in clause
(ii) above, (v) any security maturing not more than one (1) year
after the date of acquisition, issued directly or fully
Guaranteed or insured by any state, commonwealth or territory of
the United States, or by any political subdivision thereof, and
rated at least "A" by either Standard and Poor's Corporation (or
any successor thereto) or Moody's Investors Service, Inc. (or any
successor thereto), (vii) commercial paper having the highest
rating obtainable from Moody's Investors Service, Inc. (or any
successor thereto) or Standard and Poor's Corporation (or any
successor thereto) and in each case maturing within one (1) year
after the date of acquisition and (viii) investments in money
market funds including those managed by the Trustee or an
Affiliate thereof, which invest substantially all their assets in
securities of the types described in clauses (i) through (vii)
above.
"Change of Control" means (i) any sale, lease or other
transfer of all or substantially all of the assets of the Company
to any Person (other than a Wholly Owned Subsidiary of the
Company) in one transaction or a series of related transactions;
(ii) any consolidation or merger of the Company with another
Person pursuant to a transaction in which the outstanding Voting
Stock of the Company is changed into or exchanged for cash,
securities or other property, other than any such transaction
where (a) no Disqualified Stock is issued and (b) holders of
Voting Stock of the Company immediately prior to such transaction
beneficially own (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act as in effect on the date of this Indenture),
directly or indirectly, not less than a majority of the Voting
Stock of the surviving corporation of such merger or
consolidation outstanding immediately after such transaction;
(iii) a Person or group (other than any Permitted Holder) becomes
the beneficial owner (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act as in effect on the date of this Indenture) of
Voting Stock of the Company representing more than 50% of the
voting power of all Voting Stock of the Company then outstanding;
provided, however, that this clause (iii) shall not be applicable
by reason of any issuance or transfer of Common Stock pursuant to
Section 4.20 hereof; (iv) Continuing Directors cease to
constitute at least a majority of the Board of Directors of the
Company; provided, however, that this clause (iv) shall not be
applicable if the Continuing Directors do not constitute at least
a majority of the Board of Directors as a result of the election
of directors nominated by any of the Permitted Holders; (v) the
stockholders of the Company shall approve any plan or proposal
for the liquidation or dissolution of the Company or (vi) RII is
no longer 100% owned by the Company and Wholly-Owned Subsidiaries
of the Company.
"Class A Common Stock" means the shares of Class A
Common Stock, $.01 par value per share, of the Company, as
adjusted to reflect any merger, consolidation, recapitalization,
reclassification, split-up, stock dividend, rights offering,
reverse stock split or other action made, declared or effected
with respect to the Class A Common Stock.
"Class B Common Stock" means the shares of Class B
Common Stock, $.01 par value per share, of the Company, as
adjusted to reflect any merger, consolidation, recapitalization,
reclassification, split-up, stock dividend, rights offering,
reverse stock split or other action made, declared or effected
with respect to the Class B Common Stock. For purposes of this
definition, Class B Common Stock shall include Retained Class A
Shares.
"Class B Voting Trustee" means the trustee under the
Voting Trust Agreement.
"Commodity Agreement" means any commodity purchase
agreement, commodity swap agreement or other similar agreement of
any Person designed to protect such Person or any of its
Subsidiaries against fluctuations in commodity values.
"Common Stock" means the Class A Common Stock and Class
B Common Stock, collectively.
"Company" means the party named as such above, until a
successor replaces such Person in accordance with the terms of
this Indenture, and thereafter means such successor.
"Company Order" means a written request or order signed
in the name of the Company by its Chairman of the Board,
President or any of its Vice Presidents, and by its Chief
Financial Officer, Treasurer, any of its Assistant Treasurers,
its Secretary or any of its Assistant Secretaries and delivered
to the Trustee.
"Consensual Plan" means the Amended Joint Plan of
Reorganization dated as of January 12, 1998, adopted with respect
to the Company and RII, as the same may be amended or modified
from time to time.
"Consolidated Cash Flow" means, for any period, on a
consolidated basis for the Company and its Subsidiaries, the sum
(without duplication) for such period of Consolidated Net Income
plus, to the extent deducted in determining Consolidated Net
Income, each of (i) Consolidated Income Tax Expense, (ii)
Consolidated Depreciation and Amortization Expense, (iii)
Consolidated Fixed Charges and (iv) all other non-cash items
deducted from net revenue in determining Consolidated Net Income
for such period except for any non-cash charges that represent
accruals of, or reserves for, cash disbursements to be made in
any future accounting period.
"Consolidated Depreciation and Amortization Expense" of
the Company and its Subsidiaries means, for any period for which
the determination thereof is to be made, the depreciation and
amortization expense (including, without limitation, amortization
of goodwill, other intangibles, debt discount and debt issue
costs) of the Company and such Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP.
"Consolidated Fixed Charges" means, for the Company and
its Subsidiaries, for any period, the sum (without duplication)
of (i) the aggregate amount of interest, whether expensed or
capitalized, paid, accrued or scheduled to be paid or accrued
during such period (including any non-cash interest payments or
accruals, the interest portion of Capital Lease Obligations, all
amortization of debt discount (including amortization of fees),
net costs pursuant to Interest Rate Agreements, Currency
Agreements and Commodity Agreements (including amortization of
fees) and the interest component of any deferred payment
obligation) of the Company and its Subsidiaries, determined on a
consolidated basis in accordance with GAAP, excluding (to the
extent otherwise included) the amortization or write off of any
deferred financing costs relating to the Old Notes and incurred
in connection with the Restructuring Agreement and the
transactions contemplated thereby, (ii) one-third of the rental
expense attributable to operating leases and (iii) dividends in
respect of Preferred Stock and Disqualified Stock.
"Consolidated Income Tax Expense" of the Company and
its Subsidiaries means, for any period for which the
determination thereof is to be made, the aggregate of the income
tax expense of the Company and such Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to any
Person for any period, the aggregate of the Net Income of such
Person and its Subsidiaries for such period, on a consolidated
basis, determined in accordance with GAAP; provided, that (i) the
Net Income of any Person that is not a Subsidiary or that is
accounted for by the equity method of accounting shall be
included only to the extent of the amount of dividends or
distributions paid in cash to the Person whose Consolidated Net
Income is being determined or a Wholly Owned Subsidiary thereof,
(ii) the Net Income of any Subsidiary that is subject to any
Payment Restriction shall be included in Consolidated Net Income
to the extent of the amount of dividends or distributions that
could have been paid in cash to the Person whose Consolidated Net
Income is being determined or a Wholly Owned Subsidiary of such
Person (to the extent such Wholly Owned Subsidiary is not subject
to any Payment Restriction), (iii) the Net Income of any Person
acquired by the Person whose Consolidated Net Income is being
determined or a Subsidiary thereof in a pooling of interests
transaction for any period prior to the date of such acquisition
shall be excluded and (iv) the cumulative effect of a change in
accounting principles shall be excluded.
"Consolidated Net Worth" means, with respect to any
Person at any date, the sum of (i) the consolidated equity of the
common stockholders of such Person and its consolidated
Subsidiaries as of such date plus (ii) the respective amounts
reported on such Person's balance sheet as of such date with
respect to any series of Preferred Stock (other than Disqualified
Stock) that by its terms is not entitled to the payment of
dividends unless such dividends may be declared and paid only out
of net earnings in respect of the year of such declaration and
payment, but only to the extent of any cash received by such
Person upon issuance of such Preferred Stock, less (x) all
write-ups (other than write-ups resulting from foreign currency
translations and write- ups of tangible assets of a going concern
business made within 12 months after the acquisition of such
business) subsequent to the Issue Date in the book value of any
asset owned by such Person or a consolidated Subsidiary of such
Person, (y) all Investments as of such date in unconsolidated
Subsidiaries and in Persons that are not Subsidiaries (except, in
each case, Permitted Investments), and (z) all unamortized debt
discount and expense and unamortized deferred charges as of such
date, all of the foregoing determined in accordance with GAAP.
"Consolidation Event" means the entry by a court of
competent jurisdiction, in connection with an event described in
Section 11.2, of an order (which order shall not have been
vacated upon rehearing or appeal) which provides for (a) the
substantive consolidation of the Company and RII or any of its
Subsidiaries or affiliates, (b) that the Company and RII or any
of its Subsidiaries or affiliates are alter egos, or (c)
otherwise finding that the assets and liabilities of the Company
should be consolidated or merged with the assets and liabilities
of RII or any of its Subsidiaries or affiliates. The provisions
of this Indenture relating to Consolidation Events are for
protective and precautionary purposes only and do not indicate
that any of the parties hereto believe that any Consolidation
Event will or should occur.
"Consulting Agreements" means the consulting agreements
dated as of October 17, 1997 and those certain letter agreements
dated as of October 17, 1997 referred to in such consulting
agreements, between James W. Hart, James W. Hart, Jr., and
Douglas B. Hart, respectively, and Reeves, S.p.A.
"Continuing Directors" means, with respect to the
Company, a director who either was a member of the Board of
Directors of the Company on the Issue Date or who became a
director of the Company subsequent to such date and whose
election, or nomination for election by the Company's
stockholders, was duly approved by a majority of the Continuing
Directors then on the Board of Directors of the Company, either
by a specific vote or by approval of the proxy statement issued
by the Company on behalf of the entire Board of Directors of the
Company in which such individual is named as nominee for
director.
"Corporate Trust Office of the Trustee" shall be at the
address of the Trustee specified in Section 11.2 hereof or such
other address as to which the Trustee may give written notice to
the Company.
"Currency Agreement" means any foreign exchange
contract, currency swap agreement or other similar agreement or
arrangement of any Person designed to protect such Person or any
of its Subsidiaries against fluctuations in currency values.
"Custodian" means any receiver, trustee, assignee,
liquidator, sequestrator or similar official under any Bankruptcy
Law.
"Default" means any event that is or with the passage
of time or the giving of notice or both would be an Event of
Default.
"Depository" means, with respect to the Notes issued in
the form of one or more Global Notes, The Depository Trust
Company or another Person designated as Depository by the Company
(or any successor thereto), which Person must be a clearing
agency registered under the Exchange Act.
"Disqualified Stock" means any Capital Stock of the
Company or any Subsidiary of the Company 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 or
with the passage of time, matures or is mandatorily redeemable,
pursuant to a sinking fund obligation or otherwise, or is
redeemable at the option of the holder thereof, in whole or in
part, on or prior to the maturity date of the Notes, or which is
exchangeable or convertible (whether at the option of the Company
or the holder thereof or upon the happening of any event) into
debt securities of the Company or any Subsidiary of the Company,
except to the extent and only to the extent that such exchange or
conversion rights cannot occur prior to the maturity date of the
Notes.
"Employment Agreement Guarantees" means the guaranty by
The Reeves Company LLC of the Employment Agreements, a copy of
which is included in the Supplement to the Consensual Plan.
"Employment Agreements" means the employment agreements
dated as of November 18, 1997 and those two certain letter
agreements referred to in section 17 of such employment
agreements, between James W. Hart, James W. Hart, Jr., and
Douglas B. Hart, respectively, and Reeves Brothers, Inc.
"Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Existing Indebtedness" means Indebtedness of the
Company and its Subsidiaries outstanding on the Issue Date, other
than the Bank Revolving Credit Facility, until such Indebtedness
is repaid.
"Fair Market Value" means with respect to any asset,
property or Capital Stock, the price which could be negotiated in
an arm's-length, free market transaction between a willing and
knowledgeable seller and a willing and knowledgeable buyer,
neither of whom is under undue pressure or compulsion to complete
the transaction. "Fair Market Value" shall be determined by the
Board of Directors of the Company acting in good faith and shall
be evidenced by a duly and properly adopted resolution of the
Board of Directors set forth in an Officers' Certificate
delivered to the Trustee.
"Fenchurch Tax Sharing Note" means the $1,250,000
aggregate principal amount 13% Senior Note due November 15, 2004
issued to Fenchurch, Inc. on the terms summarized in the
Consensual Plan.
"Fixed Charge Coverage Ratio" means, for any Person,
for any period, such Person's ratio of Consolidated Cash Flow to
Consolidated Fixed Charges for such period; provided, however,
that (i) if the Company or any Subsidiary has incurred any
Indebtedness since the beginning of such period that remains
outstanding or if the transaction giving rise to the need to
calculate the Fixed Charge Coverage Ratio is an incurrence of
Indebtedness, or both, Consolidated Cash Flow and Consolidated
Fixed Charges for such period shall be calculated after giving
effect on a pro forma basis to such Indebtedness as if such
Indebtedness had been incurred on the first day of such period
and the discharge of any other Indebtedness repaid, repurchased,
defeased or otherwise discharged with the proceeds of such new
Indebtedness as if such discharge had occurred on the first day
of such period, (ii) if the Company or any Subsidiary has repaid,
repurchased, defeased or otherwise discharged any Indebtedness
since the beginning of such period or if any Indebtedness is to
be repaid, repurchased, defeased or otherwise discharged (in each
case other than Indebtedness incurred under any revolving credit
facility unless such Indebtedness has been permanently repaid and
has not been replaced) on the date of the transaction giving rise
to the need to calculate the Fixed Charge Coverage Ratio,
Consolidated Cash Flow and Consolidated Fixed Charges for such
period shall be calculated on a pro forma basis as if such
discharge had occurred on the first day of such period and as if
the Company or such Subsidiary had not earned the interest income
actually earned during such period in respect of cash or Cash
Equivalents used to repay, repurchase, defease or otherwise
discharge such Indebtedness, (iii) if since the beginning of such
period the Company or any Subsidiary shall have made any Asset
Sale, the Consolidated Cash Flow for such period shall be reduced
by an amount equal to the Consolidated Cash Flow (if positive)
directly attributable to the assets which are the subject of such
Asset Sale for such period, or increased by an amount equal to
the Consolidated Cash Flow (if negative), directly attributable
thereto for such period and Consolidated Fixed Charges for such
period shall be reduced by an amount equal to the Consolidated
Fixed Charges directly attributable to any Indebtedness of the
Company or any Subsidiary repaid, repurchased, defeased or
otherwise discharged with respect to the Company and its
continuing Subsidiaries in connection with such Asset Sale for
such period (or, if the equity interests of any Subsidiary are
sold, the Consolidated Fixed Charges for such period directly
attributable to the Indebtedness of such Subsidiary to the extent
that none of the Company or any of its Subsidiaries will have any
obligation with respect to such Indebtedness after such sale),
(iv) if since the beginning of such period the Company or any
Subsidiary (by merger or otherwise) shall have made an Asset
Acquisition, including any Asset Acquisition occurring in
connection with a transaction requiring a calculation to be made
hereunder, Consolidated Cash Flow and Consolidated Fixed Charges
for such period shall be calculated after giving pro forma effect
thereto (including the incurrence of any Indebtedness) as if such
Asset Acquisition occurred on the first day of such period and
(v) if since the beginning of such period any Person (that
subsequently became a Subsidiary or was merged with or into the
Company or any Subsidiary since the beginning of such period)
shall have made any Asset Sale or Asset Acquisition that would
have required an adjustment pursuant to clause (iii) or (iv)
above if made by the Company or a Subsidiary during such period,
Consolidated Cash Flow and Consolidated Fixed Charges for such
period shall be calculated after giving pro forma effect thereto
as if such Asset Sale or Asset Acquisition occurred on the first
day of such period. For purposes of this definition, whenever
pro forma effect is to be given to an Asset Acquisition, the
amount of income or earnings relating thereto and the amount of
Consolidated Fixed Charges associated with any Indebtedness
incurred in connection therewith, the pro forma calculations
shall be determined in good faith by the chief financial officer
of the Company and accompanied by a report of the Company's
independent public accountants stating that such calculations
were made in compliance with Article 11 of Regulation S-X under
the Securities Act. If any Indebtedness bears a floating rate of
interest and is being given pro forma effect, the interest of
such Indebtedness shall be calculated as if the rate in effect on
the date of determination had been the applicable rate for the
entire period (taking into account any Interest Rate Agreement
applicable to such Indebtedness if such Interest Rate Agreement
has a remaining term in excess of 12 months).
"GAAP" means United States generally accepted
accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as have been approved
by a significant segment of the accounting profession, which are
in effect from time to time.
"Government Securities" means securities which are (i)
direct obligations of the United States of America for the
payment of which the full faith and credit of the United States
is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the
United States of America the payment of which is unconditionally
Guaranteed as a full faith and credit obligation by the United
States of America which, in either case, are not callable or
redeemable at the option of the issuer thereof.
"Guarantee" means a guarantee (other than by
endorsement of negotiable instruments for collection in the
ordinary course of business), direct or indirect, in any manner
(including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part
of any Indebtedness or other liabilities.
"Hart Associate" means (a) each of, and any member of
the immediate family of any of, James W. Hart, James W. Hart,
Jr., Douglas B. Hart or Jennifer Fray (all of such individuals
and such members of their immediate families are collectively
referred to as the "Harts"), (b) any corporation or organization
(other than the Company or any of its subsidiaries) of which a
Hart is an executive officer or partner or of which a Hart is,
directly or indirectly, the beneficial owner of 10% or more of
any class of equity securities or (c) any trust or other estate
in which a Hart has a beneficial interest or as to which a Hart
serves as trustee or in a similar capacity. For the purposes of
this definition, a Person's "immediate family" includes that
Person's spouse, parents, children, siblings, mothers and
fathers-in-law, daughters and sons-in- law and brothers and
sisters-in-law.
"Holder" or "Noteholder" means a registered owner of
the Notes as reflected on the books of the Company.
"Hypothecators" means James W. Hart, James W. Hart,
Jr., Douglas B. Hart and Jennifer Fray.
"incur" means, with respect to any Indebtedness or
other obligation of any Person, to create, issue, incur (by
conversion, exchange or otherwise), assume, Guarantee (including
the Guarantee of the Indebtedness of a Subsidiary or other
Affiliate) or otherwise become liable in respect of such
Indebtedness or other obligation or the recording, as required
pursuant to GAAP or otherwise, of any such Indebtedness or other
obligation on the balance sheet of such Person (and "incurrence",
"incurred," "incurrable" and "incurring" shall have meanings
correlative to the foregoing); provided, that the accrual of
interest (whether such interest is payable in cash or in kind)
and the accretion of original issue discount shall not be deemed
an incurrence of Indebtedness; provided, further that (a) any
Indebtedness or Disqualified Stock of a Person existing at the
time such Person becomes (after the Issue Date) a Subsidiary
(whether by merger, consolidation, acquisition or otherwise) of
the Company shall be deemed to be incurred or issued for purposes
of Section 4.11, as the case may be, by such Subsidiary at the
time it becomes a Subsidiary of the Company and (b) any
amendment, modification or waiver of any document pursuant to
which Indebtedness was previously incurred shall be deemed to be
an incurrence of Indebtedness unless such amendment, modification
or waiver does not (i) increase the principal or premium thereof
or interest rate thereon (including by way of original issue
discount), (ii) change to an earlier date the stated maturity
thereof or the date of any scheduled or required principal
payment thereon or the time or circumstances under which such
Indebtedness may or shall be redeemed or the Weighted Average
Life to Maturity thereof, (iii) if such Indebtedness is
subordinated to the Notes, modify or affect, in any manner
adverse to the Holders, such subordination, (iv) if the Company
is the obligor thereon, provide that a Subsidiary of the Company
not already an obligor thereon shall be an obligor thereon or (v)
violate, or cause the Indebtedness to violate, the provisions of
Section 4.12 or 4.13.
"Indebtedness" means, with respect to any Person,
without duplication, (i) all liabilities, contingent or
otherwise, of such Person (a) for 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), (b) evidenced by bonds,
notes, debentures, drafts accepted or similar instruments or
letters of credit or representing the balance deferred and unpaid
of the purchase price of any property or (c) for the payment of
money relating to a Capital Lease Obligation; (ii) obligations
under reimbursement agreements of such Person with respect to
letters of credit; (iii) obligations of such Person with respect
to Interest Rate Agreements, Currency Agreements or Commodity
Agreements; (iv) all liabilities of others of the kind described
in the preceding clause (i), (ii) or (iii) that (a) such Person
has Guaranteed, (b) have been incurred by a partnership in which
it is a general partner (to the extent such Person is liable,
contingently or otherwise therefor) or (c) are otherwise its
legal liability (other than endorsements for collection in the
ordinary course of business); and (v) all obligations of others
secured by a Lien to which any of the properties or assets
(including, without limitation, leasehold interests and any other
tangible or intangible property rights) of such Person are
subject, whether or not the obligations secured thereby shall
have been assumed by such Person or shall otherwise be such
Person's legal liability; provided, however, that notwith
standing anything in the foregoing that may be deemed to be to
the contrary, Indebtedness shall not include (i) liabilities
arising from agreements providing for indemnification or
adjustment of purchase price or from Guarantees securing any
obligations of the Company or any Subsidiary pursuant to such
agreements, incurred or assumed in connection with the
disposition of any business, assets or Subsidiary of the Company
(other than Guarantees or similar credit support by the Company
or any Subsidiary of Indebtedness incurred by any Person
acquiring all or any portion of such business, assets or
Subsidiary for the purpose of financing such acquisition or
Indebtedness relating to any sale and leaseback transaction), so
long as that the maximum aggregate liability in respect of the
foregoing permitted pursuant to this clause (i) shall at no time
exceed the net cash proceeds actually received from the sale of
such business, assets or Subsidiary; (ii) any Trade Payables and
any other accrued current liabilities incurred in the ordinary
course of business as the deferred purchase price of property
acquired in the ordinary course of business; (iii) liabilities
arising from Guarantees to suppliers, lessors, licensees,
contractors, franchisees or customers incurred in the ordinary
course of business (exclusive of obligations for the payment of
money borrowed and reimbursement obligations in respect of
amounts drawn under letters of credit); and (iv) performance,
completion, guarantee, surety and similar bonds that do not
constitute obligations for borrowed money to the extent provided
by the Company or any Subsidiary in the ordinary course of
business consistent with past practice and relating to goods and
services to be provided by the Company or such Subsidiary. The
amount of Indebtedness of any Person at any date shall be,
without duplication, (i) the outstanding balance at such date of
all unconditional obligations as described above and the maximum
liability of any such contingent obligations at such date and
(ii) in the case of Indebtedness of others secured by a Lien to
which the property or assets owned or held by such Person is
subject but which is otherwise nonrecourse to such Person, the
lesser of the Fair Market Value at such date of any assets
subject to a Lien securing the Indebtedness of others and the
amount of the Indebtedness secured.
"Indenture" means this Indenture, as amended or
supplemented from time to time.
"Interest Rate Agreement" means any swap agreement,
interest rate cap or collar agreement or other similar agreement
or arrangement of any Person designed to protect such Person or
any of its Subsidiaries against fluctuations in interest rates.
"Investment" of any Person means (i) all investments by
such Person in any other Person in the form of loans, advances or
capital contributions, (ii) all Guarantees of Indebtedness or
other obligations of any other Person by such Person, (iii) all
purchases (or other acquisitions for consideration) by such
Person of Indebtedness, Capital Stock or other securities of any
other Person and (iv) all other items that would be classified as
investments (including, without limitation, purchases of assets
outside the ordinary course of business) on a balance sheet of
such Person prepared in accordance with GAAP; provided, that
notwithstanding anything in the foregoing that may be deemed to
be to the contrary, Investment shall not include (i) sales of
goods or services on trade credit terms consistent with the
Company's and its Subsidiaries' past practices or otherwise
consistent with trade credit terms in common use in the industry
and recorded as accounts receivable on the balance sheet of the
Person making such sale; (ii) loans and advances to employees of
the Company in the ordinary course of business and consistent
with past practices, including travel, moving and other like
advances; (iii) lease, utility and other similar deposits in the
ordinary course of business; (iv) obligations or securities
received in the ordinary course of business in settlement of
debts owing to the Company or a Subsidiary thereof as a result of
foreclosure, perfection, enforcement of any Lien or otherwise;
(v) Investments in existence on the Issue Date; and (vi)
Investments in securities not consisting of cash or Cash
Equivalents and received in connection with an Asset Sale or
other disposition of assets permitted hereunder.
"Issue Date" means [ ], 1998, the date on
which Notes are first to be issued under this Indenture.
"Legal Holiday" means a Saturday, a Sunday or a day on
which banking institutions in the City of New York or the city in
which the Trustee has its Corporate Trust Office are not required
to be open. 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.
"Lien" means, with respect to any asset, any mortgage,
lien, pledge, charge, security interest or encumbrance of any
kind in respect of such asset, whether or not filed, recorded or
otherwise perfected under applicable law (including any
conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell
(excluding options or agreements for sales of assets not
prohibited by the Indenture) or give a security interest in and
any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Marketable Securities" means securities listed and
trading on any national securities exchange or approved for
quotation and trading on the National Market System of the
National Association of Securities Dealers Automated Quotation
System; provided, however, that (a) either any such security is
freely tradable under the Securities Act upon issuance or the
holder thereof has contractual registration rights that will
permit the sale of such Marketable Security pursuant to an
effective registration statement not later than ninety days after
issuance to the Company or one of its Wholly Owned Subsidiaries
and (b) such securities also are so listed or included for
trading privileges.
"Maturity Date" means November 15, 2004.
"Net Cash Proceeds" means, with respect to any Asset
Sale, the proceeds of such Asset Sale in cash or Cash
Equivalents, including payments in respect of deferred payment
obligations (to the extent corresponding to the principal, but
not interest, component thereof) when received in the form of
cash or Cash Equivalents (except to the extent such obligations
are financed or sold with recourse to the Company or any
Subsidiary of the Company) and proceeds from the conversion of
other property received when converted to cash or Cash
Equivalents, net of (a) third- party brokerage commissions, sales
commissions and other third-party fees and expenses (including
(x) reasonable fees and expenses of counsel, accountants and
investment bankers; (y) all legal, title and recording tax
expenses; and (z) all payments made to obtain any necessary
consent to such Asset Sale) related to such Asset Sale, (b)
provisions for all cash taxes payable as a result of such Asset
Sale, (c) payments made to repay Indebtedness (other than
Indebtedness under the Bank Revolving Credit Facility, repayment
of which is governed by Section 4.9) or any other obligation
outstanding at the time of such Asset Sale the incurrence of
which was not prohibited by this Indenture and that is secured by
a Lien, the incurrence of which was not prohibited by this
Indenture, on the property or assets sold to the extent required
by the terms of such Lien and actually repaid in cash or Cash
Equivalents, (d) amounts provided by the Company or any
Subsidiary as a reserve, to the extent required by GAAP, against
any liabilities associated with such Asset Sale and retained by
the Company or any Subsidiary, as the case may be, after such
Asset Sale; and (e) all distributions and other payments required
to be made to minority interest holders in subsidiaries or joint
ventures as a result of such Asset Sale; provided, however, that
the amounts of any such reserves, to the extent not utilized for
the foregoing purposes or no longer required from time to time to
be retained as reserves, shall be Net Cash Proceeds at such times
when any such amounts cease to be retained as reserves. To the
extent, if any, that any consideration for any such Asset Sale
(which would otherwise constitute Net Cash Proceeds) is required
to be held in escrow pending determination of a purchase price
adjustment, such consideration (or any portion thereof) shall
become Net Cash proceeds only at such time as it is released to
the Company or any Subsidiary from escrow.
"Net Equity Proceeds" means (a) in the case of any sale
by the Company of Qualified Capital Stock of the Company, the
aggregate net cash proceeds received by the Company, after
payment of expenses, commissions and the like incurred in
connection therewith (including reasonable fees and expenses of
counsel and investment bankers), and (b) in the case of any
exchange, exercise, conversion or surrender of any outstanding
Indebtedness of the Company or any Subsidiary for or into shares
of Qualified Capital Stock of the Company, the amount of such
Indebtedness (or, if such Indebtedness was issued at an amount
less than the stated principal amount thereof, the accrued amount
thereof as determined in accordance with GAAP) as reflected in
the consolidated financial statements of the Company prepared in
accordance with GAAP as of the most recent date next preceding
the date of such exchange, exercise, conversion or surrender
(plus any additional cash amount required to be paid by the
holder of such Indebtedness to the Company or to any Wholly Owned
Subsidiary of the Company upon such exchange, exercise,
conversion or surrender and less any and all payments made to the
holders of such Indebtedness, and all other expenses incurred by
the Company in connection therewith), in the case of each of
clauses (a) and (b) to the extent consummated after the Issue
Date.
"Net Income" means, with respect to any Person, the net
income (loss) of such Person, determined in accordance with GAAP,
excluding, however, (i) any gain (but not loss), together with
any related provisions for taxes on such gain (but not loss),
realized in connection with (a) any Asset Sale (including,
without limitation, dispositions pursuant to sale and leaseback
transactions) or (b) the disposition of any securities or the
extinguishment of any Indebtedness of such Person or any of its
Subsidiaries and (ii) any extraordinary gain (but not loss),
together with any related provision for taxes on such
extraordinary gain (but not loss).
"New Equity Holders" means (i) Persons who receive
Class B Common Stock in connection with the Consensual Plan, (ii)
Persons who are entitled to receive Additional Interest pursuant
to Section 4.20 and (iii) transferees of the Person included in
clauses (i) and (ii) above.
"Non-Recourse Pledge Agreement" means the Non-Recourse
Pledge Agreement dated as of the date of this Indenture, as
amended, amended and restated or otherwise modified from time to
time, pursuant to which the Hypothecators have pledged on a
non-recourse basis the Pledged Collateral owned by them to the
Trustee, in the form attached hereto as Exhibit B.
"Notes" means the Company's 13% Senior Notes issued
pursuant to this Indenture (including any Accrued Interest
Notes).
"Officer" means, with respect to any Person, the
Chairman of the Board, the Chief Executive Officer, the
President, the Chief Operating Officer, the Chief Financial
Officer, the Treasurer, any Assistant Treasurer, the Controller,
the Secretary or any Vice President of such Person.
"Officers' Certificate" means a certificate signed on
behalf of the Company by two Officers of the Company, one of whom
must be the principal executive officer, the principal financial
officer or the principal accounting officer of the Company, that
meets the requirements of Section 12.5 hereof.
"Old Notes" means the 11% Senior Notes due 2002 of RII
in the original aggregate principal amount of $122,500,000 and
the 13 3/4% Subordinate Notes due 2001 of RII in the original
aggregate principal amount of $16,000,000, collectively.
"Opinion of Counsel" means a written opinion from legal
counsel who is acceptable to the Trustee that meets the
requirements of Section 12.5 hereof. The counsel may be an
employee of or counsel to the Company, any Subsidiary of the
Company or the Trustee.
"Other Permitted Liens" means (i) Liens for taxes,
assessments, governmental charges or claims which are not yet
delinquent or which are being contested in good faith by
appropriate proceedings, which proceedings have the effect of
preventing the forfeiture or sale of the property or assets
subject to such Lien, and for which a reserve or other
appropriate provision, if any, as shall be required in conformity
with GAAP shall have been made; (ii) statutory Liens of
landlords, vendors and laborers and carriers', warehousemen's,
mechanics', suppliers', materialmen's, repairmen's, or other like
Liens arising in the ordinary course of business and with respect
to amounts which are not yet delinquent or which are being
contested in good faith by appropriate proceedings, which
proceedings have the effect of preventing the forfeiture or sale
of the property or assets subject to such Lien, and for which a
reserve or other appropriate provision, if any, as shall be
required by GAAP shall have been made; (iii) Liens incurred or
deposits made in the ordinary course of business in connection
with workers' compensation, unemployment insurance and other
types of social security legislation or regulations; (iv) Liens
incurred or deposits made to secure the performance of tenders,
bids, leases, statutory obligations, surety and appeal bonds,
government contracts, trade contracts, performance and
return-of-money bonds and other obligations of a like nature
incurred in the ordinary course of business (exclusive of
obligations for the payment of borrowed money); (v) easements,
rights-of-way, minor defects or irregularities in title and other
similar charges or encumbrances not interfering in any material
respect with the business of the Company or any Subsidiary
incurred in the ordinary course of business; (vi) any attachment
or judgment Lien, unless the judgment it secures shall not,
within 45 days after the entry thereof, have been discharged or
the execution thereof stayed pending appeal; or (vii) rights of
banks to set off deposits against debts owed to such banks.
"Payment Restriction" means with respect to a
Subsidiary of any Person, any encumbrance, restriction or
limitation, whether by operation of the terms of its charter or
by reason of any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation, on the ability of (i)
such Subsidiary to (a) pay dividends or make other distributions
on its Capital Stock or make payments on any obligation,
liability or Indebtedness owed to such Person or any other
Subsidiary of such Person, (b) make loans or advances to such
Person or any other Subsidiary of such Person, or (c) transfer
any of its properties or assets to such Person or any other
Subsidiary of such Person, or (ii) such Person or any other
Subsidiary of such Person to receive or retain any such (a)
dividends, distributions or payments, (b) loans or advances, or
(c) transfer of properties or assets.
"Permitted Holders" means Oaktree Capital Management,
L.L.C., and Goldman Sachs and Co. and their respective Affiliates
and any group (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act as in effect on the date of this Indenture)
including any of the foregoing.
"Permitted Indebtedness" means (i) Indebtedness of RII
and its Subsidiaries in respect of the Bank Revolving Credit
Facility not to exceed $60 million in aggregate principal amount
at any one time outstanding as reduced in accordance with Section
4.9 (including any Guaranty of RII or any of its Subsidiaries
relating thereto); (ii) Existing Indebtedness; (iii) Indebtedness
pursuant to the Notes, the RII Notes and the Fenchurch Tax
Sharing Note; (iv) Indebtedness of the Company to any Wholly
Owned Subsidiary of the Company and Indebtedness of any
Subsidiary of the Company to the Company or another Wholly Owned
Subsidiary of the Company; provided, however, that any subsequent
transfer or any other event which results in any such Subsidiary
ceasing to be a Subsidiary or any subsequent transfer of such
Indebtedness (except to the Company or another Subsidiary) shall
be deemed, in each case, to constitute the incurrence of such
Indebtedness by the Issuer thereof; (v) obligations with respect
to Interest Rate Agreements, Currency Agreements and Commodity
Agreements; (vi) Permitted Refinancing Indebtedness; (vii) the
incurrence by the Company or any Subsidiary of Indebtedness
represented by Capital Lease Obligations, Attributable Debt,
mortgage financings or Purchase Money Obligations, in each case
incurred for the purpose of financing all or any part of the
purchase price or cost of construction of property (including
additions or replacements to or refurbishments or renovations of
existing property) newly acquired or constructed for use in the
business of the Company or such Subsidiary, in an aggregate
principal amount not to exceed $1 million at any time
outstanding; and (viii) Indebtedness of the Company or its
Subsidiaries (x) evidenced by standby letters of credit which are
issued in the ordinary course of business in support of
self-insurance obligations or operating leases or (y) evidenced
by standby letters of credit (not covered by the immediately
preceding clause (x)) to support industrial revenue bonds, or
agreements to reimburse the issuers of industrial revenue bonds,
in an aggregate principal amount not to exceed $2.5 million at
any time.
"Permitted Investments" means (i) any Investments in
the Company or in a Wholly Owned Subsidiary of the Company that
is engaged primarily in a Related Business; (ii) any Investments
in cash or Cash Equivalents; (iii) Investments by the Company or
any Wholly Owned Subsidiary of the Company in a Person, if as a
result of such Investment (a) such Person becomes a Wholly Owned
Subsidiary of the Company that is engaged primarily in a Related
Business; or (b) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, the Company or a
Wholly Owned Subsidiary of the Company (which remains a Wholly
Owned Subsidiary following consummation of the transaction) and
such Person is engaged primarily in a Related Business; and (iv)
other Investments in one or more Persons that do not exceed $2
million in the aggregate at any time outstanding; provided,
however, that the Company will not transfer to any of its
Subsidiaries assets or proceeds from the sale of its assets to
third parties.
"Permitted Liens" means (i) Liens existing on the Issue
Date; (ii) Liens securing Indebtedness outstanding under the Bank
Revolving Credit Facility as of the Issue Date; (iii) Liens on
property of a Person existing at the time such Person is merged
or consolidated with the Company or any Subsidiary of the Company
or at the time such Person becomes a Subsidiary of the Company;
provided, that such Liens were not created in connection with, or
in contemplation of, such merger or consolidation and do not
extend to any assets other than those of the Person merged or
consolidated with the Company or the Subsidiary of the Company;
(iv) Liens on property existing at the time of acquisition
thereof by the Company or any Subsidiary of the Company;
provided, that such Liens were not created in connection with, or
in contemplation of, such acquisition; (v) Purchase Money Liens
and Liens to secure Capital Lease Obligations, Attributable Debt
and mortgage financings included in clause (vii) of the
definition of Permitted Indebtedness covering only the property
acquired with such Indebtedness; (vi) Liens on assets of
Subsidiaries securing Indebtedness of Subsidiaries (other than
Permitted Indebtedness) incurred in compliance with Section 4.11;
(vii) Liens securing Permitted Refinancing Indebtedness;
provided, that such Liens extend to or cover only the property or
assets then securing the Indebtedness being refinanced; and
(viii) Other Permitted Liens.
"Permitted Refinancing Indebtedness" means any
Indebtedness of the Company or any of its Subsidiaries issued in
exchange for, or the net proceeds of which are used to refinance,
renew, replace, defease or refund other Indebtedness of the
Company or any of its Subsidiaries; provided, that, except in the
case of the redemption of all of the outstanding Notes, in which
case none of the following shall be applicable, (1) the principal
amount of such Indebtedness does not exceed the principal amount
of the Indebtedness so refinanced, renewed, replaced, defeased or
refunded (plus the amount of reasonable expenses incurred in
connection therewith), (2) such Indebtedness has a Weighted
Average Life to Maturity equal to or greater than and a final
maturity no earlier than the Weighted Average Life to Maturity
and final maturity of the Indebtedness being refinanced, renewed,
replaced, defeased or refunded, (3) with respect to Indebtedness
that is subordinated to the Notes, such Permitted Refinancing
Indebtedness is subordinated in right of payment pursuant to
terms at least as favorable to the Holders of Notes as those, if
any, contained in the documentation governing the Indebtedness
being refinanced, renewed, replaced, defeased or refunded, and
(4) no such Indebtedness incurred by the Company is refinanced,
renewed, replaced, defeased or refunded with Indebtedness
incurred by a Subsidiary.
"Person" means any individual, corporation,
partnership, limited liability company or partnership, joint
venture, association, joint-stock company, trust, unincorporated
organization or government or other agency or political
subdivision thereof.
"Pledged Collateral" shall have the meaning given to
such term in the Non-Recourse Pledge Agreement.
"Preferred Stock" means, with respect to any Person,
all Capital Stock of such Person which has a preference in
liquidation or a preference with respect to the payment of
dividends to another class or series of Capital Stock.
"principal" of a Note means the principal of such Note
plus the premium, if any, thereon.
"pro forma" means, with respect to any calculation made
or required to be made pursuant to the terms of this Indenture, a
calculation in accordance with Article 11 of Regulation S-X under
the Securities Act.
"Purchase Money Liens" means Liens to secure or
securing Purchase Money Obligations permitted to be incurred
under this Indenture.
"Purchase Money Obligations" means Indebtedness
representing, or incurred to finance, the cost (a) of acquiring
any assets and (b) of construction or improvement of property, in
each case for use in the business of the Company and its
Subsidiaries (including Purchase Money Obligations of any other
Person at the time such other Person is merged with or is
otherwise acquired by the Company or a Subsidiary); provided,
that (i) the principal amount of such Indebtedness does not
exceed 100% of such cost, including construction or improvement
costs, (ii) any Lien securing such Indebtedness does not extend
to or cover any other asset or property other than the asset or
property being so acquired, constructed or improved and (iii)
such Indebtedness is incurred, and any Liens with respect thereto
are granted, within 180 days of the acquisition of such property
or asset.
"Qualified Capital Stock" means, with respect to any
Person, any Capital Stock of such Person that is not Disqualified
Stock.
"Registration Rights Agreement" means the Registration
Rights Agreement dated as of the date hereof, by and among the
Company and the holders named therein, relating to the Notes, as
such agreement may be amended, modified or supplemented from time
to time.
"Related Business" means the business engaged in on the
Issue Date by the Company and its Subsidiaries (other than the
business of the Apparel Textile Group of Reeves Brothers, Inc.)
and those businesses incidental thereto.
"Reorganization Securities" means securities of the
Company (including shares of Common Stock) issued to a Holder
pursuant to an order or decree of a court of competent
jurisdiction entered in respect of any case, proceeding,
dissolution, liquidation or other winding up or event referred to
in Section 11.2, which securities (i) have a maturity, mandatory
redemption obligation or put right, if any, longer than, or
occurring after the final maturity date of, all Senior
Indebtedness outstanding on the date of issuance of such
Reorganization Securities (and to any securities issued in
exchange for any Senior Indebtedness), (ii) are unsecured and are
not supported by any guarantee or similar undertaking or credit
support extended by any Subsidiary or affiliate of the Company
not otherwise liable under the Notes unless such guarantee or
credit support is subordinated to all Senior Indebtedness, (iii)
in the case of debt securities, do not provide for terms and
conditions, and in the case of equity securities do not provide
for covenants, more onerous to the Company (and any successor
thereto) than those provided in the Senior Indebtedness, and (iv)
by their terms or by law are subordinated to Senior Indebtedness
outstanding on the date of issuance of such Reorganization
Securities (and to any securities issued in exchange of any such
Senior Indebtedness) at least to the same extent as the Notes are
subordinated to the Senior Indebtedness.
"Responsible Officer," when used with respect to the
Trustee, means the Chairman of the Board, the President or any
other officer or assistant officer of the Trustee assigned by the
Trustee to administer its corporate trust matters.
"Restricted Investment" means an Investment other than
a Permitted Investment.
"Restricted Payment" means, with respect to any Person,
any of the following: (i) any dividend or other distribution in
respect of the Capital Stock of any such Person or any of its
Subsidiaries (other than (a) dividends or distributions payable
solely in Capital Stock (other than Disqualified Stock) and (b)
in the case of Subsidiaries of a Person, dividends or
distributions payable to such Person or to a Wholly Owned
Subsidiary of such Person); (ii) the purchase, redemption or
other acquisition or retirement for value of any Capital Stock of
such Person or any of its Subsidiaries; (iii) the making of any
principal payment on, or the purchase, defeasance, repurchase,
redemption or other acquisition or retirement for value, prior to
any scheduled maturity, scheduled repayment or scheduled sinking
fund payment, of any Indebtedness which is subordinated in right
of payment to the Notes; and (iv) the making of any Restricted
Investment.
"Restructuring Agreement" means the Restructuring
Agreement, as amended and restated as of November 6, 1997 by and
among Oaktree Capital Management, Goldman, Sachs and Co., CIBC
Oppenheimer, RII and Fenchurch, Inc.
"Retained Class A Shares" means those shares of Class A
Common Stock which are permitted or required to be exchanged into
Class B Common Stock under this Agreement, the Non-Recourse
Pledge Agreement or the Stockholders Agreement but have not been
so exchanged (whether because of applicable law or otherwise).
Such shares shall be deemed shares of Class B Common Stock and
shall be treated in all respects as if they were shares of Class
B Common Stock, notwithstanding the fact that they may remain
denominated as Class A Common Stock.
"RII" means Reeves Industries inc., a Delaware
corporation and a Wholly-Owned Subsidiary of the Company.
"RII Notes" means the 11% Senior Notes due 2002 of RII.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as
amended.
"Securities Payment" means (i) any payment or
distribution of any kind or character, whether in cash, property
or securities (including any such 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 Notes), which may be payable or deliverable in
respect of the Notes in any case, proceeding, dissolution,
liquidation or other winding up or event referred to in Section
11.2, or otherwise on account of any principal or interest on the
Notes (except as provided in Section 11.11), (ii) any payment
from and after the occurrence of a Consolidation Event on account
of the purchase or other acquisition of the Notes by the Company,
or (iii) any payment made from and after the occurrence of a
Consolidation Event from any deposit pursuant to Section 8.4.
"Senior Indebtedness" means the following obligations,
whether outstanding on the date of this Indenture or thereafter
created, incurred or assumed, and whether at any time owing
actually or contingent:
(i) all obligations in respect of the RII Notes,
including all obligations in respect thereof consisting of the
principal of and premium, if any, and accrued and unpaid
interest, and all fees, expenses and other amounts (including
interest, premium or fees accruing on or after the commencement
of any case or proceeding under any Bankruptcy Law relating to
the Company or the occurrence of any event described in Section
11.2, whether or not any claim in respect thereof shall be
allowed or allowable in such case or proceeding); and
(ii) all obligations owing under the Bank Revolving
Credit Facility, including, without limitation, in respect of any
principal and premium, if any, and accrued and unpaid interest,
fees, expenses and other amounts (including interest, fees,
expenses and other amounts accruing on or after the commencement
of any proceeding under any Bankruptcy Law relating to the
Company or the occurrence of any event described in Section 11.2,
whether or not any claim in respect thereof shall be allowed or
allowable in such case or proceeding);
provided, however, that such obligations shall be Senior
Indebtedness only upon the occurrence of a Consolidation Event.
"Senior Indebtedness Representative" means any trustee,
agent or representative (if any) for any Senior Indebtedness and
shall include General Electric Capital Corporation, as Agent
under the Bank Revolving Credit Facility.
"Significant Subsidiary" means any Subsidiary that
would be a "significant subsidiary" as defined in Article 1, Rule
1-02 of Regulation S-X, promulgated pursuant to the Securities
Act, as such Regulation is in effect on the date hereof.
"SPA" means Reeves S.p.A., an Italian corporation.
"Stockholders Agreement" means the Stockholders
Agreement among the Company and the stockholders of the Company
named therein.
"Subsidiary" means, with respect to any Person, (i) a
corporation a majority of whose Capital Stock with voting power,
under ordinary circumstances, to elect directors is at the time,
directly or indirectly, owned by such Person, by one or more
Subsidiaries of such Person or by such Person and one or more
Subsidiaries thereof or (ii) any other Person (other than a
corporation) in which such Person, one or more Subsidiaries
thereof or such Person and one or more Subsidiaries thereof,
directly or indirectly, at the date of determination thereof has
at least a majority ownership interest and has the power to, and
does, appoint the governing Person of such Person. For purposes
of this definition, any directors' qualifying shares or
investments by foreign nationals mandated by applicable law shall
be disregarded in determining the ownership of a Subsidiary.
"Tax Allocation Agreements" shall mean, collectively,
(a) the tax allocation agreement dated as of the first day of May
1986 entered into by and among Schick Incorporated (later renamed
Hart Holding Company), Newreeveco, Inc. (later renamed Reeves
Industries, Inc.), Reeves Brothers, Inc., Cinderella Knitting
Mills, Inc., and Turner Trucking Company (later renamed Turner
Freight Systems, Inc.), effective for taxable periods through
December 31, 1991, as amended by agreement dated November 5,
1997, and (b) the tax allocation agreement effective as of the
first day of the consolidated return year beginning January 1,
1992, by and among Hart Holding Company Incorporated (later
renamed Fenchurch, Inc.), Fenchurch, Inc. (subsequently merged
into Hart Holding Company Incorporated), RII, Reeves Brothers,
Inc., Turner Freight Systems, Inc., Reeves Penna, Inc., A.R.A.
Manufacturing Company, Hart Investments Properties Corporation,
Hart Capital Corporation, and Reeves Holdings, Inc., as amended
on November 21, 1995 and as further amended by agreement made and
entered into as of November 5, 1997.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa- 77bbbb), as amended, as in effect on the date on
which this Indenture is qualified thereunder.
"Trade Payables" means any accounts payable or any
other indebtedness or monetary obligation to trade creditors
created, assumed or Guaranteed by a Person arising in the
ordinary course of business of such Person in connection with the
acquisition of goods and services.
"Trustee" means the party named as such above until a
successor replaces it in accordance with the applicable
provisions of this Indenture and thereafter means the successor
serving hereunder.
"Voting Stock" means, with respect to any Person, (i)
one or more classes of the Capital Stock of such Person having
general voting power to elect at least a majority of the board of
directors, managers or trustees of such Person (irrespective of
whether or not at the time Capital Stock of any other class or
classes have or might have voting power by reason of the
happening of any contingency) and (ii) any Capital Stock of such
Person convertible or exchangeable without restriction at the
option of the holder thereof into Capital Stock of such Person
described in clause (i) above.
"Voting Trust Agreement" means the Voting Trust
Agreement, dated the date hereof, among the Company, the holders
of the Class B Common Stock and the Class B Voting Trustee named
therein or its successor serving thereunder.
"Weighted Average Life to Maturity" means, when applied
to any Indebtedness at any date, the number of years obtained by
dividing (a) the sum of the products obtained by multiplying (x)
the amount of each then remaining installment, sinking fund,
serial maturity or other required payments of principal,
including payment at final maturity, in respect thereof, by (y)
the number of years (calculated to the nearest one-twelfth) that
will elapse between such date and the making of such payment, by
(b) the then outstanding principal amount of such Indebtedness.
"Wholly Owned Subsidiary" means, with respect to any
Person, a Subsidiary of such Person all of the outstanding
Capital Stock of which shall at the time be owned by such Person
or by one or more Wholly Owned Subsidiaries of such Person or by
such Person and one or more Wholly Owned Subsidiaries of such
Person.
Section 1.2 Other Definitions.
Defined in
Term Section
"Additional Default Interest". . . . . . . 4.20
"Additional Interest". . . . . . . . . . . 4.20
"Additional Interest Schedule" . . . . . . 4.20
"Affiliate Transaction". . . . . . . . . . 4.14
"Agent Members". . . . . . . . . . . . . . 2.14
"Asset Sale Offer" . . . . . . . . . . . . 3.9
"Change of Control Offer". . . . . . . . . 4.8
"Change of Control Payment". . . . . . . . 4.8
"Change of Control Payment Date" . . . . . 4.8
"Covenant Defeasance". . . . . . . . . . . 8.3
"Event of Default" . . . . . . . . . . . . 6.1
"Excess Proceeds". . . . . . . . . . . . . 4.9
"Global Notes" . . . . . . . . . . . . . . 2.1
"Legal Defeasance" . . . . . . . . . . . . 8.2
"Noteholder Equity Interest" . . . . . . . 4.20
"Offer Amount" . . . . . . . . . . . . 3.9
"Offer Period" . . . . . . . . . . . . 3.9
"Paying Agent" . . . . . . . . . . . . 2.3
"Physical Notes" . . . . . . . . . . . 2.14
"Purchase Date". . . . . . . . . . . . 3.9
"Registrar". . . . . . . . . . . . . . 2.3
"Surviving Entity" . . . . . . . . . . 5.1
Section 1.3 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:
"Commission" means the SEC;
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means
the Trustee; and
"obligor" on the indenture securities means the Company
and any successor obligor.
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 1.4 Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in
the plural include the singular;
(5) provisions apply to successive events and
transactions; and
(6) references to sections of or rules under the
Securities Act shall be deemed to include substitute, replacement
or successor sections or rules adopted by the SEC from time to
time.
ARTICLE II
THE NOTES
Section 2.1 Form and Dating.
The Notes and the related Trustee's certificate of
authentication shall be substantially in the form of Exhibit A
hereto, which is part of this Indenture. The Notes may have
notations, legends or endorsements required by law, stock
exchange rule or usage. Each Note shall be dated the date of its
authentication. The Notes shall be issued in fully registered
form, without coupons, in Authorized Denominations.
The terms and provisions contained in the Notes shall
constitute, and are hereby expressly made, a part of this
Indenture and the Company and the Trustee, by their execution and
delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby.
On the Issue Date, the Notes shall be initially issued
in the form of one or more permanent global Notes, in registered
form (the "Global Notes"), deposited with the Trustee, as
custodian for the Depository. Any Global Note shall provide that
it shall represent the aggregate amount of outstanding Notes from
time to time endorsed thereon and that the aggregate amount of
outstanding Notes represented thereby may from time to time be
reduced, as appropriate, to reflect exchanges and redemptions.
Any endorsement of a Global Note to reflect the amount of any
decrease in the amount of Notes represented thereby shall be made
by the Trustee, as custodian for the Depository, as hereinafter
provided.
The Company may issue Accrued Interest Notes in
accordance with the second paragraph of Section 2 of the Notes.
All Accrued Interest Notes so issued shall constitute obligations
of the Company under this Indenture and shall be subject to the
terms and conditions contained herein (except with respect to the
date from which interest shall accrue) as if they were issued on
the Issue Date.
Section 2.2 Execution and Authentication.
Two Officers shall sign the Notes for the Company by
manual or facsimile signature. The Company's seal shall be
reproduced on the Notes and may be in facsimile form.
If an Officer whose signature is on a Note no longer
holds that office at the time a Note is authenticated, the Note
shall nevertheless be valid.
A Note shall not be valid until authenticated by the
manual signature of the Trustee. The signature shall be
conclusive evidence that the Note has been authenticated under
this Indenture.
The Trustee shall, upon receipt of a Company Order,
authenticate Notes for original issue in the aggregate principal
amount of $73,004,724. The aggregate principal amount of Notes
outstanding at any time may not exceed such amount plus the
principal amount of any Accrued Interest Notes issued pursuant to
the second paragraph of Section 2 of the Notes except as provided
in Section 2.7.
The Trustee may appoint an authenticating agent
acceptable to the Company to authenticate the Notes. An
authenticating agent may authenticate the Notes 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 2.3 Registrar and Paying Agent.
The Company shall maintain an office or agency where
the Notes may be presented for registration of transfer or for
exchange ("Registrar") and an office or agency where the Notes
may be presented for payment ("Paying Agent"). The Registrar
shall keep a register of the Notes and of their transfer and
exchange. The Company may appoint one or more co-registrars and
one or more additional paying agents. The term "Registrar"
includes any co-registrar and the term "Paying Agent" includes
any additional paying agent. The Company may change any Paying
Agent or Registrar without notice to any Holder. The Company
shall notify the Trustee in writing 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 or Registrar.
The Company initially appoints the Trustee to act as
the Registrar and Paying Agent.
Section 2.4 Paying Agent to Hold Money in Trust.
The Company shall require each Paying Agent other than
the Trustee to agree in writing that the Paying Agent will hold
in trust for the benefit of Holders or the Trustee all money held
by the Paying Agent for the payment of principal or interest on
the Notes, and will 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 or a Subsidiary) shall have no further
liability for the money. If the Company or a Subsidiary 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. Upon any bankruptcy or reorganization proceedings
relating to the Company, the Trustee shall serve as Paying Agent
for the Notes.
Section 2.5 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 all Holders, and the Company and the
Trustee shall otherwise comply with TIA Section 312(a). If the
Trustee is not the Registrar, the Company shall furnish to the
Trustee, at least five Business Days before each interest payment
date and at such other times as the Trustee may reasonably
request in writing, a list in such form and as of such date as
the Trustee may reasonably require of the names and addresses of
the Holders.
Section 2.6 Transfer and Exchange.
When Notes are presented to the Registrar with a
request to register the transfer or to exchange them for an equal
principal amount of Notes of other authorized denominations, the
Registrar shall register the transfer or make the exchange as
requested if its requirements for such transactions are met. To
permit registrations of transfer and exchanges, the Company shall
execute and the Trustee shall authenticate Notes at the
Registrar's request. No service charge to the Holder shall be
made for any registration of transfer or exchange, but the
Company or the Trustee may require from the transferring or
exchanging Holder payment of a sum sufficient to cover any
transfer tax or similar governmental charge payable in connection
therewith (other than any such transfer taxes or similar
governmental charges payable upon exchanges pursuant to Section
2.13, 3.6, 4.8, 4.9 or 9.5).
The Registrar shall not be required (A) to register the
transfer of or to exchange Notes during a period beginning at the
opening of business 15 days before the day of any selection of
Notes for redemption under Section 3.7 hereof and ending at the
close of business on the day of selection; or (B) to register the
transfer of or to exchange any Note so selected for redemption in
whole or in part, except the unredeemed portion of any Note being
redeemed in part; or (C) to register the transfer of or to
exchange a Note between a record date and the next succeeding
interest payment date.
Any Holder of a Global Note shall, by acceptance of
such Global Note, agree that transfers of the beneficial
interests in such Global Note may be effected only through a book
entry system maintained by the Holder of such Global Note (or its
agent), and that ownership of a beneficial interest in the Global
Note shall be required to be reflected in a book entry.
Prior to the due presentation for registration of
transfer of any Note, the Company, the Trustee, the Paying Agent,
the Registrar or any co-registrar may deem and treat the Person
in whose name a Note is registered as the absolute owner of such
Note for the purpose of receiving payment of principal of and
interest, if any, on such Note and for all other purposes
whatsoever, whether or not such Note is overdue, and none of the
Company, the Trustee, the Paying Agent, the Registrar or any
co-registrar shall be affected by notice to the contrary.
All Notes issued upon any transfer or exchange pursuant
to this Section 2.6 will evidence the same debt and will be
entitled to the same benefits under this Indenture as the Notes
surrendered upon such transfer or exchange.
Section 2.7 Replacement Notes.
If a mutilated Note is surrendered to the Trustee or if
the Holder claims that a Note held by such Holder has been lost,
destroyed or wrongfully taken, the Company shall issue and the
Trustee shall authenticate a replacement Note if the Trustee's
requirements 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 and any
authenticating agent from any loss that any of them may suffer if
a Note is replaced. The Company or Trustee may charge for its
expenses in replacing a Note.
Every replacement Note is an additional obligation of
the Company and shall be entitled to all of the benefits of this
Indenture equally and proportionately with all other Notes duly
issued hereunder.
Section 2.8 Outstanding Notes.
The Notes outstanding at any time are all the Notes
authenticated by the Trustee except for those canceled by it,
those delivered to it for cancellation, and those described in
this Section 2.8 as not outstanding. Except as set forth in
Section 2.9 hereof, a Note does not cease to be outstanding
because the Company or an Affiliate of the Company holds the
Note.
If a Note is replaced pursuant to Section 2.7 hereof,
it ceases to be outstanding unless the Trustee receives proof
satisfactory to it that the replaced Note is held by a bona fide
purchaser.
If the Note is considered paid under Section 4.1
hereof, it ceases to be outstanding and interest on it ceases to
accrue.
Section 2.9 Treasury Notes.
(a) In determining whether the Holders of the
required principal amount of Notes have concurred in any
direction, waiver or consent, Notes owned by the Company or by
any Subsidiary thereof or by any other Affiliate controlled by
the Company shall be considered as though not outstanding, except
that for the purposes of determining whether the Trustee shall be
protected in relying on any such direction, waiver or consent,
only Notes that the Trustee knows are so owned shall be so
disregarded.
(b) In determining whether the Holders of the
required principal amount of Notes 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, Notes
owned by the Company and Affiliates of the Company other than
Permitted Holders 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
direction or consent, only Notes that the Trustee knows are so
owned shall be so disregarded.
Section 2.10 Temporary Notes.
Until definitive Notes are ready for delivery, the Company
may prepare and the Trustee shall authenticate temporary Notes
upon a written order of the Company signed by two Officers of the
Company. Temporary Notes shall be substantially in the form of
definitive Notes but may have variations that the Company
considers appropriate for temporary Notes. Without unreasonable
delay, the Company shall prepare and the Trustee shall
authenticate definitive Notes in exchange for temporary Notes.
Holders of temporary Notes shall be entitled to all of the
benefits of this Indenture.
Section 2.11 Cancellation.
The Company at any time may deliver Notes to the
Trustee for cancellation. The Registrar and Paying Agent shall
forward to the Trustee any Notes surrendered to them for
registration of transfer, exchange or payment. The Trustee and
no one else shall cancel all Notes surrendered for registration
of transfer, exchange, payment, replacement or cancellation and,
unless otherwise directed by the Company, shall destroy canceled
Notes in accordance with its normal practices. If such notes are
destroyed, certification of the destruction of all canceled Notes
shall be delivered to the Company, at the Company's request. The
Company may not issue new Notes to replace Notes that it has 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 Notes, 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, in
each case at the rate provided in the Notes and in Section 4.1
hereof. The Company shall notify the Trustee in writing of the
amount of defaulted interest proposed to be paid on each Note and
the date of the proposed payment. The Company shall fix or cause
to be fixed each such special record date and payment date;
provided, that no such special record date shall be less than 10
days prior to the related payment date for such defaulted
interest. At least 15 days before the special record date, the
Company shall mail or cause to be mailed to Holders a notice that
states the special record date, the related payment date and the
amount of such interest to be paid.
Section 2.13 CUSIP Number.
The Company in issuing the Notes may use a "CUSIP"
number (or numbers), and if so, the Trustee shall use the CUSIP
number(s) in notices of redemption or exchange as a convenience
to Holders; provided, that any such notice may state that no
representation is made as to the correctness or accuracy of the
CUSIP number(s) printed in the notice or on the Notes, and that
reliance may be placed only on the other identification numbers
printed on the Notes. The Company will promptly notify in
writing the Trustee of any such CUSIP number used by the Company
in connection with the Notes and any change in such CUSIP number.
Section 2.14 Book-Entry Provisions for Global Notes.
(a) The Global Notes initially shall (i) be registered
in the name of the Depository or the nominee of such Depository,
(ii) be delivered to the Trustee as custodian for such Depository
and (iii) bear legends as may be reasonably requested by the
Depository.
Members of, or participants in, the Depository ("Agent
Members") shall have no rights under this Indenture with respect
to any Global Note held on their behalf by the Depository, or the
Trustee as its custodian, or under the Global Note, and the
Depository may be treated by the Company, the Trustee and any
agent of the Company or the Trustee as the absolute owner of the
Global Note for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Company, the Trustee
or any agent of the Company or the Trustee from giving effect to
any written certification, proxy or other authorization furnished
by the Depository or impair, as between the Depository and its
Agent Members, the operation of customary practices governing
the exercise of the rights of a Holder of any Note.
(b) Transfers of Global Notes shall be limited to
transfer in whole, but not in part, to the Depository, its
successors or their respective nominees. Interests of beneficial
owners in the Global Notes may be transferred or exchanged for
certificated Notes in registered form in substantially the form
set forth in Exhibit A ("Physical Notes") and interests of
beneficial owners in Physical Notes may be transferred or
exchanged for Global Notes, in each case, in accordance with the
rules and procedures of the Depository. In addition, Physical
Notes shall be transferred to all beneficial owners in exchange
for their beneficial interests in Global Notes if (i) the
Depository notifies the Company that it is unwilling or unable to
continue as Depository for any Global Note and a successor
depositary is not appointed by the Company within 90 days of such
notice, (ii) the Company delivers an Officers' Certificate to the
Trustee stating that the Global Note shall be so exchanged or
(iii) an Event of Default entitling the Holders of the Notes to
accelerate the maturity thereof has occurred and is continuing
and the Registrar has received a written request from the
Depository to issue Physical Notes.
(c) In connection with any transfer or exchange of a
portion of the beneficial interest in any Global Note to
beneficial owners pursuant to paragraph (b), the Registrar shall
(if one or more Physical Notes are to be issued) reflect on its
books and records the date and a decrease in the principal amount
of the Global Note in an amount equal to the principal amount of
the beneficial interest in the Global Note to be transferred, and
the Company shall execute, and the Trustee shall upon receipt of
a written order from the Company authenticate and make available
for delivery, one or more Physical Notes of like tenor and
amount.
(d) In connection with the transfer of Global Notes as
an entirety to beneficial owners pursuant to paragraph (b), the
Global Notes shall be deemed to be surrendered to the Trustee for
cancellation, and the Company shall execute, and the Trustee
shall authenticate and deliver, to each beneficial owner
identified by the Depository in writing in exchange for its
beneficial interest in the Global Notes, an equal aggregate
principal amount of Physical Notes of Authorized Denominations.
(e) The Holder of any Global Note may grant proxies
and otherwise authorize any person, including Agent Members and
persons that may hold interests through Agent Members, to take
any action which a Holder is entitled to take under this
Indenture or the Notes.
Section 2.15 Wire Payments to Holders.
Notwithstanding any provisions of this Indenture and
the Notes to the contrary, at the request of a Holder, all
payments with respect to any of the Notes held by such Holder,
may be made by the Paying Agent upon receipt from the Company of
immediately available funds prior to 11:30 a.m., New York City
time, on the date such payment is due, directly to the Holder of
such Note in immediately available funds; provided, however, that
no such payment in immediately available funds shall be made to
any Holder under this Section 2.15 unless such Holder has
delivered written instructions to the Trustee prior to the
relevant record date for such payment requesting that such
payment will be so made and designating the bank account to which
such payments shall be so made and in the case of payments of
principal, surrenders the Note to the Trustee in exchange for a
Note or Notes aggregating the same principal amount as the
unredeemed principal amount of the Notes surrendered. The
Trustee shall be entitled to rely on the last instruction
delivered by the Holder pursuant to this Section 2.15 unless a
new instruction is delivered prior to the relevant record date
for a payment date. The Company will indemnify and hold the
Trustee harmless against any loss, liability or expense
(including reasonable attorneys' fees and expenses) resulting
from any act or omission to act on the part of the Company or any
such Holder in connection with this Section 2.15 or which the
Paying Agent may incur as a result of making any payment in
accordance with this Section 2.15.
ARTICLE III
REDEMPTION AND PREPAYMENT
Section 3.1 Notices to Trustee.
If the Company elects to redeem Notes pursuant to the
optional redemption provisions of the Notes and Section 3.7
hereof, it shall furnish to the Trustee, at least 45 days but not
more than 60 days before a redemption date (unless a shorter
notice shall be satisfactory to the Trustee), an Officer's
Certificate setting forth (i) the redemption date, (ii) the
principal amount of Notes to be redeemed and (iii) the redemption
price.
Section 3.2 Selection of Notes to Be Redeemed.
If less than all of the Notes are to be redeemed, the
Trustee shall select the Notes to be redeemed among the Holders
of the Notes on a pro rata basis, by lot or in accordance with
any other method the Trustee considers fair and appropriate (and
in such manner as complies with applicable legal and stock
exchange requirements, if any).
The Trustee shall promptly notify the Company in
writing of the Notes selected for redemption and, in the case of
any Note selected for partial redemption, the principal amount
thereof to be redeemed. The Trustee may select for redemption
portions of the principal of Notes that have denominations larger
than $1,000. Notes and portions of Notes selected shall be in
Authorized Denominations; except that if all of the Notes of a
Holder are to be redeemed, the entire outstanding amount of Notes
held by such Holder, even if not an Authorized Denomination,
shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for
redemption also apply to portions of Notes called for redemption.
Section 3.3 Notice of Redemption.
At least 30 days but not more than 60 days before a
redemption date, the Company shall mail or cause to be mailed, by
first class mail, a notice of redemption to each Holder whose
Notes are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed and
shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the
portion of the principal amount of such Note to be redeemed and
that, after the redemption date upon surrender of such Note, a
new Note or Notes in principal amount equal to the unredeemed
portion shall be issued;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be
surrendered to the Paying Agent to collect the redemption price;
(f) that, unless the Company defaults in making such
redemption payment, interest on Notes called for redemption
ceases to accrue on and after the redemption date; and
(g) the Section of this Indenture and/or the Notes
pursuant to which the Notes called for redemption are being
redeemed.
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 have delivered to the Trustee, at
least 45 days prior to the redemption date (unless a shorter
notice shall be satisfactory to the Trustee), an Officers'
Certificate requesting that the Trustee give such notice and
setting forth the information to be stated in such notice as
provided in the preceding paragraph.
Section 3.4 Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with
Section 3.3 hereof, Notes called for redemption become
irrevocably due and payable on the redemption date at the
redemption price. A notice of redemption may not be conditional.
Notice of redemption shall be deemed to be given when
mailed, whether or not the Holder receives such notice. In any
event, failure to give such notice, or any defect therein, shall
not affect the validity of the proceedings for the redemption of
the Notes.
Section 3.5 Deposit of Redemption Price.
On or before 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 Notes to be redeemed on that date other than Notes or
portions thereof called for redemption which have been delivered
by the Company to the Trustee for cancellation. Whichever of the
Trustee or the Paying Agent receiving the money shall promptly
return to the Company any money deposited with it by the Company
in excess of the amounts necessary to pay the redemption price
of, and accrued interest on, all Notes to be redeemed.
If the Company complies with the provisions of the
preceding paragraph, on and after the redemption date, interest
shall cease to accrue on the Notes or the portions of Notes
called for redemption. If a Note is redeemed on or after an
interest record date, but on or prior to the related interest
payment date, then any accrued and unpaid interest shall be paid
to the Person in whose name such Note was registered at the close
of business on such record date. If any Note 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 shall 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 Notes and in
Section 4.1 hereof.
Section 3.6 Notes Redeemed in Part.
Upon surrender of a Note 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 Note equal in
principal amount to the unredeemed portion of the Note
surrendered.
Section 3.7 Optional Redemption.
The Notes will be subject to redemption at any time at
the option of the Company, in whole or in part, upon not less
than 30 nor more than 60 days' notice, at a redemption price of
100% of the principal amount then outstanding plus accrued and
unpaid interest thereon to the applicable date of redemption.
Section 3.8 Mandatory Redemption.
Except as set forth under Sections 4.8 and 4.9 hereof,
the Company shall not be required to make mandatory redemption
or sinking fund payments with respect to the Notes.
Section 3.9 Offers to Purchase by Application of
Excess Proceeds.
In the event that pursuant to Section 4.9 hereof the
Company shall commence an offer to all Holders of Notes to
purchase Notes (an "Asset Sale Offer"), it shall follow the
procedures specified below.
The Asset Sale Offer shall remain open for a period of
20 Business Days following its commencement or such longer period
as may be required by applicable law (the "Offer Period"). No
later than five Business Days after the termination of the Offer
Period (the "Purchase Date"), the Company shall purchase the
principal amount of Notes required to be purchased pursuant to
Section 4.9 hereof (the "Offer Amount") or, if less than the
Offer Amount has been tendered, all Notes tendered in response to
the Asset Sale Offer. Payment for any Notes so purchased shall
be made in the same manner as interest payments are made.
If the Purchase Date is on or after an interest record
date and on or before the related interest payment date, any
accrued and unpaid interest shall be paid to the Person in whose
name a Note is registered at the close of business on such record
date, and no additional interest shall be payable to Holders who
tender Notes pursuant to the Asset Sale Offer.
Within 10 days of each date on which the aggregate
amount of Excess Proceeds exceeds $5 million, the Company shall
send, by first class mail, postage prepaid, a notice to the
Trustee and each Holder at the address appearing in the register
maintained by the Registrar of the Notes, which notice shall
specify the Purchase Date, which shall be no earlier than 25 days
nor later than 60 days from the date such notice is mailed. The
notice shall contain all instructions and materials necessary to
enable such Holders to tender Notes pursuant to the Asset Sale
Offer. The Asset Sale Offer shall be made to all Holders of
Notes. The notice, which shall govern the terms of the Asset
Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant
to this Section 3.9 and Section 4.9 hereof and the length of time
the Asset Sale Offer shall remain open;
(b) the Offer Amount, the purchase price and the
Purchase Date;
(c) that any Note not tendered or accepted for payment
shall continue to accrue interest;
(d) that, unless the Company defaults in making such
payment, any Note accepted for payment pursuant to the Asset Sale
Offer shall cease to accrue interest after the Purchase Date;
(e) that Holders electing to have a Note purchased
pursuant to an Asset Sale Offer shall be required to surrender
the Note, with the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Note completed, to the Company, a
depositary if appointed by the Company, or a Paying Agent at the
address specified in the notice prior to the close of business on
the third Business Day before the Purchase Date;
(f) that Holders shall be entitled to withdraw their
election if the Company, the depositary or the Paying Agent, as
the case may be, receives, not later than the expiration of the
Offer Period, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of the
Note the Holder delivered for purchase and a statement that such
Holder is withdrawing such Holder's election to have such Note
purchased;
(g) that, if the aggregate principal amount of Notes
surrendered by Holders exceeds the Offer Amount, the Company
shall select the Notes to be purchased on a pro rata basis (with
such adjustments as may be deemed appropriate by the Company so
that only Notes in Authorized Denominations shall be purchased);
and
(h) that Holders whose Notes are purchased only in
part shall be issued new Notes equal in principal amount to the
unpurchased portion of the Notes surrendered.
Notwithstanding anything to the contrary elsewhere
herein, the Company will comply with the requirements of Rule
14e-1 under the Exchange Act and any other laws and regulations
thereunder to the extent such laws and regulations are applicable
in connection with the repurchase of the Notes in connection with
an Asset Sale Offer and the Company will not be deemed to be in
violation of this Section 3.9 or Section 4.9 hereof to the extent
that such compliance conflicts with this Section 3.9 or Section
4.9 hereof.
On the Purchase Date, the Company shall, to the extent
lawful, accept for payment on a pro rata basis to the extent
necessary, the Offer Amount of Notes or portions thereof tendered
pursuant to the Asset Sale Offer, or if less than the Offer
Amount has been tendered, all Notes (or portions thereof)
tendered, and shall deliver to the Trustee an Officers'
Certificate stating that such Notes or portions thereof were
accepted for payment by the Company in accordance with the terms
of this Section 3.9. The Company or the Paying Agent, as the case
may be, shall promptly (but in any case not later than five
Business Days after the Purchase Date) mail or deliver to each
tendering Holder an amount equal to the purchase price of the
Notes tendered by such Holder and accepted by the Company for
purchase, and the Company shall issue, and the Trustee shall
promptly authenticate and mail or deliver a new Note to such
Holder, in a principal amount equal to any unpurchased portion of
the Notes surrendered. Any Note not so accepted shall be
promptly mailed or delivered by the Company to the Holder
thereof. The Company shall publicly announce the results of the
Asset Sale Offer on the Purchase Date.
ARTICLE IV
COVENANTS
Section 4.1 Payment of Notes.
The Company shall pay or cause to be paid the principal
of, premium, if any, and interest on the Notes on the dates and
in the manner provided in the Notes and this Indenture.
Principal, premium, if any, and interest shall be considered paid
on the date due if the Paying Agent, if other than the Company or
a Subsidiary thereof, holds at least one Business Day before that
date, money deposited by the Company in immediately available
funds and designated for and sufficient to pay all principal,
premium, if any, and interest then due.
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 Notes 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.
Section 4.2 Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan,
City of New York, an office or agency (which may be an office of
the Trustee or an Affiliate of the Trustee, Registrar or
co-registrar) where Notes may be surrendered for registration of
transfer or for exchange and where notices and demands to or upon
the Company in respect of the Notes 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.
The Company may also from time to time designate one or
more other offices or agencies where the Notes may be presented
or surrendered for any or all such purposes and may from time to
time rescind such designations; provided, however, that no such
designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency in the Borough
of Manhattan, the City of New York for such purposes. The
Company shall give prompt written notice to the Trustee of any
such designation or rescission and of any change in the location
of any such other office or agency.
The Company hereby designates the Corporate Trust
Office of the Trustee as one such office or agency of the Company
in accordance with Section 2.3.
Section 4.3 Reports.
Whether or not required by the rules and regulations of
the SEC, so long as any Notes are outstanding, the Company will
furnish to the Holders within 15 days after the date on which it
would have been required to make filings with the SEC (without
regard to any extension that may be permitted by the SEC) (i) all
reports that would be required to be contained in a filing with
the SEC on Forms 10-Q and 10-K (or any successor form) if the
Company were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and
Results of Operations," and, with respect to the annual
information only, a report thereon by the Company's certified
independent accountants and (ii) all reports that would be
required to be filed with the SEC on Form 8-K if the Company were
required to file such reports. In addition, whether or not
required by the rules and regulations of the SEC, the Company
will file a copy of all such information and reports with the SEC
for public availability for so long as any Notes are outstanding;
provided, however, that the Company will not be obligated to file
such information or reports if the SEC does not permit or accept
such filings. All such reports shall be filed with the SEC
(unless the SEC will not accept such a filing) and furnished to
the Holders within the time for filing such reports with the SEC
pursuant to the rules and regulations of the SEC (without regard
to any rules or regulations permitting extensions of time to file
such reports). In addition, the Company agrees that, for so long
as at least $20,000,000 in aggregate principal amount of Notes
remain outstanding, it will furnish to the Holders and to
beneficial holders of Notes and to prospective purchasers of
Notes designated by the Holders, upon their request, the
information required to be delivered pursuant to Rule
144(A)(d)(4) under the Securities Act. Upon qualification of the
Indenture under the TIA, the Company shall also comply with TIA
Section 314(a).
Section 4.4 Compliance Certificate.
(a) The Company shall deliver to the Trustee, within
120 days after the end of each fiscal year, a certificate of the
principal executive officer, the principal financial officer or
the principal accounting officer of the Company stating that a
review of the activities of the Company and its Subsidiaries
during the preceding fiscal year has been made under the
supervision of the signing officer with a view to determining
whether the Company has kept, observed, performed and fulfilled
its obligations under this Indenture, and further stating, as to
such officer signing such certificate, that to the best of his or
her knowledge the Company has kept, observed, performed and
fulfilled each and every covenant contained in this Indenture and
is not in default in the performance or observance of any of the
terms, provisions and conditions of this Indenture (or, if a
Default or Event of Default shall have occurred and is pending,
describing all such Defaults or Events of Default of which he or
she may have knowledge and what action the Company is taking or
proposes to take with respect thereto) and that to the best of
his or her knowledge no event has occurred and remains in
existence by reason of which payments on account of the principal
of or interest, if any, on the Notes is prohibited or, if such
event has occurred, a description of the event and what action,
if any, the Company is taking or proposes to take with respect
thereto and listing all redemptions of Notes and Restricted
Payments made during the period covered by the certificate, if
any. For purposes of this Section 4.4(a), such compliance shall
be determined without regard to any grace period or requirement
of notice provided pursuant to the terms of this Indenture.
(b) So long as not contrary to the then generally
accepted auditing and accounting standards, the year-end
financial statements delivered pursuant to Section 4.3 above
shall be accompanied by a written statement of the Company's
independent public accountants (who shall be a firm of
established national reputation) that in making the examination
necessary for certification of such financial statements, nothing
has come to their attention that would lead them to believe that
the Company has violated any provisions of Sections 4.1, 4.5,
4.9, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.17, 4.18 or 5.1, as
they relate solely to accounting matters or, if any such
violation has occurred and has come to their attention,
specifying the nature and period of existence 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 such violation. It is specifically understood by all parties
that the accountant's examination is not designed primarily
toward obtaining such knowledge.
(c) The Company shall, so long as any of the Notes
are outstanding, deliver to the Trustee, promptly, but in any
case within 3 Business Days of any Officer becoming aware of any
Default or Event of Default, an Officers' Certificate specifying
such Default or Event of Default and what action, if any, the
Company is taking or proposes to take with respect thereto.
Section 4.5 Taxes.
The Company shall pay, and shall cause each of its
Subsidiaries to pay, prior to delinquency, all material taxes,
assessments, and governmental levies except such as are being
contested in good faith and by appropriate proceedings or where
the failure to effect such payment would not have a material
adverse effect on the Company and its Subsidiaries taken as a
whole.
Section 4.6 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, plead,
or in any manner whatsoever claim or take the benefit or
advantage of, any stay or extension law or any usury or other law
wherever enacted, now or at any time hereafter in force, that may
affect the covenants, or the performance, of this Indenture; and
the Company (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and
covenants that it shall not, by resort to any such law, hinder,
delay or impede the execution of any power herein granted to the
Trustee, but shall suffer and permit the execution of every such
power as though no such law has been enacted.
Section 4.7 Corporate Existence.
Subject to Article Five and Section 4.17 hereof, the
Company shall do or cause to be done all things necessary to
preserve and keep in full force and effect (i) its corporate
existence, and the corporate, partnership or other existence of
each of its Subsidiaries, in accordance with the respective
organizational documents (as the same may be amended from time to
time) of the Company or any such Subsidiary and (ii) the rights
(charter and statutory), licenses and franchises of the Company
and its Subsidiaries; provided, however, that the Company shall
not be required to preserve any such right, license or franchise,
or the corporate, partnership or other existence of any of its
Subsidiaries, if the Board of Directors shall determine that the
preservation thereof is no longer desirable in the conduct of the
business of the Company and its Subsidiaries, taken as a whole,
and that the loss thereof is not adverse in any material respect
to the Holders; and provided, further, that this Section 4.7
shall not apply to any Subsidiary after its corporate existence
is terminated or it otherwise ceases to be a Subsidiary of the
Company in accordance with the provisions hereof.
Section 4.8 Change of Control.
(a) Upon the occurrence of a Change of Control (the
date of such occurrence being the "Change of Control Date"), each
Holder will have the right to require the Company to repurchase
all or any part (equal to an Authorized Denomination) of such
Holder's Notes pursuant to the offer described in paragraph (b)
below (the "Change of Control Offer") at an offer price in cash
equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest, if any, to the date of purchase (the
"Change of Control Payment").
(b) Within 30 days following the Change of Control
Date, the Company will send, by first-class mail, postage
prepaid, a notice to the Trustee and to each Holder at the
address appearing in the register maintained by the Registrar of
the Notes stating:
(1) that the Change of Control Offer is being
made pursuant to this Section 4.8 and that all Notes tendered
will be accepted for payment;
(2) the purchase price and the purchase date,
which will be no earlier than 30 days nor later than 60 days from
the date such notice is mailed (the "Change of Control Payment
Date");
(3) that any Note not tendered will continue to
accrue interest;
(4) that, unless the Company defaults in the
payment of the Change of Control Payment, all Notes accepted for
payment pursuant to the Change of Control Offer will cease to
accrue interest after the Change of Control Payment Date;
(5) that Holders electing to have any Notes
purchased pursuant to a Change of Control offer will be required
to surrender the Notes, with the form entitled "Option of Holder
to Elect Purchase" on the reverse of the Notes completed, to the
Paying Agent at the address specified in the notice prior to the
close of business on the third Business Day preceding the Change
of Control Payment Date;
(6) that Holders will be entitled to withdraw
their election if the Paying Agent receives, not later than the
close of business on the third Business Day preceding the Change
of Control Payment Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the
principal amount of Notes delivered for purchase, and a statement
that such Holder is withdrawing such Holder's election to have
such Notes and
(7) that Holders whose Notes are being purchased
only in part will be issued new Notes equal in principal amount
to the unpurchased portion of the Notes surrendered.
(c) Notwithstanding anything to the contrary elsewhere
herein, the Company will comply with the requirements of Rule
14e-1 under the Exchange Act and any other laws and regulations
thereunder to the extent such laws and regulations are applicable
in connection with the repurchase of the Notes in connection with
a Change of Control Offer and the Company will be deemed not to
be in violation of this Section 4.8 to the extent that such
compliance conflicts with this Section 4.8.
(d) If the Change of Control Payment Date is on or
after an interest record date and on or before the related
interest payment date, any accrued and unpaid interest shall be
paid to the Person in whose name a Note is registered at the
close of business on such record date, and no additional interest
shall be payable to Holders who tender pursuant to the Change of
Control Offer.
(e) On the Change of Control Payment Date, the Company
shall (1) accept for payment Notes or portions thereof tendered
pursuant to the Change of Control Offer, (2) deposit with the
Paying Agent an amount equal to the Change of Control Payment in
respect of all Notes or portions thereof so tendered and (3)
deliver or cause to be delivered to the Trustee the Notes so
accepted together with an Officers' Certificate stating the Notes
or portions thereof tendered to the Company. The Paying Agent
shall promptly mail to each Holder of Notes so accepted the
Change of Control Payment for such Notes, and the Company shall
issue, and the Trustee shall promptly authenticate and mail or
deliver to each Holder, a new Note in principal amount equal to
any unpurchased portion of the Notes surrendered, if any;
provided, that each such new Note shall be in an Authorized
Denomination. Any Note not so accepted shall be promptly mailed
or delivered by the Company to the Holder thereof. The Company
will publicly announce the results of the Change of Control Offer
on or as soon as practicable after the Change of Control Payment
Date.
Section 4.9 Limitation on Asset Sales.
The Company shall not, and shall not permit any of its
Subsidiaries to, consummate any Asset Sale, unless (i) the
Company (or the Subsidiary, as the case may be) receives
consideration at the time of such sale or other disposition at
least equal to the Fair Market Value thereof; (ii) not less than
85% of the consideration received by the Company (or its
Subsidiaries, as the case may be) is in the form of cash or Cash
Equivalents; provided, however, that the amount of (a) any
liabilities (as shown on the Company's or such Subsidiary's most
recent balance sheet or in the notes thereto) of the Company or
any Subsidiary (other than liabilities that are by their terms
subordinated to the Notes) that are assumed by the transferee of
any such assets with the effect that none of the Company or any
of its Subsidiaries will have any obligation with respect to such
liabilities following such assumption by the transferee, (b) any
notes or other obligations received by the Company or its
Subsidiaries from such transferee that are converted by the
Company or such Subsidiary into cash within 90 days following
receipt (to the extent of the cash received) and (c) any
Marketable Securities received by the Company or its Subsidiaries
from such transferee that are converted by the Company or such
Subsidiary into cash within 90 days following receipt (to the
extent of the cash received), shall be deemed to be cash for
purposes of this clause (ii); and (iii) the Net Cash Proceeds
received by the Company (or its Subsidiaries, as the case may be)
from such Asset Sale are applied in accordance with the following
paragraphs of this Section 4.9.
The Company may, (i) within 60 days following the
receipt of Net Cash Proceeds from any Asset Sale, apply such Net
Cash Proceeds to the repayment of Indebtedness of the Company
under the Bank Revolving Credit Facility and to cash
collateralize letters of credit outstanding thereunder, in each
case to the extent required by (A) the terms of the Bank
Revolving Credit Facility as in effect on the Issue Date in
connection with an Asset Sale not prohibited by the Bank
Revolving Credit Facility as in effect on the Issue Date, or (B)
the terms of a consent granted by the Lenders thereunder to an
Asset Sale prohibited by the Bank Revolving Credit Facility as in
effect on the Issue Date; provided, that (x) any such repayment
of Indebtedness shall result in a permanent reduction in the
revolving credit or other commitment relating thereto in an
amount equal to the principal amount so repaid, and (y) at such
time as any such letters of credit are no longer required to be
cash collateralized, any such cash collateralization shall be (1)
utilized to repay Indebtedness under the Bank Revolving Credit
Facility which repayment shall result in a permanent reduction in
the revolving credit or other commitment relating thereto in an
amount equal to the principal amount so repaid or (2) released to
the Company and applied as Excess Proceeds in accordance with the
following paragraph; or (ii) within 180 days following the
receipt of Net Cash Proceeds from any such Asset Sale, apply such
Net Cash Proceeds or commit pursuant to a definitive contract to
apply such Net Cash Proceeds within 60 days to make an investment
in a Related Business.
Notwithstanding the foregoing, to the extent that any
or all of the Net Cash Proceeds of any Asset Sale is prohibited
or delayed by applicable local law from being repatriated to the
United States, the portion of such Net Cash Proceeds so affected
will not be required to be applied pursuant to this covenant but
may be retained for so long, but only for so long, as the
applicable local law will not permit repatriation to the United
States. The Company agrees to promptly take all reasonable
actions required by the applicable local law to permit such
repatriation, and once such repatriation of any affected Net Cash
Proceeds is permitted under applicable local law, such
repatriation will be immediately effected and such repatriated
Net Cash Proceeds will be applied in the manner set forth in this
covenant as if such Asset Sale had occurred on the date of
repatriation.
If, upon completion of the applicable period, any
portion of the Net Cash Proceeds of any Asset Sale shall not have
been applied by the Company as described in clause (i) or (ii)
above (the "Excess Proceeds") and such Excess Proceeds, together
with any remaining unapplied Excess Proceeds from any prior Asset
Sale, exceed $5 million, then the Company will make an offer to
repurchase the Notes pursuant to Section 3.9 (on a pro rata basis
if the amount available for such repurchase is less than the
outstanding principal amount of the Notes plus accrued and unpaid
interest, if any, to the date of repurchase) at a purchase price
of 100% of the principal amount thereof plus accrued and unpaid
interest, if any, to the date of repurchase. If the aggregate
principal amount of Notes surrendered by Holders thereof plus
accrued and unpaid interest, if any, exceeds the amount of Excess
Proceeds, the Company shall select the Notes to be purchased on a
pro rata basis. If the aggregate principal amount of Notes
surrendered by Holders thereof in any Asset Sale Offer plus
accrued and unpaid interest, if any, is less than the amount of
Excess Proceeds, the unused portion of such Excess Proceeds may
be used by the Company for general corporate purposes. Upon
completion of an Asset Sale Offer, the amount of Excess Proceeds
shall be reset to zero.
Pending application pursuant to the above paragraphs,
including to the extent unapplied Excess Proceeds do not exceed
$5 million, Net Cash Proceeds shall be either invested in Cash
Equivalents or remitted to the applicable lender to pay down any
Indebtedness outstanding under the Bank Revolving Credit Facility
(which pay down may but need not result in a permanent reduction
in the revolving credit or other commitment relating thereto).
Section 4.10 Limitation on Restricted Payments.
The Company shall not, and shall cause each of its
Subsidiaries not to, directly or indirectly, make any Restricted
Payment unless:
(i) no Default or Event of Default shall have occurred
and be continuing at the time of or immediately after giving
effect to such Restricted Payment;
(ii) at the time of and immediately after giving effect
to such Restricted Payment, at least $1.00 of additional
Indebtedness could be incurred pursuant to Section 4.11(a)(i)
hereof; and
(iii) immediately after giving effect to such Restricted
Payment, the aggregate amount of all Restricted Payments
declared or made after the Issue Date does not exceed the sum of
(a) 50% of the Adjusted Net Income of the Company (or in the
event such Adjusted Net Income shall be a deficit, minus 100% of
such deficit) during the period (treated as one accounting
period) from the Issuance Date and ending on the last day of the
fiscal quarter immediately preceding the date of declaration or
making of such Restricted Payment; plus (b) 100% of the aggregate
Net Equity Proceeds received by the Company from the issue or
sale, after the Issuance Date, of Capital Stock of the Company
(other than Net Equity Proceeds from (1) the issue or sale of
Disqualified Stock or Capital Stock of the Company to any
Subsidiary of the Company and (2) any Net Equity Proceeds
received from issuances and sales financed directly or indirectly
using funds borrowed from the Company, until and to the extent
such borrowing is repaid) and any Indebtedness or other
securities of the Company (other than the issue or sale to any
Subsidiary of the Company) convertible into or exercisable for
Qualified Capital Stock of the Company which has been so
converted or exercised (to the extent the conversion or exercise
price has been paid in cash), as the case may be, or as a capital
contribution; plus (c) $2.5 million.
Notwithstanding the foregoing, the above limitations will not
prevent:
A. the payment of any dividend within 60 days after
the date of declaration thereof, if at such date of declaration
such payment complied with the provisions hereof;
B. the purchase, redemption, acquisition or
retirement of any shares of Capital Stock of the Company in
exchange for, or out of the net proceeds of the substantially
concurrent sale of, shares of Qualified Capital Stock of the
Company (other than to a Subsidiary of the Company and excluding
any such net proceeds received from issuances and sales financed
directly or indirectly using funds borrowed from the Company,
until and to the extent such borrowing is repaid);
provided, however, that such proceeds are not included
in clause (b) of paragraph (iii) above; or
C. the redemption or retirement of Indebtedness of
the Company which is subordinate in right of payment to the
Notes, in exchange for, by conversion into, or out of the net
proceeds of the substantially concurrent issue or sale of
Qualified Capital Stock of the Company (other than to a
Subsidiary of the Company and excluding any such net proceeds
received from issuances and sales financed directly or indirectly
using funds borrowed from the Company, until and to the extent
such borrowing is repaid) or Permitted Refinancing Indebtedness;
provided, however, that such proceeds are not included in clause
(b) of paragraph (iii) above;
provided, that no Default or Event of Default has occurred and is
continuing at the time, or shall occur under any provision of
this Indenture other than this Section 4.10 as a result of any of
the actions contemplated in clauses (A) through (C) above. In
determining the amount of Restricted Payments permissible under
clause (iii) above, amounts expended pursuant to clause (A) above
shall be included, without duplication, as Restricted Payments.
Not later than the date of making any Restricted
Payment, the Company shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and
setting forth the basis upon which the calculations required by
this Section were computed, which calculations may be based upon
the Company's latest available financial statements.
Section 4.11 Limitation on Incurrence of Indebtedness;
Issuance of Capital Stock.
(a) The Company will not, and will not permit any
Subsidiary to, directly or indirectly, incur any Indebtedness
(including Acquired Indebtedness) other than Permitted
Indebtedness.
Notwithstanding the foregoing, the Company or any
Subsidiary may incur Indebtedness (including Acquired
Indebtedness) if (i) at the time of such incurrence, the Fixed
Charge Coverage Ratio of the Company for the period of the four
consecutive fiscal quarters then ended immediately prior to such
incurrence, taken as one period and calculated on a pro forma
basis as if such Indebtedness had been incurred and the proceeds
therefrom applied on the first day of such four-quarter period
and, in the case of Acquired Indebtedness, as if the related
acquisition (whether by means of purchase, merger or otherwise)
also had occurred on such date with the appropriate adjustments
with respect to such acquisition being included in such pro forma
calculation, would have been, not less than 1.75 to 1 if such
Indebtedness is incurred on or prior to the first anniversary of
the Issue Date; 1.9 to 1 if such Indebtedness is incurred after
the first but on or prior to the second anniversary of the Issue
Date; and 2.0 to 1 if such Indebtedness is incurred after the
second anniversary of the Issue Date and (ii) no Default or Event
of Default shall have occurred and be continuing at the time or
as a consequence of the incurrence of such Indebtedness;
provided, however, that in the case of Indebtedness incurred that
is subordinated to the Notes, such indebtedness has no scheduled
principal payments prior to the day following the first
anniversary of the Maturity Date of the Notes.
(b) The Company will not incur, create, issue,
assume, guarantee or otherwise become liable for any Indebtedness
that is subordinate or junior in right of payment to any other
Indebtedness unless such Indebtedness is also expressly
subordinated to the Notes to the same extent as such other
Indebtedness; provided, however, that the foregoing limitation
will not apply to distinctions between categories of Indebtedness
that exist by reason of any Liens arising or created in respect
of some but not all such Indebtedness.
(c) The Company will not permit any of its
Subsidiaries to issue any Capital Stock (other than to the
Company or to a Wholly Owned Subsidiary of the Company). The
Company will not issue Disqualified Stock.
Section 4.12 Limitation on Liens.
The Company shall not, and shall not permit any of its
Subsidiaries to, create, incur, assume or otherwise cause or
suffer to exist or become effective any Lien of any kind (other
than Permitted Liens) upon any property or assets of the Company
or of any Subsidiary of the Company, now owned or hereafter
acquired, unless all payments due under this Indenture and the
Notes are secured on an equal and ratable basis with the
obligations so secured until such time as such obligations are no
longer secured by a Lien; provided, that if the Indebtedness
secured by such Lien is subordinate or junior in right of payment
to the Notes then the Lien securing such Indebtedness shall be
subordinate or junior in priority to the Lien securing the Notes
at least to the same extent as such Indebtedness is subordinate
or junior to the Notes.
If at any time the Company or any of its Subsidiaries
shall incur any Lien requiring that the Notes be equally and
ratably secured pursuant to this Section 4.12, the Company shall
promptly deliver to the Trustee an Officers' Certificate, stating
that such covenant has been complied with, and an Opinion of
Counsel, stating that in such counsel's opinion such covenant has
been complied with and that any instruments executed by the
Company or any Subsidiary in their performance of such covenant
complied with the requirements thereof.
Section 4.13 Limitation on Dividend and
Other Payment Restrictions
Affecting Subsidiaries.
The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any consensual
encumbrance or restriction on the ability of any Subsidiary of
the Company to (i) pay dividends or make any other distributions
on its Capital Stock, or any other interest or participation in
or measured by its profits, owned by the Company or a Subsidiary;
(ii) pay any Indebtedness owed to the Company or a Subsidiary of
the Company; (iii) make loans or advances to the Company or a
Subsidiary of the Company or Guarantee Indebtedness of the
Company or a Subsidiary; or (iv) transfer any of its properties
or assets to the Company or a Subsidiary of the Company, except
for (a) restrictions contained in the Bank Credit Facility as in
effect on the Issue Date; (b) restrictions contained in the
by-laws of SPA as in effect on the Issue Date; (c) consensual
encumbrances binding upon any Person at the time such Person
becomes a Subsidiary of the Company (unless the agreement
creating such consensual encumbrance was entered into in
connection with, or in contemplation of, such entity becoming a
Subsidiary); (d) consensual encumbrances or restrictions under
any agreement that refinances or replaces any agreement described
in clauses (a) or (b) above; provided, that the terms and
conditions of any such restrictions are no less favorable to the
Holders than those under the agreement so refinanced or replaced;
(e) customary nonassignment provisions in leases, purchase money
financings and any encumbrance or restriction due to applicable
law; (f) restrictions imposed by law; (g) restrictions imposed on
a Subsidiary pursuant to a bona fide contract for disposition of
all or substantially all of the assets or 100% of the Capital
Stock of such Subsidiary by the Company; (h) restrictions on the
transfer of assets subject to Liens permitted by this Indenture;
and (i) restrictions imposed by the indenture relating to the RII
Notes.
Section 4.14 Limitation on Transactions with
Affiliates.
The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, enter into any
transaction or series of transactions with any Affiliate, any
Hart Associate or holder of 10% or more of the Company's or any
Subsidiary's common stock (other than with the Company or a
Wholly Owned Subsidiary of the Company) (an "Affiliate
Transaction"), on terms that are less favorable to the Company or
such Subsidiary, as the case may be, than would be available in a
comparable transaction negotiated on an arm's-length basis with
an unrelated Person. In addition, the Company will not, and will
not permit any Subsidiary of the Company to, enter into an
Affiliate Transaction, or any series of related Affiliate
Transactions, unless (i) with respect to such Affiliate
Transaction or Transactions involving or having a value of more
than $1 million, the Company has obtained the approval of a
majority of the Board of Directors of the Company (including a
majority of the Company's disinterested directors) and (ii) with
respect to such Affiliate Transaction or Transactions involving
or having a value of more than $5 million or as to which there
are no disinterested directors, the Company has delivered to the
Trustee an opinion of an independent investment banking firm or
appraisal firm of national standing to the effect that such
Affiliate Transaction or Transactions are fair to the Company or
such Subsidiary, as the case may be, from a financial point of
view.
The foregoing shall not prohibit (i) the Employment
Agreements, the Consulting Agreements, the Employment Agreement
Guarantees, the Fenchurch Note and the Arrangement Fee Note, (ii)
the Tax Allocation Agreements, (iii) any dividends or other
distribution permitted to be paid pursuant to Section 4.10, (iv)
loans or advances to employees in the ordinary course of business
consistent with past practice up to a maximum of $25,000 per
employee and up to a maximum of $150,000 in the aggregate at any
one time outstanding, (v) the payment of reasonable fees to
directors of the Company who are not employees of the Company or
of any of its Subsidiaries or (vi) reasonable and customary
indemnification arrangements between the Company or any of its
Subsidiaries and their respective directors and officers pursuant
to which the Company or any such Subsidiary agrees to indemnify
such directors and officers against losses and expenses incurred
by such directors and officers in connection with their service
to the Company or such Subsidiary, as the case may be (to the
extent such indemnification arrangements are permitted under
applicable law).
Section 4.15 Limitation on Sale and Leaseback
Transactions.
Except to the extent included in clause (vii) of the
definition of Permitted Indebtedness, the Company will not, and
will not permit any of its Subsidiaries to, enter into, renew or
extend any sale and leaseback transaction with respect to any
property (whether now owned or hereafter acquired) unless (i) the
consideration received upon any such sale or transfer of the
property to be leased is applied in accordance with the
requirements of Section 4.9 hereof and (ii) the Company or such
Subsidiary would be entitled pursuant to Section 4.11(a) hereof
to incur additional Indebtedness in an amount at least equal to
the Attributable Debt in respect of such sale and leaseback
transaction.
Section 4.16 Compliance with Laws.
The Company shall comply, and shall cause each of its
Subsidiaries to comply, with all applicable statutes, rules,
regulations, orders and restrictions of the United States of
America, all states and municipalities thereof, and of any other
government, governmental department, commission, board,
regulatory authority, bureau, agency and instrumentality of the
foregoing, in respect of the conduct of their respective
businesses and the ownership of their respective properties,
except such as are being contested in good faith and by
appropriate proceedings and except for such noncompliance as
would not in the aggregate have a material adverse effect on the
financial condition or results of operations of the Company and
its Subsidiaries taken as a whole.
Section 4.17 Limitation on Sale of Capital Stock of
Subsidiaries.
The Company will not, and will not permit any of its
Subsidiaries to, sell, pledge, hypothecate or otherwise convey or
dispose of any Capital Stock of the Company's Subsidiaries other
than (i) the pledge of the stock of RBI and all of its
Subsidiaries pursuant to the Bank Revolving Credit Facility; (ii)
the sale of 100% of the Capital Stock of any other Subsidiary
owned collectively by the Company and/or its Subsidiaries;
provided, that such sale complies with the requirements of
Section 4.9; and (iii) sales of Capital Stock of a Subsidiary of
the Company to a Wholly Owned Subsidiary.
Section 4.18 Payments for Consents.
Neither the Company nor any of its Subsidiaries shall,
directly or indirectly, pay or cause to be paid, any
consideration, whether by way of interest, fee or otherwise, to
any Holder of any Note for or as an inducement to any consent,
waiver or amendment of any of the terms or provisions of this
Indenture or the Notes, unless such consideration is offered to
be paid or agreed to be paid to all Holders of the Notes which so
consent, waive or agree to amend in the time frame set forth in
solicitation documents relating to such consent, waiver or
agreement.
Section 4.19 Maintenance of Properties, etc.
The Company shall, and shall cause each of its
Subsidiaries to, maintain its Properties in normal working order
and condition and make all necessary repairs, renewals,
replacements, additions and improvement thereto, ordinary wear
and tear excepted, all as in the judgment of the Company may be
necessary so that the business carried on in connection therewith
may be conducted at all times; provided, that nothing in this
Section 4.19 shall prevent the Company or any of its Subsidiaries
from discontinuing the operation, use and maintenance of any of
its Properties if such discontinuance is, in the judgment of the
Company or such Subsidiary, desirable in the conduct of its
business.
The Company shall, and shall cause each of its
Subsidiaries to, maintain with insurers which the Company
believes in good faith to be financially sound and reputable such
insurance as may be required by law and such other insurance (or
self- insurance), to such extent and against such hazards and
liabilities as it in good faith determines is customarily
maintained by companies similarly situated with like properties.
Section 4.20 Additional Interest.
(a) Subject to Section 4.20(b) below, if all of
the issued and outstanding Notes have not been redeemed in full
as of the second, third, fourth, fifth, sixth or seventh
anniversary of the Additional Interest Calculation Date, the
Company will pay additional interest ("Additional Interest") on
the Notes in the form of Class B Common Stock by issuing and
delivering within five days following each such anniversary to
the Class B Voting Trustee, to hold pursuant to the terms of the
Voting Trust Agreement on behalf of the Holders, the number of
shares of Class B Common Stock that, on such anniversary date,
together with the Class B Common Stock issued to the New Equity
Holders on the effective date of the Consensual Plan, will result
in the New Equity Holders holding the aggregate percentage of
fully-diluted Common Stock (the "Noteholder Equity Interest") set
forth in the following schedule (the "Additional Interest
Schedule"):
Anniversary of Additional Noteholder
Interest Calculation Date Equity Interest
Second . . . . . . . . . . . . . 30%
Third. . . . . . . . . . . . . . 40%
Fourth . . . . . . . . . . . . . 55%
Fifth. . . . . . . . . . . . . . 70%
Sixth. . . . . . . . . . . . . . 80%
Seventh. . . . . . . . . . . . . 85%
(b) Notwithstanding the foregoing, if as of any
anniversary of the Additional Interest Calculation Date set forth
above, all interest from and after the Additional Interest
Calculation Date to such anniversary and all interest accrued
through such anniversary on the Notes shall have been paid in
full, in cash, then the amount of Additional Interest payable on
such anniversary and each anniversary thereafter in the
Additional Interest Schedule shall be reduced such that the
Noteholder Equity Interest for such anniversary and each
anniversary thereafter set forth in the Additional Interest
Schedule shall be reduced by 1/2% for each 1% of the original
principal amount of the Notes properly redeemed by the Company
prior to such anniversary of the Additional Interest Calculation
Date. For the purposes of this paragraph 4.20(b), if the Company
shall have redeemed in cash Notes in an aggregate principal
amount equal to the aggregate principal amount of all Accrued
Interest Notes issued since the Additional Interest Calculation
Date, the interest payment in respect of which such Accrued
Interest Notes were issued shall be deemed to have been paid in
cash. For example, if between the second and third anniversaries
of the Additional Interest Calculation Date, 10% of the original
principal amount of the Notes is properly redeemed and all
interest on the Notes has been paid in cash or the Company has
redeemed an additional principal amount of Notes equal to the
aggregate principal amount of all Accrued Interest Notes issued
since the Additional Interest Calculation Date, the Additional
Interest Schedule would be reduced such that the Noteholder
Equity Interest on the third, fourth, fifth, sixth and seventh
anniversary dates of the Additional Interest Calculation Date
would be 35%, 50%, 65%, 75% and 80%, respectively (reflecting a
5% reduction). The Company shall promptly deliver to the Trustee
and to each Noteholder (i) an Officers' Certificate, stating (i)
the reduction of Additional Interest, if any, to be paid in
compliance with this Section 4.20(b) and (ii) whether the Company
has complied with this Section 4.20(b), or, if the Company has
not complied with this Section 4.20(b), the Additional Interest,
if any to be reduced to so comply. Such Officers' Certificate
shall set forth an Additional Interest Schedule revised to give
effect to the reduction called for by this Section 4.20(b).
(c) The obligations of the Company under this
Section 4.20 to pay Additional Interest shall be secured by the
non-recourse pledge of the Pledged Collateral as set forth in
Article Ten. In the event that the Company fails to perform its
obligation to pay Additional Interest pursuant to this Section
4.20 and such failure remains uncured for five days (an
"Additional Interest Default"), the Trustee shall exercise its
rights under the Non-Recourse Pledge Agreement for the benefit of
the Holders solely with respect to the number of shares of Common
Stock included in the Pledged Collateral that will increase the
Noteholder Equity Interest to the amount set forth on the
Additional Interest Schedule that would have resulted had the
Additional Interest Default not occurred and all dividends and
distributions made or with respect to such shares of Common Stock
other than cash dividends and distributions which the Pledgors
are permitted to retain pursuant to the Non-Recourse Pledge
Agreement. In no event will the holders of the Notes have the
right to any assets of the Hypothecators other than the Pledged
Collateral.
(d) Notwithstanding anything herein to the
contrary, upon the occurrence of an Event of Default specified in
Section 6.1(vii)(a) - 6.1(vii)(f) or Section 6.1(viii), in each
case at a time when the Noteholder Equity Interest is 50% or
less, the Hypothecators shall be jointly and severally obligated
to transfer to the Trustee for the benefit of the Holders that
portion of Pledged Collateral that will increase the Noteholder
Equity Interest to 51% (the "Additional Default Interest").
(e) Upon the incurrence of any obligation to
issue or transfer Common Stock pursuant to paragraphs (a), (c) or
(d) of this Section 4.20, the Company shall provide the Trustee
with an Officers' Certificate stating that such obligation has
arisen under this Section 4.20(a), (c) or (d) and the actions to
be taken by the Company in compliance therewith, containing such
information as the Trustee may reasonably request (including,
without limitation, the number of shares of Common Stock to be
issued and the names and denominations of such Common Stock with
respect to each Holder). Upon completion of any issuance or
transfer pursuant to paragraphs (a), (c) or (d) of this Section
4.20, the Company shall deliver to the Trustee an Officers'
Certificate indicating the actions taken by the Company in
connection with such issuance or transfer (including, without
limitation, the number of shares and source of the Common Stock
so issued or transferred) and that the conditions of this Section
4.20 have been complied with. Upon the Trustee's receipt of any
shares of Class A Common Stock in connection with this Section
4.20, Article Ten or the Non-Recourse Pledge Agreement, the
Trustee shall deliver this Class A Common Stock to the Company
and the Company shall exchange such shares of Class A Common
Stock for Class B Common Stock, if possible, and shall distribute
such shares of Class B Common Stock or Retained Class A Shares,
as the case may be, to the Class B Voting Trustee to hold
pursuant to the terms of the Voting Trust Agreement for the
benefit of the Holders listed in the register maintained by the
Registrar as of the date of the Additional Interest Default pro
rata (with such adjustments as may be deemed appropriate by the
Trustee to avoid fractional shares). The Company agrees to give
immediate effect to such exchange, if possible, and issue
certificates for such Class B Common Stock and to use its best
efforts to cause such Class B Common Stock or Retained Class A
Shares, as the case may be, to be distributed to the Class B
Voting Trustee.
(f) The Company shall at all times reserve and
keep available, free of pre-emptive rights, out of its authorized
Class B Common Stock, solely for the purpose of issue and
delivery pursuant to this Section 4.20, as provided herein, the
maximum number of shares of Class B Common Stock that may be
issuable or deliverable pursuant to this Section 4.20. Such
shares shall, when issued or delivered in accordance with this
Section 4.20, be duly and validly issued and fully paid and
non-assessable and free from all taxes, liens and charges.
(g) The Company covenants that if any shares of
Common Stock to be issued and delivered hereunder require
registration with or approval of any governmental authority under
any federal or state law before such shares may be validly issued
and delivered, the Company will in good faith and as
expeditiously as possible endeavor to secure such registration or
approval, as the case may be. The shares of Common Stock issued
and delivered to the Trustee shall, subject to the Voting Trust
Agreement and the Stockholders Agreement, be freely tradeable
without restriction thereunder, except in the case of shares of
Common Stock held by an Affiliate of the Company. The
Hypothecators shall use their best efforts to assist the Company
in connection with any such registration or approval, but it
shall not have any obligation to effect any such registration or
approval or incur any expense related thereto. Any such expense
shall be borne by the Company.
(h) Issuance and delivery of shares of Common
Stock pursuant to this Section 4.20 or the Non-Recourse Pledge
Agreement shall be made without charge to the Trustee, the
Holders or the Class B Voting Trustee for any issue or transfer
tax, or other incidental expense, in respect of the issuance or
delivery of such shares, all of which taxes and expenses shall be
paid by the Company and in no event will any Hypothecator be
liable for any such taxes and expenses.
(i) If at any time the Common Stock shall be
listed on the Nasdaq National Market System, the New York Stock
Exchange or any other national securities exchange or automated
quotation system the Company will, if permitted by the rules of
such exchange or automated quotation system, list and keep
listed, so long as the Common Stock shall be so listed on such
exchange or automated quotation system, all Common Stock issuable
hereunder; provided, however, that if the rules of such exchange
or automated quotation system permit the Company to defer the
listing of such Common Stock until the first issuance of Common
Stock in accordance with the provisions of this Section 4.20, the
Company may list such Common Stock issuable pursuant to this
Section 4.20 in accordance with the requirements of such exchange
or automated quotation system at such time.
(j) If, following the payment of Additional
Interest or Additional Default Interest, the Company shall, at
any time or from time to time, (i) declare a dividend on the
Common Stock payable in capital stock (including shares of Common
Stock), (ii) subdivide, split or otherwise reclassify the
outstanding Common Stock, (iii) combine, split or otherwise
reclassify the outstanding Common Stock into a smaller number of
shares, (iv) issue any shares of its capital stock in a
reclassification of the Common Stock (including any such
reclassification in connection with a consolidation or merger in
which the Company is the continuing corporation) or (v) take any
other similar action, then in each such case, the Company shall,
within 15 days of the effective date of such action, issue and
deliver to the Class B Voting Trustee to hold pursuant to the
terms of the Voting Trust Agreement for the benefit of the
Holders that number of shares of Common Stock that will restore
the Noteholder Equity Interest to the level in effect prior to
such action. Any shares of Common Stock received by a
Hypothecator as a result of such action by the Company shall
immediately become Pledged Collateral and shall be delivered to
the Trustee to the extent provided herein or in the Non-Recourse
Pledge Agreement. Such adjustments shall be made successively
whenever any action described in this paragraph shall occur.
(k) For each share of Class B Common Stock due to
be issued pursuant to this Section 4.20, the Company shall be
obligated to pay additional cash interest to the persons to whom
said shares are to be issued in an amount equal to the aggregate
par value of the Class B Common Stock to be so issued. In
exchange for the issuance of said shares to such persons, said
additional cash interest due shall be deemed to have been
satisfied and shall no longer be payable.
ARTICLE V
SUCCESSORS
Section 5.1 Limitation on Mergers,
Consolidations and Sales of Assets.
The Company will not consolidate with or merge with or
into any other Person, or permit any other Person to consolidate
or merge with or into the Company, nor will the Company sell,
lease, convey or otherwise dispose of all or substantially all of
its assets, in a single transaction or a series of transactions,
unless (i) the entity formed by or surviving any such
consolidation or merger, or to which such sale, lease, conveyance
or other sale shall have been made (the "Surviving Entity"), is a
corporation organized and existing under the laws of the United
States, any state thereof, or the District of Columbia; (ii) if
the Company is not the Surviving Entity, the Surviving Entity
assumes by supplemental indenture all of the obligations of the
Company under the Notes and this Indenture; (iii) immediately
after giving effect to such transaction, no Default or Event of
Default shall have occurred and be continuing; (iv) immediately
after giving effect to such transaction (but prior to any
purchase accounting adjustments resulting from the transaction),
the Consolidated Net Worth of the Surviving Entity would be at
least equal to the Consolidated Net Worth of the Company
immediately prior to such transaction; and (v) immediately after
giving effect to such transaction, the Surviving Entity could
incur at least $1.00 of additional Indebtedness pursuant to
Section 4.11(a); provided, that the Consolidated Fixed Charge
Coverage Ratio of such Surviving Entity shall be determined on a
pro forma basis giving effect to both the Consolidated Fixed
Charges and the Consolidated Cash Flow of the Person merging with
or into or consolidated with the Company or any of its
Subsidiaries, as the case may be, or to whom the Company or any
of its Subsidiaries, as the case may be, has sold, leased or
conveyed all or substantially all of its assets.
Notwithstanding the foregoing, the Company shall not
merge or consolidate with or into (or sell substantially all of
its assets to) RII and RII shall not merge or consolidate with or
into (or sell substantially all of its assets to) RBI. Except as
provided in the immediately preceding sentence, the Company or
any of its Wholly-Owned Subsidiaries, as the case may be, may
merge or consolidate with or into the Company or a Wholly-Owned
Subsidiary or sell substantially all of the assets of a
Subsidiary to the Company or any Wholly-Owned Subsidiary.
The Company shall deliver to the Trustee prior to the
consummation of the proposed transaction an Officers' Certificate
to the foregoing effect, an Opinion of Counsel stating that the
proposed transaction and such supplemental indenture comply with
this Section 5.1 and an Accountants' Certificate setting forth
the computations necessary to confirm the satisfaction of the
conditions set forth in clauses (iv) and (v) of this Section 5.1
and certifying the accuracy thereof. The Trustee shall be
entitled to rely conclusively upon such Officers' Certificate,
Opinion of Counsel and Accountants' Certificate.
Section 5.2 Successor Corporation Substituted.
Upon any consolidation or merger involving the Company,
or any sale, lease, conveyance or other disposition of all or
substantially all of the assets of the Company, in accordance
with Section 5.1 hereof, the successor corporation (if not the
Company) formed by such consolidation or with which the Company
is merged or to which such sale, lease, conveyance or other
disposition is made shall succeed to, and be substituted for (so
that from and after the date of such consolidation, merger, sale,
lease, conveyance or other disposition, the provisions of this
Indenture and the Notes referring to the "Company" shall refer
instead to the successor corporation and not to the Company), and
may exercise every right and power of, the Company under this
Indenture with the same effect as if such successor Person had
been named as the Company herein. When a successor corporation
assumes all of the obligations of the Company hereunder and under
the Notes and agrees to be bound hereby and thereby, the
predecessor Company shall be released from such obligations.
ARTICLE VI
DEFAULTS AND REMEDIES
Section 6.1 Events of Default.
An "Event of Default" shall occur upon:
(i) failure by the Company to pay interest on the
Notes for 30 days after becoming due;
(ii) failure by the Company to pay the principal
of or premium (if any) on the Notes, whether at maturity or upon
acceleration, redemption or otherwise (including the failure to
repurchase the Notes tendered pursuant to a Change of Control
Offer or an Asset Sale Offer);
(iii) failure by the Company or any of its
Subsidiaries to comply with the provisions of Section 4.8, 4.9 or
5.1 of this Indenture;
(iv) the failure of the Company to comply with any
of its covenants or the breach by the Company of any of its
representations or warranties in any material respect under the
Restructuring Agreement as of the Additional Interest Calculation
Date or failure by the Company or any of its Subsidiaries to
comply with any of its covenants or the breach by the Company
or any of its Subsidiaries of any of its representations or
warranties in any material respect hereunder (other than a breach
of a covenant, representation or warranty which is specifically
provided for elsewhere in this Section 6.1) for 30 days after
written notice specifying the failure and that the same is a
Default shall have been given to the Company by the Trustee or
Holders of 25% in principal amount of the Notes outstanding;
(v) default or defaults, including a payment
default, (after giving effect to all applicable grace periods)
under one or more agreements, instruments, mortgages, bonds,
debentures or other evidences of Indebtedness under which the
Company or any of its Subsidiaries has an aggregate outstanding
principal amount of Indebtedness in excess of $5 million for all
such issues of all such Persons and either (x) such Indebtedness
is already due and payable in full or (y) such default or
defaults have resulted in the acceleration of the maturity
of such Indebtedness;
(vi) any final judgment or order (not covered by
insurance) is entered against the Company or any Subsidiary in
excess of $5 million either individually or in the aggregate for
all such final judgments or orders against all such Persons and
remains undischarged or unstayed for 60 days;
(vii) the Company or any of its Subsidiaries
pursuant to or within the meaning of any Bankruptcy Law:
(a) commences a voluntary case or
proceeding,
(b) consents to the entry of a judgment,
decree or order for relief against it in an involuntary case or
proceeding,
(c) consents to the appointment of a
Custodian of it or for all or substantially all of its property,
(d) consents to the institution of a
bankruptcy or an insolvency proceeding against it,
(e) makes a general assignment for the
benefit of its creditors,
(f) takes any corporate action to authorize
or effect any of the foregoing; or
(g) generally is not able to pay its debts
as they become due;
(viii) a court of competent jurisdiction enters a
judgment, decree or order under any Bankruptcy Law that is for
relief against the Company or any Significant Subsidiary of the
Company, in an involuntary case or proceeding which shall:
(a) approve a petition seeking
reorganization, arrangement, adjustment or composition in respect
of the Company or any Subsidiary of the Company,
(b) appoint a Custodian for the Company of
any Subsidiary of the Company or for all or substantially all of
the property of any of them, or
(c) order the winding-up or liquidation of
the Company or any Subsidiary of the Company, and in each case
the judgment, order or decree remains unstayed and in effect for
60 days;
(ix) failure by any Hypothecator to comply with
any of its covenants or the breach by any Hypothecator of any of
its representations or warranties under the Non-Recourse Pledge
Agreement for 30 days (or for six months only with respect to
Section 4(b) of the Non-Recourse Pledge Agreement) after written
notice specifying the failure and that the same is a Default
shall have been given to the Company by the Trustee or Holders of
25% in principal amount of the Notes outstanding; or
(x) any Lien granted or purported to be granted
pursuant to the Non-Recourse Pledge Agreement shall be or become
unenforceable or invalid, or the priority thereof shall become
diminished, or any Hypothecator shall contest or disaffirm any
such Lien.
Section 6.2 Acceleration.
If an Event of Default occurs and is continuing, the
Trustee by written notice to the Company, or the Holders of at
least 25% of the aggregate principal amount of the then
outstanding Notes, by written notice to the Company and the
Trustee, may declare all of the Notes to be due and payable
immediately. Upon such declaration, the unpaid principal of,
premium, if any, and accrued interest on the Notes shall be due
and payable. Notwithstanding the foregoing, in the case of an
Event of Default specified in clause (vii) or (viii) of Section
6.1 with respect to the Company or any Significant Subsidiary,
such an amount shall ipso facto become immediately due and
payable without any declaration, notice or other act on the part
of the Trustee or any Holder.
Section 6.3 Other Remedies.
If an Event of Default occurs and is continuing, the
Trustee may pursue any available remedy to collect the payment of
the principal or premium, if any, and interest on the Notes and
to enforce the performance of any provision of the Notes or this
Indenture and may take any necessary action requested of it as
Trustee to settle compromise, adjust or otherwise conclude any
proceeding to which it is a party.
The Trustee may maintain a proceeding even if it does
not possess any of the Notes or does not produce any of them in
the proceeding. A delay or omission by the Trustee or any Holder
of a Note 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.
No remedy is exclusive of any other remedy. All remedies are
cumulative to the extent permitted by law.
Section 6.4 Waiver of Past Events of Defaults.
Subject to Sections 6.2, 6.7 and 9.2, the Holders of
not less than a majority in aggregate principal amount of the
then outstanding Notes, by written notice to the Trustee, may on
behalf of the Holders of all of the Notes (a) waive any existing
Event of Default and its consequences, except (i) a continuing
Event of Default in the payment of interest on, premium, if any,
or the principal of, the Notes and (ii) a Default in respect of a
covenant or a provision which cannot be modified or amended
without the consent of all Holders and/or (b) rescind an
acceleration and its consequences, including any related payment
default that resulted from such acceleration, if the rescission
would not conflict with any judgment or decree of a court of
competent jurisdiction. Upon any such waiver or rescission, such
Default shall cease to exist, and 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 6.5 Control by Majority.
Holders of a majority in aggregate principal amount of
the then outstanding Notes may direct the time, method and place
of conducting any proceeding for exercising any remedy available
to the Trustee or exercising any trust or power conferred on it
under this Indenture; provided, that the Trustee may take any
other actions it deems proper that are not inconsistent with such
directions. However, the Trustee may refuse to follow any
direction that conflicts with law or this Indenture or that the
Trustee reasonably determines may be unduly prejudicial to the
rights of other Holders or that may involve the Trustee in
personal liability.
Section 6.6 Limitation on Suits.
A Holder may pursue a remedy with respect to this
Indenture or the Notes only if:
(a) the Holder gives to the Trustee written notice of
a continuing Event of Default;
(b) the Holders of at least 25% in principal amount
of the then outstanding Notes make a written request to the
Trustee to pursue the remedy;
(c) such Holder or Holders offer and, if requested,
provide to the Trustee indemnity satisfactory to the Trustee
against any loss, liability or expense;
(d) 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;
(e) during such 60-day period the Holders of a
majority in principal amount of the then outstanding Notes do not
give the Trustee a direction inconsistent with the request; and
(f) by accepting a Note, each Holder, in its capacity
as a Holder and as a stockholder of the Company (if the Holder is
a stockholder of the Company), agrees that in the event of any
subsequent bankruptcy, insolvency or other proceeding regarding
the Company or its affiliates it will not directly or indirectly
seek to reject or support a motion to reject or challenge any of
the Employment Agreements and Consulting Agreements, and that the
Employment Agreement Guarantees, the Fenchurch Note or the
Arrangement Fee Note shall not be subject to any objection,
request for estimation, equitable subordination or to otherwise
limit recovery thereof.
Section 6.7 Rights of Holders of Notes to Receive
Payment.
Notwithstanding any other provision of this Indenture,
the right of any Holder to receive payment of principal, premium,
if any, and interest on the Notes, on or after the respective due
dates expressed in the Notes (including in connection with an
offer to purchase), or to bring suit in accordance with the terms
of this Indenture 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 6.8 Collection Suit by Trustee.
If an Event of Default specified in Section 6.1(i),
(ii) or (iii) 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 for the whole amount of principal,
premium, if any, and interest remaining unpaid on the Notes and
interest on overdue principal and, to the extent lawful, interest
and such further amount as shall be sufficient to cover the costs
and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel. Section 6.9 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 Notes), 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 7.7
hereof. 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 Notes 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.
If the Trustee collects any money pursuant to this
Article, it shall, subject to Article XI of this Indenture, pay
out the money in the following order:
First: to the Trustee, its agents and attorneys for
amounts due under Section 7.7 and 6.9 hereof, including payment
of all reasonable compensation, expense and liabilities incurred,
and all advances made, by the Trustee and the costs and expenses
of collection;
Second: to Holders for amounts due and unpaid on the
Notes for principal, premium, if any, and interest, ratably,
without preference or priority of any kind, according to the
amounts due and payable on the Notes for principal, premium, if
any, and interest, respectively; and
Third: to the Company or to such party as a court of
competent jurisdiction shall direct.
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 undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claim
or defenses made by the party litigant. This Section 6.11 does
not apply to a suit by the Trustee, a suit by a Holder pursuant
to Section 6.7 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding Notes.
Section 6.12 Event of Default from Willful Action.
In the case of any Event of Default occurring by reason
of any willful action (or inaction) taken (or not taken) by or on
behalf of the Company with the intention of avoiding payment of
the premium that the Company would have had to pay if the Company
then had elected to redeem any series of Notes pursuant to
Section 3.7 hereof, a one percent premium shall also become and
be immediately due and payable to the extent permitted by law.
The Trustee will have no responsibility for making, or
obligation to make, any determination that any such Event of
Default has occurred by reason of any willful action (or
inaction) taken (or not taken) by or on behalf of the Company
pursuant to this Section 6.12. If such premium is payable
hereunder, the Company will provide the Trustee with an Officers'
Certificate setting forth the date such premium is required to be
paid at least 45 days prior to such payment date.
ARTICLE VII
TRUSTEE
Section 7.1 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:
(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; and (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 conforming
to the requirements of this Indenture. However, in the case
of any such certificates or opinions which, by any provision
hereof, are required to be furnished to the Trustee, the Trustee
shall examine such certificates and opinions to determine whether
or not they conform to the requirements of this Indenture.
(c) No provision of this Indenture shall be
construed to relieve the Trustee from liabilities for its own
negligent action, its own negligent failure to act, or its own
willful misconduct, except that:
(i) this paragraph does not limit the effect
of paragraph (b) of this Section 7.1;
(ii) the Trustee shall not be liable for any
error of judgment made in good faith by a Responsible Officer,
unless it is proved that the Trustee was negligent in
ascertaining the pertinent facts; and
(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
6.2, 6.4 or 6.5 hereof.
(d) No provision of this Indenture shall require the
Trustee to expend or risk its own funds or incur any liability.
The Trustee shall be under no obligation to exercise any of its
rights and powers under this Indenture at the request of any
Holders, unless such Holders shall have offered to the Trustee
security and indemnity reasonably satisfactory to the Trustee
against any cost, loss, liability or expense.
(e) 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.
(f) Whether or not therein expressly so provided,
every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee
shall be subject to the provisions of this Section 7.1.
Section 7.2 Rights of Trustee.
(a) The Trustee may conclusively rely 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 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 its attorneys and
agents and shall not be responsible for the misconduct or
negligence of any attorney or agent appointed with due care.
(d) The Trustee shall not be liable for any action it
takes or omits to take in good faith that it believes to be
authorized or within the rights or powers conferred upon it by
this Indenture.
(e) Unless otherwise specifically provided in this
Indenture, any demand, request, direction or notice from the
Company shall be sufficient if signed by an Officer of the
Company.
Section 7.3 Individual Rights of Trustee.
The Trustee in its individual or any other capacity may
become the owner or pledgee of Notes and may make loans to,
accept deposits from and perform services for, and may otherwise
deal with, the Company or any Affiliate of the Company with the
same rights it would have if it were not Trustee. However, in
the event that the Trustee acquires any conflicting interest it
must eliminate such conflict within 90 days, apply to the SEC for
permission to continue as trustee or resign. Any Agent may do
the same with like rights and duties. The Trustee is also
subject to Sections 7.10 and 7.11 hereof.
Section 7.4 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 Notes, shall not be accountable for any money paid to the
Company or upon the Company's direction under any provision of
this Indenture, shall not be responsible for the use or
application of any money received by any Paying Agent other than
the Trustee, and shall not be responsible for any statement or
recital herein or any statement in the Notes or any other
document in connection with the sale of the Notes or pursuant to
this Indenture other than its certificate of authentication.
Section 7.5 Notice of Defaults.
If a Default or an Event of Default occurs and is
continuing and if it is known to a Responsible Officer of the
Trustee, the Trustee shall mail to Holders a notice of the
Default or Event of Default within 90 days after it occurs.
Except in the case of a Default or Event of Default in payment of
principal, premium, if any, or interest on any Note, the Trustee
may withhold the notice if and so long as a committee of its
Responsible Officers in good faith determines that withholding
the notice is in the interests of the Holders.
Section 7.6 Reports by Trustee to Holders of the
Notes.
Within 60 days after each May 15 of any year, beginning
with the May 15 following the date of this Indenture, the Trustee
shall mail to the Holders of the Notes a brief report dated as of
such reporting date that complies with TIA Section 313(a) (but if
no event described in TIA Section 313(a) has occurred within the
twelve months preceding the reporting date, no report need be
transmitted). The Trustee also shall comply with TIA Section
313(b)(2). The Trustee shall also transmit by mail all reports
as required by TIA Section 313(c).
A copy of each report at the time of its mailing to the
Holders shall be mailed to the Company and filed with the SEC and
each stock exchange on which the Notes are listed (if any). The
Company shall promptly notify the Trustee whenever the Notes
become listed on any stock exchange or of any delisting thereof.
Section 7.7 Compensation and Indemnity.
The Company 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 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.
The Company shall indemnify the Trustee against any and
all losses, damages, claims, liabilities or expenses incurred by
it arising out of or in connection with the acceptance or
administration of its duties under this Indenture and the Non-
Recourse Pledge Agreement, including the costs and expenses of
enforcing this Indenture and the Non-Recourse Pledge Agreement
against the Company and the Hypothecators, as the case may be
(including this Section 7.7), and defending itself against any
claim (whether asserted by any Holder or any other Person) or
liability in connection with the exercise or performance of any
of its powers or duties hereunder or thereunder, except to the
extent any such loss, damage, claim, liability or expense may be
attributable to its negligence, bad faith or willful misconduct.
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 unless such failure prejudices the Company. 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 obligations of the Company under this Section 7.7
shall survive the satisfaction and discharge of this Indenture.
To secure the Company's payment obligations under this
Section 7.7, the Trustee shall have a Lien prior to the Notes on
all money or property held or collected by the Trustee, except
that held in trust to pay principal of and interest on particular
Notes. Such Lien shall survive the satisfaction and discharge of
this Indenture.
When the Trustee incurs expenses or renders services
after an Event of Default specified in Section 6.1(vii) or
Section 6.1(viii), the expenses and the compensation for the
services (including the reasonable fees and expenses of its
agents and counsel) are intended to constitute expenses of
administration under any Bankruptcy Law.
Section 7.8 Replacement of Trustee.
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 7.8.
The Trustee may resign in writing 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 Notes may remove the Trustee by so notifying
Trustee and the Company in writing. The Company may remove the
Trustee if:
(a) the Trustee fails to comply with Section 7.10
hereof;
(b) 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;
(c) a Custodian or public officer takes charge of
the Trustee or its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of the Trustee for any reason, the Company shall
promptly appoint a successor Trustee.
If a successor Trustee does not accept its appointment
within 30 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 Notes may petition
any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee, after written request by any Holder who
has been a Holder for at least six months, fails to comply with
Section 7.10, such Holder may petition any court of competent
jurisdiction for the removal of the Trustee and the appointment
of a successor Trustee.
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 Holders. The retiring Trustee shall promptly
transfer all property held by it as Trustee to the successor
Trustee; provided, that all sums owing to the Trustee hereunder
have been paid and subject to the Lien provided for in Section
7.7 hereof. Notwithstanding replacement of the Trustee pursuant
to this Section 7.8, the Company's obligations under Section 7.7
hereof shall continue for the benefit of the retiring Trustee.
Section 7.9 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,
that such successor is eligible and, qualified under Section 7.10
hereof.
Section 7.10 Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that is
a corporation organized and doing business under the laws of the
United States of America or of any state thereof that is
authorized under such laws to exercise corporate trust power,
that is subject to supervision or examination by federal or state
authorities and that has a combined capital and surplus of at
least $100 million or, in the event that the Trustee is part of a
bank holding company system, the bank holding company must have a
combined capital and surplus of at least $100 million, in either
case, as set forth in its most recent published annual report of
condition.
This Indenture shall always have a Trustee who
satisfies the requirements of TIA Section 310(a)(1), (2) and (5).
The Trustee is subject to TIA Section 310(b).
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 VIII
DISCHARGE OF INDENTURE
Section 8.1 Discharge of Indenture; Option to Effect
Legal Defeasance or Covenant Defeasance.
(a) This Indenture shall cease to be of further
effect (except that the Company's obligations under Section 7.7
and the Company's, the Trustee's and any Paying Agent's
obligations under Section 8.6 shall survive) when all outstanding
Notes theretofore authenticated and issued have been delivered
(other than destroyed, lost or stolen Notes that have been
replaced or paid) to the Trustee for cancellation and the Company
has paid all sums payable hereunder.
(b) In addition, the Company may, at the option of
its Board of Directors evidenced by a resolution set forth in an
Officers' Certificate, at any time, elect to have either Section
8.2 or 8.3 hereof be applied to all outstanding Notes upon
compliance with the conditions set forth below in this Article
Eight.
Section 8.2 Legal Defeasance and Discharge.
Upon the Company's exercise under Section 8.1 hereof of
the option applicable to this Section 8.2, the Company shall,
subject to the satisfaction of the conditions set forth in
Section 8.4 hereof, be deemed to have been discharged from its
obligations with respect to all outstanding Notes on the date the
conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the
Company shall be deemed to have paid and discharged the entire
Indebtedness represented by the outstanding Notes, which shall
thereafter be deemed to be "outstanding" only for the purposes of
Section 8.5 hereof and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all its
other obligations under such Notes and this Indenture (and the
Trustee, on demand of and at the expense of the Company, shall
execute proper instruments acknowledging the same), except for
the following provisions which shall survive until otherwise
terminated or discharged hereunder: (a) the rights of Holders of
outstanding Notes to receive solely from the trust fund described
in Section 8.4 hereof, and as more fully set forth in such
Section, payments in respect of the principal of, premium, if
any, and interest on such Notes when such payments are due, (b)
the Company's, the Trustee's and the Paying Agent's obligations
with respect to such Notes under Sections 2.3 through 2.7 and
Section 4.2 and the Company's obligations under Section 7.7 and
(c) this Article Eight. Subject to compliance with this Article
Eight, the Company may exercise its option under this Section 8.2
notwithstanding the prior exercise of its option under Section
8.3 hereof.
Section 8.3 Covenant Defeasance.
Upon the Company's exercise under Section 8.1 hereof of
the option applicable to this Section 8.3, the Company shall,
subject to the satisfaction of the conditions set forth in
Section 8.4 hereof, be released from its obligations under the
covenants contained in Sections 4.8, 4.9, 4.10, 4.11, 4.12, 4.13,
4.14, 4.15, 4.17 and 4.20 and clause (v) of Section 5.1 hereof
with respect to the outstanding Notes on the date the conditions
set forth below are satisfied (hereinafter, "Covenant
Defeasance"), and the Notes shall thereafter be deemed not
"outstanding" for the purposes of any direction, waiver, consent
or declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to
be deemed "outstanding" for all other purposes hereunder (it
being understood that such Notes shall not be deemed outstanding
for accounting purposes). For this purpose, Covenant Defeasance
means that, with respect to the outstanding Notes, the Company
may omit to comply with and shall have no liability in respect of
any term, condition or limitation set forth in any such covenant,
whether directly or indirectly, by reason of any reference
elsewhere herein to any such covenant or by reason of any
reference in any such covenant to any other provision herein or
in any other document and such omission to comply shall not
constitute a Default or an Event of Default under Section 6.1
hereof, but, except as specified above, the remainder of this
Indenture and such Notes shall be unaffected thereby.
Section 8.4 Conditions to Legal or Covenant
Defeasance.
The following shall be the conditions to the
application of either Section 8.2 or 8.3 hereof to the
outstanding Notes:
In order to exercise either Legal Defense or Covenant
Defeasance:
(a) the Company must irrevocably deposit or cause
to be deposited with the Trustee or with a trustee satisfactory
to the Trustee and the Company under the terms of an irrevocable
trust agreement in form and substance reasonably satisfactory to
the Trustee, in trust, for the benefit of the Holders of the
Notes, (A) cash in United States dollars or (B) Government
Securities maturing as to principal and interest in such amounts
and at such times, or (C) a combination thereof, in each case, in
such amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants, to
pay the principal of, premium, if any, and interest on the
outstanding Notes on the stated date for payment thereof or on
the applicable redemption date, as the case may be, of such
principal or installment of principal of, premium, if any, or
interest on the outstanding Notes;
(b) in the case of an election under Section 8.2
hereof, the Company shall have delivered to the Trustee an
Opinion of Counsel in the United States acceptable to the Trustee
confirming that (A) the Company has received from, or there has
been published by, the Internal Revenue Service a ruling or (B)
since the date of this Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect
that the Holders of the outstanding Notes will not recognize
income, gain or loss for federal income tax purposes as a result
of such Legal Defeasance and will be subject to federal income
tax on the same amounts, in the same manner and at the same times
as would have been the case if such Legal Defeasance had not
occurred;
(c) in the case of an election under Section 8.3
hereof, the Company shall have delivered to the Trustee an
Opinion of Counsel in the United States acceptable to the Trustee
confirming that the Holders of the outstanding Notes will not
recognize income, gain or loss for federal income tax purposes as
a result of such Covenant Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such Covenant
Defeasance had not occurred;
(d) no Default or Event of Default shall have
occurred and be continuing (1) on the date of such deposit (other
than a Default or Event of Default resulting from the incurrence
of Indebtedness all or a portion of the proceeds of which will be
used to defease the Notes pursuant to this Article Eight
concurrently with such incurrence) or (2) insofar as Section
6.1(vii) or Section 6.1(viii) hereof is concerned, at any time
during the period ending on the 91st day after the date of
deposit (it being understood that the condition in this clause
(2) is a condition subsequent and shall not be deemed satisfied
until the expiration of such period);
(e) such Legal Defeasance or Covenant Defeasance
shall not result in a breach or violation of, or constitute a
default under, this Indenture or any other material agreement or
instrument to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries is
bound;
(f) 123 days pass after the deposit is made and
during the 123-day period no Event of Default specified in
Section 6.1(vii) or (viii) with respect to the Company occurs
which is continuing at the end of the period;
(g) the Company shall have delivered to the
Trustee an Officers' Certificate stating that the deposit was not
made by the Company with the intent of defeating, hindering,
delaying or defrauding any actual creditors of the Company;
(h) the Company shall deliver to the Trustee an
Opinion of Counsel stating that, as a result of such Legal
Defeasance or Covenant Defeasance the trust created hereunder
shall not be required to register as an investment company under,
or other be subject to, the Investment Company Act of 1940, as
amended; and
(i) the Company shall have delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel, each
stating that all conditions precedent provided for relating to
the Legal Defeasance or the Covenant Defeasance have been
complied with.
Section 8.5 Deposited Money and
Government Securities to
be Held in Trust; Other
Miscellaneous Provisions.
Subject to Section 8.6 hereof, all money and Government
Securities (including the proceeds thereof) deposited with the
Trustee (or other qualifying trustee, collectively for purposes
of this Section 8.5, the "Trustee") pursuant to Section 8.4
hereof in respect of the outstanding Notes shall be held in trust
and applied by the Trustee, in accordance with the provisions of
such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as Paying
Agent) as the Trustee may determine, to the Holders of such Notes
of all sums due and to become due thereon in respect of
principal, premium, if any, and interest, but such money need not
be segregated from other funds except to the extent required by
law.
The Company shall pay and indemnify the Trustee against
any tax, fee or other charge imposed on or assessed against the
cash or Government Securities deposited pursuant to Section 8.4
hereof or the principal and interest received in respect thereof
other than any such tax, fee or other charge which by law is for
the account of the Holders of the outstanding Notes.
Anything in this Article Eight to the contrary
notwithstanding, the Trustee shall deliver or pay to the Company
from time to time upon the request of the Company any money or
Government Securities held by it as provided in Section 8.4
hereof which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written
certification thereof delivered to the Trustee (which may be the
opinion delivered under Section 8.4(a) hereof), are in excess of
the amount thereof that would then be required to be deposited to
effect an equivalent Legal Defeasance or Covenant Defeasance.
Section 8.6 Repayment to Company.
Subject to applicable law, any money deposited with the
Trustee or any Paying Agent, or then held by the Company, in
trust for the payment of the principal of, premium, if any, or
interest on any Note and remaining unclaimed for two years after
such principal, and premium, if any, or interest has become due
and payable shall be paid to the Company on its request or (if
then held by the Company) shall be discharged from such trust;
and the Holder of such Note shall thereafter, as a creditor, look
only to the Company for payment thereof (unless an abandoned
property law designates another Person), and all liability of the
Trustee or such Paying Agent with respect to such trust money,
and all liability of the Company as trustee thereof, shall
thereupon cease; provided, however, that the Trustee or such
Paying Agent, before being required to make any such repayment,
may at the expense of the Company cause to be published once, in
the New York Times and The Wall Street Journal (national
edition), notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30
days from the date of such notification or publication, any
unclaimed balance of such money then remaining will be repaid to
the Company.
Section 8.7 Reinstatement.
If the Trustee or Paying Agent is unable to apply any
United States Dollars or Government Securities in accordance with
Section 8.2 or 8.3 hereof, as the case may be, by reason of any
order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application,
then the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred
pursuant to Section 8.2 or 8.3 hereof until such time as the
Trustee or Paying Agent is permitted to apply all such money in
accordance with Section 8.2 or 8.3 hereof, as the case may be;
provided, however, that, if the Company makes any payment of
principal of, premium, if any, or interest on any Note following
the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such Notes to receive
such payment from the money held by the Trustee or Paying Agent.
ARTICLE IX
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.1 Without Consent of Holders of Notes.
Notwithstanding Section 9.2 of this Indenture, the Company and
the Trustee may amend or supplement this Indenture, the
Non-Recourse Pledge Agreement or the Notes without the consent of
any Holder of a Note:
(a) to, cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to
or in place of certificated Notes;
(c) to provide for the assumption of the Company's
obligations to Holders in the case of a merger or consolidation
or sale, assignment, transfer, lease, conveyance or other
disposition of all or substantially all of the Company's
properties or assets pursuant to Article Five hereof;
(d) to make any change that would provide any
additional rights or benefits to the Holders or that does not
adversely affect the rights hereunder of any Holder;
(e) to comply with requirements of the SEC in order to
effect or maintain the qualification of this Indenture under the
TIA; or
(f) to evidence or provide for a replacement Trustee
under Section 7.8.
Upon the request of the Company accompanied by a
resolution of its Board of Directors authorizing the execution of
any such amended or supplemental Indenture, and upon receipt by
the Trustee of the documents described in Section 9.6 hereof, the
Trustee shall join with the Company in the execution of any
amended or supplemental Indenture authorized or permitted by the
terms of this Indenture and make any further appropriate
agreements and stipulations that may be therein contained, but
the Trustee shall not be obligated to enter into such amended or
supplemental Indenture that affects its own rights, duties or
immunities under this Indenture or otherwise.
Section 9.2 With Consent of Holders of Notes.
The Company and the Trustee may amend or supplement
this Indenture, the Non-Recourse Pledge Agreement or the Notes
with the consent of the Holders of at least a majority in
principal amount of the Notes then outstanding (including
consents obtained in connection with a tender offer or exchange
offer for the Notes), and, subject to Sections 6.4 and 6.7
hereof, any existing Event of Default (other than an Event of
Default in the payment of the principal of, premium, if any, or
interest on the Notes, except a payment default resulting from an
acceleration that has been rescinded) or compliance with any
provision of this Indenture, the Non-Recourse Pledge Agreement or
the Notes, may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes
(including consents obtained in connection with a tender offer or
exchange offer for the Notes).
Upon the request of the Company accompanied by a
resolution of its Board of Directors authorizing the execution of
any such amended or 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 9.6 hereof, the
Trustee shall join with the Company in the execution of such
amended or supplemental Indenture unless such amended or
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 amended or supplemental Indenture.
It shall not be necessary for the consent of the
Holders under this Section 9.2 to approve the particular form of
any proposed amendment or waiver, but it shall be sufficient if
such consent approves the substance thereof.
After an amendment, supplement or waiver under this
Section 9.2 becomes effective, the Company shall mail to the
Holders of the Notes a notice briefly describing the amendment,
supplement 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 amended or supplemental
Indenture or waiver. Subject to Sec- tions 6.4 and 6.7 hereof,
the Holders of a majority in aggregate principal amount of the
Notes then outstanding may waive compliance in a particular
instance by the Company or the Hypothecator, as the case may be,
with any provision of this Indenture, the Non- Recourse Pledge
Agreement or the Notes. Anything herein to the contrary
notwithstanding, without the consent of each Holder affected, an
amendment or waiver may not (with respect to any Notes held by a
non-consenting Holder):
(a) reduce the principal amount of Notes whose
Holders must consent to an amendment, supplement or waiver of any
provision of this Indenture, the Non-Recourse Pledge Agreement or
the Notes;
(b) reduce the principal of or change the fixed
maturity of any Note;
(c) alter any of the provisions permitting or
requiring the redemption of the Notes, except with respect to
permitting or requiring redemption or repurchase of Notes
pursuant to Sections 4.8 and 4.9 hereof, or reduce the purchase
price payable or change the time for payment in connection with
repurchases or redemptions of Notes pursuant to Sections 4.8 or
4.9 hereof;
(d) reduce the rate of or change the time for
payment of interest, including default interest, on any Note;
(e) waive a Default or Event of Default in the
payment of principal of or premium, if any, or interest on the
Notes (except a rescission of acceleration of the Notes by the
Holders of at least a majority in aggregate principal amount of
the Notes and a waiver of the payment default that resulted from
such acceleration);
(f) make the principal of, or the interest on any
Note payable in money other than that stated in the Notes;
(g) make any change in the provisions of this
Indenture relating to waivers of past Defaults or the rights of
Holders to receive payments of principal of, premium, if any, or
interest on the Notes;
(h) waive a redemption payment with respect to
any Note except for a payment required by Section 4.8 or 4.9;
(i) alter the ranking of the Notes relative to
other Indebtedness of the Company;
(j) waive or amend Section 4.18 or 4.20 hereof;
(k) release any Pledged Collateral, except in
connection with a sale, transfer or other disposition permitted
by the Non-Recourse Pledge Agreement; or
(l) make any change in Section 6.4 or 6.7 hereof
or in the foregoing amendment and waiver provisions.
Section 9.3 Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the
Notes shall be set forth in an amended or supplemental Indenture
that complies with the TIA as then in effect.
Section 9.4 Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes
effective, a consent to it by a Holder is a continuing consent by
the Holder and every subsequent Holder of a Note or portion of a
Note that evidences the same debt as the consenting Holder's
Note, even if notation of the consent is not made on any Note.
However, any such Holder of a Note or subsequent Holder of a Note
may revoke the consent as to its Note if the Trustee receives
written notice of revocation before the date the waiver,
supplement or amendment becomes effective. An amendment,
supplement or waiver becomes effective in accordance with its
terms and thereafter binds every Holder.
The Company may, but shall not be obligated to, fix a
record date for the purpose of determining the Holders entitled
to give their consent or take any other action described above or
required or permitted to be taken pursuant to this Indenture. If
a record date is fixed, then notwithstanding the immediately
preceding paragraph, those Persons who were Holders at such
record date (or their duly designated proxies), and only those
Persons, shall be entitled to give such consent or to revoke any
consent previously given or to take any such action, whether or
not such Persons continue to be Holders after such record date.
No such consent shall be valid or effective for more than 120
days after such record date.
Section 9.5 Notation on or Exchange of Notes.
Upon the direction of the Company, the Trustee may
place an appropriate notation about an amendment, supplement or
waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall
authenticate new Notes that reflect the amendment, supplement or
waiver.
Failure to make the appropriate notation or issue a new
Note shall not affect the validity and effect of such amendment,
supplement or waiver.
Section 9.6 Trustee to Sign Amendments, Etc.
The Trustee need not sign any supplemental indenture
adversely affecting its rights. In executing any amended or
supplemental indenture, the Trustee, shall be entitled to receive
and (subject to Section 7.1) shall be fully protected in relying
upon, an Officers' Certificate and an Opinion of Counsel stating
that the execution of such amended or supplemental indenture is
authorized or permitted by this Indenture, and that it will be
valid and binding upon the Company in accordance with its terms.
ARTICLE X
SECURITY
Section 10.1 Non-Recourse Pledge Agreement.
In order to jointly and severally secure the due and
punctual performance of the Secured Obligations (as defined in
the Non-Recourse Pledge Agreement), each Hypothecator will make
an assignment of its right, title and interest in and to the
Pledged Collateral to the Trustee pursuant to the Non-Recourse
Pledge Agreement, and to the extent therein provided, no later
than the Issue Date. Each Holder, by accepting a Note, agrees to
all of the terms and provisions of the Non-Recourse Pledge
Agreement, as the same may be amended from time to time pursuant
to the provisions of the Non-Recourse Pledge Agreement. The due
and punctual performance of the Secured Obligations shall be
secured by the Pledged Collateral as provided in the Non-
Recourse Pledge Agreement. The Non-Recourse Pledge Agreement
will create a direct and continuing valid Lien on the Pledged
Collateral, as set forth therein, free and clear of all Liens
whatsoever, except the Liens created by the Non-Recourse Pledge
Agreement.
Section 10.2 Recording, Etc.
The Company will cause, at its own expense, the
Non-Recourse Pledge Agreement, this Indenture and all amendments
or supplements thereto to be registered, recorded and filed or
re-recorded, re-filed 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 security interest created under the
Non-Recourse Pledge Agreement in the Pledged Collateral and to
effectuate and preserve the security therein of the Holders and
all rights of the Trustee.
The Company shall furnish to the Trustee promptly after
the execution and delivery of the Non-Recourse Pledge Agreement,
an Opinion of Counsel either (a) stating that, in the opinion of
such Counsel, this Indenture and the assignment of the Pledged
Collateral intended to be made by the Non-Recourse Pledge
Agreement and all other instruments of further assurance or
amendment have been properly recorded, registered and filed to
the extent necessary to make effective the security interest in
the Pledged Collateral intended to be created by the Non-Recourse
Pledge Agreement, 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 security interests in the
Pledged Collateral created pursuant to the Non-Recourse Pledge
Agreement such recording, registering and filing are the only
recordings, registering and filings necessary to give notice
thereof and that no re-recordings, reregistering 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 to preserve and protect
fully the rights of the Holders and the Trustee with respect to
the security interests in the Pledged Collateral hereunder and
under the Non-Recourse Pledge Agreement or (b) stating that, in
the opinion of such counsel, no such recordation, registration or
filing is necessary to make such Lien and assignment effective.
If at any time the Secured Obligations are no longer
secured pursuant to the Non-Recourse Pledge Agreement, whether
due to the payment in full or defeasance of the Notes or
otherwise, and if all obligations due to the Holders and the
Trustee under the Non-Recourse Pledge Agreement have been fully
performed, the security interest hereunder and under the
Non-Recourse Pledge Agreement for the benefit of the Notes may be
released at the sole option of the Hypothecators.
The release of any Pledged Collateral from the terms
hereof and the Non-Recourse Pledge Agreement will not be deemed
to impair the security under this Indenture in contravention of
the provisions hereof if and to the extent the Pledged Collateral
is released pursuant to the Non-Recourse Pledge Agreement. The
Trustee and each of the Holders acknowledge that a release of
Pledged Collateral in accordance with the terms of the
Non-Recourse Pledge Agreement will not be deemed for any purpose
to be an impairment of the security under this Indenture. To the
extent applicable, each Hypothecator and Company shall cause TIA
Section 314(d) relating to the release of property or securities
from the Lien of the Non-Recourse Pledge Agreement 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 in
which TIA Section 314(d) requires that such certificate or
opinion be made by an independent Person.
Section 10.3 Suits to Protect the Pledged Collateral.
At the expense of the Company, 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 Pledged
Collateral by any acts which may be unlawful or in violation of
the Non-Recourse Pledge Agreement or this Indenture, and such
suits and proceedings as the Trustee may deem expedient to
preserve or protect its interests and the interests of the
Holders in the Pledged 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 interest of the Holders or the Trustee).
Section 10.4 Trustee Duties.
The powers conferred upon the Trustee by this Article X
are solely to protect the guarantees and pledges provided for
herein and shall not impose any duty upon the Trustee to exercise
any such powers except as expressly provided in this Indenture.
The Trustee shall be under no duty to the Company or any
Hypothecator to make or give any presentment, demand for
performance, notice of nonperformance, protest, notice of
protest, notice of dishonor or other notice or demand in
connection with any Pledged Collateral or to take any steps
necessary to preserve any rights against prior parties except as
expressly provided in this Indenture. To the extent permitted by
law, the Trustee shall not be liable to the Company or any
Hypothecator for failure to collect or realize upon any or all of
the Pledged Collateral or for any delay in so doing, nor shall
the Trustee be under any duty to the Company or any Hypothecator
to take any action whatsoever with regard thereto. The Trustee
has no duty to the Company, any Hypothecator or the Holders to
comply with any filing or other legal requirements necessary to
establish or maintain the validity, priority or enforceability
of, or the Trustee's rights in or to, any of the Pledged
Collateral.
ARTICLE XI
SUBORDINATION
Section 11.1 Securities Subordinate to Senior
Indebtedness.
The Company covenants and agrees, and each Holder of a
Note, by acceptance thereof, likewise covenants and agrees, that,
following the occurrence of a Consolidation Event, to the extent
and in the manner hereinafter set forth in this Article XI
(subject to the provisions of Section 11.11), the Indebtedness
represented by the Notes and the payment of the principal of and
interest on and all other amounts owing under each and all of the
Notes are hereby expressly made subordinate and subject in right
of payment to the prior indefeasible payment in full and in cash
of all Senior Indebtedness and that the subordination is for the
benefit of and enforceable by the holders of Senior Indebtedness.
Section 11.2 Payment Over of Proceeds Upon
Dissolution, Etc.
Following the occurrence of a Consolidation Event, in
the event of (a) any insolvency or bankruptcy case or proceeding,
or any receivership, liquidation, reorganization or other similar
case or proceeding in connection therewith, relative to the
Company or to its creditors, as such, or to its assets, whether
under Bankruptcy Law or otherwise, or (b) any liquidation,
dissolution or other winding up of the Company, whether voluntary
or involuntary and whether or not involving insolvency or
bankruptcy, or (c) any assignment for the benefit of creditors or
any other marshaling of assets and liabilities of the Company,
then and in any such event the holders of Senior Indebtedness
shall be entitled to indefeasibly receive payment in full and in
cash of all amounts due or to become due on or in respect of all
Senior Indebtedness before the Holders of the Notes are entitled
to receive any payment on account of principal of or interest on
or any other amounts owing under the Notes, and to that end the
holders of Senior Indebtedness shall be entitled to receive, for
application to the payment thereof, any Securities Payment.
In the event that, notwithstanding the foregoing
provisions of this Section 11.2, the Trustee or any Holder shall
have received any Securities Payment before all Senior
Indebtedness is indefeasibly paid in full and in cash, then and
in such event such payment or distribution shall be paid over or
delivered forthwith to the trustee in bankruptcy, receiver,
liquidating trustee, custodian, assignee, agent or other Person
making payment or distribution of assets of the Company for
application to the payment of all Senior Indebtedness remaining
unpaid, to the extent necessary to indefeasibly pay all Senior
Indebtedness in full and in cash, after giving effect to any
concurrent payment or distribution to or for the holders of
Senior Indebtedness.
For purposes of this Article XI only, the words
"Securities Payment" shall not be deemed to include
Reorganization Securities.
Section 11.3 Subrogation to Rights of Holders of
Senior Indebtedness.
Subject to the payment in full of all Senior
Indebtedness and the occurrence of a Consolidation Event, the
Holders of the Notes shall be subrogated to the rights of the
holders of such Senior Indebtedness to receive payments and
distributions of cash, property and securities applicable to the
Senior Indebtedness until the principal of, premium, if any, and
interest on the Notes shall be paid in full. For purposes of
such subrogation, no payments or distributions to the holders of
the Senior Indebtedness of any cash, property or securities to
which the Holders of the Notes or the Trustee would be entitled
except for the provisions of this Article XI, and no payments
over pursuant to the provisions of this Article XI to the holders
of Senior Indebtedness by Holders of the Notes or the Trustee,
shall, as among the Company, its creditors other than holders of
Senior Indebtedness and the Holders, be deemed to be a payment or
distribution by the Company to or on account of the Senior
Indebtedness.
Section 11.4 Provisions Solely to Define Relative
Rights.
The provisions of this Article XI are and are intended
solely for the purpose of defining the relative rights of the
Holders on the one hand and the holders of Senior Indebtedness on
the other hand upon the occurrence of a Consolidation Event.
Nothing contained in this Article XI or elsewhere in this
Indenture or in the Notes is intended to or shall (a) impair, as
among the Company, its creditors other than holders of Senior
Indebtedness and the Holders, the obligation of the Company,
which is absolute and unconditional (and which, subject to the
rights under this Article XI of the holders of Senior
Indebtedness upon the occurrence of a Consolidation Event, is
intended to rank equally with all other general obligations of
the Company), to pay to the Holders the principal of and interest
on the Notes as and when the same shall become due and payable in
accordance with their terms; or (b) affect the relative rights
against the Company of the Holders and creditors of the Company
other than the holders of Senior Indebtedness upon the occurrence
of a Consolidation Event; or (c) prevent the Trustee or any
Holder from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the
rights, if any, under this Article XI of the holders of Senior
Indebtedness to receive cash, property and securities otherwise
payable or deliverable to the Trustee or such Holder upon the
occurrence of a Consolidation Event.
Section 11.5 Trustee to Effectuate Subordination.
Each Holder of a Note by his acceptance thereof
authorizes and directs the Trustee on behalf of such Holder to
take such action as may be necessary or appropriate to effectuate
the subordination provided in this Article XI and appoints the
Trustee his attorney-in-fact for any and all such purposes. If
the Trustee does not file a proper proof of claim or proof of
debt in the form required in any case or proceeding described in
Section 11.2 at least 20 days before the expiration of the time
to file such proof, the Senior Indebtedness Representative may,
and is hereby authorized to, file such proof for and on behalf of
the Holders.
Section 11.6 No Waiver of Subordination Provisions.
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 on the part of the Company or by any act or
failure to act, in good faith, by any such holder, or by any
non-compliance by the Company with the terms, provisions and
covenants of this Indenture, regardless of any knowledge thereof
any such holder may have or be otherwise charged with.
Without in any way limiting the generality of the
foregoing paragraph, the holders of Senior Indebtedness may, at
any time and from time to time, without the consent of or notice
to the Trustee or the Holders, without incurring responsibility
to or notice to the Holders or the Trustee and without impairing
or releasing the subordination provided in this Article XI 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, Senior Indebtedness, or otherwise
amend, modify, compromise, supplement or waive in any manner
Senior Indebtedness or any instrument evidencing the same or any
agreement under which Senior Indebtedness is outstanding; (ii)
sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing Senior Indebtedness;
(iii) release the Company or any Person liable in any manner for
the collection of Senior Indebtedness; (iv) exercise or refrain
from exercising any rights against the Company and any other
Person; and (v) take, or omit to take, any other action that in
the absence of the authority granted hereby, could have the
effect of impairing, invalidating or rendering unenforceable, in
whole or in part, or otherwise affecting any of the provisions of
this Article XI.
Section 11.7 Reliance on Judicial Order or
Certificate of Liquidating Agent.
Upon any payment or distribution of assets of the
Company referred to in this Article XI, the Trustee, subject to
the provisions of Article VII, and the Holders shall be entitled
to rely upon any order or decree entered by any court of
competent jurisdiction in which such insolvency, bankruptcy,
receivership, liquidation, reorganization, dissolution, winding
up or similar case or proceeding is pending, or a certificate of
the trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee for the benefit of creditors, agent or other
Person making such payment or distribution, delivered to the
Trustee or to the Holders, for the purpose of ascertaining the
Persons entitled to participate in such payment or 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 XI.
The Trustee shall not be charged with knowledge of the
existence of Senior Indebtedness or of any facts that would
prohibit any payment hereunder by the Trustee unless the Trustee
shall have received notice to that effect at the address of the
Trustee. With respect to the holders of Senior Indebtedness, the
Trustee undertakes to perform or to observe only such of its
covenants or obligations as are specifically set forth in this
Article XI and no implied covenants or obligations with respect
to holders of Senior Indebtedness shall be read into this
Indenture against the Trustee.
Section 11.8 Trustee Not Fiduciary for Holders of
Senior Indebtedness.
The Trustee shall not be deemed to owe any fiduciary
duty to the holders of Senior Indebtedness.
Section 11.9 Rights of Trustee as Holder of Senior
Indebtedness; Preeservation of Trustee's Rights.
The Trustee in its individual capacity shall be
entitled to all the rights set forth in this Article XI with
respect to any Senior Indebtedness which may at any time be held
by it, to the same extent as any other holder of Senior
Indebtedness, and nothing in this Indenture shall deprive the
Trustee of any of its rights as such holder.
Nothing in this Article XI shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 7.7.
Section 11.10 Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the
Trustee shall have been appointed by the Company and be then
acting hereunder, the term "Trustee" as used in this Article XI
shall in such case (unless the context otherwise requires) be
construed as extending to and including such Paying Agent within
its meaning as fully for all intents and purposes as if such
Paying Agent were named in this Article XI in addition to or in
place of the Trustee; provided, however, that Section 11.9 shall
not apply to the Company or any Affiliate of the Company if it or
such Affiliate acts as Paying Agent.
Section 11.11 Trust Moneys Not Subordinated.
Notwithstanding anything contained herein to the
contrary, all payments from money or the proceeds of Government
Securities deposited with the Trustee prior to the occurrence of
a Consolidation Event and held in trust under Article VIII by the
Trustee and applied, prior to the occurrence of a Consolidation
Event, to the payment of principal of and interest on the Notes
shall not be subordinated to the prior payment of any Senior
Indebtedness or subject to the restrictions set forth in this
Article XI, and none of the Holders shall be obligated to pay
over any such Additional Interest or Additional Default Interest
or payments from money or the proceeds of Government Securities
held in trust under Article VIII to the Company or any holder of
Senior Indebtedness of the Company or any other creditor of the
Company.
Section 11.12 Reliance by Holders of Senior
Indebtedness on Subordination
Provisions.
Each Holder of a Note by his acceptance thereof
acknowledges and agrees that the foregoing subordination
provisions are, and are intended to be, an inducement and a
consideration to each holder of any Senior Indebtedness, whether
such Senior Indebtedness was created or acquired before or after
the issuance of the Notes, to acquire and continue to hold, or to
continue to hold, such Senior Indebtedness and such holder of
Senior Indebtedness shall be deemed conclusively to have relied
on such subordination provisions in acquiring and continuing to
hold, or in continuing to hold, such Senior Indebtedness.
ARTICLE XII
MISCELLANEOUS
Section 12.1 Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or
conflicts with the duties imposed by any of TIA Sections 310-317,
inclusive, through operation of TIA Section 318(c), such imposed
duties shall control.
Section 12.2 Notices.
Any notice or communication by any party hereto to the
other parties hereto shall be 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 guaranteeing next day delivery, to the
others, at the following address:
If to the Company:
REEVES, INC.
101 Merritt 7 Corporation Park, 2nd Floor
Norwalk, CT 06586
Attention: General Counsel
Telecopier: (203) 845-2325
Telephone: (203) 846-9988
With a copy to:
Proskauer Rose LLP
1585 Broadway
New York, New York 10036
Attention: Alan B. Hyman, Esq.
Telephone: (212) 969-3000
Telecopier: (212) 969-2900
If to the Trustee:
First Trust National Association
111 East Wacker Drive, Suite 3000
Chicago, Illinois 60601
Attention: H. H. Hall, Jr.
Telephone: 312-228-9448
Telecopier: 312-228-9459
If to any Hypothecator, to its address set forth in the
Non-Recourse Pledge Agreement.
Each of the Company and the Trustee, by notice to the
others may designate additional or different addresses for
subsequent notices or communications.
All notices and communications (other than those sent
to Holders) shall be deemed to have been duly given: at the time
delivered by hand, if personally delivered; five Business Days
after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt acknowledged, if
telecopied; and the next Business Day after timely delivery to
the courier, if sent by a reputable overnight air courier
guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed
by first class mail, certified or registered, return receipt
requested, or by a reputable overnight air courier guaranteeing
next day delivery to its address shown on the register kept by
the Registrar. Any notice or communication shall also be so
mailed to any Person described in TIA Section 313(c), to the
extent required by the TIA. Failure to mail a notice or
communication to a Holder or any defect in it shall not affect
its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner
provided above within the time prescribed, it is duly given,
whether or not the addressee receives it.
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 12.3 Communication by Holders
of Notes with Other Holders of Notes.
Holders may communicate pursuant to TIA Section 312(b)
with other Holders with respect to their rights under this
Indenture or the Notes. The Company, the Trustee, the Registrar
and any other Person shall have the protection of TIA Section
312(c).
Section 12.4 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
reasonably satisfactory to the Trustee (which shall include the
statements set forth in Section 12.5 hereof) stating that, in the
opinion of the signers, all conditions precedent and covenants,
if any, provided for in this Indenture relating to the proposed
action have been complied with; and
(b) an Opinion of Counsel in form and substance
reasonably satisfactory to the Trustee (which shall include the
statements set forth in Section 12.5 hereof) stating that, in the
opinion of such counsel, all such conditions precedent and
covenants have been complied with.
Section 12.5 Statements Required in Certificate or
Opinion.
Each certificate or opinion with respect to compliance
with a condition or covenant provided for in this Indenture
(other than a certificate provided pursuant to TIA Section
314(a)(4)) shall comply with the provisions of TIA Section 314(e)
and 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 or she has made such examination or investigation as is
necessary to enable him or her 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; provided, that with respect to matters of fact, Opinions
of Counsel may rely on an Officers' Certificate or certificate of
public officials.
Section 12.6 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 12.7 Employees and Stockholders.
No director, officer, employee, incorporator or
stockholder of the Company, as such, shall have any liability for
any obligations of the Company under the Notes or this Indenture
or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder by accepting a Note
waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the Notes. Such
waiver may not be effective to waive liabilities under the
federal securities laws and it is the view of the SEC that such a
waiver is against public policy.
Section 12.8 Governing Law.
THIS INDENTURE AND THE NOTES SHALL BE CONSTRUED,
INTERPRETED AND THE RIGHTS OF THE PARTIES DETERMINED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
REFERENCE TO ITS CHOICE OF LAW PROVISIONS.
Section 12.9 Jurisdiction; Venue.
(a) EACH OF THE PARTIES HERETO AGREES THAT ANY
ACTION, SUIT OR PROCEEDING AGAINST ANY OF THE PARTIES HERETO
ARISING UNDER OR RELATING IN ANY WAY TO THIS AGREEMENT, ANY
AGREEMENT CONTEMPLATED HEREBY OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY MAY ONLY BE BROUGHT OR ENFORCED IN THE COURTS
OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN
DISTRICT OF NEW YORK, AND EACH OF THE PARTIES HERETO IRREVOCABLY
CONSENTS TO THE JURISDICTION OF EACH SUCH COURT IN RESPECT OF ANY
SUCH ACTION, SUIT OR PROCEEDING. EACH OF THE PARTIES HERETO
FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS IN ANY
SUCH ACTION, SUIT OR PROCEEDING BY THE MAILING OF COPIES THEREOF
BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, RETURN RECEIPT
REQUESTED TO SUCH PARTY AT ITS ADDRESS AS PROVIDED FOR NOTICES
HEREUNDER.
(b) EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES ANY OBJECTION THAT IT MAY NOW OR HERE- AFTER HAVE TO THE
LAYING OF VENUE OF ANY ACTION, SUIT OR PROCEEDING ARISING UNDER
OR RELATING IN ANY WAY TO THIS AGREEMENT, ANY AGREEMENT
CONTEMPLATED HEREBY OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY IN ANY COURT LOCATED IN THE STATE OF NEW YORK, AND HEREBY
FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT A COURT LOCATED IN THE
STATE OF NEW YORK IS NOT A CONVENIENT FORUM FOR ANY SUCH ACTION,
SUIT OR PROCEEDING.
Section 12.10 No Adverse Interpretation of Other
Agreements.
This Indenture may not be used to interpret any other
indenture, loan or debt agreement of the Company or its
Subsidiaries or of any other Person. 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
Notes shall bind its successors. All agreements of the Trustee
in this Indenture shall bind its successors.
Section 12.12 Severability.
In case any provision in this Indenture or in the Notes
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 counterparts of this
Indenture. Each signed counterpart shall be an original, but all
of them together represent one and 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 of this Indenture and shall in no way modify or
restrict any of the terms or provisions hereof.
[Signatures on following page]<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, all as of the date first written
above.
REEVES, INC.
Attest: By:__________________
Name: Name:
Title:
By:__________________
Name:
Title:
FIRST TRUST NATIONAL
ASSOCIATION
Attest: By:__________________
Name: Name:
Title:
THE HYPOTHECATORS
_____________________
Name: James W. Hart
_____________________
Name: James W. Hart
_____________________
Name: Douglas B. Hart<PAGE>
EXHIBIT A
(Face of Note)
13% Senior Note due 2004
No. CUSIP No. [__________]
REEVES, INC.
a Delaware corporation,
promises to pay to
or registered assigns, the principal sum of ___________________
Dollars on November 15, 2004.
Interest Payment Dates: May 15 and November 15
Record Dates: May 1 and November 1
Additional provisions of this Security are set forth on
the other side of this Security.
Dated: __________________ REEVES, INC.
By:_________________
Name:
Title:
By:_________________
Name:
Title:
THE HYPOTHECATORS
_____________________
Name: James W. Hart
_____________________
Name: James W. Hart
_____________________
Name: Douglas B. Hart
_____________________
Name: Jennifer Fray
<PAGE>
Trustee's Certificate
of Authentication
This is one of the 13% Senior Notes
due 2004 referred to in the within-
mentioned Indenture:
First Trust National Association
_____________________________________
as Trustee
By: _________________________________
Authorized Signatory<PAGE>
(Back of Note)
13% Senior Note due 2004
Capitalized terms used herein shall have the meanings
assigned to them in the Indenture referred to below unless
otherwise indicated.
Section 1. Interest. Reeves, Inc., a Delaware
corporation (the "Company," which term includes any successor
corporation under the Indenture hereinafter referred to),
promises to pay interest on the principal amount of this Note at
13% per annum from the Issue Date until maturity. The Company
will pay interest semi-annually on May 15 and November 15 of each
year, or if any such day is not a Business Day, on the next
succeeding Business Day (each an "Interest Payment Date").
Interest on the Notes will accrue from the most recent date to
which interest has been paid or, if no interest has been paid,
from January 15, 1998; provided, that if there is no existing
Default in the payment of interest, and if this note is
authenticated between a record date referred to on the face
hereof and the next succeeding Interest Payment Date, interest
shall accrue from such next succeeding Interest Payment Date;
provided, further, that the first Interest Payment Date shall be
May 15, 1998. The Company shall pay interest (including
post-petition interest in any proceeding under Bankruptcy Law) on
overdue principal and premium, if any, from time to time on
demand at a rate that is 2% per annum in excess of the interest
rate then in effect on the Notes 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 periods) from time to
time on demand at the same rate to the extent lawful. Interest
will be computed on the basis of a 360-day year of twelve 30-day
months.
Section 2. Method of Payment. The Company will pay
interest on the Notes (except defaulted interest) to the Persons
who are registered Holders of Notes at the close of business on
May 1 or November 1 preceding the Interest Payment Date (whether
or not such day is a Business Day), even if such Notes are
canceled after such record date and on or before such Interest
Payment Date, except as provided in Section 2.12 of the Indenture
with respect to defaulted interest. The Notes will be payable as
to principal and interest at the office or agency of the Company
maintained for such purpose within or without the City and State
of New York, or, at the option of the Company, payment of
interest may be made by check mailed to the Holders at their
addresses set forth in the register of Holders. Such payment
will be in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public
and private debts.
The Company may, at its option, satisfy its obligation
to pay interest on this Note on any Interest Payment Date by
delivering to the Holder of this Note a new Note (an "Accrued
Interest Note"), in the form of this Note, dated such Interest
Payment Date (and bearing interest from such Interest Payment
Date) and having a principal amount corresponding to the amount
of interest due on this Note on such Interest Payment Date;
provided, however, that the Company shall not issue an Accrued
Interest Note in payment of any accrued interest payable upon any
redemption or repurchase of all or any portion of this Note, and
instead shall pay such accrued interest in cash.
Section 3. Paying Agent and Registrar. Initially,
First Trust National Association, the Trustee under the
Indenture, will act as Registrar and Paying Agent. The Company
may change any Paying Agent or Registrar without notice to any
Holder. The Company or any of its Subsidiaries may act in any
such capacity.
Section 4. Indenture. The Company issued the Notes
under an Indenture dated as of [ ,] 1998 (the
"Indenture") among the Company, the Trustee and the Pledgors.
The terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (15 U.S. Code 77aaa-77bbb).
The Notes are subject to all such terms, and Holders are referred
to the Indenture and such Act for a statement of such terms. The
Notes are unsecured obligations of the Company, other than
certain obligations to pay Additional Interest and Additional
Default Interest, as described in Section 5 below. Upon the
occurrence of a Consolidation Event, the Notes are subordinate
and subject in right of payment to the prior payment in full and
in cash of all Senior Indebtedness, as described in Section 17
hereof and in the Indenture. The Notes are limited to
$73,004,724 (plus the principal amount of any Accrued Interest
Notes issued pursuant to the second paragraph of Section 2 of the
Notes) in aggregate principal amount.
Section 5. Additional Interest and Additional
Default Interest. In the event that the Notes have not been
redeemed or repaid in full as of the second, third, fourth,
fifth, sixth or seventh anniversary of the Additional Interest
Calculation Date, the Company will pay Additional Interest on the
Notes in the form of the Company's Common Stock, as set forth in
the Indenture. The obligation of the Company to pay such
additional interest shall be secured by a pledge of Common Stock
by SPV Fenchurch, LLC (the "Hypothecator"). In addition, upon
the occurrence of certain events of default under the Indenture,
the Hypothecators will transfer and deliver to the Trustee, for
the benefit of the holders of the Notes, Common Stock of the
Company in an amount such that the holders of the Notes will
collectively own 51% of the outstanding Common Stock of the
Company.
Section 6. Optional Redemption. The Notes will be
subject to redemption at any time at the option of the Company,
in whole or in part, upon not less than 30 nor more than 60 days'
notice, at a redemption price of 100% of the principal amount
then outstanding plus accrued and unpaid interest thereon to the
applicable date of redemption.
Section 7. Mandatory Redemption. Except as set
forth under Sections 4.8 or 4.9 of the Indenture, the Company
shall not be required to make mandatory redemption or sinking
fund payments with respect to the Notes.
Section 8. Notice of Redemption. Notice of
redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each Holder whose Notes are to
be redeemed at its registered address. Notes in denominations
larger than $1,000 may be redeemed in part but only in Authorized
Denominations, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to
accrue on Notes or portions thereof called for redemption,
provided that the Company shall have deposited with the Trustee
or Paying Agent funds sufficient to redeem such Notes not later
than the redemption date.
Section 9. Change of Control. Upon the occurrence
of a Change of Control, the Company will be required to make an
offer to repurchase all or any part (equal to $1,000 principal
amount or an integral multiple thereof) of a Holder's Notes at a
purchase price equal to 101% of the principal amount thereof plus
accrued and unpaid interest, if any, to the date of purchase.
Within 30 days following the date on which the Company has actual
knowledge that a Change of Control has occurred, the Company
shall mail a notice to each Holder setting forth the procedures
governing the Change of Control Offer as required by the
Indenture. Holders of Notes may elect to have such Notes
purchased by completing the form entitled "Option of Holder to
Elect Purchase" appearing below.
Section 10. Asset Sales. If the Company consummates
any Asset Sales, and when the aggregate amount of Excess Proceeds
exceeds $5 million, the Company shall make an offer to all
Holders of Notes to purchase the maximum principal amount of
Notes that may be purchased out of such Excess Proceeds, at an
offer price in cash equal to 100% of the principal amount thereof
plus accrued and unpaid interest, if any, to the date of
repurchase. Holders of Notes that are the subject of an offer to
purchase shall receive an Asset Sale Offer from the Company prior
to any related purchase date and may elect to have such Notes
purchased by completing the form entitled "Option of Holder to
Elect Purchase" appearing below.
Section 11. Denominations, Transfer, Exchange. The
Notes are in registered form without coupons in Authorized
Denominations. The transfer of Notes may be registered and Notes
may be exchanged as provided in the Indenture. The Registrar and
the Trustee may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and the Company
may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Registrar shall not be required
(A) to register the transfer of or to exchange Notes during a
period beginning at the opening of business 15 days before the
day of any selection of Notes for redemption under Section 3.7 of
the Indenture and ending at the close of business on the day of
selection; or (B) to register the transfer of or to exchange any
Note so selected for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part; or (C) to
register the transfer of or to exchange a Note between a record
date and the next succeeding Interest Payment Date.
Section 12. Persons Deemed Owners. The registered
Holder of a Note may be treated as its owner for all purposes,
subject, with respect to payment of interest, to the provisions
of the Indenture relating to record dates.
Section 13. Amendment, Supplement and Waiver.
Subject to certain exceptions, the Indenture or the Notes may be
amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the then outstanding
Notes, and any existing default or compliance with any provision
of the Indenture or the Notes may be waived with the consent of
the Holders of a majority in principal amount of the then
outstanding Notes. Without the consent of any Holder of a Note,
the Indenture or the Notes may be amended or supplemented to cure
any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated
Notes, to provide for the assumption of the Company's obligations
to Holders in case of a merger or consolidation or sale,
assignment, transfer, lease, conveyance or other disposition of
all or substantially all of the Company's properties or assets,
to make any change that would provide any additional rights or
benefits to the Holders or that does not adversely affect the
rights under the Indenture of any such Holder, to comply with the
requirements of the SEC in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act or
to evidence or provide for a replacement Trustee pursuant to the
Indenture.
Section 14. Restrictive Covenants. The Indenture
imposes certain limitations on the ability of the Company and its
Subsidiaries to, among other things, pay dividends or make
certain other Restricted Payments, incur additional Indebtedness
or Liens, enter into transactions with Affiliates, make payments
in respect of its Capital Stock or issue additional or sell
Capital Stock, merge or consolidate with any other person or
sell, lease, transfer or otherwise dispose of substantially all
of its properties or assets or enter into sale and leaseback
transactions. The limitations are subject to certain
qualifications and exceptions. The Company must make quarterly
reports to the Trustee regarding compliance with such
limitations.
Section 15. Successor Corporation. When a successor
corporation assumes all the obligations of its predecessor under
the Notes and the Indenture, the predecessor corporation will be
released from those obligations.
Section 16. Defaults and Remedies. If an Event of
Default occurs and is continuing, the Trustee or the Holders of
at least 25% in aggregate principal amount of Notes then
outstanding may declare all the Notes to be due and payable
immediately in the manner and with the effect provided in the
Indenture. Holders of Notes may not enforce the Indenture or the
Notes except as provided in the Indenture. The Trustee may
require indemnity satisfactory to it before it enforces the
Indenture or the Notes. Subject to certain limitations, Holders
of a majority in aggregate principal amount of the Notes then
outstanding may direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Holders of Notes notice
of any continuing Default or Event of Default (except a Default
in payment of principal or interest) if it determines that
withholding notice is in their interest. By accepting a Note,
each Holder, in its capacity as a Holder, agrees that it will not
directly or indirectly seek to reject or support a motion to
reject any of the Employment Agreements, the Consulting
Agreements, the Employment Agreement Guarantees, the Fenchurch
Note or the Arrangement Fee Note in the event of a Reeves
Brothers Inc. bankruptcy filing.
Section 17. Subordination of Securities. The
indebtedness evidenced by this Note is, to the extent provided in
the Indenture, subordinate and subject in right of payment to the
prior payment in full and in cash of all Senior Indebtedness upon
the occurrence of a Consolidation Event, and this Note is issued
subject to the provisions of the Indenture with respect thereto.
Each Holder of this Note, by accepting the same, (a) agrees to
and shall be bound by such provisions, (b) authorizes and directs
the Trustee on his behalf to take such action as may be necessary
or appropriate to effectuate the subordination so provided, and
(c) appoints the Trustee his attorney-in- fact for any and all
such purposes.
Section 18. 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 the Trustee.
Section 19. No Recourse Against Others. A director,
officer, employee, incorporator or stockholder, of the Company,
as such, shall not have any liability for any obligations of the
Company under the Notes or the Indenture or for any claim based
on, in respect of, or by reason of, such obligations or their
creation. Each Holder by accepting a Note waives and releases
all such liability. The waiver and release are part of the
consideration for the issuance of the Notes. Such waiver may not
be effective to waive liabilities under the federal securities
laws and it is the view of the SEC that such a waiver is against
public policy.
Section 20. Authentication. This Note shall not be
valid until authenticated by the manual signature of the Trustee
or an authenticating agent.
Section 21. Notes. The term "Notes" refers to,
collectively, the Notes issuable under the Indenture (including
any Accrued Interest Notes).
Section 22. 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).
Section 23. 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 Notes and the Trustee may 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 Notes or as contained in any notice of
redemption and reliance may be placed only on the other
identification numbers placed thereon.
The Company will furnish to any Holder upon written
request and without charge a copy of the Indenture. Requests for
such documents and for additional information may be made to:
Reeves, Inc., 101 Merritt, 7 Corporation Park, 2nd Floor,
Norwalk, CT 06586, Attention: Secretary.<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or
(we) assign and transfer this Note to
______________________________________________________________
(Insert assignee's soc sec. or tax I.D. no.)
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint _____________________________________
agent to transfer this Note 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 face of this Note)
Signature Guarantee:_______________________<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the
Company pursuant to Section 4.8 or 4.9 of the Indenture, check
the applicable box below:
Section 4.8 Section 4.9
If you want to elect to have only part of the Note
purchased by the Company pursuant to Section 4.8 or 4.9 of the
Indenture, state the amount you elect to have purchased:
$________________
Date: _________________ Your Signature:_________________
(Sign exactly as your name appears
on the Note)
Tax Identification No.:__________
Signature Guarantee: ___________________<PAGE>
[PWRWG DRAFT 3/6/98]
INDENTURE
dated as of __________________, 1998
among
REEVES, INC.,
the HYPOTHECATORS NAMED HEREIN
and
FIRST TRUST NATIONAL ASSOCIATION,
as Trustee.
<PAGE>
TABLE OF Page
INDENTURE. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I DEFINITIONS AND INCORPORATION
BY REFERENCE. . . . . . . . . . . . . . . . . . . . . . . . . .1
Section 1.1 Definitions . . . . . . . . . . . . . . . .1
Section 1.2 Other Definitions . . . . . . . . . . . . 24
Section 1.3 Incorporation by Reference of Trust
Indenture Act. . . . . . . . . . . . . . .25
Section 1.4 Rules of Construction . . . . . . . . . . 25
ARTICLE II THE NOTES. . . . . . . . . . . . . . . . . . . . .26
Section 2.1 Form and Dating . . . . . . . . . . . . . 26
Section 2.2 Execution and Authentication. . . . . . . 27
Section 2.3 Registrar and Paying Agent. . . . . . . . 27
Section 2.4 Paying Agent to Hold Money in Trust . . . 28
Section 2.5 Holder Lists. . . . . . . . . . . . . . . 28
Section 2.6 Transfer and Exchange . . . . . . . . . . 28
Section 2.7 Replacement Notes . . . . . . . . . . . . 29
Section 2.8 Outstanding Notes . . . . . . . . . . . . 29
Section 2.9 Treasury Notes. . . . . . . . . . . . . . 30
Section 2.10 Temporary Notes . . . . . . . . . . . . . 30
Section 2.11 Cancellation. . . . . . . . . . . . . . . 30
Section 2.12 Defaulted Interest. . . . . . . . . . . . 31
Section 2.13 CUSIP Number. . . . . . . . . . . . . . . 31
Section 2.14 Book-Entry Provisions for Global Notes. . 31
Section 2.15 Wire Payments to Holders. . . . . . . . . 33
ARTICLE III REDEMPTION AND PREPAYMENT. . . . . . . . . . . . .33
Section 3.1 Notices to Trustee. . . . . . . . . . . . 33
Section 3.2 Selection of Notes to Be Redeemed . . . . 33
Section 3.3 Notice of Redemption. . . . . . . . . . . 34
Section 3.4 Effect of Notice of Redemption. . . . . . 35
Section 3.5 Deposit of Redemption Price . . . . .35
Section 3.6 Notes Redeemed in Part. . . . . . . . . . 35
Section 3.7 Optional Redemption . . . . . . . . . . . 36
Section 3.8 Mandatory Redemption. . . . . . . . . . . 36
Section 3.9 Offers to Purchase by Application of
Excess Proceeds. . . . . . . . . . . . . .36
ARTICLE IV COVENANTS. . . . . . . . . . . . . . . . . . . 38
Section 4.1 Payment of Notes. . . . . . . . . . . . . 38
Section 4.2 Maintenance of Office or Agency . . . . . 38
Section 4.3 Reports . . . . . . . . . . . . . . . . . 39
Section 4.4 Compliance Certificate. . . . . . . . . . 40
Section 4.5 Taxes . . . . . . . . . . . . . . . . . . 41
Section 4.6 Stay, Extension and Usury Laws. . . . . . 41
Section 4.7 Corporate Existence . . . . . . . . . . . 41
Section 4.8 Change of Control . . . . . . . . . . . . 41
Section 4.9 Limitation on Asset Sales . . . . . . . . 43
Section 4.10 Limitation on Restricted Payments . . . . 45
Section 4.11 Limitation on Incurrence of Indebtedness;
Issuance of Capital Stock. . . . . . . . .47
Section 4.12 Limitation on Liens . . . . . . . . . . . 48
Section 4.13 Limitation on Dividend and Other Payment
Restrictions Affecting Subsidiaries. . . .48
Section 4.14 Limitation on Transactions with
Affiliates. . . . . . . . . . . . . . . . 49
Section 4.15 Limitation on Sale and Leaseback
Transactions. . . . . . . . . . . . . . . 50
Section 4.16 Compliance with Laws. . . . . . . . . . . 50
Section 4.17 Limitation on Sale of Capital Stock of
Subsidiaries. . . . . . . . . . . . . . . 50
Section 4.18 Payments for Consents . . . . . . . . . . 50
Section 4.19 Maintenance of Properties, etc. . . . . . 51
Section 4.20 Additional Interest. . . . . . . . . . . . 51
ARTICLE V SUCCESSORS . . . . . . . . . . . . . . . . . . . .55
Section 5.1 Limitation on Mergers, Consolidations and
Sales of Assets. . . . . . . . . . . . . .55
Section 5.2 Successor Corporation Substituted . . . . 56
ARTICLE VI DEFAULTS AND REMEDIES. . . . . . . . . . . . . . .56
Section 6.1 Events of Default . . . . . . . . . . . . 56
Section 6.2 Acceleration. . . . . . . . . . . . . . . 59
Section 6.3 Other Remedies. . . . . . . . . . . . . . 59
Section 6.4 Waiver of Past Events of Defaults . . . . 59
Section 6.5 Control by Majority . . . . . . . . . . . 60
Section 6.6 Limitation on Suits . . . . . . . . . . . 60
Section 6.7 Rights of Holders of Notes to Receive
Payment. . . . . . . . . . . . . . . . . .61
Section 6.8 Collection Suit by Trustee. . . . . . . . 61
Section 6.9 Trustee May File Proofs of Claim. . . . . 61
Section 6.10 Priorities. . . . . . . . . . . . . . . . 61
Section 6.11 Undertaking for Costs . . . . . . . . . . 62
Section 6.12 Event of Default from Willful Action. . . 62
ARTICLE VII TRUSTEE. . . . . . . . . . . . . . . . . . . . . .63
Section 7.1 Duties of Trustee . . . . . . . . . . . . 63
Section 7.2 Rights of Trustee . . . . . . . . . . . . 64
Section 7.3 Individual Rights of Trustee. . . . . . . 64
Section 7.4 Trustee's Disclaimer. . . . . . . . . . . 65
Section 7.5 Notice of Defaults. . . . . . . . . . . . 65
Section 7.6 Reports by Trustee to Holders of
the Notes . . . . . . . . . . . . . . . . 65
Section 7.7 Compensation and Indemnity. . . . . . . . 66
Section 7.8 Replacement of Trustee. . . . . . . . . . 67
Section 7.9 Successor Trustee by Merger, Etc. . . . . 68
Section 7.10 Eligibility; Disqualification . . . . . . 68
Section 7.11 Preferential Collection of Claims
Against Company . . . . . . . . . . . . . 68
ARTICLE VIII DISCHARGE OF INDENTURE. . . . . . . . . . . .68
Section 8.1 Discharge of Indenture; Option to Effect
Legal Defeasance or Covenant Defeasance . 68
Section 8.2 Legal Defeasance and Discharge. . . . . . 69
Section 8.3 Covenant Defeasance . . . . . . . . . . . 69
Section 8.4 Conditions to Legal or Covenant
Defeasance . . . . . . . . . . . . . . . .70
Section 8.5 Deposited Money and Government Securities
to be Held in Trust; Other Miscellaneous
Provisions . . . . . . . . . . . . . . . .71
Section 8.6 Repayment to Company. . . . . . . . . . . 72
Section 8.7 Reinstatement . . . . . . . . . . . . . . 72
ARTICLE IX AMENDMENT, SUPPLEMENT AND WAIVER . . . . . . . . .73
Section 9.1 Without Consent of Holders of Notes . . . 73
Section 9.2 With Consent of Holders of Notes. . . . . 74
Section 9.3 Compliance with Trust Indenture Act . . . 76
Section 9.4 Revocation and Effect of Consents . . . . 76
Section 9.5 Notation on or Exchange of Notes. . . . . 76
Section 9.6 Trustee to Sign Amendments, Etc.. . . . . 76
ARTICLE X SECURITY . . . . . . . . . . . . . . . . . . . . .77
Section 10.1 Non-Recourse Pledge Agreement.. . . . . . 77
Section 10.2 Recording, Etc. . . . . . . . . . . . . . 77
Section 10.3 Suits to Protect the Pledged Collateral. .78
Section 10.4 Trustee Duties. . . . . . . . . . . . . . 79
ARTICLE XI SUBORDINATION. . . . . . . . . . . . . . . . . . .79
Section 11.1 Securities Subordinate to Senior
Indebtedness . . . . . . . . . . . . . . .79
Section 11.2 Payment Over of Proceeds Upon
Dissolution, Etc. . . . . . . . . . . . . 79
Section 11.3 Subrogation to Rights of Holders of
Senior Indebtedness . . . . . . . . . . . 80
Section 11.4 Provisions Solely to Define Relative
Rights . . . . . . . . . . . . . . . . . .80
Section 11.5 Trustee to Effectuate Subordination . . . 81
Section 11.6 No Waiver of Subordination Provisions . . 81
Section 11.7 Reliance on Judicial Order or
Certificate of Liquidating Agent. . . . . 82
Section 11.8 Trustee Not Fiduciary for Holders of
Senior Indebtedness. . . . . . . . . . . .82
Section 11.9 Rights of Trustee as Holder of Senior
Indebtedness; Preservation of
Trustee's Rights . . . . . . . . . . . . .82
Section 11.10 Article Applicable to Paying Agents . . . 83
Section 11.11 Trust Moneys Not Subordinated . . . . . . 83
Section 11.12 Reliance by Holders of Senior Indebtedness
on Subordination Provisions . . . . . . . 83
ARTICLE XII MISCELLANEOUS. . . . . . . . . . . . . . . . . . .84
Section 12.1 Trust Indenture Act Controls. . . . . . . 84
Section 12.2 Notices . . . . . . . . . . . . . . . . . 84
Section 12.3 Communication by Holders of Notes
with Other Holders of Notes. . . . . . . .85
Section 12.4 Certificate and Opinion as to
Conditions Precedent . . . . . . . . . . .85
Section 12.5 Statements Required in Certificate
or Opinion . . . . . . . . . . . . . . . .86
Section 12.6 Rules by Trustee and Agents . . . . . . . 86
Section 12.7 Employees and Stockholders. . . . . . . . 86
Section 12.8 Governing Law . . . . . . . . . . . . . . 87
Section 12.9 Jurisdiction; Venue . . . . . . . . . . . 87
Section 12.10 No Adverse Interpretation of Other
Agreements . . . . . . . . . . . . . . . .87
Section 12.11 Successors. . . . . . . . . . . . . . . . 88
Section 12.12 Severability. . . . . . . . . . . . . . . 88
Section 12.13 Counterpart Originals . . . . . . . . . . 88
Section 12.14 Table of Contents, Headings, Etc. . . . . 88
<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
(c). . . . . . . . . . . . . . . . . . . . N.A.
311(a) . . . . . . . . . . . . . . . . . . . 7.11
(b). . . . . . . . . . . . . . . . . . . . 7.11
(c). . . . . . . . . . . . . . . . . . . . N.A.
312(a) . . . . . . . . . . . . . . . . . . . 2.05
(b). . . . . . . . . . . . . . . . . . . . 12.03
(c). . . . . . . . . . . . . . . . . . . . 12.03
313(a) . . . . . . . . . . . . . . . . . . . 7.06
(b)(1) . . . . . . . . . . . . . . . . . . N.A.
(b)(2) . . . . . . . . . . . . . . . . . . 7.06
(c). . . . . . . . . . . . . . . . . . . . 7.06, 12.02
(d) . . . . . . . . . . . . . . . . . . . 7.06
314(a) . . . . . . . . . . . . . . . . . . . 4.03, 4.04, 12.02
(b). . . . . . . . . . . . . . . . . . . . 10.02
(c)(1) . . . . . . . . . . . . . . . . . . 12.04
(c)(2) . . . . . . . . . . . . . . . . . . 12.04
(c)(3) . . . . . . . . . . . . . . . . . . N.A.
(d). . . . . . . . . . . . . . . . . . . . 10.02
(e). . . . . . . . . . . . . . . . . . . . 12.05
(f) . . . . . . . . . . . . . . . . . . . N.A.
315(a) . . . . . . . . . . . . . . . . . . . . 7.01
(b). . . . . . . . . . . . . . . . . . . . 7.05, 12.02
(c). . . . . . . . . . . . . . . . . . . . 7.01
(d). . . . . . . . . . . . . . . . . . . . 7.01
(e). . . . . . . . . . . . . . . . . . . . 6.11
316(a) (last sentence) . . . . . . . . . . . . 2.09
(a)(1)(A). . . . . . . . . . . . . . . . . 6.05
(a)(1)(B). . . . . . . . . . . . . . . . . 6.04
(a)(2) . . . . . . . . . . . . . . . . . . N.A.
(b). . . . . . . . . . . . . . . . . . . . 6.07
(c). . . . . . . . . . . . . . . . . . . . 2.12
317(a)(1). . . . . . . . . . . . . . . . . . . 6.08
(a)(2) . . . . . . . . . . . . . . . . . . 6.09
(b). . . . . . . . . . . . . . . . . . . . 2.04
<PAGE>
318(a) . . . . . . . . . . . . . . . . . . . 12.01
(b). . . . . . . . . . . . . . . . . . . . N.A.
(c). . . . . . . . . . . . . . . . . . . . 12.01
__________________
"N.A." means not applicable.
*This Cross-Reference Table is not part of the Indenture.
Exhibit T3E
PROSKAUER ROSE LLP
Counsel for Debtor and Debtor-in-Possession
1585 Broadway
New York, New York 10036
(212) 969-3000
Alan B. Hyman (AH-6655)
Jeffrey W. Levitan (JL-6155)
Lisa A. Chiappetta (LC-6514)
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- -----------------------------------x
:
In re: : (Chapter 11)
:
REEVES INDUSTRIES, INC. : Case No. 97 B 47727 (PCB)
:
Debtor. :
- -----------------------------------x
SECOND AMENDED DISCLOSURE STATEMENT PURSUANT TO
SECTION 1125 OF THE BANKRUPTCY CODE FOR THE JOINT PLAN
OF REORGANIZATION OF THE DEBTOR AND REEVES, INC.
Dated: January 16, 1998
New York, New York
<PAGE>
I.
INTRODUCTION AND SUMMARY
A. Overview
Reeves Industries, Inc., debtor and debtor-in-
possession, and Reeves, Inc. ("RI") transmit this Second Amended
Disclosure Statement dated January 16, 1998 pursuant to
Section 1125(b) of the Bankruptcy Code and Rule 3017 of the
Federal Rules of Bankruptcy Procedure, in connection with the
Amended Joint Plan of Reorganization dated January 12, 1998 in
order to provide adequate information to enable holders of Claims
and Equity Interests that are impaired under the Plan to make an
informed judgment in exercising their right to vote for
acceptance or rejection of the Plan. A copy of the Plan is
attached hereto as Exhibit A. All capitalized terms used but not
defined in this Disclosure Statement shall have the meaning
ascribed to them in the Plan unless otherwise noted.
THE DEBTOR STRONGLY URGES ACCEPTANCE OF THE PLAN.
SIMILARLY, THE DEBTOR HAS NEGOTIATED THE TERMS OF THE PLAN WITH
AN INFORMAL COMMITTEE OF CERTAIN HOLDERS OF OLD SENIOR NOTES AND
OLD SUBORDINATED DEBENTURES. THE INFORMAL COMMITTEE ALSO STRONGLY
RECOMMENDS THAT ALL HOLDERS OF OLD SENIOR NOTES AND OLD
SUBORDINATED DEBENTURES VOTE TO ACCEPT THE PLAN.
The Plan effectuates, among other things, a
restructuring of the Debtor's Old Senior Notes and Old
Subordinated Debentures by exchanging them for New Senior Notes
issued by the Debtor and New Structurally Subordinated Notes
issued by RI (collectively, the "New Notes"). The Plan also
grants the holders of Old Senior Notes and Old Subordinated
Debentures (collectively, the "Bondholders")[1] a direct equity
interest in RI and an indirect equity interest in the Debtor.
The corporate structure of the Debtor and its Affiliates, after
implementation of the transactions contemplated under the Plan,
will be as follows:[2]
Harts Bondholders
| (25%)|
(75%) |
| |
RI New Structurally
| Subordinated Notes
(100%)
|
Reeves --- New Senior Notes
|
(100%)
| |
Europe Reeves B.V. |
|
(100%)
|
|
|--------------------------- Brothers
| | |
| (100%) (100%)
| | |
| ------ Reeves Penna, Inc. ARA Manufacturing
| | | Company, Inc.
| | |
(99%) (1%) |
| | |
SPV Reeves |
|
(99.998%) (.002%)
| |
SPA ----------------- |
Under the Plan, each holder of an Allowed Senior
Noteholder Claim will receive its Pro Rata share of (a)(i)
$70,318,387 of the New Senior Notes and (ii) $65,619,183 of the
New Structurally Subordinated Notes (these amounts equate to
approximately$574 of New Senior Notes and approximately $536 of
New Structurally Subordinated Notes per every $1,000 of Old
Senior Notes held), and (b) a number of issued and outstanding
shares of RI Common Stock representing a 22.47% direct equity
ownership in RI. Each holder of an Allowed Subordinated
Debentureholder Claim will receive its Pro Rata share of (a)(i)
$4,681,613 of the New Senior Notes and (ii) $7,385,540 of the New
Structurally Subordinated Notes (these amounts equate to
approximately $426 of New Senior Notes and approximately $671 of
New Structurally Subordinated Notes per every $1,000 of Old
Subordinated Debentures held), and (b) a number of issued and
outstanding shares of RI Common Stock representing a 2.53% direct
equity ownership in RI.[3] The Plan further provides for the
payment of Additional Interest to the Bondholders in the form of
RI Common Stock in the event that the New Structurally
Subordinated Notes are not redeemed by certain anniversary dates
of the deemed issuance date for the New Notes of November 15,
1997 (the "Issuance Date"), as set forth in greater detail in
this Disclosure Statement. The payment of Additional Interest is
supported by the Non-Recourse Pledge,[4] which pledges to the New
Structurally Subordinated Note Indenture Trustee, on a non-
recourse basis, of all of the shares of RI Common Stock held by
the Harts. As of the Effective Date, the Harts will own 75% of
the shares of RI Common Stock.
B. Summary of Classification and Treatment Under the Plan
In general, the Plan (1) divides Claims and Equity
Interests into six classes, (2) sets forth the treatment afforded
to each class, and (3) provides the means by which the Debtor
will be reorganized under chapter 11 of the Bankruptcy Code. The
following table sets forth a summary of the treatment of each
type of Claim and Equity Interest under the Plan (a more detailed
description of the Plan is set forth later in this Disclosure
Statement in Section III entitled "The Plan").[5]
Class Type of Claim/Interest Treatment
Not Applicable Allowed Administrative Claims To be paid in full,
in Cash, in such
amounts as (1) are
incurred in the
ordinary course of
business by the
Debtor, (2) are
Allowed by the
Bankruptcy Court
upon the later of
the Effective Date,
the date of a Final
Order allowing such
Administrative
Claims, or any other
date specified in
such order, or (3)
may be agreed upon
between the holders
of such
Administrative
Claims and the
Debtor.
Administrative
Claims include the
obligations to GECC
under the Secured
Guaranty, costs
incurred in the
operation of the
Debtor's business
after the
commencement of its
chapter 11 case, the
fees and expenses of
Professionals
retained by the
Debtor, the Informal
Committee, or any
statutory committee
appointed to serve
in the Debtor's
chapter 11 case, and
the fees due to the
United States
Trustee pursuant to
28 U.S.C. Section 1930.
Not Applicable Allowed Priority
Tax Claims To be paid in full, in Cash,
upon the later of (1) the
Effective Date, (2) the date
upon which there is a Final
Order allowing such Claim as
an Allowed Priority Tax Claim,
(3) the date that such Allowed
Priority Tax Claim would have
been due if the Reorganization
Case had not been commenced,
or (4) upon such other terms
as may be agreed to between
the Debtor and the holder of
any Allowed Priority Tax
Claim; provided, however, that
the Debtor may, at its option,
in lieu of payment in full of
Allowed Priority Tax Claims on
the Effective Date make Cash
payments respecting Allowed
Priority Tax Claims deferred
in accordance with Section
1129(a)(9) of the Bankruptcy
Code.
1 Allowed Priority Claims Unimpaired. To be paid in
full, in Cash, upon the later
of the Effective Date or the
date on which there is a Final
Order allowing any such Claim
as an Allowed Priority Claim,
or upon such other terms as
may be agreed to by the Debtor
and any holder of an Allowed
Priority Claim.
2 Allowed General
Secured Claims Unimpaired. To be paid in
full, in Cash, on the
Effective Date or the date
upon which there is a Final
Order allowing such Claim as
an Allowed General Secured
Claim, or will otherwise be
rendered unimpaired, or upon
such other terms as may be
agreed to by the Debtor and
any holder of an Allowed
General Secured Claim.
3 Allowed General
Unsecured Claims Unimpaired. The legal,
equitable, and contractual
rights to which an Allowed
General Unsecured Claim
entitles the holder thereof
shall be left unimpaired and,
accordingly, shall be
satisfied on the latest of (1)
the Effective Date, (2) the
date a General Unsecured Claim
becomes an Allowed Claim, (3)
the date an Allowed General
Unsecured Claim becomes due
and payable in accordance with
any agreements between the
Debtor and the holder of an
Allowed General Unsecured
Claim or in the ordinary
course of the Debtor's
business consistent with the
Debtor's ordinary payment
practices, or (4) on such
other date as may be agreed to
by the Debtor and the holder
of such Allowed General
Unsecured Claim.
4A Allowed Senior
Noteholder Claims Impaired. As of the Effective
Date, all Old Senior Notes
shall be canceled, annulled
and extinguished, and each
holder of an Allowed Senior
Noteholder Claim shall
receive, in accordance with
the terms of the Plan, its Pro
Rata share of (a) $70,318,387
of the New Senior Notes issued
pursuant to the New Senior
Note Indenture, (b)
$65,619,183 of the New
Structurally Subordinated
Notes issued pursuant to the
New Structurally Subordinated
Note Indenture, and (c) a
number of shares of the issued
and outstanding RI Common
Stock representing a 22.47%
equity ownership in RI. The
holders of Allowed Senior
Noteholder Claims shall also
be entitled (upon returning an
executed signature page for
each of the Registration
Rights Agreements and the
Stockholders Agreement when
exchanging the Old Senior
Notes for New Senior Notes,
New Structurally Subordinated
Notes, and RI Common Stock) to
the benefits of and be subject
to the obligations arising
under, as applicable, the
Registration Rights Agreements
and the Stockholders
Agreement, and shall also be
bound by the Voting Trust
Agreement without any further
action.[7]
4B Allowed Subordinated
Debentureholder
Claims Impaired. As of the Effective
Date, all Old Subordinated
Debentures shall be canceled,
annulled and extinguished, and
each holder of an Allowed
Subordinated Debentureholder
Claim shall receive, in
accordance with the terms of
the Plan, its Pro Rata share
of (a) $4,681,613 of the New
Senior Notes issued pursuant
to the New Senior Note
Indenture, (b) $7,385,540 of
the New Structurally
Subordinated Notes issued
pursuant to the New
Structurally Subordinated Note
Indenture, and (c) a number of
shares of the issued and
outstanding RI Common Stock
representing a 2.53% equity
ownership in RI. The holders
of Allowed Subordinated
Debentureholder Claims shall
also be entitled (upon
returning an executed
signature page for each of the
Registration Rights Agreements
and the Stockholders Agreement
when exchanging the Old
Subordinated Debentures for
New Senior Notes, New
Structurally Subordinated
Notes, and RI Common Stock) to
the benefits of and be subject
to the obligations arising
under, as applicable, the
Registration Rights Agreements
and the Stockholders
Agreement, and shall also be
bound by the Voting Trust
Agreement without any further
action.[7]
5 Affiliate Claims Impaired. As of the Effective
Date, all Affiliate Claims
shall be Allowed, and, in full
satisfaction thereof, on or
before the Effective Date, the
Consulting Agreements, the
Fenchurch Tax Sharing Note,
the Tax Allocation Agreements,
the Employment Agreements, and
the SPV Reeves Guarantees
shall have been executed and
shall become effective.
6 Equity Interests Impaired. As of the Effective
Date, all Equity Interests in
the Debtor shall be retained
and continue to be held by RI
as such in Reorganized Reeves.
Upon the Effective Date, the
holders of Equity Interests
will be impaired through the
dilution of RI Common Stock
resulting from, among other
things, the granting of shares
of RI Common Stock to the
holders of Old Senior Notes
and Old Subordinated
Debentures equal to 25% of all
issued and outstanding RI
Common Stock.
The Plan also implements certain settlements respecting
Affiliate Claims and subordination rights.[8]
THIS DISCLOSURE STATEMENT HAS BEEN APPROVED BY ORDER OF THE
BANKRUPTCY COURT AS CONTAINING INFORMATION OF A KIND, AND IN
SUFFICIENT DETAIL, TO ENABLE HOLDERS OF CLAIMS AND EQUITY
INTERESTS TO ACCEPT OR REJECT THE PLAN. APPROVAL OF THIS
DISCLOSURE STATEMENT DOES NOT, HOWEVER, CONSTITUTE A
DETERMINATION BY THE BANKRUPTCY COURT AS TO THE FAIRNESS OR THE
MERITS OF THE PLAN.
THIS DISCLOSURE STATEMENT CONTAINS A SUMMARY OF CERTAIN
PROVISIONS OF THE PLAN, THE PLAN DOCUMENTS, AND CERTAIN
FINANCIAL INFORMATION. WHILE THE DEBTOR BELIEVES THAT THESE
SUMMARIES ARE FAIR AND ACCURATE AND PROVIDE ADEQUATE INFORMATION
WITH RESPECT TO THE DOCUMENTS SUMMARIZED, SUCH SUMMARIES ARE
QUALIFIED TO THE EXTENT THAT THEY DO NOT SET FORTH THE ENTIRE
TEXT OF SUCH DOCUMENTS. FURTHERMORE, ALTHOUGH THE DEBTOR HAS
MADE EVERY EFFORT TO BE ACCURATE, THE FINANCIAL INFORMATION
CONTAINED HEREIN HAS NOT BEEN THE SUBJECT OF AN AUDIT BY AN
OUTSIDE ACCOUNTING FIRM. IN THE EVENT OF ANY CONFLICT,
INCONSISTENCY, OR DISCREPANCY BETWEEN THE TERMS AND PROVISIONS IN
THIS DISCLOSURE STATEMENT AND THE TERMS AND PROVISIONS IN THE
PLAN, THE PLAN DOCUMENTS, OR THE FINANCIAL INFORMATION TO BE
INCORPORATED THEREIN BY REFERENCE, THE PLAN SHALL GOVERN FOR ALL
PURPOSES. ALL HOLDERS OF CLAIMS AND EQUITY INTERESTS SHOULD READ
THIS DISCLOSURE STATEMENT, THE PLAN, THE EXHIBITS TO THIS
DISCLOSURE STATEMENT, AND THE PLAN DOCUMENTS IN THEIR ENTIRETY
BEFORE VOTING ON THE PLAN.
THE STATEMENTS AND FINANCIAL INFORMATION CONTAINED HEREIN
HAVE BEEN MADE AS OF THE DATE HEREOF UNLESS OTHERWISE SPECIFIED.
HOLDERS OF CLAIMS AND EQUITY INTERESTS REVIEWING THIS DISCLOSURE
STATEMENT SHOULD NOT INFER AT THE TIME OF SUCH REVIEW THAT THERE
HAVE BEEN NO CHANGES IN THE FACTS SET FORTH HEREIN UNLESS SO
SPECIFIED. WHILE THE DEBTOR HAS MADE EVERY EFFORT TO DISCLOSE
WHERE CHANGES IN PRESENT CIRCUMSTANCES COULD REASONABLY BE
EXPECTED TO AFFECT MATERIALLY THE VOTE ON THE PLAN, THIS
DISCLOSURE STATEMENT IS QUALIFIED TO THE EXTENT THAT CERTAIN
EVENTS, SUCH AS THOSE MATTERS DISCUSSED IN SECTION VI BELOW
ENTITLED "RISK FACTORS," DO OCCUR.
IN ACCORDANCE WITH THE BANKRUPTCY CODE, THIS DISCLOSURE
STATEMENT HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS SUCH COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THE STATEMENTS CONTAINED HEREIN.
C. Voting and Confirmation Procedures
Accompany this Disclosure Statement are copies of the
following documents (1) the Plan, which is attached hereto as
Exhibit A, (2) an Order from the Bankruptcy Court (a) approving
this Disclosure Statement as containing adequate information
pursuant to Section 1125 of the Bankruptcy Code; (b) approving
the forms of Ballots to be executed by holders of impaired Claims
and Equity Interests for voting on the Plan; and (c) approving
the notice of and fixing the time for (i) submitting acceptances
or rejections to the Plan, (ii) the hearing to consider
confirmation of the Plan, and (iii) filing objections to
confirmation of the Plan; and (3) forms of Ballots to be executed
by holders of impaired Claims and Equity Interests for voting to
accept or reject the Plan.
The forms of Ballots, and the related materials delivered
together herewith, are being furnished, for purposes of
soliciting votes on the Plan, to beneficial holders of (1) Old
Senior Notes whose respective names (or the names of whose
nominees) appear as of the Record Date on the security holder
lists maintained by the Old Senior Note Indenture Trustee
pursuant to the Old Senior Note Indenture, and (2) Old
Subordinated Debentures whose respective names (or the names of
whose nominees) appear as of the Record Date of the security
holder lists maintained with the Old Subordinated Debenture
Indenture Trustee pursuant to the Old Subordinated Debenture
Indenture. [9]
1. Who May Vote
Under the Bankruptcy Code, impaired classes of Claims
or interests are entitled to vote to accept or reject a plan of
reorganization. A class which is not "impaired" is deemed to
have accepted a Plan and does not vote. A class is "impaired"
under the Bankruptcy Code unless the legal, equitable, and
contractual rights of the holders of Claims or interests in such
class are not modified or altered. For purposes of the Plan,
holders of Senior Noteholder Claims in Class 4A, Subordinated
Debentureholder Claims in Class 4B, Affiliate Claims in Class 5,
and Equity Interests in Class 6 are impaired and are entitled to
vote on the Plan.
2. Voting Instructions
All votes to accept or reject the Plan must be cast by
using the form of Ballot, or, in the case of a brokerage firm
holding Old Senior Notes or Old Subordinated Debentures in its
own name on behalf of a beneficial owner, the Ballot entitled
"Master Ballot" enclosed with this Disclosure Statement. No
votes other than ones using such Ballots will be counted except
to the extent the Bankruptcy Court orders otherwise. The
Bankruptcy Court has fixed 4:00 p.m., New York City Time, on
January 14, 1998 (the "Record Date") as the time and date for the
determination of holders of record of Claims who are entitled to
(a) receive a copy of this Disclosure Statement and all of the
related materials, and (b) vote to accept or reject the Plan.
After carefully reviewing the Plan and this Disclosure Statement,
including the attached exhibits and the Plan Documents, please
indicate your acceptance or rejection of the Plan on the
appropriate Ballot and return such Ballot to:
Reeves Industries, Inc.
c/o Bankruptcy Services, LLC
70 East 55th Street
6th Floor
New York, New York 10022
(212) 376-8494
Attn: Ms. Stephanie Brizard
BALLOTS MUST BE RECEIVED ON OR BEFORE 4:00 P.M. (NEW YORK CITY
TIME) ON FEBRUARY 23, 1998 (THE "VOTING DEADLINE"). ANY BALLOT
WHICH IS NOT EXECUTED BY A DULY AUTHORIZED PERSON SHALL NOT BE
COUNTED. ANY BALLOT WHICH IS EXECUTED BY THE HOLDER OF AN
ALLOWED CLAIM BUT WHICH DOES NOT INDICATE AN ACCEPTANCE OR
REJECTION OF THE PLAN SHALL BE DEEMED TO BE AN ACCEPTANCE.
If you have any questions regarding the procedures for
voting on the Plan, please call the Debtor's balloting agent,
Bankruptcy Services, LLC, at the above address and telephone
number.
3. Acceptance or Rejection of the Plan
Under the Bankruptcy Code, a voting Class of Claims is
deemed to have accepted the Plan if it is accepted by creditors
in such Class who, of those voting on the Plan, hold at least
two-thirds in amount and more than one-half in number of the
Allowed Claims of such Class. A voting Class of Equity Interests
is deemed to have accepted the Plan if it is accepted by holders
of Equity Interests who hold at least two-thirds in amount of the
Equity Interests of such Class that have actually voted on the
Plan.
If the Plan is not accepted by all impaired Classes of
Allowed Claims, the Plan may still be confirmed by the Bankruptcy
Court pursuant to Section 1129(b) of the Bankruptcy Code if
(a) the Plan has been accepted by at least one impaired Class of
Claims, and (b) the Bankruptcy Court determines, among other
things, that the Plan "does not discriminate unfairly" and is
"fair and equitable" with respect to each non-accepting impaired
Class. If the Plan is not accepted by all impaired Classes of
Allowed Claims, the Debtor reserves the right to ask the
Bankruptcy Court to find that the Plan does not discriminate
unfairly and is fair and equitable with respect to each impaired
Class that has not accepted the Plan.
4. Confirmation Hearing
Section 1128(a) of the Bankruptcy Code requires the
Bankruptcy Court, after notice, to hold a Confirmation Hearing.
Section 1128(b) of the Bankruptcy Code provides that any party-
in-interest may object to Confirmation of the Plan.
Pursuant to Section 1128 of the Bankruptcy Code and
Rule 3017(c) of the Bankruptcy Rules, the Bankruptcy Court has
scheduled the Confirmation Hearing before the Honorable Prudence
Carter Beatty at the United States Bankruptcy Court, Southern
District of New York, One Bowling Green, New York, New York for
February 26, 1998 at 2:30 p.m. A notice setting forth the time
and date of the Confirmation Hearing has been included along with
this Disclosure Statement. The Confirmation Hearing may be
adjourned from time to time by the Bankruptcy Court without
further notice, except for the an announcement of such
adjournment date by the Bankruptcy Court in open court at such
hearing.
5. Objections
Any objection to Confirmation of the Plan must be in
writing, must comply with the Bankruptcy Rules and the Local
Rules of the Bankruptcy Court, and must be filed and served as
required by the Bankruptcy Court pursuant to the Disclosure
Statement Approval Order. A copy of the Disclosure Statement
Approval Order accompanies this Disclosure Statement and contains
all relevant procedures relating to the submission of objections
to Confirmation of the Plan. Parties submitting objections
should review such order in its entirety.
BACKGROUND AND EVENTS PRECIPITATING
CHAPTER 11 FILING AND SOLICITATION
A. Overview of the Debtor and its Business Operations
Reeves is a holding company whose principal asset is the
common stock of its wholly-owned subsidiary, Brothers (Brothers,
together with Reeves are collectively referred to as
"Consolidated Reeves"). As of the Filing Date, Brothers and its
subsidiary SPA had approximately 900 employees primarily located
at five facilities in New York, Connecticut, South Carolina,
North Carolina, and Italy. For the fiscal year 1996,
Consolidated Reeves' revenues were approximately $247,380,872,
consolidated losses were approximately $75,621,922, with
consolidated assets and liabilities of $161,000,575
and $220,854,385, respectively. Brothers is a diversified
industrial manufacturing company which operates under two
principal business divisions (1) the Printing Blanket Group
("PBG"), and (2) the Reeves Advanced Materials Group ("RAM").
PBG manufactures and sells offset printing blankets and
other graphic art products for industrial applications as well as
urethane coated materials for aircraft and military applications.
PBG manufactures its products both domestically, at Brothers'
facility in Spartanburg, South Carolina, and internationally
through Reeves, S.p.A., an Italian corporation and an indirect
wholly-owned subsidiary of Brothers. PBG has over eighty years
of experience in the printing blanket industry and enjoys a first
or second domestic and international market position for its
products.
RAM manufactures and sells specialty coated rubber and
synthetic fabrics (e.g., fabrics for automotive airbags, truck
tarpaulins, gaskets, and gas meter diaphragms). RAM manufactures
its products domestically and internationally at facilities
located in Spartanburg, South Carolina, and Rutherfordton, North
Carolina. RAM has nearly fifty years of experience in the
industry, which has established RAM as a premier coating company.
RAM has a leading market share in specialty rubber materials and
a leading position in thermoplastics. Since 1989, RAM has been
the largest United States manufacturer of coated automotive
airbag material.
B. Pre-Petition Debt Structure of the Debtor
The Debtor's pre-petition financing obligations consist of
the Old Senior Notes issued pursuant to the Old Senior Note
Indenture, the Old Subordinated Debentures issued pursuant to the
Old Subordinated Debenture Indenture, obligations to GECC arising
under the Secured Guaranty, guarantees of certain of Brothers'
equipment leases, and other miscellaneous minor debt.
1. Old Senior Notes and Old Subordinated Debentures
Pursuant to the Old Senior Note Indenture, $122,500,000 of
Old Senior Notes due 2002 were issued by Reeves to Chemical Bank,
as Indenture Trustee.[10] The Old Senior Notes are unsecured
obligations of Reeves ranking pari passu with all existing and
future senior unsecured indebtedness of Reeves.[11] Interest on
the Old Senior Notes accrues at the rate of 11% per annum and is
payable on each January 15 and July 15.
The Old Senior Note Indenture contains certain restrictive
covenants including those which, subject to certain exceptions,
restrict the ability of Reeves and certain of its Affiliates to
incur additional indebtedness, pay dividends, redeem capital
stock, redeem subordinated indebtedness, make certain
investments, enter into transactions with certain Affiliates,
merge or consolidate with any other person, or sell, transfer, or
lease substantially all of its assets. The Old Senior Notes are
redeemable at Reeves' option, in whole or in part, at various
premiums set forth in the Old Senior Notes declining ratably to
par on July 15, 2000, in each case together with accrued
interest, if any, to the date fixed for redemption.
Approximately $47,900,000 of the proceeds from the issuance
of the Old Senior Notes were used to redeem all of Reeves'
outstanding 12 1/2% Senior Notes due 1996, and $54,000,000 of such
proceeds were used to redeem all of Reeves' outstanding 13 %
Senior Subordinated Debentures due 1998. The balance of the net
proceeds were used to satisfy all indebtedness then outstanding
under a revolving loan and letter of credit facility provided
under a loan agreement dated as of March 30, 1988 (as amended)
among Reeves, Brothers, and Internationale Netherlanden Bank
N.V., as Agent.
Pursuant to the Subordinated Debenture Indenture,
$16,000,000[12] of Old Subordinated Debentures due 2001 were
issued by Schick Acquisition Corp., predecessor to Reeves, to
Fleet National Bank, as Indenture Trustee.[13] The Old
Subordinated Debentures are unsecured obligations of Reeves.
Interest on the Old Subordinated Debentures accrues at the rate
of 13 % per annum and is payable on each May 1 and November 1.
The Old Subordinated Debentures are subordinate and subject in
right of payment to the prior payment in full, in cash or cash
equivalents, of all existing and future "Senior Indebtedness" of
Reeves, as defined in the Old Subordinated Debenture
Indenture.[14]
The Old Subordinated Debenture Indenture contains
restrictive covenants including those which, subject to certain
exceptions, limit Reeves' ability to incur additional
indebtedness, repurchase capital stock owned by management, and
merge or consolidate. The Old Subordinated Debentures may be
redeemed, in whole or in part, at any time at the redemption
prices set forth in the Old Subordinated Debentures. In
addition, the Old Subordinated Debentures contain a mandatory
redemption provision that requires Reeves to make sinking fund
payments of $6,000,000 on May 1, 1999 and May 1, 2000.
The proceeds of the Old Subordinated Debentures, together
with proceeds from the issuance of the 12 1/2% Senior Notes due
1996, 13 % Senior Subordinated Debentures due 1998, and a term
loan in the aggregate amount of $100,000,000 obtained pursuant to
a loan agreement dated as of May 1, 1986 by and among Schick
Acquisition Corp., Brothers and National Westminster Bank USA,
were used to finance the leveraged buy out of Reeves' predecessor
by the predecessor to Fenchurch.
2. Bank Debt Prior To Refinancing
Prior to the Filing Date, Consolidated Reeves' operations
were primarily financed pursuant to a certain secured credit
agreement among Brothers, Reeves, several banks and financial
institutions party thereto, and The Chase Manhattan Bank, as
agent (collectively, the "Chase Bank Group") dated as of
August 5, 1992 (as amended and restated as of July 14, 1995), as
amended December 31, 1995, May 31, 1996, April 1, 1996,
September 29, 1996, and January 14, 1997 (collectively, the
"Chase Credit Agreement"). The Chase Credit Agreement consisted
of two components (a) a term loan to Brothers in the principal
amount of $15,000,000 (the "Term Loan") from Nomura America
Holding, Inc. ("Nomura") and Bank of America Illinois ("Bank of
America"), and (b) a $30,000,000 revolving working capital
facility pursuant to which funds were made available on a daily
basis in accordance with a borrowing base formula (the "Chase
Revolving Credit Facility").
Reeves and Brothers were both borrowers under the Chase
Revolving Credit Facility. The obligations of Reeves and
Brothers under the Chase Revolving Credit Facility were cross-
guaranteed. In addition, Brothers' obligations under the Term
Loan were guaranteed by Reeves pursuant to a Term Loan Guarantee
dated January 14, 1997. Both the Term Loan and the Chase
Revolving Credit Facility were secured solely by Brothers'
accounts receivable and inventory.
C. Refinancing of Bank Debt
As a result of the various business and liquidity
difficulties set forth above, the Debtor and Brothers defaulted
on certain financial covenants under the Chase Credit Agreement.
Accordingly, the Debtor and Brothers determined it was necessary
to refinance its bank debt under the Chase Credit Agreement and
received waivers of such defaults to allow them to effectuate a
refinancing. Thereafter, the Debtor and Brothers had discussions
with several financial institutions regarding a restructuring
that included an increased working capital facility. After
analyzing available alternatives, the Debtor and Brothers
determined it was in their best interests and in the best
interests of their creditors to refinance their obligations under
the Chase Credit Agreement pursuant to a credit agreement, dated
as of November 6, 1997 (the "Credit Agreement"), between
Brothers, as borrower, Reeves, as guarantor, and GECC, as lender
and agent. The Credit Agreement provides for a revolving working
capital facility in the maximum amount of $60,000,000, including
a $5,000,000 letter of credit subfacility, pursuant to which
funds are made available on a daily basis in accordance with a
borrowing base formula set forth in the Credit Agreement. The
proceeds of the Credit Agreement were used to pay all outstanding
obligations to the Chase Bank Group (which totaled approximately
$42,430,000) and continues to be used for working capital, other
corporate purposes, and, subject to the terms thereof, is
available to fund the Debtor's reorganization.
The Credit Agreement has a term of twenty-four months, and
will expire in September 1999. Interest for all revolving loans
accrues at the Index Rate (as defined in the Credit Agreement)
plus 1.5% per annum or, at the election of Reeves, the Commercial
Paper Rate (as defined in the Credit Agreement) plus 3% or the
LIBOR Rate (as defined in the Credit Agreement) plus 3% per
annum. Default interest and letter of credit fees are 2.0% above
the rate otherwise applicable. The Credit Agreement also
contains certain financial reporting requirements and events of
default. Under the Credit Agreement, Reeves' voluntary
chapter 11 filing does not constitute an event of default
provided, among other things, that an order is entered by the
Bankruptcy Court confirming and leaving unimpaired all of Reeves'
obligations to GECC under the Secured Guaranty. Such order was
entered by the Bankruptcy Court on December 16, 1997. Pursuant
to the order, Reeves' obligations and the liens granted under the
Secured Guaranty were reaffirmed and GECC was granted a super
priority administrative expense claim in connection with such
obligations.
The Credit Agreement also contains certain restrictive
covenants including those which, subject to certain exceptions,
restrict the ability of Reeves and certain of its Affiliates, as
well as Brothers, to incur additional indebtedness, pay
dividends, redeem capital stock, redeem subordinated
indebtedness, make certain investments, enter into transactions
with certain Affiliates, merge or consolidate with any other
Person, or sell, transfer or lease substantially all of its
assets.
The obligations of Reeves and Brothers pursuant to the GECC
Loan Documents are secured by a first priority security interest
in substantially all existing and after-acquired assets of
Reeves, Brothers, and their respective domestic subsidiaries,
other than certain pre-existing encumbered (leased) fixed assets.
In addition, the stock of Brothers and certain of its
subsidiaries is pledged to GECC. This pledge includes (a) a
pledge from Brothers of all of the membership interests of SPV
Reeves, a special purpose, bankruptcy-remote Delaware limited
liability company (which was created as a separate special
purpose limited liability company to, among other reasons, induce
GECC to extend credit under the Credit Agreement) and subsidiary
of Brothers which holds 99.998% of the capital stock of SPA and
certain convertible debentures issued by SPA in favor of Brothers
(the "Convertible Debentures"), and (b) a pledge of 65% of the
capital stock of SPA and 65% of the Convertible Debentures.
Reeves and its subsidiaries, except for SPA, guarantee the
obligations of Brothers under the Credit Agreement. All
obligations of Brothers, as Borrower, are cross-defaulted to each
other and to all other material obligations of Reeves, Brothers,
and their respective subsidiaries as set forth in the Credit
Agreement.
At the closing of the Credit Agreement, Brothers paid GECC a
closing fee of $525,000. Brothers also paid GECC a collateral
monitoring fee of $100,000 and will pay $65,000 to GECC on the
first anniversary of the closing of the Credit Agreement.
Brothers also paid GECC's due diligence expenses related to the
closing of the Credit Agreement.
D. Events Precipitating Chapter 11 Filing
Between 1989 and 1996, Brothers undertook a substantial
capital expansion program to modernize the production
capabilities of each of Brothers' business divisions, which
proved successful for PBG and RAM. As a result, the market share
positions of each of those groups have been maintained and even
advanced in certain areas. Additionally, during this time,
Brothers embarked on an effort to reduce the overall cost
structure of its business divisions, and to dispose of certain
businesses in an effort to increase its profitability. Despite
these efforts, beginning in 1995 one of Brothers' business
divisions, the Apparel Textile Group ("ATG"),[15] began
experiencing enormous losses.
While the other business divisions of Brothers were
successful in their capital expansion and cost-reduction efforts,
ATG began to experience declining sales directly attributable to
ATG's inability to compete with an increasingly greater number of
foreign-produced textile products resulting from, among other
things, the North American Free Trade Agreement ("NAFTA"), which
adversely impacted sales throughout the United States apparel
textile industry generally. In addition, despite the success of
the capital expansion programs, RAM experienced a decline in
sales and profitability from 1995 to 1996 due to a significant
shift in the type of airbags being utilized by the automotive
manufacturing industry. The combined effect of the decline in
profitability of ATG and the decline in airbag sales experienced
by RAM resulted in substantial liquidity difficulties for
Consolidated Reeves.
As a result of their business difficulties, in September
1996, Consolidated Reeves retained the firm of Merrill Lynch &
Co. to investigate the possibility of selling one or more of
Brothers' business divisions on a going concern basis. Reeves,
however, was unable to obtain an offer substantial enough to
retire its outstanding long-term debt.
As a result of their continued liquidity difficulties, in
May 1997, the Debtor and Brothers retained the firm of Zolfo
Cooper, LLC ("Zolfo Cooper"), as management and financial
consultants to assist in the restructuring of the Debtor's
operations and finances. While the Debtor and Zolfo Cooper began
the process of developing a long-term business plan, based on the
Debtor's continuing liquidity difficulties, it became apparent
that the Debtor would not be able to make the scheduled interest
payment due July 15, 1997 on the Old Senior Notes, and that the
Debtor would need to restructure its long-term indebtedness. In
addition, during this period, the Debtor incurred covenant
defaults under the Chase Credit Agreement, which were temporarily
waived by the Chase Bank Group in order to facilitate a global
restructuring of Reeves' long-term indebtedness.
In early 1997, it became evident that Brothers had to
dispose of ATG to remain profitable. Although Reeves attempted
to sell ATG as a going concern, Reeves was unable to secure a
satisfactory offer. Consequently, ATG ceased operating and began
liquidating. As a result, on August 1, 1997 and August 21, 1997,
Brothers closed both of its ATG plants in Chesnee, South Carolina
and Bishopville, South Carolina. Brothers is now in the process
of liquidating the assets at both locations. These plants
utilized equipment leased by Brothers from Sanwa Business Credit
Corporation, U.S. Leasing, Provident Commercial Group, and Fleet
Capital Corporation (collectively, the "Lessors"). These
equipment leases were guaranteed by Reeves, and represent a
significant liability. There are currently ongoing negotiations
with the Lessors regarding the disposition of the leases in light
of the discontinuance of the ATG operations, and, prior and
subsequent to the Filing Date, agreements were reached with Sanwa
Business Credit Corporation and Fleet Capital Corporation to
satisfy their obligations under leases for ATG equipment and to
resolve disputes regarding certain asserted defaults under leases
for ATG and non-ATG equipment. The agreements provide for, among
other things, a waiver of the payment and non-payment defaults
under the leases, reinstatement of the cross-defaulted non-ATG
equipment leases and schedules, a payment schedule for monies
owed under the leases, certain financial covenants and
conditions, payment of waiver fees, and providing letters of
credit to secure certain lease obligations.
E. Development of the Plan of Reorganization
1. Restructuring Negotiations with the Informal Committee
When it became apparent that Reeves would not be able to
make the interest payment due July 15, 1997 on the Old Senior
Notes, Reeves commenced negotiations with two of the largest
holders of Old Senior Notes and Old Subordinated Debentures to
effectuate a consensual restructuring of those obligations.
Specifically, Reeves commenced negotiations with Oaktree Capital
Management LLC ("Oaktree"), who together with related entities
holds approximately $76,780,000 of the Old Senior Notes and
$7,853,000 of the Old Subordinated Debentures, and Goldman Sachs
& Co. ("Goldman"), who holds approximately $8,000,000 of the Old
Senior Notes and $320,000 of the Old Subordinated Debentures.
Through these negotiations, Reeves reached an agreement for
the restructuring of its public debt, which the parties
determined would be best accomplished through a pre-arranged
chapter 11 proceeding. This agreement is embodied in an Amended
and Restated Restructuring Agreement dated as of November 6,
1997. Oaktree and Goldman thereafter formed the Informal
Committee to represent the collective interests of all holders of
Old Senior Notes and Old Subordinated Debentures. The Informal
Committee is represented by the law firm of Paul, Weiss, Rifkind,
Wharton & Garrison (who also represented Oaktree and Goldman
prior to formation of the Informal Committee). Counsel to the
Informal Committee can be contacted at Paul, Weiss, Rifkind,
Wharton & Garrison, 1285 Avenue of the Americas, New York, New
York 10019-60643, (212) 373-3000, Attn: Robert D. Drain, Esq.
The Informal Committee has also retained Chanin & Co. as
financial advisors.
2. Formulation of Plan
During discussions with its creditor constituencies, the
Debtor emphasized the benefits of a consensual transaction, and
the potential harm and uncertainties that a protracted,
contentious restructuring process would have on Consolidated
Reeves' relationships with suppliers and customers. Accordingly,
the Plan represents a pre-arranged plan of reorganization, at the
Reeves (holding company) level only, which should result in the
reorganization of Reeves' long-term debt under the Old Senior
Notes and the Old Subordinated Debentures in a relatively short
time frame, thereby minimizing disruption to customer and
supplier relationships and business operations at the Brothers
operational level. Pursuant to the Plan, the Debtor's
obligations under the Credit Agreement will be affirmed and the
holders of Senior Noteholder Claims and Subordinated
Debentureholder Claims will receive in the aggregate
(a) $75,000,000[16] of New Senior Notes, (b) $73,004,723 of New
Structurally Subordinated Notes, and (c) a 25% indirect equity
ownership of Reorganized Reeves, which may be increased through
the payment of Additional Interest under the New Structurally
Subordinated Note Indenture to an aggregate of an 85% indirect
equity ownership of Reorganized Reeves by the year 2004.
The distributions to holders of Old Senior Notes and Old
Subordinated Debentures under the Plan are in compromise and
settlement of a dispute with respect to whether the Old Senior
Notes are "Senior Indebtedness" to which the Old Subordinated
Debentures are subordinate under the terms of the Old
Subordinated Debenture Indenture. The plain language of the Old
Subordinated Debenture Indenture does not appear to provide that
all or a substantial amount of the Old Senior Notes are "Senior
Indebtedness," and thus such Old Subordinated Debentures would be
pari passu with the Old Senior Notes. On the other hand, parole
evidence suggested that the parties intended the Old Senior Notes
to be "Senior Indebtedness." Based on an agreement between the
Informal Committee and a separately represented holder of a
significant amount of Old Subordinated Debentures, the Plan
treats the Old Subordinated Debentures as if 75% of the Old
Subordinated Debentures ranked pari passu with the Old Senior
Notes and 25% of the Old Subordinated Debentures are subordinate
to the Old Senior Notes. The Debtor believes that this
settlement is reasonable and fair in light of the terms of the
Old Subordinated Debenture Indenture, the relatively small amount
of Old Subordinated Debentures outstanding, and the costs,
delays, and risks inherent in litigation of the issue.
The Plan also resolves certain Affiliate Claims pertaining
to, among other things, tax allocation issues. All other Allowed
Claims, including those arising under the equipment lease
guarantees, will be unimpaired under the Plan.
F. Developments in Chapter 11 Case
On November 24, 1997, the Bankruptcy Court held a hearing on
the Debtor's applications to retain Proskauer Rose LLP as counsel
to the Debtor, Zolfo Cooper, LLC as special financial advisors
and bankruptcy consultants to the Debtor, Price Waterhouse &
Company, LLP as general accountants to the Debtor, and Bankruptcy
Services, LLC as Noticing and Balloting Agent, at which time the
Bankruptcy Court granted the requested relief. In addition, the
Bankruptcy Court granted the Debtor's application for an order
scheduling hearings to consider the approval of this Disclosure
Statement and establishing certain noticing and procedural
matters relating thereto. Also at the hearing, the Bankruptcy
Court entered an interim order under which the Debtor's
obligations and the liens granted under the Secured Guaranty were
reaffirmed and GECC was granted a super priority administrative
expense claim in connection with such obligations. A Final Order
relating thereto was entered on December 16, 1997. On
December 17, 1997, the Bankruptcy Court entered an order setting
January 30, 1998 as the last date by which creditors (with
certain exceptions, including the Bondholders, the Indenture
Trustees, and the holders of Affiliate Claims) of the Debtor must
file proofs of claim against the Debtor or the Debtor's estate.
On January 5, 1998, a meeting of creditors under Section 341 of
the Bankruptcy Code was held at the Office of the United States
Trustee.
III
THE PLAN
A. General Requirements Respecting Confirmation of the Plan
The following is a summary intended as a brief overview of
the Plan and is qualified in its entirety by reference to the
full text of the Plan, a copy of which is annexed hereto as
Exhibit A. Holders of Claims and Equity Interests are
respectfully referred to the relevant provisions of the
Bankruptcy Code and are encouraged to review the Plan and this
Disclosure Statement with their counsel.
In general, a chapter 11 plan of reorganization must
(1) divide Claims and interests into separate categories and
classes, (2) specify the treatment that each category and class
is to receive under such plan, and (3) contain other provisions
necessary to implement the reorganization of a debtor. A
chapter 11 plan may specify that the legal, equitable, and
contractual rights of the holders of Claims or equity interests
in certain classes are to remain unchanged by the reorganization
effectuated by the plan. Such classes are referred to as
"unimpaired" and, because of such favorable treatment, are deemed
to vote to accept the plan. Accordingly, it is not necessary to
solicit votes from holders of Claims or equity interests in such
"unimpaired" classes. Under the Debtor's Plan, Class 1
consisting of Priority Claims, Class 2 consisting of General
Secured Claims, and Class 3 consisting of General Unsecured
Claims are unimpaired and, therefore, are deemed to have accepted
the Plan.
Section 1122 of the Bankruptcy Code provides that a plan of
reorganization shall classify the Claims and equity interests of
a debtor's creditors and equity interest holders. In compliance
with Section 1122 of the Bankruptcy Code, the Plan divides the
holders of Claims and Equity Interests into two categories and
six Classes, and sets forth the treatment offered to each
Class.[17] These Classes take into account the differing nature
and priority of Claims against the Debtor. Section 101(5) of the
Bankruptcy Code defines "Claim" as a "right to payment, whether
or not such right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed,
undisputed, legal, equitable, secured or unsecured" or a "right
to an equitable remedy for breach of performance if such breach
gives rise to a right to payment whether or not such right to an
equitable remedy is reduced to judgment, fixed, contingent,
matured, unmatured, disputed, undisputed, secured or unsecured."
A "Claim" against a debtor also includes a Claim against property
of the debtor, as provided in Section 102(2) of the Bankruptcy
Code. An interest is an equity interest in a debtor.
For the holder of a Claim to participate in a reorganization
plan and receive the treatment offered to the class in which it
is classified, its Claim must be Allowed. Under the Plan, an
Allowed Claim is defined as (1) a Claim that has been listed by
the Debtor in its Schedules and (a) is not listed as disputed,
contingent, or unliquidated; and (b) is not a Claim as to which a
proof of Claim has been filed, (2) a Claim as to which a timely
proof of Claim has been filed as of the Bar Date and (a) no
objection thereto, or application to equitably subordinate or
otherwise limit recovery, has been made on or before any
applicable deadline; or (b) if an objection thereto, or
application to equitably subordinate or otherwise limit recovery,
has been interposed, the extent to which such Claim (whether in
whole or in part) has been Allowed by a Final Order, (3) a Claim
arising from the recovery of property under Sections 550 or 553
of the Bankruptcy Code and Allowed in accordance with
Section 502(h) of the Bankruptcy Code, or (4) any Claim Allowed
under the Plan.
Under the Plan, the administrative claim of GECC is Allowed
in an aggregate amount equal to the outstanding principal amount
as of the Effective Date plus unpaid interest, fees and expenses,
if any, and all other obligations of Reeves payable under the
Secured Guaranty, which are or have been accrued through the
Effective Date. All Senior Noteholder Claims and all
Subordinated Debentureholder Claims are also Allowed as to each
holder thereof in an amount equal to the aggregate principal
amount outstanding under the Old Senior Notes and the Old
Subordinated Debentures held by each such Claimant plus interest
through the Filing Date and treated in accordance with Sections
5.4 and 5.5 of the Plan. In addition, all Affiliate Claims are
Allowed under the Plan and will be treated in accordance with
Section 5.6 of the Plan. The Plan further provides that no
objections will be entertained to (1) the allowance of the
administrative claim of GECC, or the validity, priority,
enforceability, or non-avoidability of the Liens securing the
obligations to GECC under the Secured Guaranty, (2) the allowance
of the Claims of any holder of Old Senior Notes and Old
Subordinated Debentures, (3) the allowance and treatment of the
Affiliate Claims, or (4) the distributions to be made or
treatment accorded under the Plan to the Allowed Senior
Noteholder Claims, the Allowed Subordinated Debentureholder
Claims, and the Allowed Affiliate Claims.
B Treatment of Claims and Interests Under the Plan
The Plan segregates the various Claims against, and Equity
Interests in, the Debtor into Administrative Claims, Priority Tax
Claims, Class 1 consisting of Priority Claims, Class 2 consisting
of General Secured Claims, Class 3 consisting of General
Unsecured Claims, Class 4A consisting of Senior Noteholder
Claims, Class 4B consisting of Subordinated Debentureholder
Claims, Class 5 consisting of Affiliate Claims, and Class 6
consisting of Equity Interests.
Under the Plan, Claims in Classes 1, 2, and 3 are
unimpaired, and Claims in Classes 4A, 4B, and 5, and Equity
Interests in Class 6, are impaired. In the Debtor's opinion, the
treatment accorded to the impaired Classes of Claimants
represents the best treatment which can be provided to these
Claimants under the circumstances and is superior to the
treatment which would be afforded to such Claimants in the event
of a liquidation of the Debtor. Set forth below is a summary of
the Plan's treatment of the various categories and Classes.
1. Unclassified Categories of Claims
a. Category 1 Administrative Claims
Administrative Claims include the actual and necessary
costs and expenses incurred during a chapter 11 case. Such
expenses include the obligations to GECC under the Secured
Guaranty, costs incurred in the operation of the Debtor's
business after the commencement of its chapter 11 case, the fees
and expenses of Professionals retained by the Debtor, the
Informal Committee, or any statutory committee appointed to serve
in the Debtor's chapter 11 case, and the fees due to the United
States Trustee pursuant to 28 U.S.C. Section 1930.
Pursuant to the Plan, all Administrative Claims are to
be paid in full, in Cash, in such amounts as (i) are incurred in
the ordinary course of business by the Debtor, or (ii) are
Allowed by the Bankruptcy Court upon the later of the Effective
Date, the date upon which there is a Final Order allowing such
Administrative Claim, or any other date specified in such order,
or (iii) as may be agreed upon between the holders of such
Administrative Claims and the Debtor. The Reorganized Debtor
shall also pay the reasonable fees and expenses incurred on or
before the Effective Date by the members of the Informal
Committee, including counsel and financial advisors to the
Informal Committee incurred in connection with the Reorganization
Case or the Plan (without application by, or on behalf of, any
such Person to the Bankruptcy Court, unless specifically ordered
by the Bankruptcy Court) as an Administrative Claim (unless any
such Person has been retained by an Official Committee pursuant
to Sections 327 or 1103 of the Bankruptcy Code). If the
Reorganized Debtor and any such Person cannot agree on the amount
of fees and expenses to be paid to such Person, the amount of
such fees and expenses shall be determined by the Bankruptcy
Court.
All final applications for Professional Fees for services
rendered in connection with the Reorganization Case and the Plan
prior to the Confirmation Date shall be filed with the Bankruptcy
Court within thirty (30) days after the Confirmation Date.
Payments respecting final Professional Fee applications shall be
made by the Debtor or Reorganized Reeves upon the Bankruptcy
Court's authorization thereof on appropriate notice and hearing.
All Professional Fees for services rendered in connection with
the Reorganization Case and the Plan after the Confirmation Date
shall be paid by Reorganized Reeves without further Bankruptcy
Court authorization or the need to file a fee application. If
Reorganized Reeves and any Professional cannot agree on the
amount of fees and expenses to be paid to such party, the amount
of any such fees and expenses shall be determined by the
Bankruptcy Court.
b. Category 2 Priority Tax Claims
Allowed Priority Tax Claims are comprised of the Allowed
unsecured Claims of governmental units entitled to a priority in
right of payment under Section 507(a)(8) of the Bankruptcy Code.
Under the Plan, all Allowed Priority Tax Claims shall be paid by
the Debtor in full, in Cash, on the later of (i) the Effective
Date, (ii) the date upon which there is a Final Order allowing
such Claim as an Allowed Priority Tax Claim, (iii) the date that
such Allowed Priority Tax Claim would have been due if the
Reorganization Case had not been commenced, or (iv) upon such
other terms as may be agreed to between the Debtor and the holder
of any Allowed Priority Tax Claim; provided, however, that the
Debtor may, at its option, in lieu of payment in full of Allowed
Priority Tax Claims on the Effective Date, make Cash payments
respecting Allowed Priority Tax Claims, deferred to the extent
permitted by Section 1129(a)(9) of the Bankruptcy Code and, in
such event, interest shall be paid on the unpaid portion of such
Allowed Priority Tax Claim at a rate to be agreed to by the
Debtor and the appropriate governmental unit or, if they are
unable to agree, as determined by the Bankruptcy Court. The
Debtor believes that there will be no or a minimal amount of
Allowed Priority Tax Claims.
2. Unimpaired Classes of Claims
A chapter 11 plan may specify that the legal, equitable, and
contractual rights of the holders of Claims or equity interests
in certain classes are to remain unchanged by the reorganization
effectuated by the plan. Such classes are referred to as
"unimpaired" and, because of such favorable treatment, are deemed
to vote to accept the plan. Accordingly, it is not necessary to
solicit votes from holders of Claims or equity interests in such
"unimpaired" classes. Under the Debtor's Plan, the Class of
Priority Claims (Class 1), the Class of General Secured Claims
(Class 2) and the Class of General Unsecured Claims (Class 3) are
unimpaired and, therefore, are deemed to have accepted the Plan.
a. Class 1 Priority Claims
Priority Claims include the Allowed unsecured Claims
entitled to priority in right of payment pursuant to Section 507
of the Bankruptcy Code, other than Priority Tax Claims. Pursuant
to the Plan, all Allowed Priority Claims shall be paid in full,
in Cash, upon the later of the Effective Date, or the date on
which there is a Final Order allowing any such Claim as an
Allowed Priority Claim, or upon such other terms as may be agreed
to by the Debtor and any holder of an Allowed Priority Claim. As
of the date hereof, the Debtor does not anticipate that there
will be a significant amount of Allowed Priority Claims on the
Effective Date.
b. Class 2 General Secured Claims
As of the date hereof, the Debtor does not believe that
there will be any Allowed General Secured Claims on the Effective
Date. To the extent, however, that there are such Allowed
Claims, the Plan provides that at the Debtor's option, such
Claims will either be paid in full, in Cash, on the Effective
Date or the date upon which there is a Final Order allowing such
Claim as an Allowed General Secured Claim, or such Claims will
otherwise be rendered unimpaired, or upon such other terms as may
be agreed to by the Debtor and any holder of an Allowed General
Secured Claim.
b. Class 3 -- General Unsecured Claims
Pursuant to the Plan, all of the legal, equitable, and
contractual rights of Allowed General Unsecured Claims shall be
left unimpaired and, accordingly, shall be satisfied on the
latest of (a) the Effective Date, (b) the date a General
Unsecured Claim becomes an Allowed Claim, (c) the date an Allowed
General Unsecured Claim becomes due and payable in the ordinary
course of the Debtor's business consistent with the Debtor's
ordinary payment practices or pursuant to any agreement between
the Debtor and the holder of an Allowed General Unsecured Claim,
or (d) on such other date as may be agreed to by the Debtor and
the holder of such Allowed General Unsecured Claim. The Debtor
estimates that Cash distributions under the Plan in respect of
General Unsecured Claims will be approximately $47,000 in the
aggregate.[18] Contingent, unliquidated General Unsecured
Claims, such as the Allowed Claims under the guarantees of
Brothers' equipment leases or other indebtedness, are unimpaired
under the Plan and shall continue in effect, unaltered after the
Effective Date, with the exception of an injunction against the
right to enforce any alleged default under any contract, lease,
guaranty, or other instrument of the Debtor or its subsidiaries
arising from the commencement of the Reorganization Case, or the
insolvency or financial condition of the Debtor. The Debtor does
not anticipate making any Cash payments under the Plan in respect
of any contingent, unliquidated General Unsecured Claims. The
Debtor believes that the Confirmation of the Plan will enhance
the ability of Brothers to perform its obligations under the
equipment leases and other agreements guaranteed by the Debtor.
3. Impaired Classes
Pursuant to Section 1124 of the Bankruptcy Code, a class of
Claims or equity interests is impaired unless the legal,
equitable, and contractual rights of the holders of Claims or
equity interests in such class are not modified or altered.
Holders of Allowed Claims and interests in impaired classes are
entitled to vote on a debtor's plan of reorganization. Under the
Debtor's Plan, the Class of Senior Noteholder Claims (Class 4A),
the Class of Subordinated Debentureholder Claims (Class 4B), the
Class of Affiliate Claims (Class 5), and the Class of Equity
Interests (Class 6) are impaired and, therefore, are entitled to
vote on the Debtor's Plan.
a. Class 4A -- Allowed Senior Noteholder Claims
Pursuant to the Plan, as of the Effective Date, all of the
Old Senior Notes shall be canceled, annulled, and extinguished
and each holder of an Allowed Senior Noteholder Claim shall
receive its Pro Rata share of (a) $70,318,387 of the New Senior
Notes issued pursuant to the New Senior Note Indenture,
(b) $65,619,183 of the New Structurally Subordinated Notes issued
pursuant to the New Structurally Subordinated Note Indenture, and
(c) a number of shares of the issued and outstanding RI Common
Stock representing a 22.47% equity ownership in RI. RI will have
two classes of RI Common Stock, Class A RI Common Stock and
Class B RI Common Stock. The two classes of RI Common Stock are
identical in all respects and, except as required by law or the
certificate of incorporation of RI, will vote together as a
single class on all matters submitted to the holders of RI Common
Stock. The Harts will receive Class A RI Common Stock under the
Plan. The holders of Allowed Senior Noteholder Claims and the
holders of Allowed Subordinated Debentureholder Claims will
receive Class B RI Common Stock under the Plan. The payment of
Additional Interest will be made in the form of Class B RI Common
Stock. All of the shares of Class B RI Common Stock will be
deposited into a voting trust to allow the class to vote as a
block.[19] Except in limited circumstances relating to the
payment of Additional Interest or the conversion of Class A RI
Common Stock received in connection with the exercise of remedies
under the Non-Recourse Pledge, RI may not issue additional shares
of Class B RI Common Stock. The holders of Allowed Senior
Noteholder Claims shall also be entitled (upon returning an
executed signature page for each of the Registration Rights
Agreements and the Stockholders Agreement when exchanging the Old
Senior Notes for New Senior Notes, New Structurally Subordinated
Notes, and RI Common Stock) to the benefits of and be subject to
the obligations arising under, as applicable, the Registration
Rights Agreements and the Stockholders Agreement, and shall also
be bound by the Voting Trust Agreement without any further
action.[20] Interest on the New Senior Notes shall accrue from
January 15,1998. The obligations to pay Additional Interest
under the New Structurally Subordinated Notes shall be supported
by the Non-Recourse Pledge.[21]
b. Class 4B Allowed Subordinated Debentureholder
Claims
Under the Plan, as of the Effective Date, all of the Old
Subordinated Debentures shall be canceled, annulled, and
extinguished, and each holder of an Allowed Subordinated
Debentureholder Claim shall receive its Pro Rata share of
(a) $4,681,613 of the New Senior Notes issued pursuant to the New
Senior Note Indenture, (b) $7,385,540 of the New Structurally
Subordinated Notes issued pursuant to the New Structurally
Subordinated Note Indenture, and (c) a number of shares of the
issued and outstanding RI Common Stock representing a 2.53%
equity ownership in RI. RI will have two classes of RI Common
Stock, Class A RI Common Stock and Class B RI Common Stock. The
two classes of RI Common Stock are identical in all respects and,
except as required by law or the certificate of incorporation of
RI, will vote together as a single class on all matters submitted
to the holders of RI Common Stock. The Harts will receive
Class A RI Common Stock under the Plan. The holders of Allowed
Senior Noteholder Claims and the holders of Allowed Subordinated
Debentureholder Claims will receive Class B RI Common Stock under
the Plan. The payment of Additional Interest will be made in the
form of Class B RI Common Stock. All of the shares of Class B RI
Common Stock will be deposited into a voting trust to allow the
class to vote as a block.[22] Except in limited circumstances
relating to the payment of Additional Interest or the conversion
of Class A RI Common Stock received in connection with the
exercise of remedies under the Non-Recourse Pledge, RI may not
issue additional shares of Class B RI Common Stock. The holders
of Allowed Subordinated Debentureholder Claims shall also be
entitled (upon returning an executed signature page for each of
the Registration Rights Agreements and the Stockholders Agreement
when exchanging the Old Subordinated Debentures for New Senior
Notes, New Structurally Subordinated Notes, and RI Common Stock)
to the benefits of and be subject to the obligations arising
under, as applicable, the Registration Rights Agreements and the
Stockholders Agreement, and shall also be bound by the Voting
Trust Agreement without any further action.[23] Interest on the
New Structurally Subordinated Notes shall accrue from January 15,
1998. The obligations to pay Additional Interest under the New
Structurally Subordinated Notes shall be supported by the Non-
Recourse Pledge.[23]
c. Class 5 Affiliate Claims
Pursuant to the Plan, as of the Effective Date, all
Affiliate Claims shall be Allowed, and, in full satisfaction
thereof, on or before the Effective Date, the Consulting
Agreements, the Fenchurch Tax Sharing Note,[25] the Tax
Allocation Agreements,[26] the Employment Agreements, and the SPV
Reeves Guarantees, shall have been executed and shall become
effective according to their terms. The obligations under
certain of these agreements are structurally senior to the New
Senior Notes and the New Structurally Subordinated Notes. Such
agreements, however, (i) were negotiated in settlement of
potentially significant Claims against the Debtor, and in some
instances, against Brothers, (ii) ensure the continued
enhancement of key personnel, and (iii) were negotiated in
conjunction with other agreements, such as the Non-Recourse
Pledge, the side letters to the Employment Agreements, and the RI
Common Stock allocations under the Plan that significantly
benefit the Bondholders. The SPV Reeves Guarantees and the
Fenchurch Tax Sharing Note are not subject to any objection,
request for estimation, equitable subordination or to otherwise
limit recovery, in any subsequent insolvency, bankruptcy, or
other proceeding regarding SPV Reeves.[27] Copies of the
Employment Agreements, the SPV Reeves Guarantees, and the
Consulting Agreements are included as Exhibits C, D, and E,
respectively, in the Plan Supplement. A copy of the SPV Reeves
LLC Agreement is included as Exhibit G in the Plan Supplement. A
copy of the Fenchurch Tax Sharing Note is included as Exhibit L
in the Plan Supplement. A copy of the Escrow Agreement
respecting the Employment Agreements will be included as Exhibit
O in the Plan Supplement.
d. Class 6-- Equity Interests
Under the Plan, as of the Effective Date, all existing
Equity Interests in the Debtor shall be retained and continue to
be held by RI. The Plan also provides that upon the Effective
Date, the holders of Equity Interests will be impaired through
the dilution of RI Common Stock resulting from, among other
things, the granting of shares of RI Common Stock to the holders
of Old Senior Notes and Old Subordinated Debentures equal to 25%
of all issued and outstanding RI Common Stock. Claims in respect
of any rejected unexercised stock options shall receive no
distributions.
C. Description of Transactions to Be Implemented in Connection
with the Plan
1. New Senior Note Indenture
On the Effective Date, $75,500,000 of New Senior Notes will
be issued pursuant to the New Senior Note Indenture. Reorganized
Reeves will be the issuer and IBJ Schroder Bank & Trust will be
the Indenture Trustee under the New Senior Note Indenture. The
New Senior Notes will bear interest at the rate of 11% per annum,
which interest will accrue from January 15, 1998, and be paid
semi-annually in arrears on February 28 and August 31. The New
Senior Notes will mature on January 15, 2002. The New Senior
Notes will be general unsecured senior obligations of Reorganized
Reeves, will rank pari passu in right of payment with all other
senior indebtedness of Reorganized Reeves (excluding indebtedness
of Reorganized Reeves under the GECC Loan Documents to which the
New Senior Notes will be contractually subordinated), and will
rank senior in right of payment to any subordinated indebtedness
of Reorganized Reeves.
Under the New Senior Note Indenture, Reorganized Reeves has
the option of redeeming the New Senior Notes at any time, in
whole or in part, at 101% of the principal amount thereof in the
first year, together with accrued and unpaid interest, if any, to
the date of redemption, provided that at least $20,000,000
aggregate principal amount remains outstanding (and not held by
Reorganized Reeves or an Affiliate thereof) following such
redemption unless all of the outstanding New Senior Notes are so
redeemed. The New Senior Note Indenture also provides that upon
the occurrence of a change of control of Reorganized Reeves
(other than to the Bondholders), Reorganized Reeves will be
required to make an offer to repurchase the New Senior Notes at a
price equal to 101% of the principal amount thereof, together
with accrued and unpaid interest, if any, to the date of
purchase. Reorganized Reeves will be required to offer to
purchase the New Senior Notes at a redemption of 100% of the
principal amount thereof plus accrued and unpaid interest, if
any, with the net cash proceeds of sales or other disposition of
assets not applied to (a) the permanent reduction of obligations
under the GECC Loan Documents, or (b) reinvestment into
Reorganized Reeves' business.
In addition, the New Senior Note Indenture will contain
usual and customary covenants for debt obligations of this type,
including covenants regarding, among other matters
(a) transactions with Affiliates, (b) investments, (c) the sale
or issuance of capital stock of subsidiaries, (d) the creation of
liens, (e) the maintenance of the properties and business of
Reorganized Reeves and its subsidiaries, (f) sale and leaseback
transactions (g) consolidations mergers and transfers of all or
substantially all of Reorganized Reeves' assets, and (h) the
incurrence of indebtedness.
The New Senior Note Indenture will also contain usual and
customary events of default for debt obligations of this type,
including, without limitation (a) default in the payment of
principal on any New Senior Note when the same become due and
payable, (b) default in the payment of interest on any New Senior
Note when the same becomes due and payable, and such default
continues for a period of thirty (30) days, (c) defaults in the
performance of or a breach of any other covenant or material
agreement of Reorganized Reeves under the New Senior Note
Indenture and such default or breach continues for a period of 30
consecutive days after written notice by the trustee or the
holders of 25% or more in aggregate principal amount of the New
Senior Notes then outstanding, (d) default or defaults (including
a payment default) under one or more agreements, instruments,
mortgages, bonds, debentures or other evidence of indebtedness
under which Reorganized Reeves or any of its subsidiaries has an
outstanding principal amount of indebtedness in excess of
$5,000,000 individually or in the aggregate for all such issues
of all such persons and either (i) such indebtedness is already
due and payable in full; or (ii) such default or defaults have
resulted in the acceleration of the maturity of such
indebtedness, (e) any final judgment or order (not covered by
insurance) for the payment of money in excess of $5,000,000
individually or in the aggregate for all such final judgments or
orders against all such persons shall be rendered against the
Reorganized Reeves or any of its subsidiaries and remains
undischarged or unstayed for 60 days, and (f) with respect to the
Reorganized Reeves and its subsidiaries, the occurrence of
certain acts of bankruptcy or insolvency or failure to pay debts
generally as they come due.
A copy of the New Senior Note Indenture is included as
Exhibit A in the Plan Supplement.
2. New Structurally Subordinated Note Indenture
On the Effective Date, $73,004,723[28] of New Structurally
Subordinated Notes will be issued pursuant to the New
Structurally Subordinated Note Indenture. RI will be the issuer
and First Trust National Association will be the Indenture
Trustee under the New Structurally Subordinated Note Indenture.
The New Structurally Subordinated Notes will bear interest at a
rate of 13% per annum, which interest will accrue from
January 15, 1998, and be paid semi-annually in arrears on May 15
and November 15. The New Structurally Subordinated Notes will
mature on November 15, 2004. Other than the Non-Recourse
Pledge,[29] the New Structurally Subordinated Notes will be
general unsecured senior obligations of RI, will rank pari passu
in right 2 of payment with all other senior indebtedness of RI
(excluding indebtedness of RI under the GECC Loan Documents to
which the New 9Structurally Subordinated Notes will be
contractually subordinated), and will rank senior in right of
payment to all ]subordinated indebtedness of RI. The New
Structuraly Subordinated Notes will be structurally subordinated
to the indebtedness of RI's subsidiaries, including the New
Senior Notes, as well as contractually subordinated to the New
Senior Notes.
The New Structurally Subordinated Note Indenture will
provide for the payment of Additional Interest. Specifically, if
the New Structurally Subordinated Notes have not been redeemed in
full as of the anniversaries of the Issuance Date, as set forth
below, RI will pay the Additional Interest on the New
Structurally Subordinated Notes by issuing a number of shares of
RI Common Stock that, together with the 25% equity ownership of
RI issued on the Effective Date of the Plan, will provide the
Bondholders with the aggregate percentage interests as follows
(a) on the second anniversary of the Issuance Date - an
additional 5% (30% in the aggregate), (b) on the third
anniversary of the Issuance Date - an additional 10% (40% in the
aggregate), (c) on the fourth anniversary of the Issuance Date -
an additional 15% (55% in the aggregate), (d) on the fifth
anniversary of the Issuance Date - an additional 15% (70% in the
aggregate), (e) on the sixth anniversary of the Issuance Date -
an additional 10% (80% in the aggregate), and (f) on the seventh
anniversary of the Issuance Date - an additional 5% (85% in the
aggregate). If all issued and accrued paid-in-kind ("PIK")
interest on the New Structurally Subordinated Notes shall have
been paid in full, in Cash, then payment of new Additional
Interest shall be reduced by 1/2% for each 1% redemption of the
original principal amount of the New Structurally Subordinated
Notes (and after payment of all accumulated PIK interest, (e.g.
if between the years 1999 and 2000 the Debtor redeems 10% of the
original principal amount of the New Structurally Subordinated
Notes, the aggregate direct and indirect ownership interest at
the year 2001 anniversary of the Issuance Date shall be 35%,
which reflects a 5% reduction).
Under the New Structurally Subordinated Note Indenture, RI
has the option of redeeming the New Structurally Subordinated
Notes at any time, in whole or in part, at 100% of the principal
amount thereof together with accrued and unpaid interest, if any,
to the date of redemption. The change of control provisions,
covenants, and events of default under the New Structurally
Subordinated Note Indenture will be the same as under the New
Senior Note Indenture.
A copy of the New Structurally Subordinated Note Indenture
is included as Exhibit B in the Plan Supplement.
3. New Reeves Charter
Upon the Effective Date, Reorganized Reeves will
continue to be a Delaware corporation and shall adopt the New
Reeves Charter consisting of (a) an amended and restated
certificate of incorporation, and (b) amended and restated by-
laws, in the forms contained in the Plan Supplement. The New
Reeves Charter, together with the provisions of the Plan, will
provide for the retention and continuation of 100% of the Equity
Interests in Reorganized Reeves by RI, the authorization and
issuance of the New Senior Notes, a prohibition of the issuance
of nonvoting equity securities in accordance with
Section 1123(a)(6) of the Bankruptcy Code, and such other
provisions that are necessary to facilitate consummation of the
Plan.
A copy of the New Reeves Charter is included as Exhibit H in
the Plan Supplement.
4. New RI Charter and RI Common Stock
Upon the Effective Date, RI will continue to be a
Delaware corporation and will adopt (a) an amended and restated
certificate of incorporation, and (b) amended and restated by-
laws, in the forms contained in the Plan Supplement. The New RI
Charter, together with the provisions of the Plan, will provide
for the authorization and issuance of the of the RI Common Stock
(including as to Additional Interest) and the New Structurally
Subordinated Notes, a prohibition of the issuance of nonvoting
equity securities in accordance with Section 1123(a)(6) of the
Bankruptcy Code, and such other provisions that are necessary to
facilitate consummation of the Plan.
A copy of the New RI Charter is included as Exhibit I
in the Plan Supplement.
RI will continue to be the direct parent of Reeves with
its sole purpose being to hold the Reorganized Reeves Common
Stock, issue the additional shares of RI Common Stock, and issue
the New Structurally Subordinated Notes. Upon the Effective Date
of the Plan, the RI Common Stock will be held as follows (a) 75%
by the Harts, (b) 22.47% by the holders of Old Senior Notes, and
(c) 2.53% by the holders of Old Subordinated Debentures.
Although there is no present intention to pay dividends, under
the RI Charter the holders of RI Common Stock will be entitled to
such dividends as may be declared from time to time by the Board
of Directors of RI from funds, property, or stock legally
available therefor, and subject to the Non-Recourse Pledge and
the Stockholders Agreement, will be entitled to receive Pro Rata
all assets of RI upon a liquidation, dissolution, or winding up
of RI. Except as required by law or as otherwise provided in
RI's certificate of incorporation, the holders of RI Common Stock
will vote on all matters as a single class and each holder of RI
Common Stock will be entitled to one vote for each share of RI
Common Stock that it owns. Holders of RI Common Stock will not
have cumulative voting rights.
Certain provisions of RI's certificate of incorporation and
RI's by-laws, as summarized below, may be deemed to have an anti-
takeover effect and may delay, defer or prevent a tender offer or
takeover attempt that a stockholder might consider in its best
interest, including an attempt that might result in the receipt
of a premium over the market price for the shares held by
stockholders.
For so long as the Bondholders hold less than a majority,
but more than 10% of the outstanding RI Common Stock (and with
respect to subsections (a), (b), (c), (e), (f), (g), (h), and (i)
below, any of the New Senior Notes or New Structurally
Subordinated Notes remain outstanding), the following actions
shall require the approval of stockholders holding not less than
85% (or 80% if Additional Interest has been paid on the second
anniversary of the Issuance Date) of the RI Common Stock
outstanding:
a. any merger of RI or any subsidiary thereof, any
sale of all or any substantial assets of RI or any subsidiary
thereof, or any business combination involving RI or any
subsidiary thereof, unless all of the net proceeds of such a
transaction will be used to permanently retire all or any portion
of the obligations arising under the GECC Loan Documents or to
redeem all or any portion of the New Senior Notes and New
Structurally Subordinated Notes;
b. any incurrence of indebtedness by RI or any
subsidiary thereof in excess of $10,000,000 at any time
outstanding, unless all of the net proceeds from the incurrence
of such indebtedness shall be used to redeem outstanding New
Senior Notes or New Structurally Subordinated Notes;
c. any acquisition of a business by RI or any
subsidiary thereof where the aggregate consideration to be paid
by RI or its subsidiary exceeds $5,000,000 per annum, but without
cumulation;
d. any transaction with an Affiliate[30] of RI (other
than a wholly-owned subsidiary), other than performance under the
Employment Agreements, the Consulting Agreements, the SPV Reeves
Guarantees, the Fenchurch Tax Sharing Note, or the Tax Allocation
Agreements;
e. any issuance of capital stock (including, without
limitation, options and convertible securities) of RI unless all
net proceeds of such offering will be used (i) to redeem all or
any portion of outstanding New Senior Notes or New Structurally
Subordinated Notes, or (ii) to retire permanently all or any
portion of the outstanding obligation under the GECC Loan
Documents;
f. any issuance of capital stock (including, without
limitation, options and convertible securities) of any subsidiary
of RI;
g. any amendment to the certificate of incorporation
or by-laws of RI or any subsidiary thereof; and
h. any issuance or transfer of capital stock of RI or
any subsidiary thereof if (i) as a result of such issuance or
transfer, the payment of Additional Interest at the maximum
levels set forth in Section III(C)(2) of this Disclosure
Statement would result in a limitation on the net operating
losses of RI and its subsidiaries, or (ii) such issuance or
transfer would result in a limitation on the use of the net
operating losses of RI or its subsidiaries.
The rights and duties of the shareholders of RI will be
set forth in the Stockholders Agreement, a copy of which is
included as Exhibit F in the Plan Supplement.
. 5. Non-Recourse Pledge
On the Effective Date of the Plan, the Harts will
execute the Non-Recourse Pledge to secure the payment of
Additional Interest. The Non-Recourse Pledge, however, shall be
exercised for only the number of shares of RI Common Stock
sufficient to meet the required percentage of ownership necessary
to satisfy the obligation to pay Additional Interest. The Non-
Recourse Pledge shall be limited to the pledge of the Harts'
shares of RI Common Stock and shall be without recourse to the
Harts and any of their other assets or holdings. A copy of the
Non-Recourse Pledge is included as Exhibit K in the Plan
Supplement.
6. Tax Allocation Agreements
In accordance with the Tax Allocation Agreements, as
amended by agreement made and entered into as of the 5th day of
November 1997, Brothers shall be responsible for all expenses
(including professional fees) incurred in connection with the
preparation of any federal income tax returns or the conduct of
any tax proceedings and shall be responsible for the payment to
the Internal Revenue Service ("Service") of any additional tax
liability (including any applicable interest or penalties) for
the period of January 1, 1988 through December 31, 1992
attributable to the federal consolidated tax group of which
Brothers was a member during this period, without Brothers being
entitled to reimbursement by any other member of the group.
Brothers' liability to the Service for this period is estimated
at slightly more than $4,500,000. While Brothers has not yet
received from the Service a final calculation of the amount due,
on December 17, 1997, Brothers made two payments to the Service
totaling $4,534,270.10. A copy of the amendment to the Tax
Allocation Agreements is included as Exhibit M in the Plan
Supplement.
The Tax Allocation Agreements also provide that no
member of the consolidated group shall have any present or future
obligation to any other member, except that (i) the Fenchurch Tax
Sharing Claim shall be satisfied by the issuance of the Fenchurch
Tax Sharing Note, and (ii) for any taxable year beginning on or
after January 1, 1993, if the taxable income of Fenchurch
(including certain subsidiary corporations) is increased as a
result of an audit or other proceeding (in the case of tax years
beginning on or after January 1, 1997, the provision also applies
to taxable income shown on the returns as filed), Fenchurch (and
such subsidiaries) may utilize up to $1,250,000 of net operating
losses (and credit equivalents) of other members of the
consolidated group, including Reeves and Brothers, without any
reimbursement obligation. To the extent that additional loss or
credit carryforwards are used, Fenchurch would have a
reimbursement obligation.
4. Fenchurch Tax Sharing Note
On January 1, 1998, RI issued the Fenchurch Tax Sharing
Note to Fenchurch to satisfy the Fenchurch Tax Sharing Claim.
The Fenchurch Tax Sharing Note is a 13% senior note of RI, in the
aggregate principal amount of $1,250,000, due November 15, 2004.
The Fenchurch Tax Sharing Note was issued on the same terms and
conditions as will apply to the New Structurally Subordinated
Notes, with the exception that (a) interest on the Fenchurch Tax
Sharing Note (and interest on any notes issued as interest) shall
only be payable in Cash to the extent necessary to satisfy
Fenchurch's income tax obligations arising from interest on the
Fenchurch Tax Sharing Note (and interest on any notes issued as
interest), and (b) the Fenchurch Tax Sharing Note does not accrue
Additional Interest. Under the Plan, the Fenchurch Tax Sharing
Note shall not be subject to any objection, request for
estimation, equitable subordination or to otherwise limit
recovery, in any subsequent insolvency, bankruptcy, or other
proceeding regarding RI.
8. Arrangement Fee Note
In consideration for services provided in connection with the
arrangement and implementation of the consensual restructuring
with certain holders of the Old Senior Notes and Old Subordinated
Debentures, including in respect of the GECC Loan Documents, on
or prior to the Effective Date, the Debtor will execute and issue
the Arrangement Fee Note in favor of Oaktree. The Arrangement
Fee Note will be a New Senior Note, in the aggregate principal
amount of $500,000. The Arrangement Fee Note shall not be
subject to any objection, request for estimation, equitable
subordination or to otherwise limit recovery, in any subsequent
insolvency, bankruptcy, or other proceeding regarding Reeves.
9. Voting Trust Agreement
Upon the Effective Date of the Plan, all Class B shares
will automatically become governed and bound by the Voting Trust
Agreement without further action. All of the shares of Class B
RI Common Stock, which is the RI Common Stock issued to holders
of Old Senior Notes and Old Subordinated Debentures, will be
deposited into a voting trust to allow the class to vote as a
block. The voting trustee will tabulate the votes of all holders
of Class B RI Common Stock on any matter submitted for their vote
and will vote the entire block as determined by the holders of a
majority of the shares of Class B RI Common Stock voting on the
matter. Any transfer of shares of Class B RI Common Stock
permitted under the Stockholders Agreement and applicable law
will be subject to the voting trust and the shares will bear an
appropriate legend. It is expected that minor modifications will
be made to the forms of the Stockholders Agreement and the
Registration Rights Agreements to acknowledge the voting trust.
A copy of the Voting Trust Agreement will be included as
Exhibit N in the Plan Supplement.
10. Certain Affiliate Relationships and Agreements
Hart is the father of James W. Hart, Jr., President and
Chief Executive Officer of Reeves and Brothers, and Douglas B.
Hart, Executive Vice President and Chief Operating Officer of
Reeves and Brothers, and is the principal shareholder of
Fenchurch. On the Filing Date, Fenchurch held all of the issued
and outstanding shares of RI Common Stock. Prior to Confirmation
of the Plan, Fenchurch intends to transfer such RI Common Stock
to the Harts and the Harts intend to execute a proxy and an
agreement in connection with such proxy that would effectuate the
terms of the Non-Recourse Pledge, giving Hart voting rights with
respect to such RI Common Stock for a period of seven years. On
the Effective Date of the Plan, additional shares of RI Common
Stock will be issued so that upon the Effective Date of the Plan
the Harts will own 75% of all issued and outstanding RI Common
Stock and the Bondholders will collectively own 25% of all issued
and outstanding RI Common Stock. Also upon the Effective Date,
the 75% of RI Common Stock owned by the Harts will be pledged, on
a non-recourse basis, under the Non-Recourse Pledge to secure the
payment of Additional Interest to the Bondholders.
On or before the Effective Date of the Plan, the Employment
Agreements between Hart, James W. Hart, Jr., and Douglas B. Hart,
respectively (for purposes of this paragraph and the following
paragraph, collectively, the "Harts") and Brothers, the
Consulting Agreements between the Harts, respectively and SPA,
and the SPV Reeves Guarantees between the Harts, respectively and
SPV Reeves, copies of which are contained in Exhibits C, D, and E
of the Plan Supplement, will have been executed and will have
become effective. Also on the Effective Date, the Escrow
Agreement respecting the Employment Agreements will be executed
and will become effective. Under the Escrow Agreement, in the
event of a sale of SPA, sufficient monies are required to be held
in escrow to satisfy any outstanding obligations under the
Employment Agreements. A copy of the Escrow Agreement will be
included as Exhibit O in the Plan Supplement.
The Employment Agreements will have a five year term
beginning on the Effective Date of the Plan and the Harts will
receive a combined base salary of $1,350,000 per year. The
Employment Agreements also permit an incentive bonus plan
(subject to certain approvals set forth in the Employment
Agreements), and provide for death benefits, disability benefits,
severance payments, health and medical benefits, financial
planning assistance not exceeding $5,000 per year, and four weeks
paid vacation per year. Pursuant to the Employment Agreements,
the Harts are also subject to a non-compete and non-solicitation
clause. The obligations of Brothers under the Employment
Agreements are guaranteed by SPV Reeves pursuant to the SPV
Reeves Guarantees. However, under the GECC Loan Documents,
amounts payable to the Harts under the SPV Reeves Guarantees
(a) are pledged to secure obligations under the GECC Loan
Documents, (b) are subordinated to such obligations, and (c) may
not be paid until such obligations are paid in full in accordance
with their terms. Under the Consulting Agreements, the Harts
will provide certain services to SPA in exchange for SPA's
agreement to fulfill the obligations of Brothers under the
Employment Agreements in the event Brothers fails to do so.
Pursuant to a certain letter agreement referred to in the
Employment Agreements, the Informal Committee or any member
thereof will not directly or indirectly seek to reject, will not
support a motion to reject and will affirmatively oppose any
motion to reject the Employment Agreements or the Consulting
Agreements in the event of a bankruptcy case under any title of
the Bankruptcy Code filed by Brothers or any of its Affiliates
and that they will not challenge in any way the SPV Reeves
Guarantees. In addition, as set forth in the New Senior Note
Indenture and the New Structurally Subordinated Note Indenture,
acceptance of a New Senior Note or a New Structurally
Subordinated Note, constitutes an agreement by each holder that
they will not directly or indirectly seek to reject or support a
motion to reject the Employment Agreements or the Consulting
Agreements in the event of a bankruptcy case under any title of
the Bankruptcy Code filed by Brothers or any of its Affiliates
and will not challenge in any way the SPV Reeves Guarantees.
Pursuant to a related letter agreement, effective upon the
Effective Date of the Plan, Hart, James W. Hart, Jr., and Douglas
B. Hart each agree not to stay or delay the enforcement of the
Non-Recourse Pledge, not to seek any other compensation from
Reeves or its subsidiaries, except as provided in the Employment
Agreements, the Consulting Agreements, and the SPV Reeves
Guarantees, and, among other things, in the event it becomes
appropriate, to take all reasonable actions necessary to effect a
Change of Control (as defined in the New Structurally
Subordinated Note Indenture) in a smooth and expeditious manner
and not to seek to prevent enforcement of the Non-Recourse
Pledge.
11. Registration Rights Agreements
On the Effective Date of the Plan, the Bondholders, RI, and
the Harts will enter into the Registration Rights Agreements,
copies of which are included as Exhibit J in the Plan Supplement.
The Registration Rights Agreements for the new equity holders
generally provides that after the earlier of the third
anniversary of the Issuance Date or ninety days after RI or
Reorganized Reeves effects a Public Offering,[31] new equity
holders will have the right to certain registrations on request
and piggyback registrations at the expense of Reorganized Reeves,
in addition to another registration on request at the selling
stockholders' expense, subject to customary limitations. The
holders of the New Senior Notes and New Structurally Subordinated
Notes will have customary registration rights. In addition, the
Fenchurch Tax Sharing Note shall be registrable. Copies of the
Registration Rights Agreements are included as Exhibit J in the
Plan Supplement.
12. Stockholders Agreement
On the Effective Date of the Plan, the Bondholders, RI,
and the Harts will enter into the Stockholders Agreement. A copy
of the Stockholders Agreement is included as Exhibit F in the
Plan Supplement. The Stockholders Agreement provides for, among
other things, the corporate governance of RI, restrictions on the
transfer of RI Common Stock, and various other corporate matters
concerning RI. Such matters include, among others, rights of the
parties regarding board representation, procedures for the
appointment of directors, procedures for voting, restrictions on
certain transactions of RI, restrictions on the transfer of RI
Common Stock, and tag-along rights.
The Stockholders Agreement also contains certain buy/sell
provisions. Generally, the buy/sell provisions provide that at
any time after the fourth anniversary of the Issuance Date when
the Bondholders hold less than a majority, but more than 5%, of
RI Common Stock outstanding, but prior to a Public Offering,
Bondholders holding a majority of the shares of RI Common Stock
held by all Bondholders (the "Offering Bondholders") may offer to
purchase all of the shares of RI Common Stock which they do not
own (the "Offer"). Within 30 days of the Offer (the "Notice
Period"), at the option of a majority of the shares of RI Common
Stock not held by the Bondholders, such holders must (a) accept
the Offer, or (b) notify the Bondholders and Reorganized Reeves
of their decision to make a counteroffer on the same terms and
conditions as the Offer (the "Counteroffer"). If such holders do
not notify the Bondholders and Reorganized Reeves of their
intention within the Notice Period, the Offering Bondholders
shall have the right to purchase all of the shares not owned by
the Offering Bondholders pursuant to the Offer. If a majority of
the shares of RI Common Stock not held by the Bondholders elect
to make a Counteroffer and notify the Bondholders and Reorganized
Reeves of such intention within the Notice Period, such holders
must complete a successful purchase of the RI Common Stock held
by all of the Bondholders within 150 days after the termination
of the Notice Period. If such holders fail to complete such
purchase within 150 days of after the termination of the Notice
Period, the Offering Bondholders shall have the right to purchase
all of the shares of RI Common Stock which they do not own at a
discount of 5% off of the original Offer price. A Counteroffer
must be accepted by all Bondholders. Any shares of RI Common
Stock held by the Bondholders who did not participate in making
the Offer will be purchased and sold pursuant to the Offer or
Counteroffer, as the case may be.
D. Funding for the Plan
The Cash payments due on the Effective Date of the Plan will
be made from funds generated by, among other things, the
operation of the businesses of Brothers, borrowings from and the
usage of the cash collateral of GECC, and the dispositions of
assets of Brothers or its subsidiaries.
E. Description of Other Provisions of the Plan
1. Disputed Claims
The Plan provides that with respect to any Disputed
Claims, the Bankruptcy Court may fix or liquidate the amount of
such Disputed Claims pursuant to Section 502(c) of the Bankruptcy
Code, in which event the amounts so fixed or liquidated will be
deemed the maximum amounts of the Disputed Claims pursuant to
Section 502(c) of the Bankruptcy Code for purposes of distribu-
tion under the Plan. The Plan further provides that a Disputed
Claim will only be entitled to a distribution under the Plan when
a Disputed Claim becomes an Allowed Claim upon entry of a Final
Order of the Bankruptcy Court or other court with appropriate
jurisdiction. Upon such Final Order, the Disbursing Agent will
distribute to the holder of such Allowed Claim the property
distributable to such holder as provided in the Plan.
2. Disputed Payments
The Plan provides that in the event of any dispute
between and among Claimants or the holders of Equity Interests as
to the right of any Person to receive or retain any payment or
distribution to be made to such Person under the Plan,
Reorganized Reeves may, in lieu of making such payment or
distribution to such Person, hold such payment or distribution,
without interest, until the disposition thereof shall be
determined by a Final Order of the Court or other court with
appropriate jurisdiction.
3. Unclaimed Property
Pursuant to the Plan, any Person who fails to claim any
Cash or any notes, debentures, or other instruments distributed
under the Plan within one year from the Effective Date or from
such other date as a Claim becomes an Allowed Claim will forfeit
all rights to any such distributions under the Plan. Upon
forfeiture, such Cash (including interest thereon) will become
the property of Reorganized Reeves and all such notes,
debentures, and other instruments will be canceled. Persons who
fail to claim Cash and/or such notes, debentures, or other
instruments will forfeit their rights thereto and will have no
Claim whatsoever against the Debtor or Reorganized Reeves or any
holder of an Allowed Claim to whom distributions are made.
4. Discharge
The Plan provides that except as otherwise expressly
provided in Section 1141 of the Bankruptcy Code or in the Plan,
and, without limitation, to the fullest extent authorized or
provided for by Sections 524 and 1141 of the Bankruptcy Code, the
provisions of the Plan will bind the Reorganized Debtor, any
other entity issuing securities under the Plan, any entity
acquiring property under the Plan, and any holder of a Claim or
Equity Interest, and the distributions made pursuant to the Plan
will be in full and final satisfaction, settlement, release, and
discharge as against the Debtor, of any and all Claims and Equity
Interests of any nature whatsoever that arose before the
Effective Date including, without limitation, any interest
accrued or expenses incurred thereon from and after the Filing
Date, whether or not (a) a proof of Claim or Equity Interest
based on such debt, obligation or Equity Interest is filed or
deemed filed under Section 501 of the Bankruptcy Code, (b) such
Claim or Equity Interest is Allowed under Section 502 of the
Bankruptcy Code, or (c) the holder of such Allowed Claim or
Equity Interest has accepted the Plan. Upon the Effective Date,
all holders of Claims against the Debtor, and holders of Equity
Interests in the Debtor will be precluded from asserting against
the Debtor, or any of its assets or properties, any other or
further Claims or Equity Interests based upon any act or
omission, transaction, or other activity of any kind or nature
that occurred prior to the Effective Date, and the Confirmation
Order will permanently enjoin such holders of Claims and Equity
Interests, and their successors and assigns, from enforcing or
seeking to enforce any such Claims or Equity Interests.
Notwithstanding anything in the Plan, including Section 6.22 and
Section 6.24 of the Plan, to the contrary, upon the Effective
Date, the GECC Loan Documents shall continue to remain in full
force and effect in accordance with their terms and the
obligations of Reeves and all Released Parties (as defined in
Section 6.24 of the Plan) who are parties to the GECC Loan
Documents shall continue to be valid and binding obligations of
Reorganized Reeves and such Released Parties, fully enforceable
against Reorganized Reeves and such Released Parties in
accordance with the terms of the GECC Loan Documents.
Notwithstanding anything in the Plan, the Plan shall not affect
in any way, including by discharge, release or otherwise, the
liabilities, if any, of the Debtor or of any other person with
respect to the Pension Plan, including any liability to the PBGC
under Title IV of the Employee Retirement Income Security Act of
1974 or any liability to the Pension Plan itself, nor shall any
injunction set forth in the Plan or issued in connection with
this case pertain to any action or claim with respect to the
Pension Plan.
5. Waiver of Contractual Subordination Rights
The Plan provides that as of the Effective Date, each
holder of an Allowed Claim (a) by virtue of the acceptance of the
Plan by such holder's Class in accordance with Section 1126 of
the Bankruptcy Code, (b) by virtue of the acceptance of the Plan
by such holder, (c) by virtue of the acceptance of any
distribution under the Plan on account of such Claim, or (d) by
virtue of Confirmation of the Plan, waives, releases, and
relinquishes any and all rights, claims, or causes of action
which may subordinate Claims to the payment and distributions or
consideration made or to be made hereunder or otherwise to any
other holder of a Claim against the Debtor, whether arising out
of contract or under applicable law including, without
limitation, Section 510 of the Bankruptcy Code and the provisions
of the Old Senior Note Indenture and the Old Subordinated
Debenture Indenture.[32]
6. Additional Releases [33]
The Plan provides that (a) on the Effective Date of the
Plan, in consideration for, or as part of the treatment accorded
to, the holders of Claims and Equity Interests under the Plan,
Reeves, Reorganized Reeves, Brothers, any of their respective
Affiliates, and all of such entities' respective present
officers, former officers who are members of the Hart Group,
directors, members, partners, agents, employees, attorneys, and
financial consultants, and their successors and assigns and the
Informal Committee and the Indenture Trustees and all of their
respective present officers, directors, members, partners,
agents, employees, attorneys, and financial consultants, and
their successors and assigns (collectively, the "Released
Parties"), will be forever discharged and released from any and
all rights, causes of action, claims, demands, debts, or
liabilities, of every kind or nature, known or unknown, whether
in law or equity, that any Person, including the Debtor,
Brothers, and any of their Affiliates, may have asserted, could
have asserted, or could in the future assert, directly or
indirectly, against any of the Released Parties relating to the
Debtor, Brothers, and any of their Affiliates, with the exception
of the Excluded Claims, and (b) on the Effective Date of the Plan
(i) Reeves, Reorganized Reeves, Brothers, any of their respective
Affiliates, and all of such entities' respective present
officers, former officers who are members of the Hart Group,
directors, members, partners, agents, employees, attorneys, and
financial consultants, and their successors and assigns; and
(ii) the Informal Committee and the Indenture Trustees and all of
such entities' respective present officers, directors, members,
partners, agents, employees, attorneys, and financial
consultants, and their successors and assigns, will
unconditionally and mutually release one another from any and all
rights, causes of action, claims, demands, debts, or liabilities,
of every kind or nature, known or unknown, whether in law or
equity, that any of the parties may have asserted, could have
asserted, or could in the future assert, directly or indirectly,
against each other relating to the Debtor, Brothers, or any of
their Affiliates, with the exception of Excluded Claims. Such
release includes a release by the Debtor, Brothers, and any of
their Affiliates of the Released Parties.
Excluded Claims under the Plan include any Claim,
obligation, right, cause of action or liability related to
(a) any indebtedness of any Affiliated Released Party or any such
entity for money borrowed, (b) any set-off or any counterclaim
which the Debtor may have or assert against an Affiliated
Released Party, except for any Affiliated Released Party that is
a member of the Hart Group, (c) the uncollected amount of any
Claim made by the Debtor (whether in a filed pleading, by letter
or otherwise) prior to the Effective Date against an Affiliated
Released Party, except for any Affiliated Released Party that is
a member of the Hart Group, which Claim has not been settled or
compromised, (d) any Claim arising from fraud or willful
misconduct, or (e) any obligation under the Plan or any of the
Plan Documents.
The Plan also provides that except with respect to Claims
against the Debtor that are specifically Allowed under this Plan,
which include the Affiliate Claims, the Debtor reserves the right
to object to the Claim of a Released Party against the Debtor.
The Debtor believes that the third party release and injunction
provisions under the Plan (as discussed this Section III(E)(6)
and in the following Section III(E)(7)) are appropriate, as they
are an essential element under the Plan. The Released Parties
are contributing valuable consideration to effectuate the
Reorganization Case, including a reduction of their equity
holdings from 100% to 75% (subject to further reductions if the
New Structurally Subordinated Notes are not redeemed at certain
times), the compromise of certain Affiliate Claims incurred in
connection with the Tax Allocation Agreements, and an agreement
to provide future services under the Employment Agreements.
There is also an identity between the Released Parties and the
Debtor due to, among other things, the Debtor's indemnification
obligations. In addition, all creditors will be unimpaired, or
will receive New Notes with a face amount equal to their pre-
petition debt. Finally, the Informal Committee, representing a
substantial majority of the Debtor's creditors have agreed to the
release and injunction provisions in the Plan.
7. Injunctions
Pursuant to the Plan, unless otherwise provided in the
Plan, all injunctions or stays provided for in the Reorganization
Case pursuant to Sections 105 or 362 of the Bankruptcy Code, or
otherwise, and in effect on the Confirmation Date, will remain in
full force and effect until the Effective Date. The Plan further
provides that the Confirmation Order will provide that (a) the
distributions and transfers of property pursuant to the terms of
the Plan are made free and clear of all Claims and interests
(except as otherwise expressly provided in the Plan) and that,
upon Confirmation of the Plan (except as otherwise expressly
provided in the Plan), all holders of Claims or Equity Interests
will be permanently enjoined from and restrained against
commencing or continuing any suit, action, or proceeding or
asserting against the Reorganized Debtor or its assets or
property any Claim, Equity Interest, or cause of action based
upon any act or omission, transaction, or other activity of any
kind or nature that occurred before the Confirmation Date, and
(b) upon Confirmation of the Plan (except as otherwise expressly
provided in the Plan), all holders of Claims or Equity Interests
will be permanently enjoined from and restrained against
commencing or continuing any suit, action, or proceeding against
the Released Parties relating to (i) the rights, causes of
action, claims, demands, debts, or liabilities released in
accordance with Section 6.24(a) of the Plan, and (ii) any alleged
default under any contract, lease, guaranty, or other instrument
of the Debtor or its subsidiaries arising from the commencement
of the Reorganization Case, or the insolvency or financial
condition of the Debtor.
8. Exculpation
Under the Plan, none of the Debtor, the Reorganized
Debtor, Brothers, or any of their respective Affiliates, GECC,
the Informal Committee, the Indenture Trustees, any holder of an
Equity Interest, nor any of all such Persons' respective present
officers, former officers who are members of the Hart Group,
directors, members, partners, agents, employees, attorneys, or
financial consultants, or their successors and assigns shall have
or incur any liability to any holder of a Claim or Equity
Interest for any act or omission in connection with, or arising
out of, the negotiation, preparation or formulation of the Plan,
the pursuit of Confirmation of the Plan, the consummation of the
Plan, or other administration of the Plan or property to be
distributed under the Plan, with the exception of Excluded
Claims.
9. Section 1146 Exemption
In accordance with Section 1146(c) of the Bankruptcy
Code (a) the issuance, transfer, or exchange of any security
under the Plan or the making or delivery of any instrument of
transfer pursuant to, in implementation of, or as contemplated by
the Plan, including any merger agreements or agreements of
consolidation, deeds, bills of sale, or assignments executed in
connection with any of the transactions contemplated under the
Plan, or the revesting, transfer, or sale of any real or personal
property of the Debtor pursuant to, in implementation of, or as
contemplated by the Plan, (b) the making, delivery, creation,
assignment, amendment, or recording of any note or other
obligation for the payment of money or any mortgage, deed of
trust, or other security interest under, in furtherance of, or in
connection with the Plan, the issuance, renewal, modification, or
securing of indebtedness by such means, (c) the making, delivery,
or recording of any deed or other instrument of transfer under,
in furtherance of, or in connection with, the Plan, including,
without limitation, the Confirmation Order, and (d) the transfer
or sale of any assets for the purpose of paying Additional
Interest in connection with the Plan, will not be subject to any
document recording tax, stamp tax, conveyance fee, or other
similar tax, mortgage tax, real estate transfer tax, mortgage
recording tax, or other similar tax or governmental assessment.
Consistent with the foregoing, each recorder of deeds or similar
official for any county, city, or governmental unit in which any
instrument under the Plan is to be recorded will, pursuant to the
Confirmation Order, be ordered and directed to accept such
instrument, without requiring the payment of any documentary
stamp tax, deed stamps, stamp tax, transfer tax, intangible tax,
or similar tax.
10. Full and Final Satisfaction
Pursuant to the Plan, all payments and all
distributions made under the Plan will be in full and final
satisfaction, settlement, release, and discharge of all Claims
and Equity Interests, except as otherwise provided in the Plan.
11. Cram-Down
In the event any impaired Class shall fail to accept or
shall be deemed to reject the Plan, the Debtor reserves the right
to request the Bankruptcy Court to confirm the Plan in accordance
with the provisions of Section 1129(b) of the Bankruptcy Code.
(See Section IV(B)(3) of this Disclosure Statement entitled
"Confirmation Without Acceptance By All Impaired Classes").
12. Disbursement of Funds and Delivery of Distribution
Except as otherwise provided in the Plan, all
distributions made under the Plan will be made on the Effective
Date, or as soon as practicable thereafter, to each holder of an
Allowed Claim. The holder of an Allowed Claim will be deemed to
be the Person entitled to such distribution, and distributions
will be made and at the address of such holder, who (a) filed the
most recent timely proof of Claim relating thereto, provided no
evidence that the transfer of such Claim was filed, or (b) in the
event evidence of transfer of a timely filed proof of Claim was
filed (i) the transferee named therein if the transferor named
therein does not file a timely objection pursuant to Bankruptcy
Rule 3001(e); or (ii) the Person so designated by a Final Order
of the Bankruptcy Court if a timely objection to the evidence of
transfer was filed, (c) is reflected in the Schedules as the
holder of such Claim if no timely proof of Claim related thereto
was filed, or (d) in the case of the holders of Senior Noteholder
Claims and Subordinated Debentureholder Claims, as reflected in
the records of ownership maintained by the Indenture Trustees.
Except as otherwise provided in the Plan, on the Effective Date,
or the date upon which there is a Final Order allowing a Disputed
Claim, or as soon as practicable thereafter, the Reorganized
Debtor, or the Disbursing Agent,[34] will make the Cash payments
(which will be by check) and the distributions of the New Senior
Notes, New Structurally Subordinated Notes, Reorganized Reeves
Common Stock, and RI Common Stock to the holders of Allowed
Claims to the extent provided for in the Plan by first-class mail
(or by other equivalent or superior means as determined in the
sole discretion of the Debtor, which in the case of holders of
more than $5,000,000 of the Old Senior Notes or holders of more
than $2,000,000 of the Old Subordinated Debentures, will be at a
closing at the offices of counsel for the Debtor on, or as soon
as practicable after, the Effective Date).
Distributions of Cash, New Senior Notes, New Structurally
Subordinated Notes, Reorganized Reeves Common Stock, and RI
Common Stock pursuant to the Plan will be effectuated by
Reorganized Reeves, or the Disbursing Agent, when it receives all
applicable documentation reasonably requested of holders of
Allowed Claims. To receive the benefits of and be subject to the
obligations arising under the Registration Rights Agreements and
the Stockholders Agreement, holders of Senior Noteholder Claims
and Subordinated Debentureholder Claims, upon exchanging the Old
Senior Notes or the Old Subordinated Debentures for New Senior
Notes and New Structurally Subordinated Notes, must return an
executed signature page for each such agreement to the
Reorganized Debtor or the Disbursing Agent. In the event that
any distribution to any Claimant is returned as undeliverable,
the Reorganized Debtor, or the Disbursing Agent, will use
reasonable efforts to determine the current address of such
holder, but no distribution to such holder will be made unless
and until the Reorganized Debtor has determined the then current
address of such holder, at which time such distribution will be
made to such holder without additional interest from the
Effective Date; provided, that, such distributions will be deemed
unclaimed property in accordance with the applicable provisions
of the Plan at the expiration of one year from the Effective
Date.
13. Surrender of Canceled Instruments or Securities
The Plan provides that as a condition precedent to
receiving any distribution under the Plan on account of an
Allowed Claim evidenced by the Old Senior Notes, the Old
Subordinated Debentures, or any other instruments canceled
pursuant to the Plan, the holder of such Claim will tender the
applicable notes or debentures, or other instruments evidencing
such Claim to the Disbursing Agent. Any Cash, New Senior Notes,
New Structurally Subordinated Notes, or RI Common Stock to be
distributed pursuant to the Plan on account of any such Claim
will, pending such surrender, be treated as an undeliverable
distribution pursuant to Section 6.18 of the Plan. The Plan also
provides that except as provided in Section 6.15(c) of the Plan,
each holder of an Allowed Claim will tender such note, debenture,
or other instrument to the Disbursing Agent, together with a
letter of transmittal to be provided to such holders by the
Disbursing Agent, as promptly as practicable on or following the
Effective Date. The letter of transmittal will include, among
other provisions, customary provisions with respect to the
authority of the holder of the note, debenture, or other
instrument to act and the authenticity of any signatures required
thereon. All surrendered notes, debentures, or other instruments
will be marked as canceled by the Disbursing Agent, and delivered
to Reorganized Reeves. The Plan further provides that in
addition to any requirements under applicable law, any holder of
an Allowed Claim evidenced by a note, debenture, or other
instrument that has been lost, stolen, mutilated, or destroyed
will, in lieu of surrendering such note, debenture, or other
instrument, deliver to the Disbursing Agent (a) evidence
satisfactory to the Disbursing Agent of such loss, theft,
mutilation, or destruction, and (b) such security or indemnity as
may be required by the Disbursing Agent to hold the Disbursing
Agent harmless from any damages, liabilities, or costs incurred
in treating such individual as a holder of a Claim. Upon
compliance with Section 6.15(c) of the Plan by a holder of a
Claim evidenced by a note, debenture, or other instrument such
holder will, for all purposes under the Plan, be deemed to have
surrendered such note, debenture, or other instrument.
14. Avoidance and Recovery Actions
The Plan provides that as of the Effective Date, the
Debtor waives the right to prosecute, and releases, any avoidance
or recovery actions under Sections 544, 545, 547, 548, 549, 550,
551, and 553 of the Bankruptcy Code or any other causes of
action, or rights to payments of Claims, that belong to or could
have been raised by the Debtor or its Estate, except for any such
action which may be pending on the Effective Date, as to which
Reorganized Reeves' rights will not be waived and released and
Reorganized Reeves will retain and may prosecute any such
actions.
15. Defects, Omissions and Amendments
Under the Plan, the Debtor may, without notice to
holders of Claims and Equity Interests insofar as it does not
materially and adversely affect the interest of holders of Claims
and Equity Interests, correct any defect, omission, or
inconsistency in the Plan and any exhibit thereto, in any Plan
Document, or in this Disclosure Statement and any exhibit hereto.
16. Revocation of the Plan
Subject to the terms of the Restructuring Agreement,
pursuant to the Plan the Debtor reserves the right to revoke and
withdraw the Plan at any time prior to the Confirmation Date. If
the Plan is so revoked or withdrawn, then the Plan will be deemed
null and void, and in such event nothing contained in the Plan
will be deemed to constitute a waiver or release of any Claims or
Equity Interests by or against the Debtor or any other Person, or
to prejudice in any manner the rights of the Debtor or any Person
in any further proceedings involving the Debtor.
17. Retention of Jurisdiction
The Plan provides that from and after the Confirmation
Date, the Bankruptcy Court will retain such jurisdiction as is
legally permissible including, but not limited to, jurisdiction
for the following purposes:
a To hear and determine any and all objections
to the allowance of a Claim or any controversy as to the
classification of Claims, provided that only the Debtor may file
objections to Claims;
b. To hear and determine any and all
applications by Professionals for compensation and reimbursement
of expenses;
c. To hear and determine any and all pending
applications for the rejection and disaffirmance of executory
contracts and unexpired leases, and fix and allow any Claims
resulting therefrom;
d. To liquidate or resolve any Disputed Claim;
e. To enforce the provisions of the Plan,
including the injunction, exculpation and releases provided for
in the Plan;
f. To enable the Debtor to prosecute any and all
proceedings which have been or may be brought prior to the
Effective Date to set aside Liens or encumbrances and to recover
any transfers, assets, properties, or damages to which the Debtor
may be entitled under applicable provisions of the Bankruptcy
Code or any federal, state, or local laws;
g. To correct any defect, cure any omission, or
reconcile any inconsistency in the Plan, in the Plan Documents,
or in the Confirmation Order as may be necessary to carry out its
purpose and the intent of the Plan;
h. To determine any liability to a governmental
unit which may be asserted as a result of the transactions
contemplated in the Plan;
i. To hear and determine matters concerning
state, local, and federal taxes in accordance with Sections 346,
505, and 1146 of the Bankruptcy Code; and
j. To determine such other matters as may be
provided for in the Confirmation Order or as may be authorized
under the provisions of the Bankruptcy Code.
18. Executory Contracts and Unexpired Leases
Under the Plan, any unexpired lease or executory
contract that has not been expressly rejected by the Debtor or
treated in the Plan with the Bankruptcy Court's approval on or
prior to the Confirmation Date will, as of the Confirmation Date
(subject to the occurrence of the Effective Date), be deemed to
have been assumed by the Debtor unless there is pending before
the Bankruptcy Court on the Confirmation Date a motion to reject
such unexpired lease or executory contract or such executory
contract or unexpired lease is otherwise designated for
rejection, provided, that (a) such lease or executory contract is
ultimately rejected, and (b) the filing of the Confirmation Order
will be deemed to be a rejection of all then outstanding
unexercised stock options. In accordance with
Section 1123(a)(5)(G) of the Bankruptcy Code, on the Effective
Date, or as soon as practicable thereafter, the Debtor will cure
all defaults under any executory contract or unexpired lease
assumed pursuant to Section 7.1 of the Plan by making a Cash
payment in an amount agreed to between the Debtor and the
Claimant, or as otherwise fixed. Upon the Effective Date, the
Restructuring Agreement shall be superseded in its entirety by
the terms of the Plan, the Plan Documents, and the Confirmation
Order.
<PAGE>
19. Pension Plans and the Pension Benefit Guaranty
Corporation
Reeves' wholly-owned subsidiary, Brothers, maintains
the Reeves Brothers, Inc. Pension Plan (the "Pension Plan"). The
Pension Plan is covered by Title IV of the Employee Retirement
Income Security Act of 1974 ("ERISA"). The Pension Benefit
Guaranty Corporation (the "PBGC") is a United States government
corporation created to administer the mandatory pension plan
termination insurance program established under Title IV of
ERISA. The PBGC guarantees the payment of certain pension
benefits upon termination of a pension plan covered by Title IV.
Under ERISA, the sponsor of the Pension Plan and each member of
its "controlled group" is jointly and severally liable for the
Pension Plan's unfunded benefit liabilities, due and unpaid
employer contributions, and premiums. A controlled group
includes a parent-subsidiary and/or brother-sister group of
corporations, trades, or businesses connected through ownership
of at least an 80% controlling interest with a common parent
organization. The PBGC believes that the Debtor is part of a
controlled group which includes various entities, including, but
not necessarily limited to, RI, Brothers, and SPA. The PBGC
asserts that if the Pension Plan were to terminate, these
companies and any others in the controlled group would incur
joint and several liability under ERISA for any unfunded
obligations with respect to the Pension Plan.
Brothers intends to continue the Pension Plan. ERISA,
however, provides that the PBGC may, under certain circumstances,
initiate termination proceedings. The Debtor believes that there
is no basis to terminate the Pension Plan and would contest any
termination proceeding initiated by the PBGC. The Plan provides
for certain stock transfers that may remove one or more companies
from the Pension Plan's controlled group. The PBGC has informed
the Debtor that it is investigating the impact the Plan will have
on the Pension Plan and on the pension plan termination insurance
program that the PBGC administers.
The Debtor estimates that the Pension Plan is in fact
overfunded or has a minimal underfunding on a going concern or
termination basis. The PBGC estimates that the amount of the
unfunded benefit liabilities of the Pension Plan, on a
termination basis and using the PBGC's assumptions, is
$7,600,000. The PBGC has informed the Debtor that it intends to
file a contingent, estimated priority claim for the Pension
Plan's unfunded benefit liabilities. The PBGC has also informed
the Debtor that it intends to file contingent, unliquidated
priority claims for contributions and pension termination
insurance premiums. The Debtor believes that all minimum funding
contributions have been timely paid any would challenge any such
claim. The PBGC asserts that such claims could have a
significant impact on the Reorganization Case. The Debtor will
review all claims filed by the PBGC, and does not believe that
such claims will prevent confirmation of the Plan. Both the
Debtor and the PBGC are hopeful that any pension plan issues will
be consensually and expeditiously resolved.
20. Indemnification Claims
Subject to the occurrence of the Effective Date, the
Plan provides that all Indemnification Claims will survive
Confirmation of the Plan, continue and remain unaffected thereby
and not be discharged. The Debtor or the Reorganized Debtor, as
the case may be, will continue and maintain all presently
existing director and officer insurance policies, and all such
policies will continue and remain in full force and effect
following Confirmation.
21. Retiree Benefits
Under the Plan, the payment of all retiree benefits will
continue, solely to the extent, and for the period, the Debtor is
contractually or legally obligated to provide such benefits.
22. Post-Confirmation Fees, Final Decree
Under the Plan, the Reorganized Debtor will be
responsible for the payment of any post-confirmation fees due
pursuant to 28 U.S.C. Section 1930(a)(6) and the filing of post-
confirmation reports, until a final decree is entered. The final
decree will be entered as soon as practicable after distributions
have commenced under the Plan.
23. Indenture Trustee Charging Lien
Pursuant to Section 6.33 of the Plan, upon the
Effective Date of the Plan, Reorganized Reeves shall pay to the
Indenture Trustees Cash equal to the amount of fees and expenses
of the Indenture Trustees (including the fees and expenses of
counsel retained by the Indenture Trustees), whether incurred
prior or subsequent to the Filing Date, without application by or
on behalf of the Indenture Trustees or their respective counsel
to the Bankruptcy Court. Upon such payments to the Indenture
Trustees, any Indenture Trustee Charging Liens shall be released.
Distributions made to the holders of Allowed Claims pursuant to
the Plan will not be reduced on account of such payments to the
Indenture Trustees.
24. Post-Confirmation Officers and Directors
The Plan provides that on the Effective Date of the
Plan, the operation of Reorganized Reeves will become the
responsibility of the Post-Reorganization Board, in accordance
with applicable law. Subject to the terms of the Stockholders
Agreement, the Post-Reorganization Board will consist of five
members. One member will be Hart, who will be Chairman of the
Post-Reorganization Board, three other members will be designated
by the Debtor, and one member will be designated by the Informal
Committee through the Informal Committee providing the Debtor
with three alternative designees, one of whom will be selected by
the Debtor. The names of the five members of the initial Post-
Reorganization Board and officers of Reorganized Reeves will be
filed with the Bankruptcy Court on or prior to the Confirmation
Hearing in accordance with Section 1129(a)(5) of the Bankruptcy
Code.
The Plan provides that on the Effective Date, the
operation of RI will be the responsibility of the Board of
Directors of RI. Subject to the terms of the Stockholders
Agreement, the Board of Directors of RI will consist of five
members. One member will be Hart, who will be Chairman of the
Board, three other members will be designated by the Debtor, and
one member will be designated by the Informal Committee through
the Informal Committee providing RI with three alternative
designees, one of whom will be selected by RI. The designation
of the members of the boards of directors of RI's direct and
indirect domestic subsidiaries, exclusive of SPV Reeves, may, at
the discretion of the Informal Committee, be accomplished in the
same manner as set forth herein. On the Effective Date, the
Informal Committee will have the right to appoint a designee to
SPA's board of directors under the same terms and conditions set
forth above, if such appointment is practicable in the reasonable
judgment of the Informal Committee. The names of the five
members of the initial Board of Directors and officers of RI will
be filed with the Bankruptcy Court on or prior to the
Confirmation Hearing in accordance with Section 1129(a)(5) of the
Bankruptcy Code.
25. Conditions to Effective Date of the Plan
Pursuant to Section 8.1 of the Plan, the occurrence of
the Effective Date of the Plan is subject to satisfaction of each
of the following conditions precedent:
a. The Confirmation Date shall have occurred and
the Confirmation Order, which shall be in form and substance
reasonably satisfactory to the Informal Committee and GECC, shall
have become a Final Order;
b. The Termination Date shall not have passed;
c. All other actions and documents necessary to
implement the provisions of the Plan on the Effective Date shall
have been, respectively, effected or executed and delivered;
d. All representations and warranties in the
Restructuring Agreement shall be true and correct as set forth in
appropriate certificates from the parties to the Restructuring
Agreement; and
e. There shall be no outstanding event of
default or condition that with the occurrence of time would
constitute an event of default under (i) the GECC Loan Documents,
(ii) the New Senior Note Indenture, (iii) the New Structurally
Subordinated Note Indenture, or (iv) any other Plan Document.
The Plan further provides that the Debtor and the Informal
Committee expressly reserve the right to waive, in whole or in
part, any of the conditions precedent set forth in Section 8.1 of
the Plan and that any such waiver or modification of such
conditions precedent may be effected at any time, without notice,
without leave or order of the Bankruptcy Court, and without any
formal action.
IV.
ACCEPTANCE AND CONFIRMATION OF THE PLAN
The following is a brief summary of the provisions of
the Bankruptcy Code respecting acceptance and confirmation of a
plan of reorganization. Holders of Claims and Equity Interests
are encouraged to review the relevant provisions of the
Bankruptcy Code and/or to consult their own attorneys.
A. Acceptance of the Plan
This Disclosure Statement is provided in connection with the
solicitation of acceptances of the Plan. The Bankruptcy Code
defines acceptance of a plan of reorganization by a class of
Claims as acceptance by holders of at least two-thirds in dollar
amount, and more than one-half in number, of the allowed Claims
of that class that have actually voted or are deemed to have
voted to accept or reject a plan. The Bankruptcy Code defines
acceptance of a plan of reorganization by a class of interests as
acceptance by at least two-thirds in amount of the allowed
interests of that class that have actually voted or are deemed to
have voted to accept or reject a plan.
If one or more impaired Classes rejects the Plan, the
Debtor may, in its discretion, nevertheless seek confirmation of
the Plan if the Debtor believes that it will be able to meet the
requirements of Section 1129(b) of the Bankruptcy Code for
Confirmation of the Plan (which are set forth below), despite
lack of acceptance by all impaired classes.
B. Confirmation
1. Confirmation Hearing
Section 1128(a) of the Bankruptcy Code requires the
Bankruptcy Court, after notice, to hold a hearing on confirmation
of a plan. Notice of the Confirmation Hearing of the Plan has
been provided to all known holders of Claims and Equity Interest
or their representatives along with this Disclosure Statement.
The Confirmation Hearing may be adjourned from time to time by
the Bankruptcy Court without further notice except for an
announcement of the adjourned date made at the Confirmation
Hearing or any subsequent adjourned Confirmation Hearing.
Section 1128(b) of the Bankruptcy Code provides that any
party in interest may object to confirmation of a plan. Any
objection to Confirmation of the Plan must be in writing, must
conform with the Bankruptcy Rules and the Local Rules of the
Bankruptcy Court, must set forth the name of the objectant, the
nature and amount of Claims or Equity Interests held or asserted
by the objectant against Reeves' Estate or property, and the
basis for the objection and the specific grounds in support
thereof. Such objection must be filed with the Bankruptcy Court,
with a copy forwarded to the Chambers of the Honorable Prudence
Carter Beatty, together with proof of service thereof, and served
upon (a) Proskauer Rose LLP, 1585 Broadway, New York, New York
10036, Attn: Alan B. Hyman, Esq., (b) Paul, Weiss, Rifkind,
Wharton & Garrison, 1285 Avenue of the Americas, New York,
New York 10019-60643, Attn: Robert D. Drain, Esq., and
(c) O'Melveny & Myers LLP, 153 East 53rd Street, New York, New
York 10022, Attn: Peter V. Pantaleo, Esq., so as to be received
no later than the date and time designated in the notice of the
Confirmation Hearing.
2. Statutory Requirements for Confirmation of the
Plan
At the Confirmation Hearing, Reeves will request that
the Bankruptcy Court determine that the Plan satisfies the
requirements of Section 1129 of the Bankruptcy Code. If so, the
Bankruptcy Court shall enter an order confirming the Plan. The
applicable requirements of Section 1129 of the Bankruptcy Code
are as follows:
a. The Plan must comply with the applicable
provisions of the Bankruptcy Code;
b. Reeves and RI, as co-proponents of the Plan,
must have complied with the applicable provisions of the
Bankruptcy Code;
c. The Plan has been proposed in good faith and
not by any means forbidden by law;
d. Any payment made or promised to be made by
Reeves or RI under the Plan for services or for costs and
expenses in, or in connection with, the chapter 11 case, or in
connection with the Plan and incident to the Reorganization Case,
has been disclosed to the Bankruptcy Court, and any such payment
made before Confirmation of the Plan is reasonable, or if such
payment is to be fixed after Confirmation of the Plan, such
payment is subject to the approval of the Bankruptcy Court as
reasonable;
e. Reeves has disclosed the identity and
affiliations of any individual proposed to serve, after
Confirmation of the Plan, as a director, officer, or voting
trustee of Reeves, RI, or a successor to Reeves or RI under the
Plan. Moreover, the appointment to, or continuance in, such
office of such individual, is consistent with the interests of
holders of Claims and Equity Interests and with public policy,
and Reeves has disclosed the identity of any insider that
Reorganized Reeves will employ or retain, and the nature of any
compensation for such insider;
f. Best Interests of Creditors Test. With
respect to each Class of impaired Claims or Equity Interests,
either each holder of a Claim or Equity Interest of such Class
has accepted the Plan, or will receive or retain under the Plan
on account of such Claim or Equity Interest, property of a value,
as of the Effective Date of the Plan, that is not less than the
amount that such holder would receive or retain if Reeves was
liquidated on such date under chapter 7 of the Bankruptcy Code.
In a chapter 7 liquidation, creditors and interest holders of a
debtor are paid from available assets generally in the following
order, with no lower class receiving any payments until all
amounts due to senior classes have been paid in full (i) first to
secured creditors (to the extent of the value of their
collateral); (ii) next to priority creditors; (iii) next to
unsecured creditors; (iv) next to debt expressly subordinated by
its terms or by order of the Bankruptcy Court; and (v) last to
holders of equity interest. Attached hereto as Exhibit B is a
liquidation analysis prepared by the Debtor. As set forth
therein, in light of the foregoing priority, the Debtor believes
that if its reorganization were converted to a chapter 7
liquidation, holders of Senior Noteholder Claims, Subordinated
Debentureholder Claims, Affiliate Claims, and Equity Interest
would receive less than they will receive under the Plan;
g. Each Class of Claims or Equity Interests has
either accepted the Plan or is not impaired under the Plan;
h. Except to the extent that the holder of a
particular Claim has agreed to a different treatment of such
Claim, the Plan provides that Allowed Administrative and Priority
Claims (other than Allowed Priority Tax Claims) will be paid in
full on the Effective Date and that Allowed Priority Tax Claims
will receive on account of such Claims deferred Cash payments,
over a period not exceeding six years after the date of
assessment of such Claim, of a value, as of the Effective Date,
equal to the Allowed amount of such Claim;
i. At least one impaired class of Claims has
accepted the Plan, determined without including any acceptance of
the Plan by any insider holding a Claim of such Class;
j. Feasibility. Confirmation of the Plan is not
likely to be followed by the liquidation, or the need for further
financial reorganization, of the Debtor or any successor to the
Debtor under the Plan. Attached hereto as Exhibit C are
projections for approximately three years and a pro forma balance
sheet as of the Effective Date which demonstrate that, given
estimated expenses and income, and taking into account cash
reserves, Reorganized Reeves will be able to satisfy its
obligations under the Plan (including satisfaction of the New
Senior Notes on or prior to maturity through asset sales[35] or a
refinancing), as well as its ongoing business operations.[36]
During the three year period of the Projections attached hereto
as Exhibit C, the Debtor anticipates that it will realize a "net
loss" from continuing operations due in large measure to
recording the payment in kind interest expense.[37] This is also
reflected in the Projections as an increase in the New
Structurally Subordinated Notes. During the same period of time,
the Projections indicate an increase in Cash and a decrease in
the indebtedness under the GECC Loan Documents as a result of
improved liquidity generated by the operation of Reorganized
Reeves; and
k. All fees of the type described in 28 U.S.C.
Section 1930, including the fees of the United States Trustee, will be
paid as of the Effective Date.
3. Confirmation Without Acceptance by All
Impaired Classes
Section 1129(b) of the Bankruptcy Code allows a
Bankruptcy Court to confirm a plan, even if such plan has not
been accepted by all impaired classes entitled to vote on such
plan, provided that such plan has been accepted by at least one
impaired class. If any impaired classes reject or are deemed to
have rejected the Plan, the Debtor reserves its right to seek the
application of the statutory requirements set forth in
Section 1129(b) of the Bankruptcy Code for Confirmation of the
Plan despite the lack of acceptance by all impaired classes.
Section 1129(b) of the Bankruptcy Code provides that
notwithstanding the failure of an impaired class to accept a plan
of reorganization, the plan shall be confirmed, on request of the
proponent of the plan, in a procedure commonly known as
"cram-down," so long as the plan does not "discriminate unfairly"
and is "fair and equitable" with respect to each class of Claims
or interests that is impaired under and has not accepted the
plan.
The condition that a plan be "fair and equitable" with
respect to a non-accepting class of secured Claims includes the
requirements that (a) the holders of such secured Claims retain
the liens securing such Claims to the extent of the allowed
amount of the Claims, whether the property subject to the liens
is retained by the debtor or transferred to another entity under
the plan, and (b) each holder of a secured Claim in the class
receive deferred cash payments totaling at least the allowed
amount of such Claim with a present value, as of the effective
date of the plan, at least equivalent to the value of the secured
claimant's interest in the debtor's property subject to the
liens.
The condition that a plan be "fair and equitable" with
respect to a non-accepting class of unsecured Claims includes the
requirement that either (a) such class receive or retain under
the plan property of a value as of the effective date of the plan
equal to the allowed amount of such Claim, or (b) if the class
does not receive such amount, no class junior to the non-
accepting class will receive a distribution under the plan.
The condition that a plan be "fair and equitable" with
respect to a non-accepting class of equity interests includes the
requirements that either (a) the plan provides that each holder
of an equity interest in such class receive or retain under the
plan, on account of such equity interest, property of a value, as
of the effective date of the plan, equal to the greater of
(i) the allowed amount of any fixed liquidation preference to
which such holder is entitled; (ii) any fixed redemption price to
which such holder is entitled; or (iii) the value of such equity
interest, or (b) if the class does not receive such amount, no
class of equity interests junior to the non-accepting class will
receive a distribution under the plan.
V.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN
The following summary addresses certain material
federal income tax consequences of the Plan to the Debtor and
holders of Senior Noteholder Claims in Class 4A and Subordinated
Debentureholder Claims in Class 4B. The summary is based upon
the Debtor's interpretation of provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), Treasury Regulations
promulgated thereunder, judicial authority, and current Internal
Revenue Service ("IRS") administrative rulings and practice, all
of which are subject to change (possibly with retroactive
effect), which could significantly affect the federal income tax
consequences discussed below.
The federal income tax consequences of the Plan are
complex and subject to significant uncertainties under existing
law. The Debtor's interpretation of the federal income tax
consequences is not binding on the IRS, and the Debtor has not
and does not intend to request a ruling from the IRS with respect
to any of the federal income tax aspects of the Plan. Therefore,
there can be no assurance that the IRS will not take a different
position regarding the consequences of the Plan or that any such
different position would not be sustained. In addition, this
summary does not discuss any aspects of state, local, or foreign
tax laws, and this summary does not purport to set forth all
aspects of federal income taxation that may be relevant to
certain types of holder of Claims in Class 4A and Class 4B (e.g.,
broker-dealers, mutual funds, regulated investment companies,
banks, insurance companies, tax-exempt organizations, investors
in pass-through entities, and foreign persons).
THE FOLLOWING DISCUSSION OF CERTAIN FEDERAL INCOME TAX
CONSEQUENCES IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT TAX
ADVICE. ACCORDINGLY, HOLDERS OF CLAIMS SHOULD CONSULT THEIR OWN
TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES OF THE PLAN,
INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL, FOREIGN,
AND OTHER TAX LAWS.
A. Federal Income Tax Consequences to the Debtor
1. Cancellation of Indebtedness Income
In general, for federal income tax purposes, a debtor
will realize cancellation of indebtedness income ("COD Income")
if a creditor accepts less than full payment in satisfaction of a
debt. The amount of COD Income, if any, realized by the debtor
will generally equal the positive difference between the amount
of the existing debt discharged or canceled and the consideration
exchanged therefor which, in general, will equal the sum of
(a) the issue price of any new debt, and (b) the fair market
value of stock or other property issued to the creditors. As
discussed in more detail below, the Debtor does not anticipate
that it will realize significant, if any, COD Income from the
implementation of the Plan.
The Debtor intends to treat the exchange of New Senior
Notes, New Structurally Subordinated Notes, and RI Common Stock
for the Old Senior Notes, Old Subordinated Debentures, and
accrued interest thereon through the Effective Date of the Plan
held by the holders of Senior Noteholder Claims in Class 4A and
the holders of Subordinated Debentureholder Claims in Class 4B as
follows (a) the exchange by Debtor of $75,000,000 of New Senior
Notes for $70,318,387 of Old Senior Notes, including accrued
interest through January 15, 1998, and $4,681,613 of Old
Subordinated Debentures, including accrued interest through
January 15, 1998, and (b) the acquisition by RI of $65,619,183 of
the Old Senior Notes, including accrued interest through
January 15, 1998, and $7,385,540 of the Old Subordinated
Debentures, including accrued interest through January 15, 1998,
for $73,004,723 of New Structurally Subordinated Notes and 25% of
the RI Common Stock. Interest accruing on the Old Senior Notes
and Old Subordinated Debentures between January 15, 1998 through
the Effective Date of the Plan (including interest on accrued but
unpaid interest) will be treated by the Debtor and RI as being
paid through the accrual of interest on the New Senior Notes and
New Structurally Subordinated Notes during that time period
("pre-issuance" interest). The Old Senior Notes and Old
Subordinated Debentures so acquired by RI will be contributed to
the capital of Debtor and canceled.
In general, the issue price of a debt instrument issued
for property (including another debt instrument) will be the debt
instrument's "stated redemption price at maturity," where neither
the debt instrument nor the property for which it is issued are
publicly traded, and all interest payments consist of "qualified
stated interest" at a rate equal to or greater than the
applicable federal rate ("AFR") for the debt instrument.
Qualified stated interest is stated interest at the lowest rate
provided for over the term of the debt instrument that is
unconditionally payable in cash or in property (other than debt
instruments of the issuer) at least annually at a fixed rate (or
subject to certain conditions, based on one or more indices).
The stated redemption price at maturity of a debt instrument is
the total of all future payments to be made under the debt
instrument other than payments of qualified stated interest.
In the event all interest payments do not consist of
"qualified stated interest" at the AFR, the issue price of the
debt instrument will, in general, equal its "stated principal
amount" where the debt instrument provides for "adequate stated
interest." The stated principal amount of a debt instrument, is
the aggregate amount of all payments due under the debt
instrument excluding any amount of stated interest. Adequate
stated interest exists where (a) the debt instrument has a single
fixed rate of interest that is paid or compounded at least
annually and that rate is equal to or greater than the AFR for
the debt instrument, or (b) the stated principal amount is less
than or equal to the present value of all payments under the debt
instrument discounted at the AFR as of the issue date.
For purposes of these rules, the issuance of additional
debt instruments, pursuant to an unconditional right of the
issuer to issue additional debt ("PIK instrument" - payment in
kind) in payment of interest, is aggregated with the original
debt instrument and is not considered to be a payment made on the
original debt instrument. Therefore, the issue date of the PIK
instrument is the same as the original debt instrument, i.e., in
general the issuance of a PIK instrument will be treated as the
deferral of cash interest payments on the original debt
instrument.
If the debt instrument is publicly traded (whether or
not the property for which it is exchanged is publicly traded),
its issue price will be its fair market value on the issue date.
On the other hand, if the debt instrument is not publicly traded,
but the property for which it is exchanged is publicly traded,
the issue price of the debt instrument will be equal to the fair
market value of the property on the issue date of the debt
instrument. The issue date is generally the date on which a
substantial amount of the debt instrument is issued.
Property is considered "publicly traded" under Treasury
Regulations, if, in general, at any time during the 60 day period
ending 30 days after the issue date, it is traded on a recognized
securities exchange, or is listed on a quotation medium that is a
system of general circulation providing a reasonable basis to
determine fair market value by disseminating either recent price
quotations of one or more identified brokers, dealers or traders,
or actual prices of recent sales transactions. The Debtor
understands that certain investment banks prepare periodically,
principally for internal circulation, information reports
containing nonbinding price quotations relating to certain
indebtedness, including the Old Senior Notes and likely to
include New Senior Notes and New Structurally Subordinated Notes.
The Debtor, however, believes that such internal reports should
not constitute a "quotation medium" described above, as the
listings are not intended for broad public dissemination. As a
result, the Debtor intends to take the position that the Old
Senior Notes, the Old Subordinated Debentures, the New Senior
Notes, and the New Structurally Subordinated Notes (collectively
the "Notes") are not publicly traded.
The issue price of the New Senior Notes issued by the
Debtor should equal its stated redemption price at maturity, or
$75,000,000. Should the IRS assert that the Notes are publicly
traded and should it prevail, because the Debtor anticipates that
the price quotations for the New Senior Notes will be at or about
their face amount, the issue price of the New Senior Notes
determined based upon their fair market value also should
approximate $75,000,000.
As discussed above, the issue price of the New Senior
Notes ($75,000,000) should not be less than the amount of debt
exchanged therefor, and therefore, the Debtor should realize no
COD Income upon such exchange.
In addition, to the extent that New Senior Notes are
being exchanged for Old Senior Notes (not including any New
Senior Notes exchanged for accrued interest on Old Senior Notes),
the Debtor may take the position that no significant modification
of the debt instrument has occurred and that accordingly, for
federal tax purposes, no exchange of a new instrument for an
existing debt instrument has taken place, because the obligor is
unchanged, the interest rates on the Old Senior Notes and the New
Senior Notes are substantially identical and the maturity date of
the New Senior Notes extends beyond the maturity date of the Old
Senior Notes by only six months. This position provides an
alternative basis that the Debtor has realized no COD Income upon
the exchange of the New Senior Notes for the Old Senior Notes.
The acquisition by RI of $73,004,723 of Old Senior
Notes and Old Subordinated Debentures, including accrued interest
through January 15, 1998, for $73,004,723 principal amount of the
New Structurally Subordinated Notes and 25% of the RI Common
Stock, followed by the contribution of such indebtedness to the
capital of the Debtor, should result in the realization by the
Debtor of COD Income only if the amount of debt so acquired
exceeds the adjusted tax basis RI takes in the acquired debt. In
turn, RI's adjusted tax basis in the acquired debt should equal
the sum of (a) the issue price of the New Structurally
Subordinated Notes, and (b) the fair market value of the 25% of
RI Common Stock.
As discussed above, the Debtor intends to take the
position that the Old Senior Notes, the Old Subordinated
Debentures, the New Senior Notes, and the New Structurally
Subordinated Notes are not publicly traded for purposes of the
"issue price" rules and, therefore, the issue price of the New
Structurally Subordinated Notes (because they are issued with
adequate stated interest) will equal their stated principal
amount, or approximately $73,000,000. It is not clear what the
fair market value of 25% of RI Common Stock will be on the issue
date. Without taking the fair market value of that stock into
account, the amount of debt acquired, $73,000,000 including
accrued interest, should not be more than RI's basis in the
acquired debt pursuant to the position the Debtor intends to
take, and therefore, the Debtor should not recognize any COD
Income. However, at this time, it is not clear whether the New
Structurally Subordinated Notes will be quoted at or about their
face amount. Thus, if the IRS should assert that this
indebtedness is publicly traded and prevails, the Debtor may
derive COD Income.
In the event that the Debtor realizes any COD Income as
a result of the exchanges described above (for example, if the
New Structurally Subordinated Notes are deemed publicly traded,
and their quoted prices are less than their face value), the
provisions of Sections 108(a)(1) and 108(b) provide that such COD
Income will not be included in the Debtor's gross income because
the Debtor is under the jurisdiction of a court in a case under
the Bankruptcy Code. Instead, the Debtor would be required to
reduce its tax attributes ("Attribute Reduction"), such as its
NOL carryovers and current year NOLs, capital loss and tax credit
carryovers, and adjusted tax basis in its assets, by the amount
of such COD Income. It is not entirely clear how Attribute
Reduction is effected in the case of an affiliated group of
corporations filing a consolidated federal income tax return,
such as the Debtor Group (as defined below). The Debtor believes
that Attribute Reduction, if required, should be made on an
individual corporation by corporation basis and should reduce the
tax attributes of the Debtor (but not, for example, Brothers) by
the amount of COD Income, if any, sustained by the Debtor as a
result of the implementation of the Plan. If the amount of COD
Income were to exceed the Debtor's available tax attributes, the
excess would be disregarded and would not reduce the tax
attributes of the other members of the affiliated group.
2. Interest Expense and Original Issue Discount
The measurement of the amount of cash interest payable
on the New Senior Notes will begin on January 15, 1998, a date
that may precede their issuance on the Effective Date of the
Plan. The Debtor intends to treat such "pre-issuance" interest,
i.e., interest from January 15, 1998 through the Effective Date
of the Plan, as being paid in lieu of accrued interest on the Old
Senior Notes and Old Subordinated Debentures exchanged for the
New Senior Notes from January 15, 1998 through the Effective Date
of the Plan (as well as interest on the previously accrued but
unpaid interest). If this treatment is respected, the New Senior
Notes would not be issued with OID and the interest payable on
the New Senior Notes should be deductible by the Debtor as it
accrues in accordance with its method of accounting.
However, the IRS may assert that the "pre-issuance"
interest on the New Senior Notes should be treated as additional
stated interest payable with respect to the New Senior Notes'
first payment interval. This would result in the treatment of
such "pre-issuance" interest as OID, and may result in the New
Senior Notes being issued with OID unless the amount of such OID
is de minimis, in which case OID will be deemed to be zero. The
New Senior Notes will be issued with de minimis OID, if the
amount of OID is less than 0.25% of the New Senior Note's stated
redemption price at maturity (as defined above) multiplied by the
number of complete years to maturity. For purposes of computing
de minimis OID all interest on the New Senior Notes (with the
exception of the "pre-issuance" interest) will be treated as
qualified stated interest and its stated redemption price at
maturity will be treated as including the amount of "pre-
issuance" interest.
In the event the New Senior Notes are issued with OID,
the OID will equal the amount of "pre-issuance" interest due
under the New Senior Notes. The OID, in general, will be
includible in a holder's taxable income and deductible by the
issuer in accordance with a constant yield method based on a
compounding of interest. The remaining interest payable will be
qualified stated interest and should be deductible by the Debtor
as it accrues in accordance with its method of accounting.
The New Structurally Subordinated Notes will be issued
with OID. In general, the excess of the stated redemption price
at maturity of a New Structurally Subordinated Note over its
issue price will constitute OID. The stated redemption price at
maturity of a New Structurally Subordinated Note is the sum of
all scheduled amounts payable, including interest (because
interest payable in cash or in kind at the option of the issuer
is not qualified stated interest). As discussed above, OID is,
in general, includible in a holder's taxable income and
deductible by the issuer (but see the discussion related to
AHYDOs below) in accordance with a constant yield method based on
compounding interest.
The treatment under the OID rules of callable
obligations, such as the New Structurally Subordinated Notes,
that provide for the Additional Interest if the call option is
not exercised, is in some respects unclear. The Debtor believes
that the New Structurally Subordinated Notes are subject to the
rules applicable to debt instruments that provide for an
alternative payment schedule. Under these rules, if the obligor
has an unconditional option that, if exercised, reduces the yield
to maturity on the Notes, then the obligor will be deemed to
exercise that option. If the exercise of the option does not
occur, contrary to the assumption made according to these rules
(a "change in circumstances"), then the New Structurally
Subordinated Notes are treated as having been retired and
reissued on the date of the change in circumstances for an amount
equal to the New Structurally Subordinated Notes' "adjusted issue
price" on that date. The "adjusted issue price" of a New
Structurally Subordinated Note is the sum of its issue price,
plus prior accruals of OID, reduced by the total payments (other
than payments of qualified stated interest) made with respect to
such New Structurally Subordinated Note.
While the issue is not free from doubt, the Debtor
Group intends to treat the additional interest payable in RI
Common Stock on such deemed reissuance, if the New Structurally
Subordinated Notes are not redeemed by certain dates, as
deductible by RI in an amount equal to the fair market value of
the RI Common Stock when issued, on the basis that such
Additional Interest represents an additional payment made to the
lender as an inducement for the reissuance, i.e., allowing the
maturity date of the New Structurally Subordinated Notes to be
extended, and not OID. If such Additional Interest were treated
as OID and if the New Structurally Subordinated Notes were
treated as AHYDOs (discussed below), such OID would not be
deductible.
Debt obligations that have a maturity date more than
five years from the date of issue will be applicable high yield
discount obligations ("AHYDOs") as defined in the Code if, among
other things, they are issued with significant OID, and their
yield to maturity exceeds the AFR in effect at the time of their
issuance plus five percentage points. In the event a debt
obligation is an AHYDO, no portion of the associated OID would be
deductible by the obligor until such OID is paid. In addition, a
portion of the OID thereon, equal to the amount that bears the
same ratio to such OID as (a) the excess of the yield to maturity
of the debt obligation over the AFR plus six percentage points
bears to (b) the yield to maturity, would not be deductible at
any time. To the extent that the non-deductible portion of the
OID would have been treated as a dividend if it had been
distributed by the obligor with respect to its stock, it will be
treated as a dividend to corporate holders for purposes of the
rules relating to the dividends received deduction.
While the New Structurally Subordinated Notes have a
stated term of more than five years, the New Debtor Group (as
defined below) intends to take the position that such debt
obligations are not subject to the AHYDO rules. Although there
is no authority on point, because the issuer, RI, will be
required to issue very substantial amounts of its stock to the
holders of the New Structurally Subordinated Notes if such
indebtedness is not redeemed over the next five years, the New
Debtor Group believes that principles similar to the treatment
under the OID rules of debt instruments providing for alternative
payment schedules should apply, with the result that the New
Structurally Subordinated Notes should be treated as a series of
short-term obligations (each of which has a term of less than
five years) for purposes of determining whether or not its
maturity date under the AHYDO provisions should be interpreted as
being more than five years from the date of issue of the
indebtedness.
3. NOL Carryovers and Other Tax Attributes
The Debtor is a member of an affiliated group of
corporations, including Fenchurch, RI, the Debtor, and Brothers,
which file a consolidated federal income tax return (the "Debtor
Group"). The Debtor Group's net operating loss ("NOL")
carryovers for regular federal income tax purposes, as of
December 31, 1996, were approximately $59,500,000 consisting of
the Debtor's NOLs of approximately $17,600,000 and Brothers' NOLs
of approximately $41,900,000. Although the Debtor believes that
amount to be accurate, because the Debtor Group's tax returns for
all of the tax years in which the NOLs were incurred have not
been audited by the IRS, that amount may be subject to review and
possible disallowance by the IRS. In addition, the Debtor
believes that significant additional NOLs will be generated in
the year ending December 31, 1997.
Section 382 of the Code provides rules restricting the
use of a corporation's NOL carryovers and certain other tax
attributes following an "ownership change." A corporation will
be considered as undergoing an ownership change if at any time
during a rolling three-year period (the "testing period") the
percentage of stock owned by one or more five-percent
shareholders or deemed five-percent shareholders (as defined
under technical rules under Section 382) increases by more than
50 percentage points over the lowest percentage of stock owned by
each of such shareholders during the testing period. In the case
of an affiliated group filing consolidated returns, whether an
ownership change has occurred is measured, in general, with
respect to the stock ownership of the parent corporation of the
loss group or loss subgroup.
If an ownership change occurs, the NOLs available each
year to offset income of the loss corporation's group is limited
(to the extent not previously limited) to the product of (a) the
aggregate fair market value (after taking into account any
increase in value as a result of a bankruptcy restructuring) of
the outstanding stock of the common parent of the group, and
(b) the federal long-term tax-exempt interest rate in effect on
the date of the ownership change, plus the portion of any such
limitation amount not utilized in prior years (the "Section 382
limitation"). If the group ceases the conduct of its historic
business within the two-year period following the date of the
ownership change, the ability of the group to utilize NOLs under
the foregoing formula restriction is eliminated entirely.
In addition, NOL carryovers may be used without
restriction during a five-year period (the "recognition period"),
beginning with the date of an ownership change, to offset "built-
in gains" (generally the excess of the fair market value of the
assets of the corporation over their adjusted tax basis -- in the
case of an affiliated consolidated group, built-in gains or
losses are computed on a group basis taking into account each
member's assets but disregarding stock owned by a member in any
other member corporation) existing at the time of the ownership
change and recognized during the recognition period, up to the
amount of the net built-in gain on the date of the ownership
change, provided that on the date of the ownership change the
amount of net built-in gain with respect to the assets of the
corporation (excluding cash, cash equivalents and certain other
assets) exceeds the lesser of $10,000,000 or 15% of the fair
market value of such assets. (Conversely, if a corporation has a
net unrealized built-in loss exceeding the threshold amount, any
portion of such net unrealized built-in loss recognized during
the recognition period is subject to the Section 382 limitation).
The Debtor Group or the New Debtor Group (as defined
below) should not undergo an "ownership change" as a result of
the implementation of the Plan. In addition, the New
Structurally Subordinated Notes call the Additional Interest to
be paid by RI in the medium of RI Common Stock if the New
Structurally Subordinated Notes have not been redeemed as of each
anniversary of their issue date after the first anniversary. The
Debtor believes that the issuance of such additional shares,
without more, should not cause the New Debtor Group to undergo an
ownership change. However, there can be no assurance that
changes in stock ownership unrelated to the Plan or the New
Structurally Subordinated Notes would not cause an ownership
change of the New Debtor Group. If an ownership change should
occur, the New Debtor Group's ability to utilize its NOLs could
be substantially reduced.
As a result of the issuance by RI of 25% of the RI
Common Stock to the holders of the Old Senior Notes and Old
Subordinated Debentures, the Debtor will no longer be affiliated
with Fenchurch. The corporations constituting the Debtor Group
excluding Fenchurch will constitute a separate affiliated group
with RI as its common parent (the "New Debtor Group"). The New
Debtor Group's NOL carryovers, however, will become subject to
the "separate return limitation year" ("SRLY") rules under the
Treasury Regulations that address the calculation of the federal
income tax liability of an affiliated group filing consolidated
returns. The SRLY rules generally prohibit a consolidated group
from utilizing SRLY NOLs to offset taxable income of a member of
the consolidated group who is not also a member of the SRLY
subgroup as defined therein. In this case, the SRLY subgroup
will consist of RI and its direct and indirect U.S. subsidiaries
at the time 25% of the RI Common Stock is issued. Accordingly,
if a corporation that generates taxable income subsequently
becomes a member of the New Debtor Group, the use of the New
Debtor Group's NOL carryovers against such taxable income will
not be available.
4. Alternative Minimum Tax
In general, an "alternative minimum tax" ("AMT") is
imposed on a corporation's "alternative minimum taxable income"
at a rate of 20% to the extent such tax exceeds the corporation's
regular federal income tax. In computing taxable income for AMT
purposes, certain tax deductions and other beneficial allowances
are modified or eliminated. In particular, even though a
corporation might be able to offset all of its taxable income for
regular federal income tax purposes by available NOL carryovers,
only 90% of a corporation's taxable income for AMT purposes may
be offset by available NOL carryovers (as recomputed for AMT
purposes), resulting in an effective AMT of 2%.
Any AMT that a corporation pays generally will be
allowed as a nonrefundable credit against its regular federal
income tax liability in future taxable years when the corporation
is no longer subject to the AMT.
B. Federal Income Tax Consequences to Holders of Senior
Noteholder Claims in Class 4A and Subordinated
Debentureholders Claims in Class 4B
1. Overview
The federal income tax consequences of the Plan to a
holders of Senior Noteholders Claims in Classes 4A and
Subordinated Debentureholder Claims in Class 4B may depend, in
part, on whether Old Senior Notes and Old Subordinated Debentures
and New Senior Notes constitute "securities" of the Debtor for
federal income tax purposes. The term "security" is not defined
in the Code or in the regulations issued thereunder and has not
been clearly defined by judicial decisions. The determination of
whether a particular Claim or debt constitutes a "security"
depends upon an overall evaluation of the nature of the Claim or
debt. One of the most significant factors considered in
determining whether a particular debt is a security is its
original term. In general, debt obligations issued with a
weighted average maturity at issuance of less than five years
(e.g., trade debt and revolving credit obligations) do not
constitute securities, whereas debt obligations with a weighted
average maturity at issuance of 10 years or more constitute
securities. The status of debt instruments with a weighted
average maturity of five years or more but less than ten years is
unclear. Each holder is urged to consult its tax advisor
regarding the status of the Old Senior Notes, the Old
Subordinated Debentures, and the New Senior Notes.
In general, each holder of an Old Senior Note or Old
Subordinated Debenture in Class 4A or Class 4B that constitutes a
"security" for federal income tax purposes who exchanges such
Notes for New Senior Notes (other than in payment of accrued
interest) will not recognize gain or loss upon such exchange if
the New Senior Notes constitute a "security" for federal income
tax purposes, except that if the principal amount of New Senior
Notes received exceeds the principal amount of Old Senior Notes
or Old Subordinated Debentures exchanged, gain will be recognized
in an amount equal to the lesser of (a) the gain realized on the
exchange, or (b) the fair market value of the excess principal
amount of New Senior Notes received. A holder's tax basis in the
New Senior Notes received will equal its basis in the Old Senior
Notes and Old Subordinated Debentures exchanged therefor
decreased by the fair market value of any excess principal amount
of New Senior Notes received and increased by the amount of gain,
if any, recognized in the exchange. A holder's tax basis in the
excess principal amount, if any, of New Senior Notes received
will equal their fair market value (and the holding period will
begin on their issue date). A holder's holding period for the
New Senior Notes received will include the holder's holding
period for the Old Senior Notes and Old Subordinated Debentures
(except to the extent that such New Senior Notes were issued in
respect of a Claim for accrued interest or represent New Senior
Notes of excess principal amount). As discussed above, to the
extent that Old Senior Notes are exchanged for New Senior Notes,
a holder may take the position that no exchange has occurred for
federal income tax purposes, and therefore no gain or loss will
be recognized and a holder's tax basis and holding period for the
New Senior Notes will be that of the Old Senior Notes.
In the event that a holder of a Senior Noteholder Claim
in Class 4A or a Subordinated Debentureholder Claim in Class 4B
is not exchanging a "security" for a "security" in the same
obligor, a holder of a Senior Noteholder Claim Class 4A or a
Subordinated Debentureholder Claim in Class 4B (other than a
Claim for accrued interest) will be a taxable exchange and such
holder will be required to recognize gain or loss equal to the
difference between the holder's adjusted tax basis in its Old
Senior Notes or Old Subordinated Debentures exchanged, as the
case may be, and the issue price of the New Senior Notes and New
Structurally Subordinated Notes and the fair market value of the
RI Common Stock received (except possibly, as discussed above,
with respect to Old Senior Notes exchanged for New Senior Notes).
A taxable exchange will therefore occur with respect to the
exchange of Old Senior Notes and Old Subordinated Debentures for
New Structurally Subordinated Notes and RI Common Stock. A
taxable exchange will also occur upon the exchange of Old Senior
Notes for New Senior Notes or Old Subordinated Debentures for New
Senior Notes if either (a) the Old Senior Notes or Old
Subordinated Debentures, as the case may be, or (b) the New
Senior Notes, do not constitute "securities" for federal income
tax purposes. The character of any gain or loss as long-term or
short-term capital gain or loss or as ordinary income or loss
will be determined by a number of factors, including the tax
status of the holder, whether the Notes constitute a capital
asset in the hand of the holder, whether the Notes have been held
for more than one year, or were purchased after they had been
issued at a discount. Holders will be subject to limitations on
their ability to offset capital losses against ordinary income.
Holders who are individuals and who have held the Old Senior
Notes or Old Subordinated Debentures as a capital asset for more
than 12 months at the time of the exchange are entitled to a
preferential tax rate of 28% on long-term capital gains and
pursuant to recent enacted legislation, holders who have held any
Old Senior Notes or Old Subordinated Debenture as a capital asset
for more than 18 months at the time of the exchange will be
entitled to a further reduction in the tax rate to 20% on such
long-term capital gains.
In the event of a taxable exchange, a Class 4A or Class
4B holder's tax basis in New Senior Notes and New Structurally
Subordinated Notes will equal their issue price and its tax basis
in the RI Common Stock received will be the fair market value of
such stock. The holding period for the New Senior Notes, New
Structurally Subordinated Notes, and RI Common Stock received
will begin on the day following their issuance.
To the extent amounts are received by a holder of a
Senior Noteholder Claim in Class 4A or a Subordinated
Debentureholder Claim in Class 4B in discharge of a Claim for
interest accrued during its holding period, such amounts will be
taxable to the holder as interest income (if not previously
included in the holder's gross income).
2. Interest and Original Issue Discount
As discussed above, payments of interest on the New
Senior Notes will be taxable to a holder as ordinary interest
income at the time that such payments are accrued or received in
accordance with the holder's method of tax accounting. If,
however, the New Senior Notes are treated as issued with OID,
holders will include the qualified stated interest on the New
Senior Notes at the time such payment are accrued or received in
accordance with their method of accounting and OID in taxable
income as it accrues in accordance with a constant yield method
based on a compounding of interest. De minimis OID will be
includible by the holder as gain recognized on retirement of the
debt instrument as principal payments are made.
The New Structurally Subordinated Notes will be issued
with OID. In general, as discussed above, the excess of the
stated redemption price at maturity of a New Structurally
Subordinated Note over its issue price will constitute OID. The
stated redemption price at maturity of a New Structurally
Subordinated Note is the sum of all scheduled amounts payable,
including interest (because interest payable in cash or in kind
at the option of the issuer is not qualified stated interest).
OID, is in general, includible in a holder's federal taxable
income in accordance with a constant yield method based on a
compounding of interest.
Although not free from doubt, for the reasons discussed
above, the Debtor will take the position that the Additional
Interest payable in RI Common Stock, if the New Structurally
Subordinated Notes are not redeemed by certain dates, will be
includible in a holder's federal taxable income when received in
an amount equal to the fair market value of such RI Common Stock.
Each cash payment on a New Structurally Subordinated
Note will be treated as a payment of OID to the extent that OID
has accrued as of the date such payment is due (and has not been
paid), and any excess will be treated as a payment of principal.
3. Information Reporting and Backup Withholding
The Debtor Group will be required to file information
returns with the Internal Revenue Service with respect to
payments made to certain holders of the New Notes, the Old Senior
Notes, and the Old Subordinated Debentures. In addition, certain
holders may be subject to a 31% backup withholding tax in respect
of certain payments, e.g., interest, if they do not provide their
taxpayer identification numbers. Amounts withheld under the
backup withholding rules are allowed as a refund or credit
against holders' United States federal income tax liability.
THE FOREGOING SUMMARY HAS BEEN PROVIDED FOR
INFORMATIONAL PURPOSES ONLY AND IS NOT A SUBSTITUTE FOR CAREFUL
TAX PLANNING WITH A TAX PROFESSIONAL. ALL CREDITORS ARE STRONGLY
URGED TO CONSULT WITH THEIR OWN TAX ADVISORS REGARDING THE
FEDERAL, STATE, LOCAL, AND FOREIGN TAX CONSEQUENCES OF THE PLAN.
VI.
RISK FACTORS
HOLDERS OF OLD SENIOR NOTES, OLD SUBORDINATED
DEBENTURES, AND ALL OTHER IMPAIRED CREDITORS SHOULD READ AND
CONSIDER CAREFULLY THE FACTORS SET FORTH BELOW, AS WELL AS THE
OTHER INFORMATION SET FORTH IN THIS DISCLOSURE STATEMENT (AND THE
DOCUMENTS DELIVERED TOGETHER HEREWITH AND/OR INCORPORATED BY
REFERENCE HEREIN), PRIOR TO VOTING TO ACCEPT OR REJECT THE PLAN.
A. Leverage
Although the Plan will restructure a significant amount
of the Debtor's debt, Reorganized Reeves will remain leveraged.
The degree to which the Debtor is leveraged could have important
consequences, including the following (1) the Debtor's ability to
obtain additional financing in the future for working capital,
capital expenditures, product development, acquisitions, general
corporate purposes or other purposes may be impaired, (2) a
substantial portion of the Debtor's cash flow from operations
must be dedicated to the payment of the principal of and interest
on its indebtedness, and (3) the Debtor's degree of leverage may
make it more vulnerable to economic downturns and may limit its
ability to withstand competitive pressures.
B. Dependence on Key Personnel
The Debtor is dependent on the continued services of
certain senior executives, whose continued services are the
subject of the Employment Agreements. In addition, the Debtor is
dependent upon the services of certain other employees with
technical expertise. The Debtor believes the loss of the
services of one or more of these individuals, through death or
otherwise, could have a material adverse effect on the Debtor.
C. Importance of Major Customers
For the fiscal year 1997 to date, the top twenty major
customers of RAM accounted for 67% of the total RAM net sales,
while the top twenty major customers of PBG accounted for 90% of
the total net sales of PBG. Each of these major customers
provide necessary volume to Brothers' manufacturing plants that
allow Brothers to maintain a profitable position. The loss of
one or more of these major customers would have a material
adverse effect on Brothers' results of operations.
D. Business Factors and Competitive Conditions
The competitive markets of both RAM and PBG, although
varying by product line, are highly competitive. The customers
of RAM and PBG rely on the competitive pricing, top quality and
delivery that Brothers has been supplying for many years.
Current pricing is the result of strong competition throughout
most of Brothers' product line markets. The current relationship
with out suppliers has been a major factor in providing
competitive pricing and excellent delivery to our customers. Any
gap in providing timely payment to the supplier base could
jeopardize Brothers' ability to be competitive in pricing and
delivery to the customers.
E. Projected Financial Information
The financial projections annexed as Exhibit C to this
Disclosure Statement are dependent upon the successful
implementation of the business plan and the validity of the other
assumptions contained therein. These projections reflect
numerous assumptions, including Confirmation and consummation of
the Plan in accordance with its terms, the anticipated future
performance of the Debtor, industry performance, certain
assumptions with respect to competitors of the Debtor, general
business and economic conditions, the ability to successfully
liquidate ATG, and other matters, many of which are beyond the
control of the Debtor. In addition, unanticipated events and
circumstances occurring subsequent to the preparation of the
projections may affect the actual financial results of the
Debtor. Although the Debtor believes that the projections are
reasonably attainable, variations between the actual financial
results and those projected may occur and be material.
F. Lack of Market for Securities Issued Pursuant to Plan
There is no currently existing market for the RI Common
Stock, the New Senior Notes or the New Structurally Subordinated
Notes and there can be no assurance that an active trading market
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 securities issued pursuant to the Plan will be able to
sell such securities in the future or as to the price at which
any such sale may occur. If such market were to exist, the
liquidity of the market for such securities and the prices at
which such securities will trade will depend upon many factors,
including the number of holders, investor expectations for the
Debtor, and other factors beyond the Debtor's control.
G. Certain Bankruptcy Related Considerations
1. Risk of Non-Confirmation of the Plan
Although the Debtor believes that the Plan will satisfy
all requirements necessary for Confirmation by the Bankruptcy
Court, there can be no assurance that the Bankruptcy Court will
reach the same conclusion. There can also be no assurance that
modifications of the Plan will not be required for Confirmation
or that such modifications would not necessitate the
resolicitation of votes.
2. Nonconsensual Confirmation
In the event any impaired class of claims or equity
interests does not accept a plan of reorganization, a bankruptcy
court may nevertheless confirm such plan of reorganization at the
proponent's request if at least one impaired class has accepted
the plan of reorganization (with such acceptance being determined
without including the acceptance of any "insider" in such class)
and, as to each impaired class which has not accepted the plan of
reorganization, the bankruptcy court determines that the plan of
reorganization "does not discriminate unfairly" and is "fair and
equitable" with respect to non-accepting impaired classes. In
the event that any impaired Class of Claims fails to accept the
Plan in accordance with Section 1129(a)(8) of the Bankruptcy
Code, the Debtor reserves the right to request nonconsensual
Confirmation of the Plan in accordance with Section 1129(b) of
the Bankruptcy Code.
H. Dividends
The Debtor presently intends to retain earnings for
working capital and to fund capital expenditures. Accordingly,
there is no present intention to pay Cash dividends on any shares
of Reorganized Reeves Common Stock. Accordingly, RI will not be
able to pay Cash dividends on any shares of RI Common Stock.
VII.
EXEMPTIONS FROM SECURITIES ACT
REGISTRATION; REGISTRATION RIGHTS
A. Issuance of New Securities Pursuant to the Plan
With respect to the New Senior Notes, the New
Structurally Subordinated Notes, the Reorganized Reeves Common
Stock, and the RI Common Stock to be issued on the Effective
Date, and any subsequent issuance of RI Common Stock in
connection with the payment of Additional Interest, the Debtor
and RI, as co-proponents of the Plan, intend to rely upon the
exemption from the registration requirements of the Securities
Act (and of equivalent state securities or "blue sky" laws)
provided by Section 1145(a)(1) of the Bankruptcy Code.
Generally, Section 1145(a)(1) of the Bankruptcy Code exempts the
issuance of securities from the registration requirements of the
Securities Act and equivalent state securities and "blue sky"
laws if the following conditions are satisfied (1) the securities
are issued by a debtor, an affiliate participating in a joint
plan of reorganization with the debtor, or a successor of the
debtor under a plan of reorganization, (2) the recipients of the
securities hold a Claim against, an interest in, or a Claim for
an administrative expense against, the debtor, and (3) the
securities are issued entirely in exchange for the recipient's
Claim against or interest in the debtor, or are issued
"principally" in such exchange and "partly" for Cash or property.
The Debtor believes that the issuance of securities contemplated
by the Plan will satisfy the aforementioned requirements.
B. Subsequent Transfer of Securities Issued Under the Plan
The securities issued pursuant to the Plan may be
resold by the holders thereof without restriction unless, as more
fully described below, any such holder is deemed to be an
"underwriter" with respect to such securities, as defined in
Section 1145(b)(1) the Bankruptcy Code. Generally,
Section 1145(b)(1) of the Bankruptcy Code defines an
"underwriter" as any person who (1) purchases a claim against, or
interest in, a bankruptcy case, with a view towards the
distribution of any security to be received in exchange for such
claim or interest, (2) offers to sell securities issued under a
bankruptcy plan on behalf of the holders of such securities,
(3) offers to buy securities issued under a bankruptcy plan from
persons receiving such securities, if the offer to buy is made
with a view towards distribution of such securities, or (4) is an
issuer as contemplated by Section 2(11) of the Securities Act.
Although the definition of the term "issuer" appears in
Section 2(4) of the Securities Act, the reference (contained in
Section 1145(b)(1)(D) of the Bankruptcy Code) to Section 2(11) of
the Securities Act purports to include as "underwriters" all
persons who, directly or indirectly, through one or more
intermediaries, control, are controlled by, or are under common
control with, an issuer of securities. "Control" (as such term
is defined in Rule 405 of Regulation C under the Securities Act)
means the possession, direct or indirect, of the power to direct
or cause the direction of the policies of a person, whether
through the ownership of voting securities, by contract or
otherwise. Accordingly, an officer or director of a reorganized
debtor (or its successor) under a plan of reorganization may be
deemed to be a "control person," particularly if such management
position is coupled with the ownership of a significant
percentage of the debtor's (or successor's) voting securities.
Moreover, the legislative history of Section 1145 of the
Bankruptcy Code suggests that a creditor who owns at least 10% of
the securities of a reorganized debtor may be presumed to be a
"control person."
C. Registration Rights
As discussed above, although upon their issuance
pursuant to Section 1145(a)(1) of the Bankruptcy Code the shares
of RI Common Stock may generally be resold by the holders thereof
without registration under the Securities Act (or under
equivalent state securities or "blue sky" laws), a holder may be
unable to resell his or its securities if such holder is deemed
to be (a) an "underwriter" within the meaning of
Section 1145(b)(1) of the Bankruptcy Code, or (b) an "affiliate"
or "control person" of the Debtor within the meaning of the
Securities Act. In order to enable holders of RI Common Stock to
sell their securities without restriction (and to obviate the
need to satisfy the requirements relating to applicable
exemptions from federal and state securities law registration),
the Debtor has agreed to provide the holders of such RI Common
Stock with certain registration rights under an agreement to that
effect which will be entered into among such holders and the
Debtor on the Effective Date. (See Section III(C)(11) of this
Disclosure Statement entitled "The Plan Description of
Transactions to be Implemented in Connection with the Plan
Registration Rights Agreements.")
THE FOREGOING SUMMARY DISCUSSION IS GENERAL IN NATURE
AND HAS BEEN INCLUDED IN THIS DISCLOSURE STATEMENT SOLELY FOR
INFORMATIONAL PURPOSES. THE DEBTOR MAKES NO REPRESENTATIONS
CONCERNING, AND DOES NOT HEREBY PROVIDE ANY OPINION OR ADVICE
WITH RESPECT TO, THE SECURITIES LAW AND BANKRUPTCY LAW MATTERS
DESCRIBED ABOVE. IN LIGHT OF THE COMPLEX AND SUBJECTIVE
INTERPRETIVE NATURE OF WHETHER A PARTICULAR RECIPIENT OF NEW
SECURITIES MAY BE DEEMED TO BE AN "UNDERWRITER" WITHIN THE
MEANING OF SECTION 1145(b)(1) OF THE BANKRUPTCY CODE AND/OR AN
"AFFILIATE" OR "CONTROL PERSON" UNDER APPLICABLE FEDERAL AND
STATE SECURITIES LAWS AND, CONSEQUENTLY, THE UNCERTAINTY
CONCERNING THE AVAILABILITY OF EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND EQUIVALENT STATE
SECURITIES AND "BLUE SKY" LAWS, THE COMPANY ENCOURAGES POTENTIAL
RECIPIENTS OF RI COMMON STOCK TO CONSIDER CAREFULLY AND CONSULT
WITH HIS, HER, OR ITS OWN LEGAL ADVISOR(S) WITH RESPECT TO SUCH
(AND ANY RELATED) MATTERS.
VIII.
ALTERNATIVES TO THE PLAN AND CONSEQUENCES OF REJECTION
Among the possible consequences if the Plan is rejected
or if the Bankruptcy Court refuses to confirm the Plan are the
following (1) an alternative plan could be proposed or confirmed;
or (2) the Reorganization Case could be converted to a
liquidation case under chapter 7 of the Bankruptcy Code.
A. Alternative Plans
As aforementioned, with respect to an alternative plan,
the Debtor and its professional advisors have explored various
alternative scenarios and believe that the Plan enables the
holders of Claims and Equity Interests to realize the most value.
The Debtor believes the Plan is the best plan that can be
proposed and serves the best interests of the Debtor and other
parties-in-interest.
B. Chapter 7 Liquidation
For a discussion of a chapter 7 liquidation, see
Section IV(B)(2) above entitled "Acceptance and Confirmation of
the Plan Confirmation Statutory Requirement for Confirmation
of the Plan."
IX
RECOMMENDATION AND CONCLUSION
The Debtor and the Informal Committee, and their
respective professional advisors, have analyzed different
scenarios and believe that the Plan will provide for a larger
distribution to holders of Claims than would otherwise result if
an alternative restructuring plan were proposed or the assets of
the Debtor were liquidated. In addition, any alternative other
than Confirmation of the Plan could result in extensive delays
and increased administrative expenses resulting in potentially
smaller distributions to the holders of Claims. Accordingly, the
Debtor and the Informal Committee recommend confirmation of the
Plan and urge all holders of impaired Claims to vote to accept
the Plan, and to evidence such acceptance by returning their
Ballots so that they will be received by no later than the Voting
Deadline.
Date: New York, New York
January 16, 1998
REEVES INDUSTRIES, INC.
Debtor and Debtor-in-Possession
By: /s/James W. Hart, Jr.
James W. Hart, Jr.
President and Chief Executive
Officer
REEVES, INC.
Co-Proponent
By: /s/James W. Hart, Jr.
James W. Hart, Jr.
President and Chief Executive
Officer
PROSKAUER ROSE LLP
Counsel to the Debtor and
Debtor-in-Possession
By: /s/Alan B. Hyman
Alan B. Hyman (AH-6655)
A Member of the Firm
1585 Broadway
New York, New York 10036
(212) 969-3000
TABLE OF CONTENTS
Page
I.
INTRODUCTION AND SUMMARY ................................... 1
A. Overview ......................................... 1
B. Summary of Classification and Treatment
Under the Plan.................................... 4
C. Voting and Confirmation Procedures ............... 12
1. Who May Vote ................................ 13
2. Voting Instructions ......................... 13
3. Acceptance or Rejection of the Plan ......... 14
4. Confirmation Hearing ........................ 15
5. Objections .................................. 16
II.
BACKGROUND AND EVENTS PRECIPITATING
CHAPTER 11 FILING AND SOLICITATION ........................ 16
A. Overview of the Debtor and its Business
Operations ....................................... 16
B. Pre-Petition Debt Structure of the Debtor ........ 18
1. Old Senior Notes and Old Subordinated
Debentures .................................. 18
2. Bank Debt Prior To Refinancing .............. 21
C. Refinancing of Bank Debt ......................... 22
D. Events Precipitating Chapter 11 Filing ........... 24
E. Development of the Plan of Reorganization ........ 27
1. Restructuring Negotiations with the
Informal Committee .......................... 27
2. Formulation of Plan ......................... 28
F. Developments in Chapter 11 Case ....................30
III.
THE PLAN ................................................... 31
A. General Requirements Respecting Confirmation
of the Plan ...................................... 31
B. Treatment of Claims and Interests Under
the Plan ......................................... 34
1. Unclassified Categories of Claims ........... 35
2. Unimpaired Classes of Claims ................ 37
3. Impaired Classes ............................ 40
C. Description of Transactions to Be Implemented in
Connection with the Plan ......................... 46
1. New Senior Note Indenture ................... 46
2. New Structurally Subordinated Note
Indenture ................................... 49
3. New Reeves Charter .......................... 51
4. New RI Charter and RI Common Stock .......... 52
5. Non-Recourse Pledge ......................... 55
6. Tax Allocation Agreements ................... 56
7. Fenchurch Tax Sharing Note .................. 57
8. Arrangement Fee Note ........................ 58
9. Voting Trust Agreement ...................... 58
10. Certain Affiliate Relationships and
Agreements .................................. 59
11. Registration Rights Agreements .............. 62
12. Stockholders Agreement ...................... 63
D. Funding for the Plan ............................. 64
E. Description of Other Provisions of the Plan ...... 65
1. Disputed Claims ............................. 65
2. Disputed Payments ........................... 65
3. Unclaimed Property .......................... 66
4. Discharge ................................... 66
5. Waiver of Contractual Subordination
Rights ...................................... 68
6. Additional Releases ......................... 69
7. Injunctions ................................. 71
8. Exculpation ................................. 72
9. Section 1146 Exemption ...................... 73
10. Full and Final Satisfaction ................. 74
11. Cram-Down ................................... 74
12. Disbursement of Funds and Delivery of
Distribution ................................ 74
13. Surrender of Canceled Instruments or
Securities .................................. 77
14. Avoidance and Recovery Actions .............. 78
15. Defects, Omissions and Amendments ........... 78
16. Revocation of the Plan ...................... 79
17. Retention of Jurisdiction ................... 79
18. Executory Contracts and Unexpired Leases .... 81
19. Pension Plans and the Pension Benefit
Guaranty Corporation ........................ 82
20. Indemnification Claims ...................... 84
21. Retiree Benefits ............................ 84
22. Post-Confirmation Fees, Final Decree ........ 84
23. Indenture Trustee Charging Lien ............. 84
24. Post-Confirmation Officers and Directors .... 85
25. Conditions to Effective Date of the Plan .... 86
IV.
ACCEPTANCE AND CONFIRMATION OF THE PLAN ............... 87
A. Acceptance of the Plan ........................... 88
B. Confirmation ..................................... 89
1. Confirmation Hearing ........................ 89
2. Statutory Requirements for Confirmation
of the Plan ................................. 90
3. Confirmation Without Acceptance by All
Impaired Classes ............................ 93
V.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN ........ 95
A. Federal Income Tax Consequences to the Debtor .... 97
1. Cancellation of Indebtedness Income ......... 97
2. Interest Expense and Original Issue
Discount .................................... 103
3. NOL Carryovers and Other Tax Attributes ..... 107
4. Alternative Minimum Tax ..................... 110
B. Federal Income Tax Consequences to Holders of
Senior Noteholder Claims in Class 4A and
Subordinated Debentureholders Claims in
Class 4B ......................................... 111
1. Overview .................................... 111
2. Interest and Original Issue Discount ........ 115
3. Information Reporting and Backup
Withholding ................................. 116
VI.
RISK FACTORS ............................................... 117
A. Leverage ......................................... 117
B. Dependence on Key Personnel ...................... 118
C. Importance of Major Customers .................... 118
D. Business Factors and Competitive Conditions ...... 118
E. Projected Financial Information .................. 119
F. Lack of Market for Securities Issued Pursuant
To Plan .......................................... 119
G. Certain Bankruptcy Related Considerations ........ 120
1. Risk of Non-Confirmation of the Plan ........ 120
2. Nonconsensual Confirmation .................. 120
H. Dividends ........................................ 121
VII.
EXEMPTIONS FROM SECURITIES ACT
REGISTRATION; REGISTRATION RIGHTS .......................... 121
A. Issuance of New Securities Pursuant to
the Plan ......................................... 121
B. Subsequent Transfer of Securities Issued
Under the Plan ................................... 122
C. Registration Rights .............................. 123
VIII.
ALTERNATIVES TO THE PLAN AND CONSEQUENCES OF REJECTION ..... 125
A. Alternative Plans ................................ 125
B. Chapter 7 Liquidation ............................ 126
IX.
RECOMMENDATION AND CONCLUSION .............................. 126
LIST OF EXHIBITS
A. Amended Joint Plan of Reorganization, dated January 12,
1998
B. Liquidation Analysis
C. Projections
LIST OF EXHIBITS IN PLAN SUPPLEMENT*
A. Indenture regarding 11% Senior Notes of Reeves Industries,
Inc. due January 15, 2002
B. Indenture regarding 13% Senior Notes of Reeves, Inc. due
November 15, 2004
C. Employment Agreements and two letter agreements with
respect thereto
D. Guarantees dated November 18, 1997
E. Consulting Agreements and three letter agreements with
respect thereto dated as of October 17, 1997
F. Stockholders Agreement
G. Limited Liability Company Agreement of The Reeves Company
LLC
H. Amended and Restated Certificate of Incorporation and
Bylaws of Reeves Industries, Inc.
I. Amended and Restated Certificate of Incorporation and
Bylaws of Reeves, Inc.
J. Registration Rights Agreements.
K. Non-Recourse Pledge
L. Reeves, Inc. Note due November 15, 2004 to be issued to
Fenchurch, Inc.
M. Amendment to Tax Allocation Agreements
N. Voting Trust Agreement
O. Escrow Agreement respecting Employment Agreements
FOOTNOTES
1 Throughout this Disclosure Statement, the term
"Bondholders" refers to, individually or collectively depending
on the context, the holders of Old Senior Notes, Old Subordinated
Debentures, New Senior Notes, and New Structurally Subordinated
Notes.
2 The term "Harts" refers to, unless otherwise indicated in
this Disclosure Statement, James W. Hart, James W. Hart, Jr.,
Douglas B. Hart, and Jennifer Fray.
3 RI does not presently intend to pay dividends on RI Common
Stock. See Sections III(C)(4) and VI(H) of this Disclosure
Statement entitled "New RI Charter and RI Common Stock" and
"Dividends."
4 See Section III(C)(5) of this Disclosure Statement for a
discussion of the Non-Recourse Pledge.
5 This summary contains only a brief and simplified
description of the classification and treatment of Claims and
Equity Interests under the Plan. It does not describe every
provision of the Plan. Accordingly, reference should be made to
the entire Disclosure Statement (including exhibits), the Plan,
and the Plan Supplement for a complete description of the
classification and treatment of Claims and Equity Interests.
6 See Sections III(C)(9), (11) & (12) of this Disclosure
Statement for a discussion of the Voting Trust Agreement, the
Registration Rights Agreements, and Stockholders Agreement.
7 See Sections III(C)(9), (11) & (12) of this Disclosure
Statement for a discussion of the Voting Trust Agreement, the
Registration Rights Agreements, and Stockholders Agreement.
8 See Sections II(E), III(B)(3)(c), and III(E)(5) of this
Disclosure Statement for a discussion of such settlements.
9 Ballots are only being provided to holders of Senior
Noteholder Claims in Class 4A and Subordinated Debentureholder
Claims in 4B, who are impaired and entitled to vote under the
Plan. The holders of Affiliate Claims in Class 5 and Equity
Interests in Class 6, who are also impaired, are deemed to have
accepted the Plan without executing a Ballot. This Disclosure
Statement is also being provided to certain persons for
informational purposes only.
10 Chemical Bank was subsequently replaced as Indenture
Trustee by IBJ Schroder Bank & Trust.
11 See Section II(E)(2) of this Disclosure Statement for a
discussion of the resolution under the Plan of a dispute
regarding the relative ranking of the Old Senior Notes and the
Old Subordinated Debentures.
12 The principal amount presently outstanding is $11,000,000.
13 Fleet National Bank was subsequently replaced as Indenture
Trustee by First Trust National Association, formerly, First
Trust Illinois.
14 See Section II(E)(2) of this Disclosure Statement for a
discussion of the resolution under the Plan of a dispute
regarding the relative ranking of the Old Senior Notes and the
Old Subordinated Debentures.
15 ATG domestically manufactured, processed, and sold
specialty textile fabrics. ATG's products included fabric and
garments targeted to the men's and women's casual and sportswear
market.
16 In addition, Oaktree will be receiving a New Senior Note,
in the form of the Arrangement Fee Note, in the principal amount
of $500,000.
17 A debtor is required under Section 1122 of the Bankruptcy
Code to classify the Claims and interests of its creditors and
interest holders into classes that contain Claims and interests
that are substantially similar to the other Claims or interests
in such class. While the Debtor believes that it has classified
all Claims and Equity Interests in compliance with the provisions
of Section 1122 of the Bankruptcy Code, it is possible that a
holder of a Claim or Equity Interest may challenge the Debtor's
classification of Claims or Equity Interests and the Bankruptcy
Court may find that a different classification is required for
the Plan to be confirmed. In such event, it is the present
intent of the Debtor, to the extent permitted by the Bankruptcy
Court, to modify the Plan to provide for whatever reasonable
classification might be required by the Bankruptcy Court for
Confirmation, and to use the acceptances received by the Debtor
from any holder of a Claim pursuant to this solicitation for the
purpose of obtaining the approval of the Class or Classes of
which such holder of a Claim is ultimately deemed to be a member.
18 This amount does not include contingent unsecured Claims of
the Lessors under the equipment lease guarantees.
19 See Section III(C)(9) of this Disclosure Statement for a
discussion of the Voting Trust Agreement.
20 See Sections III(C)(9), (11) & (12) of this Disclosure
Statement for a discussion of the Voting Trust Agreement, the
Registration Rights Agreements, and Stockholders Agreement.
21 See Section III(C)(5) of this Disclosure Statement for a
discussion of the Non-Recourse Pledge.
22 See Section III(C)(9) of this Disclosure Statement for a
discussion of the Voting Trust Agreement.
23 See Sections III(C)(9), (11) & (12) of this Disclosure
Statement for a discussion of the Voting Trust Agreement, the
Registration Rights Agreements, and Stockholders Agreement.
24 See Section III(C)(5) of this Disclosure Statement for a
discussion of the Non-Recourse Pledge.
25 See Section III(C)(7) of this Disclosure Statement for a
discussion of the Fenchurch Tax Sharing Note.
26 See Section III(C)(6) of this Disclosure Statement for a
discussion of the Tax Allocation Agreements.
27 See Section III(C)(10) of this Disclosure Statement for a
discussion of agreements by the Informal Committee, each member
of the Informal Committee, and the Bondholders not to, among
other things, seek to reject or support a motion to reject the
Employment Agreements and the Consulting Agreements, or challenge
in any way the SPV Reeves Guarantees.
28 This amount represents the excess of (i) $133,500,000 plus
accrued and unpaid interest on the Old Senior Notes and the Old
Subordinated Debentures (calculated at the contract rate for
each) to January 15, 1998, over (ii) $75,000,000.
29 See Section III(C)(5) of this Disclosure Statement for a
discussion of the Non-Recourse Pledge.
30 "Affiliate," for these purposes, means, with respect to any
Person, any other Person controlling, controlled by, or under
direct or indirect common control with, such Person.
31 "Public Offering" means an initial public offering and sale
of at least 15% of the outstanding RI Common Stock.
32 See Sections II(B)(1) for a discussion of the Old Senior
Notes and Old Subordinated Debentures.
33 The Office of the United States (the "U.S. Trustee") filed
an objection to this Disclosure Statement regarding the release
and injunction provisions of the Plan. The U. S. Trustee has
withdrawn its objection as it relates to this Disclosure
Statement, but has reserved such objection as an objection to
Confirmation of the Plan. The Debtor is negotiating with the
U.S. Trustee in an effort to consensually resolve the
objection.
34 It is presently contemplated that the Debtor will be the
Disbursing Agent for all Cash distributions under the Plan and
that Bankruptcy Services, LLC, the Debtor's balloting agent, or
another entity, will assist the Debtor in the disbursement of
securities to the Bondholders.
35 From time to time, certain persons have expressed interest
in purchasing one or more of Brothers' businesses. Brothers and
the Debtor have, and will continue to, respond to all such
inquiries.
36 See Section VI of this Disclosure Statement entitled "Risk
Factors" for a discussion of certain risks associated with the
Plan.
37 See Exhibit C, page 5, Assumption 5.
38 This amount, as used throughout this Section V of this
Disclosure Statement, does not include the New Senior Note in the
principal amount of $500,000 that Oaktree will be receiving as
the Arrangement Fee Note.
39 See Section II(D) of this Disclosure Statement for a
discussion of the Debtor's development of its business plan.
40 See page 7 of Exhibit B to this Disclosure Statement
setting forth estimated recoveries upon a liquidation of the
Debtor.
* The Plan Supplement, containing final versions of all of
the Plan Documents, will be filed with the Bankruptcy Court prior
to the hearing on Confirmation of the Plan. The Plan Documents
may be amended until that time.
Exhibit A of Exhibit T3E
PROSKAUER ROSE LLP
Counsel for Debtor and Debtor-in-Possession
1585 Broadway
New York, New York 10036
(212) 969-3000
Alan B. Hyman (AH-6655)
Jeffrey W. Levitan (JL-6155)
Lisa A. Chiappetta (LC-6514)
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- ----------------------------------------------------------------x
:
In re: : (Chapter 11)
:
REEVES INDUSTRIES, INC. : Case No. 97 B 47727
(PCB)
:
Debtor. :
- ---------------------------------------------------------------x
AMENDED JOINT PLAN OF REORGANIZATION UNDER
CHAPTER 11 OF THE BANKRUPTCY CODE
OF THE DEBTOR AND REEVES, INC.
Dated: January 12, 1998
New York, New York
<PAGE>
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- ----------------------------------------------------------------x
:
In re: : (Chapter 11)
:
REEVES INDUSTRIES, INC. : Case No. 97 B 47727
(PCB)
:
:
Debtor. :
- ---------------------------------------------------------------x
AMENDED JOINT PLAN OF REORGANIZATION UNDER
CHAPTER 11 OF THE BANKRUPTCY CODE
OF THE DEBTOR AND REEVES, INC.
Reeves Industries, Inc. and Reeves, Inc. propose the
following plan of reorganization pursuant to Section 1121(a) of
chapter 11, title 11 of the United States Code:
ARTICLE
DEFINITIONS
For purposes of this Plan, the following terms shall
have the meanings set forth herein. Any term used but not
defined herein shall have the meaning assigned to that term in
the Bankruptcy Code. Capitalized terms shall at all times refer
to the terms defined in this Article I. The rules of
construction contained in Section102 of the Bankruptcy Code shall
apply to this Plan.
1.1 "Additional Interest" shall mean the additional
interest payable on the New Structurally Subordinated Notes as
defined and set forth in the New Structurally Subordinated Note
Indenture.
1.2 "Administrative Claims" shall mean any and all
Claims allowed under Section 503(b) of the Bankruptcy Code and
entitled to priority under Section 507(a)(1) of the Bankruptcy
Code, including, without limitation (a)any actual and necessary
costs and expenses of preserving the Estate and administering the
Reorganization Case, (b)any actual and necessary costs and
expenses of operating the business of the Debtor, (c)fees and
expenses of Professionals to the extent Allowed by a Final Order
of the Bankruptcy Court under Sections 330, 331, or 503 of the
Bankruptcy Code, and (d)all fees and charges assessed against the
Estate pursuant to 28 U.S.C. Section 1930.
1.3 "Affiliate" shall mean, with respect to any
Person, any other Person controlling, controlled by, or under
direct or indirect common control with, such Person, and any
member of such Person's immediate family, including with respect
to the Debtor all members of the Hart Group. For the purposes of
this definition, "control," when used with respect to any
specified Person, shall mean the power to direct or cause the
direction of the management and policies of such Person, directly
or indirectly, whether through ownership of voting securities or
partnership or other ownership interests, by contract or
otherwise. The terms "controlling" and "controlled" shall have
the meanings correlative with the foregoing.
1.4 "Affiliate Claims" shall mean any Claims of any
Affiliate against the Debtor or its Estate, except that Affiliate
Claims shall not include Indemnification Claims which shall be
treated in accordance with Sections 7.1 and 7.2 of this Plan.
1.5 "Affiliate Released Party" shall mean each
officer, director, shareholder, Affiliate, employee, consultant,
attorney, agent and other representative of the Debtor.
1.6 "Allowed" shall mean with reference to any Claim
(a)a Claim that has been listed by the Debtor in its Schedules
and (i)is not listed as disputed, contingent or unliquidated, and
(ii)is not a Claim as to which a proof of Claim has been filed;
(b)a Claim as to which a proof of Claim has been filed as of the
applicable Bar Date and (i)no objection thereto, request for
estimation, or application to equitably subordinate or to
otherwise limit recovery, has been made before any applicable
deadline, or (ii)if an objection thereto, or application to
equitably subordinate or to otherwise limit recovery, has been
interposed, the extent to which such Claim (whether in whole or
in part) has been allowed by a Final Order; (c) a Claim arising
from the recovery of property under Sections 550 or 553 of the
Bankruptcy Code and allowed in accordance with Section502(h) of
the Bankruptcy Code; or (d)any Claim allowed under this Plan.
1.7 "Arrangement Fee Note" shall mean the New Senior
Note to be issued to Oaktree Capital Management, LLC in the
aggregate principal amount of $500,000, pursuant to Section 6.8
of this Plan.
1.8 "Ballot" shall mean the form or forms distributed
to each holder of an impaired Claim or Equity Interest which
indicates the holder's acceptance or rejection of this Plan and
is duly executed by such holder.
1.9 "Bankruptcy Code" shall mean the Bankruptcy
Reform Act of 1978, 11 U.S.C. Sections 101 et seq., as in effect on the
Filing Date, and as has been and may be amended.
1.10 "Bankruptcy Court" shall mean the United States
District Court having jurisdiction over the Reorganization Case
and, to the extent of any reference under 28 U.S.C. Section 157, the
unit of such District Court constituted under 28 U.S.C. Section 151.
1.11 "Bankruptcy Rules" shall mean the Federal Rules
of Bankruptcy Procedure, effective August 1, 1991, as promulgated
under the provisions of 28 U.S.C. Section 2075, in effect as of the
Filing Date and as have been and may be amended.
1.12 "Bar Date" shall mean the date or dates fixed by
order of the Bankruptcy Court that is the last date by which all
Persons asserting a Claim against the Debtor who are required to
file a proof of Claim on account thereof must have filed such a
proof of Claim or be forever barred from asserting a Claim
against the Debtor or its property and from sharing in any
distribution under this Plan, or such other date as may have been
fixed as the last date for the filing of a proof of Claim by
order of the Bankruptcy Court.
1.13 "Brothers" shall mean Reeves Brothers, Inc., a
Delaware corporation.
1.14 "Business Day" shall mean any day other than a
Saturday, Sunday or legal holiday as such term is defined in
Bankruptcy Rule 9006.
1.15 "Cash" shall mean cash, cash equivalents
(including personal checks drawn on a bank insured by the Federal
Deposit Insurance Corporation, certified checks and money orders)
and other readily marketable direct obligations of the United
States of America and certificates of deposit issued by banks.
1.16 "Claim" shall mean a Claim against a Person or
its property as defined in Section 101(5) of the Bankruptcy Code,
which shall include a right to payment, whether or not such
right is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, legal,
equitable, secured or unsecured; or a right to an equitable
remedy for breach of performance if such breach gives rise to a
right to payment, whether or not such right to an equitable
remedy is reduced to judgment, fixed, contingent, matured,
unmatured, disputed, undisputed, secured or unsecured.
1.17 "Claimant" shall mean the holder of a Claim
against the Debtor or its Estate.
1.18 "Class" shall mean a class of Claims or Equity
Interests as designated in Article II of this Plan.
1.19 "Collateral" shall mean any property or interest
in property of the Debtor's Estate subject to a Lien to secure
the payment or performance of a Claim.
1.20 "Confirmation" shall mean the entry, within the
meaning of Bankruptcy Rules 5003 and 9021, of the Confirmation
Order by the Bankruptcy Court on its docket.
1.21 "Confirmation Date" shall mean the date upon
which Confirmation occurs.
1.22 "Confirmation Hearing" shall mean the hearing
held by the Bankruptcy Court to consider confirmation of this
Plan in accordance with Section 1128 of the Bankruptcy Code, as
such hearing may be adjourned from time to time.
1.23 "Confirmation Order" shall mean the order of the
Bankruptcy Court confirming this Plan pursuant to the provisions
of the Bankruptcy Code.
1.24 "Consulting Agreements" shall mean collectively
the consulting agreements dated as of October 17, 1997 and those
certain letter agreements dated as of October 17, 1997 with
respect to such consulting agreements, between Hart, James W.
Hart, Jr., and Douglas B. Hart, respectively, and SPA, included
in the Plan Supplement.
1.25 "Contingent Claim" shall mean any Claim for which
a proof of Claim has been filed with the Bankruptcy Court (a)
which was not filed in a sum certain, or which has not accrued
and is dependent upon a future event that has not occurred or may
never occur, and (b) which has not been Allowed.
1.26 "Disbursing Agent" shall mean any entity (which
may include the Reorganized Debtor) designated in the
Confirmation Order to make distributions on reasonable terms and
conditions as required under this Plan.
1.27 "Disclosure Statement" shall mean the disclosure
statement respecting this Plan filed by the Debtor in the
Reorganization Case and approved by order of the Bankruptcy Court
as containing adequate information in accordance with Section1125
of the Bankruptcy Code.
1.28 "Disputed" shall mean any Claim or Equity
Interest represented by a proof of Claim filed with the
Bankruptcy Court (a) as to which the Debtor or any other party in
interest has interposed a timely objection or request for
estimation, or has sought to equitably subordinate or to
otherwise limit recovery, in accordance with the Bankruptcy Code
and the Bankruptcy Rules, or which is otherwise disputed by the
Debtor in accordance with applicable law, which objection,
request for estimation, action to limit recovery or dispute has
not been withdrawn or determined by Final Order, or (b) which is
a Contingent Claim.
1.29 "Effective Date" shall mean the date which is 11
days after the Confirmation Date, or if such date is not a
Business Day, the next succeeding Business Day; provided,
however, that if, as of such date, all conditions to the
occurrence of the Effective Date set forth in Section 8.1 of this
Plan have not been satisfied or waived pursuant to Section 8.2 of
this Plan, then the first Business Day on which all such
conditions have been satisfied or waived.
1.30 "Employment Agreements" shall mean collectively
the employment agreements dated November 18, 1997, between Hart,
James W. Hart, Jr., and Douglas B. Hart, respectively, and
Brothers and those two certain letter agreements with respect to
each of the employment agreements, containing the terms
summarized in the Disclosure Statement and included in the Plan
Supplement.
1.31 "Equity Interest" shall mean any interest in the
common stock or other instrument evidencing an ownership interest
in the Debtor, whether or not transferable, and any warrant,
option, right, or similar instrument entitling the holder thereof
to purchase, sell or subscribe for an ownership interest in the
Debtor.
1.32 "Escrow Agreement" shall mean the escrow
agreement to be executed in connection with the Employment
Agreements, containing the terms summarized in the Disclosure
Statement and included in the Plan Supplement.
1.33 "Estate" shall mean the estate created in the
Reorganization Case pursuant to Section541 of the Bankruptcy
Code.
1.34 "Excluded Claims" shall mean any Claim,
obligation, right, cause of action or liability related to (a)
any indebtedness of any Affiliated Released Party or any such
entity for money borrowed, (b) any set-off or any counterclaim
which the Debtor may have or assert against an Affiliated
Released Party, except for any Affiliated Released Party that is
a member of the Hart Group, (c) the uncollected amount of any
Claim made by the Debtor (whether in a filed pleading, by letter
or otherwise) prior to the Effective Date against an Affiliated
Released Party, except for any Affiliated Released Party that is
a member of the Hart Group, which Claim has not been settled or
compromised, (d) any Claim arising from fraud or willful
misconduct, or (e) any obligation under this Plan or any of the
Plan Documents.
1.35 "Fenchurch" shall mean Fenchurch, Inc., a
Delaware corporation.
1.36 "Fenchurch Tax Sharing Claim" shall mean the
Claim of Fenchurch under the Tax Allocation Agreements.
1.37 "Fenchurch Tax Sharing Note" shall mean the 13%
senior note of RI dated January 1, 1998 due November 15, 2004, in
the aggregate principal amount of $1,250,000, issued to
Fenchurch, a copy of which is included in the Plan Supplement,
and as is further described in Section 6.9 hereof. Interest
accrues on the Fenchurch Tax Sharing Note from January 15, 1998.
1.38 "Filing Date" shall mean the date upon which the
Debtor filed its voluntary chapter 11 petition for reorganization
with the Bankruptcy Court pursuant to the Bankruptcy Code.
1.39 "Final Order" shall mean an order or judgment of
the Bankruptcy Court (a)which has not been reversed, stayed,
modified or amended, and as to which the time to appeal, petition
for certiorari or move for reargument or rehearing has expired,
and no appeal, petition for certiorari or other proceedings for
reargument or rehearing shall then be pending, or (b) if an
appeal, writ of certiorari, reargument or rehearing thereof has
been sought, which has been affirmed by the highest court to
which such order was appealed, or as to which certiorari,
reargument or rehearing has been denied or resulted in no
modification thereof, where the time to take any further appeal,
petition for certiorari or move for reargument or rehearing has
expired; provided, that, the possibility that a motion under Rule
59 or Rule 60 of the Federal Rules of Civil Procedure, or any
analogous rule under the Bankruptcy Rules, may be filed with
respect to such order shall not cause such order not to be a
Final Order.
1.40 "GECC" shall mean General Electric Capital
Corporation, individually and as agent.
1.41 "GECC Loan Documents" shall mean that certain
Credit Agreement dated as of November 6, 1997, among Reeves,
Brothers and GECC, and such other documents, agreements, and
instruments relating thereto including, without limitation, the
Secured Guaranty.
1.42 "General Secured Claims" shall mean any and all
Secured Claims.
1.43 "General Unsecured Claims" shall mean any and all
Claims which are not Administrative Claims, Priority Tax Claims,
Priority Claims, General Secured Claims, Senior Noteholder
Claims, Subordinated Debentureholder Claims, or Affiliate Claims.
1.44 "Hart" shall mean James W. Hart, Chairman of
Reeves.
1.45 "Hart Group" shall mean Hart, James W. Hart, Jr.,
Douglas B. Hart, and Jennifer Fray and their families.
1.46 "Indemnification Claims" shall mean all
obligations relating to contribution, indemnification and
exculpation by Reeves and its subsidiaries, arising under
applicable laws or as provided in any of the following (a)
Reeves' Certificate of Incorporation in effect prior to or as of
the date hereof, (b) Reeves' by-laws in effect prior to or as of
the date hereof, (c) the Employment Agreements, Consulting
Agreements, SPV Reeves Guarantees, and any agreements regarding
the retention of professionals or (d) the certificates of
incorporation, by-laws or similar documents or agreements of any
of Reeves' subsidiaries as in effect prior to or after the date
hereof.
1.47 "Indenture Trustee Charging Lien" shall mean any
Lien or other priority in payment available to the Indenture
Trustees pursuant to the Old Senior Note Indenture, the Old
Subordinated Debenture Indenture, or applicable law, for the
payment of fees and expenses incurred by the Indenture Trustees
(including the fees and expenses of counsel retained by the
Indenture Trustees), whether incurred prior or subsequent to the
Filing Date, to the extent not otherwise paid pursuant to the
applicable terms of this Plan.
1.48 "Indenture Trustees" shall mean the Old Senior
Note Indenture Trustee and the Old Subordinated Debenture
Indenture Trustee.
1.49 "Informal Committee" shall mean the informal
committee of holders of Old Senior Notes and Old Subordinated
Debentures in existence as of the Filing Date.
1.50 "Lien" shall have the meaning assigned to such
term in Section101(37) of the Bankruptcy Code, except that a lien
that is voidable in accordance with Sections 544, 545, 546, 547,
548 and 549 of the Bankruptcy Code shall not constitute a Lien.
1.51 "New Reeves Charter" shall mean the amended and
restated certificate of incorporation and bylaws of Reorganized
Reeves, containing the terms summarized in the Disclosure
Statement and included in the Plan Supplement.
1.52 "New RI Charter" shall mean the amended and
restated certificate of incorporation and bylaws of RI,
containing the terms summarized in the Disclosure Statement and
included in the Plan Supplement.
1.53 "New Senior Note Indenture" shall mean the
indenture, dated as of the Effective Date, between Reeves and the
New Senior Note Indenture Trustee, containing the terms
summarized in the Disclosure Statement and included in the Plan
Supplement, under which the New Senior Notes are to be issued.
1.54 "New Senior Note Indenture Trustee" shall mean
the entity selected by the Debtor and reasonably acceptable to
the Informal Committee who shall act as the indenture trustee
under the New Senior Note Indenture.
1.55 "New Senior Notes" shall mean the 11% senior
notes of Reeves due January 15, 2002, issued pursuant to the New
Senior Note Indenture, in the aggregate principal amount of
$75,500,000. Interest shall accrue on the New Senior Notes from
January 15, 1998.
1.56 "New Structurally Subordinated Note Indenture"
shall mean the indenture, dated as of the Effective Date between
RI and the New Structurally Subordinated Note Indenture Trustee,
containing the terms summarized in the Disclosure Statement and
included in the Plan Supplement, under which the New Structurally
Subordinated Notes are to be issued.
1.57 "New Structurally Subordinated Note Indenture
Trustee" shall mean the entity selected by the Debtor and
reasonably acceptable to the Informal Committee who shall act as
the indenture trustee under the New Structurally Subordinated
Note Indenture.
1.58 "New Structurally Subordinated Notes" shall mean
the 13% senior notes of RI due November 15, 2004, issued pursuant
to the New Structurally Subordinated Note Indenture, in the
aggregate principal amount equal to $73,004,723. Interest shall
accrue on the New Structurally Subordinated Notes from January
15, 1998.
1.59 "Non-Recourse Pledge" shall mean the Pledge
Agreement pursuant to which James W. Hart, Jr., Douglas B. Hart,
Jennifer Fray, and any other member of the Hart Group who is a
holder of RI Common Stock, shall pledge to the New Structurally
Subordinated Note Indenture Trustee, without recourse to any of
their other assets or holdings, their interests in the RI Common
Stock to secure the obligation of RI to pay Additional Interest
under the New Structurally Subordinated Notes, containing the
terms summarized in the Disclosure Statement and included in the
Plan Supplement.
1.60 "Official Committee" shall mean an official
committee(s), if any, appointed in the Reorganization Case
pursuant to Section1102 of the Bankruptcy Code as the same may be
constituted from time to time.
1.61 "Old Senior Note Indenture" shall mean the
indenture, dated as of June1, 1992, as amended or supplemented
from time to time in accordance with the terms thereof, by and
between Reeves and Chemical Bank, as indenture trustee, pursuant
to which the Old Senior Notes were issued.
1.62 "Old Senior Note Indenture Trustee" shall mean
IBJ Schroder Bank & Trust, as successor indenture trustee to
Chemical Bank under the Old Senior Note Indenture.
1.63 "Old Senior Notes" shall mean the 11% senior
notes due 2002, as amended from time to time in accordance with
the terms thereof, issued pursuant to the Old Senior Note
Indenture.
1.64 "Old Subordinated Debenture Indenture" shall mean
the indenture, dated as of May 1, 1986, as amended or
supplemented from time to time in accordance with the terms
thereof, by and between Reeves and Fleet National Bank, as
indenture trustee, pursuant to which the Old Subordinated
Debentures were issued.
1.65 "Old Subordinated Debenture Indenture Trustee"
shall mean First Trust Illinois, as successor indenture trustee
to Fleet National Bank under the Old Subordinated Debenture
Indenture.
1.66 "Old Subordinated Debentures" shall mean the 13 %
subordinated debentures due May 1, 2001, as amended from time to
time in accordance with the terms thereof, issued pursuant to the
Old Subordinated Debenture Indenture.
1.67 "Person" shall mean any individual, corporation,
partnership, joint venture, trust, estate, unincorporated
association, or organization, governmental entity or political
subdivision thereof, or any other entity.
1.68 "Plan" shall mean this chapter 11 plan of reorga-
nization and any exhibits hereto and any documents incorporated
herein by reference, as same may from time to time be amended as
and to the extent permitted herein or by the Bankruptcy Code.
The Plan (including the Plan Supplement) shall be in form and
substance reasonably satisfactory to the Informal Committee and
GECC.
1.69 "Plan Documents" shall mean the Employment
Agreements, the Escrow Agreement respecting the Employment
Agreements, the Consulting Agreements, the New Senior Note
Indenture, the New Senior Notes, the New Structurally
Subordinated Note Indenture, the New Structurally Subordinated
Notes, the New Reeves Charter, the New RI Charter, the
Registration Rights Agreements, the Non-Recourse Pledge, the SPV
Reeves LLC Agreement, the SPV Reeves Guarantees, the Stockholders
Agreement, the Fenchurch Tax Sharing Note, the amendment to the
Tax Allocation Agreements, the Arrangement Fee Note, and the
Voting Trust Agreement, all included in the Plan Supplement. The
Plan Documents shall be in form and substance reasonably
satisfactory to the Informal Committee and GECC.
1.70 "Plan Supplement" shall mean the supplement,
containing copies of the Plan Documents, which shall be filed in
final form with the Bankruptcy Court no later than ten days prior
to the hearing on Confirmation of the Plan. The Plan Documents
may be amended until filed in final form no later than ten days
prior to the hearing on Confirmation of the Plan. The Plan
Supplement is incorporated into, and is a part of, this Plan as
if set forth in full herein, and all references to this Plan
shall refer to this Plan together with the Plan Supplement.
1.71 "Post-Reorganization Board" shall mean the Board
of Directors of Reorganized Reeves established in accordance with
Section 6.6 of this Plan which shall function and serve as of and
after the Effective Date in accordance with the New Reeves
Charter.
1.72 "Priority Claims" shall mean any and all Claims
(or portions thereof), if any, entitled to priority under Section
507(a) of the Bankruptcy Code, with the exclusion of Priority Tax
Claims and Administrative Claims.
1.73 "Priority Tax Claims" shall mean any and all
Claims (or portions thereof), if any, of a governmental unit
entitled to priority under Section507(a)(8) of the Bankruptcy
Code.
1.74 "Pro Rata" shall mean the ratio of an Allowed
Claim in a particular Class or Classes to the aggregate amount of
all Allowed Claims in such Class or Classes.
1.75 "Professional Fees" shall mean all awards of
compensation and reimbursement of expenses allowed to
Professionals by the Bankruptcy Court pursuant to Sections 330,
331 or 503(b) of the Bankruptcy Code.
1.76 "Professionals" shall mean those Persons
(a)employed pursuant to an order of the Bankruptcy Court in
accordance with Sections 327 and 1103 of the Bankruptcy Code and
to be compensated for services pursuant to Sections 327, 328,
329, 330 and 331 of the Bankruptcy Code, or (b) for which
compensation and reimbursement has been allowed by the Bankruptcy
Court pursuant to Section 503(b)(4) of the Bankruptcy Code.
1.77 "Reeves" or "Debtor" shall mean Reeves
Industries, Inc., a Delaware corporation, and when used in this
Plan, shall mean such corporation either (a)in its pre-Filing
Date capacity, or (b)as Debtor and Debtor-in-Possession in the
Reorganization Case, depending on the context of the use thereof.
1.78 "Registration Rights Agreements" shall mean the
agreements dated as of the Effective Date and executed by
Reorganized Reeves and RI, as the case may be, providing for
registration rights to holders of (a) RI Common Stock, (b) New
Senior Notes, and (c) New Structurally Subordinated Notes,
respectively, containing the terms summarized in the Disclosure
Statement and included in the Plan Supplement.
1.79 "Released Parties" shall have the meaning set
forth in Section 6.24(a) of this Plan.
1.80 "Reorganization Case" shall mean the Debtor's
case pursuant to chapter11 of the Bankruptcy Code administered in
the Bankruptcy Court.
1.81 "Reorganized Reeves" or "Reorganized Debtor"
shall mean Reeves Industries, Inc., a Delaware corporation, or
any successor thereto by merger, consolidation or otherwise, on
and after the Effective Date.
1.82 "Reorganized Reeves Common Stock" shall mean the
common stock of Reorganized Reeves issued at $.01 par value.
1.83 "Restructuring Agreement" shall mean the Amended
and Restated Restructuring Agreement between, among others,
Reeves, Fenchurch, Hart, CIBC Oppenheimer Corporation, and the
members of the Informal Committee dated as of November 6, 1997,
as the same may be amended.
1.84 "RI" shall mean Reeves, Inc., a Delaware
corporation.
1.85 "RI Common Stock" shall mean the shares of common
stock of RI issued at $.01 par value per share.
1.86 "Schedules" shall mean the schedules of assets
and liabilities and the statements of financial affairs filed by
the Debtor pursuant to Section521 of the Bankruptcy Code and
Bankruptcy Rule 1007, as such schedules and statements have been
or may be supplemented or amended from time to time.
1.87 "Secured Claims" shall mean any and all Claims
secured by Collateral, as determined in accordance with Section
506(a) of the Bankruptcy Code.
1.88 "Secured Guaranty" shall mean that certain
Guaranty dated as of November 6, 1997, by Reeves in favor of
GECC.
1.89 "Senior Noteholder Claims" shall mean any and all
Claims arising under or relating to the Old Senior Notes.
1.90 "SPA" shall mean Reeves S.p.A., an Italian
corporation.
1.91 "SPV Reeves" shall mean The Reeves Company LLC, a
Delaware limited liability company, which is a bankruptcy-remote
entity with the special sole purpose of holding the issued and
outstanding shares of SPA.
1.92 "SPV Reeves Guarantees" shall mean the guarantees
by SPV Reeves of the Employment Agreements, included in the Plan
Supplement.
1.93 "SPV Reeves LLC Agreement" shall mean the
operating agreement of SPV Reeves, included in the Plan
Supplement.
1.94 "Stockholders Agreement" shall mean the agreement
setting forth certain rights and obligations of the holders of
Reorganized Reeves Common Stock and RI Common Stock, containing
the terms summarized in the Disclosure Statement and included in
the Plan Supplement.
1.95 "Subordinated Debentureholder Claims" shall mean
any and all Claims arising under or relating to the Old
Subordinated Debentures.
1.96 "Tax Allocation Agreements" shall mean (a) the tax
allocation agreement dated as of the first day of May 1986
entered into by and among Schick Incorporated (later renamed Hart
Holding Company), Newreeveco, Inc. (later renamed Reeves
Industries, Inc.), Brothers, Cinderella Knitting Mills, Inc., and
Turner Trucking Company (later renamed Turner Freight Systems,
Inc.) ("Turner"), effective for taxable periods through December
31, 1991, as amended by agreement made and entered into as of the
5th day of November 1997, and (b) the tax allocation agreement
effective as of the first day of the consolidated return year
beginning January 1, 1992, by and among Hart Holding Company
Incorporated (later renamed Fenchurch, Inc.) Fenchurch
(subsequently merged into Hart Holding Company Incorporated),
Reeves, Brothers, Turner, Reeves Penna, Inc., A.R.A.
Manufacturing Company, Hart Investments Properties Corporation,
Hart Capital Corporation, and Reeves Holdings, Inc., as amended
on November 21, 1995 and as amended by agreement made and entered
into as of the 5th day of November 1997, containing the terms
summarized in the Disclosure Statement and included in the Plan
Supplement. The parties to the Tax Allocation Agreements shall
not have any liability to one another (including with respect to
non-tax obligations) except as specifically set forth in the Tax
Allocation Agreements.
1.97 "Termination Date" shall mean March 21, 1998, or
such other date provided in Section 3 of the Restructuring
Agreement for termination of the Restructuring Agreement or
agreed to by the Debtor and the Informal Committee.
1.98 "Voting Trust Agreement" shall mean the voting
trust agreement regarding the voting of Class B RI Common Stock,
containing the terms summarized in the Disclosure Statement and
included in the Plan Supplement.
ARTICLE II
CLASSIFICATION OF CLAIMS AND INTERESTS
2.1 Criterion of Class. A Claim or Equity Interest
is in a particular Class only to the extent that it qualifies
within the description of that Class, and is in a different Class
to the extent that any portion thereof qualifies within the
description of the different Class.
2.2 Allowed Claims and Equity Interests. All Allowed
Claims and Equity Interests are divided into the following
Classes, for all purposes, including voting, Confirmation and
distributions pursuant to this Plan, which shall be mutually
exclusive:
(a) Class 1 (Priority Claims). Class 1 shall
consist of all Allowed Priority Claims.
(b) Class 2 (General Secured Claims). Class2
shall consist of all Allowed General Secured Claims.
(c) Class 3 (General Unsecured Claims). Class3
shall consist of all Allowed General Unsecured Claims.
(d) Class 4A (Senior Noteholder Claims).
Class4A shall consist of all Allowed Senior Noteholder Claims.
(e) Class 4B (Subordinated Debentureholder
Claims). Class 4B shall consist of all Allowed Subordinated
Debentureholder Claims.
(f) Class 5 (Affiliate Claims). Class 5 shall
consist of all Allowed Affiliate Claims.
(g) Class 6 (Equity Interests). Class6 shall
consist of all Allowed Equity Interests.
2.3 Allowance of Claims. The administrative claim of
GECC shall be, and hereby is, Allowed in an aggregate amount
equal to the outstanding principal amount as of the Effective
Date plus unpaid interest, fees and expenses, if any, and all
other obligations of Reeves payable under the Secured Guaranty,
which are or have been accrued through the Effective Date. All
Senior Noteholder Claims and all Subordinated Debentureholder
Claims shall be Allowed as to each holder thereof in an amount
equal to the aggregate principal outstanding under the Old Senior
Notes and the Old Subordinated Debentures held by each such
Claimant plus interest through the Filing Date and treated in
accordance with Sections 5.4 and 5.5 of this Plan. All Affiliate
Claims shall be Allowed and treated in accordance with Section
5.6 of this Plan. No objections shall be entertained to (a) the
allowance of the administrative claim of GECC, or the validity,
priority, enforceability, or non-avoidability of the Liens
securing the obligations to GECC under the Secured Guaranty, (b)
the allowance of the Claims of any holder of Old Senior Notes and
Old Subordinated Debentures, (c) the allowance and treatment of
the Affiliate Claims, or (d) the distributions to be made or
treatment accorded under the Plan to the Allowed Senior
Noteholder Claims, the Allowed Subordinated Debentureholder
Claims, and the Allowed Affiliate Claims.
ARTICLE III
IDENTIFICATION OF CLASSES OF
CLAIMS AND INTERESTS IMPAIRED AND
NOT IMPAIRED UNDER THIS PLAN
3.1 Deemed Acceptance by Unimpaired Classes. Each of
Classes 1, 2, and 3 is unimpaired under this Plan and, pursuant
to Section1126(f) of the Bankruptcy Code, holders of Claims in
each such Class are conclusively presumed to accept this Plan,
and therefore are not entitled to vote.
3.2 Holders of Claims and Equity Interests Entitled
to Vote. Each holder of an Allowed Claim or Equity Interest in
an impaired Class of Claims or Equity Interests against or in the
Debtor shall be entitled to vote to accept or reject this Plan.
Classes 4A, 4B, 5 and 6 are impaired under this Plan, and only
the holders of Claims or Equity Interests in each such Class are
entitled to vote on this Plan.
3.3 Elimination of Classes. Any Class of Claims that
is not occupied as of the date of the commencement of the
Confirmation Hearing by an Allowed Claim or a Claim temporarily
Allowed under Rule 3018 of the Bankruptcy Rules shall be deemed
deleted from this Plan for all purposes.
ARTICLE IV
PAYMENT OF ALLOWED ADMINISTRATIVE CLAIMS
AND ALLOWED PRIORITY TAX CLAIMS
4.1 Non-Classification. As provided in Section
1123(a)(1) of the Bankruptcy Code, Administrative Claims and
Priority Tax Claims against the Debtor are not classified for the
purposes of voting on or receiving distributions under this Plan.
Rather, all such Claims are treated separately upon the terms set
forth in this Article IV.
4.2 Administrative Claims. All Administrative Claims
shall be paid by the Debtor in full, in Cash, in such amounts as
(a) are incurred in the ordinary course of business by the
Debtor, (b) are Allowed by the Bankruptcy Court upon the later of
the Effective Date, the date upon which there is a Final Order
allowing such Administrative Claim or any other date specified in
such order, or (c) may be agreed upon between the holder of such
Administrative Claims and the Debtor. Such expenses shall
include obligations to GECC under the Secured Guaranty, costs
incurred in the operation of the Debtor's business after the
commencement of its chapter 11 case, the fees and expenses of
Professionals retained by the Debtor, the Informal Committee, or
any statutory committee appointed to serve in the Debtor's
chapter11 case, and the fees due to the United States Trustee
pursuant to 28 U.S.C. Section 1930. Reorganized Reeves shall pay the
fees and expenses incurred on or before the Effective Date by the
members of the Informal Committee, including counsel and
financial advisors to the Informal Committee, incurred in
connection with the Reorganization Case or this Plan (without
application by, or on behalf of, any such Person to the
Bankruptcy Court, unless specifically ordered by the Bankruptcy
Court) as an Administrative Claim (unless any such Person has
been retained by an Official Committee pursuant to Sections 327
or 1103 of the Bankruptcy Code, in which event, Section 4.4 of
this Plan shall apply). If the Reorganized Debtor and any such
Person cannot agree on the amount of fees and expenses to be paid
to such Person, the amount of such fees and expenses shall be
determined by the Bankruptcy Court.
4.3 Priority Tax Claims. Allowed Priority Tax Claims
shall be paid by the Debtor in full, in Cash, upon the later of
(a) the Effective Date, (b) the date upon which there is a Final
Order allowing such Claim as an Allowed Priority Tax Claim, (c)
the date that such Allowed Priority Tax Claim would have been due
if the Reorganization Case had not been commenced, or (d) upon
such other terms as may be agreed to between the Debtor and any
holder of an Allowed Priority Tax Claim; provided, however, that
the Debtor may, at its option, in lieu of payment in full of
Allowed Priority Tax Claims on the Effective Date, make Cash
payments respecting Allowed Priority Tax Claims, deferred to the
extent permitted by Section 1129(a)(9) of the Bankruptcy Code
and, in such event, interest shall be paid on the unpaid portion
of such Allowed Priority Tax Claim at a rate to be agreed to by
the Debtor and the appropriate governmental unit or, if they are
unable to agree, as determined by the Bankruptcy Court.
4.4 Professional Fees. All final applications for
Professional Fees for services rendered in connection with the
Reorganization Case and this Plan prior to the Confirmation Date
shall be filed with the Bankruptcy Court within thirty (30) after
the Confirmation Date. Payments respecting final Professional
Fee applications shall be made by the Debtor and/or the
Reorganized Debtor upon the Bankruptcy Court's authorization
thereof on appropriate notice and hearing. All Professional Fees
for services rendered in connection with the Reorganization Case
and this Plan after the Confirmation Date shall be paid by the
Reorganized Reeves without further Bankruptcy Court authorization
or the need to file a fee application. If Reorganized Reeves and
any Professional cannot agree on the amount of fees and expenses
to be paid to such party, the amount of any such fees and
expenses shall be determined by the Bankruptcy Court.
ARTICLE V
PROVISIONS FOR TREATMENT OF CLAIMS AGAINST
AND EQUITY INTERESTS IN THE DEBTOR
5.1 Class 1 (Priority Claims). All Allowed Priority
Claims shall be paid in full, in Cash, upon the later of the
Effective Date or the date on which there is a Final Order
allowing any such Claim as an Allowed Priority Claim, or upon
such other terms as may be agreed to by the Debtor and any holder
of an Allowed Priority Claim.
5.2 Class 2 (General Secured Claims). All holders of
an Allowed General Secured Claim will, at the Debtor's option,
either be paid in full, in Cash, on the Effective Date or the
date upon which there is a Final Order allowing such Claim as an
Allowed General Secured Claim, or will otherwise be rendered
unimpaired, or upon such other terms as may be agreed to by the
Debtor and any holder of an Allowed General Secured Claim.
5.3 Class 3 (General Unsecured Claims). The legal,
equitable, and contractual rights to which an Allowed General
Unsecured Claim entitles the holder thereof shall be left
unimpaired and, accordingly, shall be satisfied on the latest of
(a) the Effective Date, (b) the date a General Unsecured Claim
becomes an Allowed Claim, (c) the date an Allowed General
Unsecured Claim becomes due and payable in the ordinary course of
the Debtor's business consistent with the Debtor's ordinary
payment practices or pursuant to any agreement between the Debtor
and the holder of an Allowed General Unsecured Claim, or (d)on
such other date as may be agreed to by the Debtor and the holder
of such Allowed General Unsecured Claim.
5.4 Class 4A (Senior Noteholder Claims). As of the
Effective Date, all of the Old Senior Notes shall be canceled,
annulled and extinguished and each holder of an Allowed Senior
Noteholder Claim shall receive its Pro Rata share of (a)
$70,318,387 of the New Senior Notes issued pursuant to the New
Senior Note Indenture, (b) $65,619,183 of the New Structurally
Subordinated Notes issued pursuant to the New Structurally
Subordinated Note Indenture, and (c) a number of shares of the
issued and outstanding RI Common Stock representing a 22.47%
equity ownership in RI. The holders of the Allowed Senior
Noteholder Claims shall also be entitled (upon returning an
executed signature page for each of the Registration Rights
Agreements and the Stockholders Agreement when exchanging the Old
Senior Notes for New Senior Notes, New Structurally Subordinated
Notes, and RI Common Stock) to the benefits of and be subject to
the obligations arising under, as applicable, the Registration
Rights Agreements and the Stockholders Agreement. Interest on
the New Senior Notes shall accrue from January 15, 1998.
5.5 Class 4B (Subordinated Debentureholder Claims).
As of the Effective Date, all of the Old Subordinated Debentures
shall be canceled, annulled and extinguished, and each holder of
an Allowed Subordinated Debentureholder Claim shall receive its
Pro Rata share of (a) $4,681,613 of the New Senior Notes issued
pursuant to the New Senior Note Indenture, (b) $7,385,540 of the
New Structurally Subordinated Notes issued pursuant to the New
Structurally Subordinated Note Indenture, and (c) a number of
shares of the issued and outstanding RI Common Stock representing
a 2.53% equity ownership in RI. The holders of the Allowed
Subordinated Debentureholder Claims shall also be entitled (upon
returning an executed signature page for each of the Registration
Rights Agreements and the Stockholders Agreement when exchanging
the Old Subordinated Debentures for New Senior Notes, New
Structurally Subordinated Notes, and RI Common Stock) to the
benefits of and be subject to the obligations arising under, as
applicable, the Registration Rights Agreements and the
Stockholders Agreement. Interest on the New Structurally
Subordinated Notes shall accrue from January 15, 1998.
5.6 Class 5 (Affiliate Claims). As of the Effective
Date, all Affiliate Claims shall be Allowed, and, in full
satisfaction thereof, on or before the Effective Date, the
Consulting Agreements, Fenchurch Tax Sharing Note, the Tax
Allocation Agreements, the Employment Agreements, and the SPV
Reeves Guarantees (as described in the Disclosure Statement and
included in the Plan Supplement), shall have been executed and
shall become effective according to their terms.
5.7 Class 6 (Equity Interests). As of the Effective
Date, all existing Equity Interests in the Debtor shall continue
to be held by RI. Upon the Effective Date, the holders of Equity
Interests will be impaired through the dilution of RI Common
Stock resulting from, among other things, the granting of shares
of RI Common Stock to the holders of Old Senior Notes and Old
Subordinated Debentures equal to 25% of all issued and
outstanding RI Common Stock. Claims in respect of any rejected
unexercised stock options shall receive no distributions.
ARTICLE VI
MEANS OF EXECUTION
In addition to the provisions set forth elsewhere in
this Plan regarding the means of execution, the following shall
constitute the means of execution of this Plan.
6.1 Plan Funding. The funds utilized to make the
Cash payments hereunder have been and will continue to be
generated by, among other things, the operation and borrowings of
the businesses of Brothers, and the dispositions of assets of
Brothers.
6.2 Plan Documents. Upon the Effective Date, all of
the Plan Documents shall have been authorized and executed and
shall become effective.
6.3 Issuance of New Senior Notes and New Structurally
Subordinated Notes. On the Effective Date, Reorganized Reeves
and RI shall be deemed to have authorized and shall issue the New
Senior Notes and the New Structurally Subordinated Notes,
respectively.
6.4 New Reeves Charter. The New Reeves Charter,
together with the provisions of this Plan, shall provide for,
among other things, the retention and continuation of 100% of the
Equity Interests in Reorganized Reeves by RI, the authorization
and issuance of the New Senior Notes, and provide for such other
provisions that are necessary to facilitate consummation of this
Plan, including a provision prohibiting the issuance of nonvoting
equity securities in accordance with Section 1123(a)(6) of the
Bankruptcy Code.
6.5 New RI Charter and RI Common Stock. The New RI
Charter, together with the provisions of this Plan, shall provide
for, among other things, the authorization and issuance of the RI
Common Stock (including as to Additional Interest) and the New
Structurally Subordinated Notes, and provide for such other
provisions that are necessary to facilitate consummation of this
Plan, including a provision prohibiting the issuance of nonvoting
equity securities in accordance with Section 1123(a)(6) of the
Bankruptcy Code. Upon the Effective Date, the RI Common Stock
will be held as follows (a)75% by James W. Hart, Jr., Douglas B.
Hart, Jennifer Fray, and any other member of the Hart Group who
is a holder of RI Common Stock, (b)22.47% by the holders of Old
Senior Notes, and (c)2.53% by the holders of Old Subordinated
Debentures.
6.6 Post-Reorganization Board of Directors and
Officers. On the Effective Date, the operation of Reorganized
Reeves shall become the responsibility of the Post-Reorganization
Board, in accordance with applicable law. Subject to the terms
of the Stockholders Agreement, the Post-Reorganization Board will
consist of five members. One member shall be Hart, who will be
Chairman of the Post-Reorganization Board, three other members
shall be designated by the Debtor, and one member shall be
designated by the Informal Committee through the Informal
Committee providing the Debtor with three alternative designees,
one of whom will be selected by the Debtor. The names of the
five members of the initial Post-Reorganization Board and
officers of Reorganized Reeves shall be filed with the Bankruptcy
Court on or prior to the Confirmation Hearing in accordance with
Section 1129(a)(5) of the Bankruptcy Code.
6.7 RI Board of Directors and Officers. On the
Effective Date, the operation of RI shall be the responsibility
of the Board of Directors of RI. Subject to the terms of the
Stockholders Agreement, the Board of Directors of RI shall
consist of five members. One member shall be Hart, who will be
Chairman of the Board, three other members shall be designated by
the Debtor, and one member shall be designated by the Informal
Committee through the Informal Committee providing RI with three
alternative designees, one of whom will be selected by RI. The
designation of the members of the boards of directors of RI's
direct and indirect domestic subsidiaries, exclusive of SPV
Reeves, may, at the discretion of the Informal Committee, be
accomplished in the same manner as set forth herein. On the
Effective Date, the Informal Committee shall have the right to
appoint a designee to SPA's board of directors under the same
terms and conditions set forth above, if such appointment is
practicable in the reasonable judgment of the Informal Committee.
The names of the five members of the initial Board of Directors
and officers of RI shall be filed with the Bankruptcy Court on or
prior to the Confirmation Hearing in accordance with Section
1129(a)(5) of the Bankruptcy Code.
6.8 Arrangement Fee Note. In consideration for the
services provided in connection with the arrangement and
implementation of the consensual restructuring with certain
holders of the Old Senior Notes and Old Subordinated Debentures
including in respect of the GECC Loan Documents, on the Effective
Date, the Debtor shall execute and issue the Arrangement Fee Note
in favor of Oaktree Capital Management, LLC. The Arrangement Fee
Note shall not be subject to any objection, request for
estimation, equitable subordination or to otherwise limit
recovery, in any subsequent insolvency, bankruptcy, or other
proceeding regarding Reeves.
6.9 Fenchurch Tax Sharing Note. On January 1, 1998,
RI issued the Fenchurch Tax Sharing Note to Fenchurch, to satisfy
the Fenchurch Tax Sharing Claim. The Fenchurch Tax Sharing Note
was issued on the same terms and conditions as will apply to the
New Structurally Subordinated Notes, with the exception that (a)
interest on the Fenchurch Tax Sharing Note (and interest on any
notes issued as interest) shall only be payable in Cash to the
extent necessary to satisfy Fenchurch's income tax obligations
arising from interest on the Fenchurch Tax Sharing Note (and
interest on any notes issued as interest), and (b) the Fenchurch
Tax Sharing Note does not accrue Additional Interest. The
Fenchurch Tax Sharing Note shall not be subject to any objection,
request for estimation, equitable subordination or to otherwise
limit recovery, in any subsequent insolvency, bankruptcy, or
other proceeding regarding RI.
6.10 Employment Agreements, Consulting Agreements, SPV
Reeves Guarantees. On or prior to the Effective Date, the
Employment Agreements, Consulting Agreements, and the SPV Reeves
Guarantees, shall have been executed and shall become effective
according to their terms. The SPV Reeves Guarantees shall not be
subject to any objection, request for estimation, equitable
subordination or to otherwise limit recovery, in any subsequent
insolvency, bankruptcy, or other proceeding regarding SPV
Reeves.
6.11 Payment to the Internal Revenue Service.
Brothers shall pay directly or indirectly by remitting the funds
to Fenchurch who shall pay the Internal Revenue Service, the
amount of the tax liability (including interest and penalties, if
any) for the period from January 1, 1988 through December 31,
1992 of the federal consolidated tax group of which it was a
member during this period, which amount is currently estimated to
be sightly more than $4,500,000, without being reimbursed by any
other member of the group.
6.12 Provisions Regarding Exchange of Debt Instruments
and Securities. Upon the Effective Date, the exchange of New
Senior Notes, New Structurally Subordinated Notes and RI Common
Stock for Old Senior Notes and Old Subordinated Debentures will
be treated as follows (a) the exchange by Reeves of $75,000,000
of the New Senior Notes for $70,318,387 of the Old Senior Notes
including accrued interest and $4,681,613 of the Old Subordinated
Debentures including accrued interest, and (b) the acquisition by
RI of $65,619,183 of the Old Senior Notes including accrued
interest and $7,385,540 of the Old Subordinated Debentures
including accrued interest, in exchange for approximately
$73,004,723 of the New Structurally Subordinated Notes and 25% of
the RI Common Stock. The Old Senior Notes and the Old
Subordinated Debentures acquired by RI will be contributed to the
capital of Reeves and canceled.
6.13 Disbursement of Funds and Delivery of
Distribution. Except as otherwise provided hereunder, all
distributions hereunder shall be made on the Effective Date, or
as soon as practicable thereafter, to each holder of an Allowed
Claim. The holder of an Allowed Claim shall be deemed to be the
Person entitled to such distribution, and distributions shall be
made and at the address of such holder, who (a)filed the most
recent timely proof of Claim relating thereto, provided no
evidence that the transfer of such Claim was filed, or (b)in the
event evidence of transfer of a timely filed proof of Claim was
filed (i)the transferee named therein if the transferor named
therein does not file a timely objection pursuant to Bankruptcy
Rule3001(e); or (ii)the Person so designated by a Final Order of
the Bankruptcy Court if a timely objection to the evidence of
transfer was filed, (c)is reflected in the Schedules as the
holder of such Claim if no timely proof of Claim related thereto
was filed, or (d) in the case of the holders of Senior Noteholder
Claims and Subordinated Debentureholder Claims, as reflected in
the records of ownership maintained by the Indenture Trustees.
Except as otherwise provided in this Plan, on the Effective Date,
or the date upon which there is a Final Order allowing a Disputed
Claim, or as soon as practicable thereafter, the Reorganized
Debtor, or the Disbursing Agent, shall make the Cash payments
(which shall be by check) and the distributions of the New Senior
Notes, New Structurally Subordinated Notes, Reorganized Reeves
Common Stock, and RI Common Stock to the holders of Allowed
Claims or Equity Interests to the extent provided for in this
Plan by first-class mail (or by other equivalent or superior
means as determined in the sole discretion of the Debtor, which
in the case of holders of more than $5,000,000 of the Old Senior
Notes or holders of more than $2,000,000 of the Old Subordinated
Debentures, shall be at a closing at the offices of counsel for
the Debtor on, or as soon as practicable after, the Effective
Date). Distributions of Cash, New Senior Notes, New Structurally
Subordinated Notes, Reorganized Reeves Common Stock, and RI
Common Stock pursuant to this Plan shall be effectuated by
Reorganized Reeves, or the Disbursing Agent, when it receives all
applicable documentation reasonably requested of holders of
Allowed Claims. To receive the benefits of and be subject to the
obligations arising under the Registration Rights Agreements and
the Stockholders Agreement, holders of Senior Noteholder Claims
and Subordinated Debentureholder Claims, upon exchanging the Old
Senior Notes or the Old Subordinated Debentures for New Senior
Notes and New Structurally Subordinated Notes, must return an
executed signature page for each such agreement to the
Reorganized Debtor or the Disbursing Agent. In the event that
any distribution to any Claimant is returned as undeliverable,
the Reorganized Debtor, or the Disbursing Agent, shall use
reasonable efforts to determine the current address of such
holder, but no distribution to such holder shall be made unless
and until the Reorganized Debtor has determined the then current
address of such holder, at which time such distribution shall be
made to such holder without additional interest from the
Effective Date; provided, that, such distributions shall be
deemed unclaimed property in accordance with Section 6.18 of this
Plan at the expiration of one year from the Effective Date.
6.14 Distribution Record Date. As of the close of
business on the Confirmation Date, the transfer registers for the
Old Senior Notes and Old Subordinated Debentures will be closed,
and the Disbursing Agent, the Old Senior Note Indenture Trustee
and the Old Subordinated Debenture Indenture Trustee and their
agents will have no obligation to recognize the transfer of any
such Notes or Debentures occurring after the close of business on
the Confirmation Date and will be entitled, for purposes of
distributions under this Plan, to recognize and deal only with
those holders of record as of the close of business on the
Confirmation Date.
6.15 Surrender of Canceled Instruments or Securities.
(a) As a condition precedent to receiving any
distribution pursuant to this Plan on account of an Allowed Claim
evidenced by the Old Senior Notes, the Old Subordinated
Debentures, or any other instruments canceled pursuant to this
Plan, the holder of such Claim will tender the applicable notes
or debentures, or other instruments evidencing such Claim to the
Disbursing Agent. Any Cash, New Senior Notes, New Structurally
Subordinated Notes, or RI Common Stock to be distributed pursuant
to this Plan on account of any such Claim will, pending such
surrender, be treated as an undeliverable distribution pursuant
to Section 6.18 of this Plan.
(b) Except as provided in Section 6.15(c)
hereof, each holder of an Allowed Claim will tender such note,
debenture, or other instrument to the Disbursing Agent, together
with a letter of transmittal to be provided to such holders by
the Disbursing Agent, as promptly as practicable on or following
the Effective Date. The letter of transmittal will include,
among other provisions, customary provisions with respect to the
authority of the holder of the note, debenture, or other
instrument to act and the authenticity of any signatures required
thereon. All surrendered notes, debentures, or other instruments
will be marked as canceled by the Disbursing Agent, and delivered
to Reorganized Reeves.
(c) In addition to any requirements under
applicable law, any holder of an Allowed Claim evidenced by a
note, debenture, or other instrument that has been lost, stolen,
mutilated, or destroyed will, in lieu of surrendering such note,
debenture, or other instrument, deliver to the Disbursing Agent
(i) evidence satisfactory to the Disbursing Agent of such loss,
theft, mutilation, or destruction, and (ii) such security or
indemnity as may be required by the Disbursing Agent to hold the
Disbursing Agent harmless from any damages, liabilities, or costs
incurred in treating such individual as a holder of a Claim.
Upon compliance with this Section 6.15(c) by a holder of a Claim
evidenced by a note, debenture, or other instrument, such holder
will for all purposes under this Plan be deemed to have
surrendered such note, debenture, or other instrument.
6.16 Disputed Claims.
(a) With respect to any Disputed Claims, the
Bankruptcy Court may fix or liquidate the amount of such Disputed
Claims pursuant to Section502(c) of the Bankruptcy Code, in which
event the amounts so fixed or liquidated shall be deemed the
maximum amounts of the Disputed Claims pursuant to Section502(c)
of the Bankruptcy Code for purposes of distribution under this
Plan.
(b) A Disputed Claim shall only be entitled to a
distribution under this Plan when a Disputed Claim becomes an
Allowed Claim upon entry of a Final Order of the Bankruptcy Court
or other court with appropriate jurisdiction. Upon such Final
Order, the Disbursing Agent shall distribute to the holder of
such Allowed Claim the property distributable to such holder as
provided in this Plan.
6.17 Disputed Payments. In the event of any dispute
between and among Claimants or holders of Equity Interests as to
the right of any Person to receive or retain any payment or
distribution to be made to such Person under this Plan, the
Reorganized Debtor may, in lieu of making such payment or
distribution to such Person, instead hold such payment or
distribution, without interest, until the disposition thereof
shall be determined by a Final Order of the Bankruptcy Court or
other court with appropriate jurisdiction.
6.18 Unclaimed Property. Any Person who fails to
claim any Cash or any notes, debentures, or other instruments
distributed hereunder within one year from the Effective Date or
from such other date as a Claim becomes an Allowed Claim shall
forfeit all rights to any such distributions under this Plan.
Upon forfeiture, such Cash (including interest thereon) shall be
the property of Reorganized Reeves and all such notes,
debentures, and other instruments shall be canceled. Persons who
fail to claim Cash and/or such notes, debentures, or other
instruments shall forfeit their rights thereto and shall have no
Claim whatsoever against the Debtor or Reorganized Reeves or any
holder of an Allowed Claim to whom distributions are made.
6.19 Set-Offs. Nothing contained in this Plan shall
constitute a waiver or release by the Debtor of any right of set-
off the Debtor may have against any Person other than the holders
of Affiliate Claims, Senior Noteholder Claims or Subordinated
Debentureholder Claims, or the administrative claim of GECC.
6.20 Withholding Taxes. Reorganized Reeves and RI
shall be entitled to deduct any federal, state or local
withholding taxes from any payments made with respect to Allowed
Claims, as appropriate.
6.21 Revesting. Except as otherwise provided by this
Plan, upon the Effective Date, title to all properties and assets
dealt with by this Plan (including all assets comprising the
Estate) shall pass to the Reorganized Debtor free and clear of
all Claims, Liens, encumbrances and interests (except those
Claims, Liens, encumbrances and interests created pursuant to
this Plan and the GECC Loan Documents) of creditors and of equity
security holders, and the Confirmation Order shall be a judicial
determination of discharge and extinguishment of all such Claims,
Liens, encumbrances, and interests.
6.22 Discharge. Except as otherwise expressly
provided in Section 1141 of the Bankruptcy Code or this Plan,
and, without limitation, to the fullest extent authorized or
provided for by Sections 524 and 1141 of the Bankruptcy Code, the
provisions of this Plan shall bind the Reorganized Debtor, any
other entity issuing securities under this Plan, any entity
acquiring property under this Plan, and any holder of a Claim or
Equity Interest, and the distributions made pursuant to this Plan
will be in full and final satisfaction, settlement, release, and
discharge as against the Debtor, of any and all Claims and Equity
Interests of any nature whatsoever that arose before the
Effective Date including, without limitation, any interest
accrued or expenses incurred thereon from and after the Filing
Date, whether or not (a)a proof of Claim or Equity Interest based
on such debt, obligation or Equity Interest is filed or deemed
filed under Section501 of the Bankruptcy Code, (b)such Claim or
Equity Interest is Allowed under Section502 of the Bankruptcy
Code, or (c)the holder of such Allowed Claim or Equity Interest
has accepted this Plan. Upon the Effective Date, all holders of
Claims against the Debtor, and holders of Equity Interests in the
Debtor shall be precluded from asserting against the Debtor, or
any of its assets or properties, any other or further Claims or
Equity Interests based upon any act or omission, transaction, or
other activity of any kind or nature that occurred prior to the
Effective Date, and the Confirmation Order shall permanently
enjoin such holders of Claims and Equity Interests, and their
successors and assigns, from enforcing or seeking to enforce any
such Claims or Equity Interests. Notwithstanding anything in
this Plan, including this Section 6.22 and Section 6.24, to the
contrary, upon the Effective Date, the GECC Loan Documents shall
continue to remain in full force and effect in accordance with
their terms, and the obligations of Reeves and all Released
Parties (as defined in Section6.24 of this Plan) who are parties
to the GECC Loan Documents shall continue to be valid and binding
obligations of Reorganized Reeves and such Released Parties,
fully enforceable against Reorganized Reeves and such Released
Parties in accordance with the terms of the GECC Loan Documents.
Notwithstanding anything in this Plan, this Plan shall not affect
in any way, including by discharge, release or otherwise, the
liabilities, if any, of the Debtor or of any other person with
respect to the Pension Plan, including any liability to the PBGC
under Title IV of the Employee Retirement Income Security Act of
1974 or any liability to the Pension Plan itself, nor shall any
injunction set forth in this Plan or issues in connection with
this case pertain to any action or claim with respect to the
Pension Plan.
6.23 Waiver of Contractual Subordination Rights. As
of the Effective Date, each holder of an Allowed Claim (a) by
virtue of the acceptance of this Plan by such holder's Class in
accordance with Section 1126 of the Bankruptcy Code, (b) by
virtue of the acceptance of this Plan by such holder, (c) by
virtue of the acceptance of any distribution under this Plan on
account of such Claim, or (d) by virtue of the Confirmation of
this Plan, waives, releases, and relinquishes any and all rights,
claims, or causes of action which may subordinate Claims to the
payment and distributions or consideration made or to be made
hereunder or otherwise to any other holder of a Claim against the
Debtor, whether arising out of contract or under applicable law
including, without limitation, Section 510 of the Bankruptcy Code
and the provisions of the Old Senior Note Indenture and the Old
Subordinated Debenture Indenture.
6.24 Additional Releases.
(a) Without limiting the provisions of Section
6.22 of this Plan and except as otherwise expressly provided
herein or in the Confirmation Order, on the Effective Date, in
consideration for, or as part of the treatment accorded to, the
holders of Claims and Equity Interests under this Plan, Reeves,
Reorganized Reeves, Brothers, any of their respective Affiliates,
and all of such entities' respective present officers, former
officers who are members of the Hart Group, directors, members,
partners, agents, employees, attorneys, and financial
consultants, and their successors and assigns and the Informal
Committee and the Indenture Trustees and all of their respective
present officers, directors, members, partners, agents,
employees, attorneys, and financial consultants, and their
successors and assigns (collectively, the "Released Parties"),
shall be deemed forever discharged and released from any and all
rights, causes of action, claims, demands, debts, or liabilities,
of every kind or nature, known or unknown, whether in law or
equity, that any Person, including the Debtor, Brothers, and any
of their Affiliates, may have asserted, could have asserted, or
could in the future assert, directly or indirectly, against any
of the Released Parties relating to the Debtor, Brothers, and any
of their Affiliates, with the exception of the Excluded Claims.
(b) On the Effective Date (i) Reeves,
Reorganized Reeves, Brothers, any of their respective Affiliates,
and all of such entities' respective present officers, former
officers who are members of the Hart Group, directors, members,
partners, agents, employees, attorneys, and financial
consultants, and their successors and assigns, and (ii)the
Informal Committee and the Indenture Trustees and all of such
entities' respective present officers, directors, members,
partners, agents, employees, attorneys, and financial
consultants, and their successors and assigns, shall be deemed to
have unconditionally and mutually released one another from any
and all rights, causes of action, claims, demands, debts, or
liabilities, of every kind or nature, known or unknown, whether
in law or equity, that any of the parties may have asserted,
could have asserted, or could in the future assert, directly or
indirectly, against each other relating to the Debtor, Brothers,
or any of their Affiliates, with the exception of Excluded
Claims. Such release shall include a release by the Debtor,
Brothers, and any of their Affiliates of the Released Parties.
(c) Notwithstanding Sections 6.24(a) and (b)
hereof, except with respect to Claims against the Debtor that are
specifically Allowed under this Plan, the Debtor reserves the
right to object to the Claim of a Released Party against the
Debtor.
6.25 Injunctions.
(a) Unless otherwise provided in this Plan, all
injunctions or stays provided for in the Reorganization Case
pursuant to Sections 105 or 362 of the Bankruptcy Code, or
otherwise, and in effect on the Confirmation Date, shall remain
in full force and effect until the Effective Date.
(b) The Confirmation Order shall provide that
the distributions and transfers of property pursuant to the terms
of this Plan are made free and clear of all Claims and interests
(except as otherwise expressly provided in this Plan) and that,
upon Confirmation of this Plan (except as otherwise expressly
provided in this Plan), all holders of Claims or Equity Interests
shall be permanently enjoined from and restrained against
commencing or continuing any suit, action, or proceeding or
asserting against the Reorganized Debtor or its assets or
property any Claim, Equity Interest, or cause of action based
upon any act or omission, transaction, or other activity of any
kind or nature that occurred before the Confirmation Date.
(c) The Confirmation Order shall provide that,
upon Confirmation of this Plan (except as otherwise expressly
provided in this Plan), all holders of Claims or Equity Interests
shall be permanently enjoined from and restrained against
commencing or continuing any suit, action, or proceeding against
the Released Parties relating to (i)the rights, causes of action,
claims, demands, debts, or liabilities released in accordance
with Section 6.24(a) of this Plan, and (ii)any alleged default
under any contract, lease, guaranty, or other instrument of the
Debtor or its subsidiaries arising from the commencement of the
Reorganization Case or the insolvency or financial condition of
the Debtor.
6.26 Exculpation. None of the Debtor, the Reorganized
Debtor, Brothers, or any of their respective Affiliates, GECC,
the Informal Committee, the Indenture Trustees, any holder of an
Equity Interest, nor any of all such Persons' respective present
officers, former officers who are members of the Hart Group,
directors, members, partners, agents, employees, attorneys, or
financial consultants, or their successors and assigns shall have
or incur any liability to any holder of a Claim or Equity
Interest for any act or omission in connection with, or arising
out of, the negotiation, preparation or formulation of this Plan,
the pursuit of Confirmation of this Plan, the consummation of
this Plan, or other administration of this Plan or property to be
distributed under this Plan, with the exception of Excluded
Claims.
6.27 Carrying Out of Terms of This Plan and Issuance
of Debt Instruments. Pursuant to Section 303 of the Delaware
General Corporation Law, all terms of, and actions contemplated
by, this Plan may be put into effect and carried out, without
further action by the directors or shareholders of Reeves,
Reorganized Reeves, or RI, who shall be deemed to have
unanimously approved this Plan, the Plan Documents and all
transactions provided for or contemplated herein.
6.28 Section 1146 Exemption. In accordance with
Section 1146(c) of the Bankruptcy Code (a) the issuance,
transfer, or exchange of any security under this Plan or the
making or delivery of any instrument of transfer pursuant to, in
implementation of, or as contemplated by this Plan, including any
merger agreements or agreements of consolidation, deeds, bills of
sale, or assignments executed in connection with any of the
transactions contemplated under this Plan, or the revesting,
transfer, or sale of any real or personal property of the Debtor
pursuant to, in implementation of, or as contemplated by this
Plan, (b)the making, delivery, creation, assignment, amendment,
or recording of any note or other obligation for the payment of
money or any mortgage, deed of trust, or other security interest
under, in furtherance of, or in connection with this Plan, the
issuance, renewal, modification, or securing of indebtedness by
such means, (c) the making, delivery, or recording of any deed or
other instrument of transfer under, in furtherance of, or in
connection with, this Plan, including, without limitation, the
Confirmation Order, and (d) the transfer or sale of any assets
for the purpose of paying Additional Interest in connection with
this Plan, shall not be subject to any document recording tax,
stamp tax, conveyance fee, or other similar tax, mortgage tax,
real estate transfer tax, mortgage recording tax, or other
similar tax or governmental assessment. Consistent with the
foregoing, each recorder of deeds or similar official for any
county, city, or governmental unit in which any instrument
hereunder is to be recorded shall, pursuant to the Confirmation
Order, be ordered and directed to accept such instrument, without
requiring the payment of any documentary stamp tax, deed stamps,
stamp tax, transfer tax, intangible tax, or similar tax.
6.29 Reorganized Debtor's Authority. Until the
Effective Date, and thereafter pursuant to Section 9.1 of this
Plan, the Bankruptcy Court shall retain jurisdiction of the
Debtor, its properties and interests in property, and its
operations.
6.30 Full and Final Satisfaction. All payments and
all distributions hereunder shall be in full and final
satisfaction, settlement, release, and discharge of all Claims
and Equity Interests, except as otherwise provided in this Plan.
6.31 Fractional Cents. Whenever any payment of a
fraction of a cent would otherwise be called for, the actual
payment shall reflect a rounding of such fraction to the nearest
whole cent (rounding down in the case of less than .50 and
rounding up in the case of .50 or more).
6.32 Fractional Distributions; Round Lots. Any other
provision of this Plan notwithstanding, no fractional shares of
New Senior Notes, New Structurally Subordinated Notes,
Reorganized Reeves Common Stock or RI Common Stock shall be
issued or distributed in connection with this Plan. Whenever the
issuance of a fractional share of such instruments would
otherwise be called for, the actual issuance shall reflect a
rounding down of such fraction to the nearest whole share if the
fraction is less than .50, and a rounding up of such fraction to
the nearest whole share if the fraction is .50 or more.
6.33 Indenture Trustee Charging Lien. Upon the
Effective Date, Reorganized Reeves shall pay to the Indenture
Trustees, Cash equal to the amount of fees and expenses of the
Indenture Trustees (including the fees and expenses of counsel
retained by the Indenture Trustees), whether incurred prior or
subsequent to the Filing Date, without application by or on
behalf of the Indenture Trustees or their respective counsel to
the Bankruptcy Court. No objections shall be entertained to the
payment of such fees and expenses to the Indenture Trustees.
Such payments shall be in full satisfaction of the Indenture
Trustee Charging Liens. Upon such payments, any Indenture
Trustee Charging Liens shall be released. Distributions made to
the holders of Allowed Claims pursuant to this Plan will not be
reduced on account of such payments to the Indenture Trustees.
ARTICLE VII
EXECUTORY CONTRACTS, INDEMNIFICATION CLAIMS,
RETIREE BENEFITS, POST-CONFIRMATION FEES AND FINAL DECREE
7.1 Executory Contracts and Unexpired Leases. Any
unexpired lease or executory contract that has not been expressly
rejected by the Debtor or treated in this Plan with the
Bankruptcy Court's approval on or prior to the Confirmation Date
shall, as of the Confirmation Date (subject to the occurrence of
the Effective Date), be deemed to have been assumed by the Debtor
unless there is pending before the Bankruptcy Court on the
Confirmation Date a motion to reject such unexpired lease or
executory contract or such executory contract or unexpired lease
is otherwise designated for rejection, provided, that (a) such
lease or executory contract is ultimately rejected, and (b) the
filing of the Confirmation Order shall be deemed to be a
rejection of all then outstanding unexercised stock options. In
accordance with Section 1123(a)(5)(G) of the Bankruptcy Code, on
the Effective Date, or as soon as practicable thereafter, the
Debtor shall cure all defaults under any executory contract or
unexpired lease assumed pursuant to this Section7.1 by making a
Cash payment in an amount agreed to between the Debtor and the
Claimant, or as otherwise fixed pursuant to a Final Order. Upon
the Effective Date, the Restructuring Agreement shall be
superseded in its entirety by the terms of this Plan, the Plan
Documents, and the Confirmation Order.
7.2 Indemnification Claims. Subject to the
occurrence of the Effective Date, all Indemnification Claims
shall survive Confirmation of this Plan, continue and remain
unaffected thereby and not be discharged. The Debtor or the
Reorganized Debtor, as the case may be, shall continue and
maintain all presently existing director and officer insurance
policies, and all such policies shall continue and remain in full
force and effect following Confirmation.
7.3 Retiree Benefits. Payment of all retiree
benefits shall continue, solely to the extent, and for the
period, the Debtor is contractually or legally obligated to
provide such benefits.
7.4 Post-Confirmation Fees, Final Decree.
The Reorganized Debtor shall be responsible for the
payment of any post-confirmation fees due pursuant to 28 U.S.C. Section
1930(a)(6) and the filing of post-confirmation reports, until a
final decree is entered. The final decree shall be entered as
soon as practicable after distributions have commenced under this
Plan.
ARTICLE VIII
CONDITIONS PRECEDENT TO
EFFECTIVENESS OF THIS PLAN
8.1 Conditions to Effective Date. The occurrence of
the Effective Date of this Plan is subject to satisfaction of
each of the following conditions precedent:
(a) The Confirmation Date shall have occurred
and the Confirmation Order, which shall be in form and substance
reasonably satisfactory to the Informal Committee and GECC, shall
have become a Final Order.
(b) The Termination Date shall not have passed.
(c) All other actions and documents necessary to
implement the provisions of this Plan on the Effective Date shall
have been, respectively, effected or executed and delivered.
(d) All representations and warranties in the
Restructuring Agreement shall be true and correct as set forth in
appropriate certificates from the parties to the Restructuring
Agreement.
(e) There shall be no outstanding event of
default or condition that with the occurrence of time would
constitute an event of default under (i)the GECC Loan Documents,
(ii) the New Senior Note Indenture, (iii) the New Structurally
Subordinated Note Indenture, or (iv) any other Plan Document.
8.2 Waiver of Conditions. The Debtor and the
Informal Committee expressly reserve the right to waive, in whole
or in part, any of the conditions set forth in Section 8.1 of
this Plan (other than Section8.1(a) insofar as it relates to
GECC). Any such waiver or modification of a condition precedent
in this ArticleVIII may be effected at any time, without notice,
without leave or order of the Bankruptcy Court, and without any
formal action.
ARTICLE IX
RETENTION OF JURISDICTION
9.1 Retention of Jurisdiction. From and after the
Confirmation Date, the Bankruptcy Court shall retain such
jurisdiction as is legally permissible including, but not limited
to, jurisdiction for the following purposes:
(a) To hear and determine any and all objections
to the allowance of a Claim or any controversy as to the
classification of Claims, provided that only the Debtor may file
objections to Claims;
(b) To hear and determine any and all
applications by Professionals for compensation and reimbursement
of expenses;
(c) To hear and determine any and all pending
applications for the rejection and disaffirmance of executory
contracts and unexpired leases, and fix and allow any Claims
resulting therefrom;
(d) To liquidate or resolve any Disputed Claim;
(e) To enforce the provisions of this Plan,
including the injunction, exculpation and releases provided for
in this Plan;
(f) To enable the Debtor to prosecute any and
all proceedings which have been or may be brought prior to the
Effective Date to set aside Liens or encumbrances and to recover
any transfers, assets, properties, or damages to which the Debtor
may be entitled under applicable provisions of the Bankruptcy
Code or any federal, state, or local laws, including actions
retained pursuant to Section10.3;
(g) To correct any defect, cure any omission, or
reconcile any inconsistency in this Plan, in the Plan Documents,
or in the Confirmation Order as may be necessary to carry out its
purpose and the intent of this Plan;
(h) To determine any liability to a governmental
unit which may be asserted as a result of the transactions
contemplated herein;
(i) To hear and determine matters concerning
state, local, and federal taxes in accordance with Sections 346,
505, and 1146 of the Bankruptcy Code; and
(j) To determine such other matters as may be
provided for in the Confirmation Order or as may be authorized
under the provisions of the Bankruptcy Code.
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Termination of Committees. Except as otherwise
provided in this Section 10.1, on the Effective Date, the
Informal Committee and any Official Committees shall cease to
exist and their respective members and employees or agents shall
be released and discharged from any further authority, duties,
responsibilities, and obligations relating to, arising from or in
connection with the Reorganization Case if any. The Informal
Committee and any Official Committees shall continue to exist
after such date (a) solely with respect to (i) all fee
applications filed pursuant to Section 330 of the Bankruptcy Code
or Claims for fees and expenses by Professionals employed by the
Debtor or agreed to be paid by the Debtor, (ii) any post-
Confirmation modifications to this Plan or Confirmation Order,
and (iii) any matters pending as of the Effective Date before the
Bankruptcy Court to which the Informal Committee and any Official
Committee is a party, until such matters are resolved; and (b) in
the case of the Informal Committee, until substantially all of
the distributions to be made with respect to the Senior
Noteholder Claims and the Subordinated Debentureholder Claims
under this Plan have been made.
10.2 Revocation of Plan. Subject to the terms of the
Restructuring Agreement, the Debtor reserves the right to revoke
and withdraw this Plan at any time prior to the Confirmation
Date. If this Plan is so revoked or withdrawn, then this Plan
shall be deemed null and void, and in such event nothing
contained herein shall be deemed to constitute a waiver or
release of any Claims or Equity Interests by or against the
Debtor or any other Person, or to prejudice in any manner the
rights of the Debtor or any Person in any further proceedings
involving the Debtor.
10.3 Avoidance and Recovery Actions. As of the
Effective Date, the Debtor waives the right to prosecute, and
releases, any avoidance or recovery actions under Sections544,
545, 547, 548, 549, 550, 551, and 553 of the Bankruptcy Code or
any other causes of action, or rights to payments of Claims, that
belong to or could have been raised by the Debtor or its Estate,
except for any such action which may be pending on the Effective
Date as to which Reorganized Reeves' rights shall not be waived
and released and Reorganized Reeves shall retain and may
prosecute any such actions.
10.4 Headings. Headings utilized in this Plan are for
the convenience of reference only, and shall not constitute a
part of this Plan for any other purpose.
10.5 Defects, Omissions and Amendments. The Debtor
may, without notice to holders of Claims and Equity Interests
insofar as it does not materially and adversely affect the
interest of holders of Claims and Equity Interests, correct any
defect, omission, or inconsistency in this Plan and any exhibit
hereto, in any Plan Document, or in the Disclosure Statement and
any exhibit thereto.
10.6 Governing Law. Except to the extent that the
Bankruptcy Code or other federal law is applicable, the rights
and obligations arising under this Plan shall be governed by and
construed and enforced in accordance with the internal laws of
the State of New York.
10.7 Notices. All notices, requests or demands for
payments provided for in this Plan shall be in writing and shall
be deemed to have been given when personally delivered by hand or
deposited in any general or branch post office of the United
States Postal Service or received by telex or telecopier.
Notices, requests and demands for payments shall be addressed and
sent, postage prepaid or delivered, in the case of notices,
requests or demands for payments to Reeves Industries, Inc., 401
Merritt 7 Corporate Park, P.O. Box 5063, Norwalk, Connecticut,
with a copy to Proskauer Rose LLP, 1585 Broadway, New York, New
York 10036, Attn: AlanB. Hyman, Esq., and or at any other address
designated by Debtor by notice to each holder of an Allowed Claim
or Equity Interest, and, in the case of notices to holders of
Allowed Claims and Equity Interests, at the last known address
according to the Debtor's books and records or at any other
address designated by a holder of an Allowed Claim on its proof
of Claim or filed with the Bankruptcy Court, provided that any
notice of change of address shall be effective only upon receipt.
10.8 Severability. Should any provision in this Plan
be determined to be unenforceable, such determination shall in no
way limit or affect the enforceability and operative effect of
any or all other provisions of this Plan.
10.9 Implementation. The Debtor shall take all steps,
and execute all documents deemed necessary to effectuate the
provisions contained in this Plan.
10.10 Inconsistency. In the event of any
inconsistency between this Plan and the Disclosure Statement, any
exhibit to this Plan or Disclosure Statement or any other
instrument or document created or executed pursuant to this Plan,
this Plan shall govern.
Dated: New York, New York
January 12, 1998
REEVES INDUSTRIES, INC.
Debtor and Debtor-in-Possession
By: James W. Hart, Jr.
James W. Hart, Jr.
President and Chief Executive
Officer
REEVES, INC.
Co-Proponent
By: James W. Hart, Jr.
James W. Hart, Jr.
President and Chief Executive
Officer
PROSKAUER ROSE LLP
Counsel to the Debtor and
Debtor-in-Possession
By: /s/ Alan B. Hyman
Alan B. Hyman (AH-6655)
A Member of the Firm
1585 Broadway
New York, New York 10036
(212) 969-3000
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . .. . . . . . ..1
1.1 "Additional Interest". . . . . . . . . . . . . . . . 2
1.2 "Administrative Claims". . . . . . . . . . . . . . . 2
1.3 "Affiliate". . . . . . . . . . . . . . . . . . . . . 2
1.4 "Affiliate Claims". . . . . . . . . . . . . . . . . .3
1.5 "Affiliate Released Party". . . . . . . . . . . . . .3
1.6 "Allowed". . . . . . . . . . . . . . . . . . .. . . .3
1.7 "Arrangement Fee Note". . . . . . . . . . . . . . . .3
1.8 "Ballot". . . . . . . . . . . . . . . . . . .. . . . 4
1.9 "Bankruptcy Code". . . . . . . . . . . . . . . . . . 4
1.10 "Bankruptcy Court". . . . . . . . . . . . . . . . . .4
1.11 "Bankruptcy Rules". . . . . . . . . . . . . . . . . .4
1.12 "Bar Date". . . . . . . . . . . . . . . . . . .. . . 4
1.13 "Brothers". . . . . . . . . . . . . . . . . . . . . .5
1.14 "Business Day". . . . . . . . . . . . . . . . . . .. 5
1.15 "Cash". . . . . . . . . . . . . . . . . . .. . . . . 5
1.16 "Claim". . . . . . . . . . . . . . . . . . .. . . . .5
1.17 "Claimant". . . . . . . . . . . . . . . . . . . . . .5
1.18 "Class". . . . . . . . . . . . . . . . . . .. . . . .5
1.19 "Collateral". . . . . . . . . . . . . . . . . . . . .6
1.20 "Confirmation". . . . . . . . . . . . . . . . . . . .6
1.21 "Confirmation Date". . . . . . . . . . . . . . . . . 6
1.22 "Confirmation Hearing". . . . . . . . . . . . . . . .6
1.23 "Confirmation Order". . . . . . . . . . . . . . . . .6
1.24 "Consulting Agreements". . . . . . . . . . . . . . . 6
1.25 "Contingent Claim". . . . . . . . . . . . . . . . . .6
1.26 "Disbursing Agent". . . . . . . . . . . . . . . . . .7
1.27 "Disclosure Statement". . . . . . . . . . . . . . . .7
1.28 "Disputed". . . . . . . . . . . . . . . . . . .. . . 7
1.29 "Effective Date". . . . . . . . . . . . . . . . . . .7
1.30 "Employment Agreements". . . . . . . . . . . . . . . 8
1.31 "Equity Interest". . . . . . . . . . . . . . . . . . 8
1.32 "Escrow Agreement". . . . . . . . . . . . . . . . . .8
1.33 "Estate". . . . . . . . . . . . . . . . . . .. . . . 8
1.34 "Excluded Claims". . . . . . . . . . . . . . . . . . 9
1.35 "Fenchurch". . . . . . . . . . . . . . . . . . . . . 9
1.36 "Fenchurch Tax Sharing Claim". . . . . . . . . . . . 9
1.37 "Fenchurch Tax Sharing Note". . . . . . . . . . . . .9
1.38 "Filing Date". . . . . . . . . . . . . . . . . . . .10
1.39 "Final Order". . . . . . . . . . . . . . . . . . . .10
1.40 "GECC". . . . . . . . . . . . . . . . . . .. . . . .10
1.41 "GECC Loan Documents". . . . . . . . . . . . . . . .10
1.42 "General Secured Claims". . . . . . . . . . . . . . 11
1.43 "General Unsecured Claims". . . . . . . . . . . . . 11
1.44 "Hart". . . . . . . . . . . . . . . . . . .. . . . .11
1.45 "Hart Group". . . . . . . . . . . . . . . . . . . . 11
1.46 "Indemnification Claims". . . . . . . . . . . . . . 11
1.47 "Indenture Trustee Charging Lien". . . . . . . . . .11
1.48 "Indenture Trustees". . . . . . . . . . . . . . . . 12
1.49 "Informal Committee". . . . . . . . . . . . . . . . 12
1.50 "Lien". . . . . . . . . . . . . . . . . . . . . . . 12
1.51 "New Reeves Charter". . . . . . . . . . . . . . . . 12
1.52 "New RI Charter". . . . . . . . . . . . . . . . . . 12
1.53 "New Senior Note Indenture". . . . . . . . . . . . .12
1.54 "New Senior Note Indenture Trustee". . . . . . . . .13
1.55 "New Senior Notes". . . . . . . . . . . . . . . . . 13
1.56 "New Structurally Subordinated Note Indenture" . . .13
1.57 "New Structurally Subordinated Note Indenturstee". .13
1.58 "New Structurally Subordinated Notes". . . . . . . .13
1.59 "Non-Recourse Pledge". . . . . . . . . . . . . . . .14
1.60 "Official Committee". . . . . . . . . . . . . . . . 14
1.61 "Old Senior Note Indenture . . . . . . . . . . . . .14
1.62 "Old Senior Note Indenture Trustee . . . . . . . . .14
1.63 "Old Senior Notes". . . . . . . . . . . . . . . . . 14
1.64 "Old Subordinated Debenture Indenture". . . . . . . 15
1.65 "Old Subordinated Debenture Indenture Trustee". . . 15
1.66 "Old Subordinated Debentures". . . . . . . . . . . .15
1.67 "Person". . . . . . . . . . . . . . . . . . . . . . 15
1.68 "Plan". . . . . . . . . . . . . . . . . . .. . . . .15
1.69 "Plan Documents". . . . . . . . . . . . . . . . . . 16
1.70 "Plan Supplement". . . . . . . . . . . . . . . . . .16
1.71 "Post-Reorganization Board". . . . . . . . . . . . .16
1.72 "Priority Claims". . . . . . . . . . . . . . . . . .17
1.73 "Priority Tax Claims". . . . . . . . . . . . . . . .17
1.74 "Pro Rata". . . . . . . . . . . . . . . . . . . . . 17
1.75 "Professional Fees". . . . . . . . . . . . . . . . .17
1.76 "Professionals". . . . . . . . . . . . . . . . . . .17
1.77 "Reeves" or "Debtor". . . . . . . . . . . . . . . . 17
1.78 "Registration Rights Agreements". . . . . . . . . . 18
1.79 "Released Parties". . . . . . . . . . . . . . . . . 18
1.80 "Reorganization Case". . . . . . . . . . . . . . . .18
1.81 "Reorganized Reeves" or "Reorganized Debtor". . . . 18
1.82 "Reorganized Reeves Common Stock". . . . . . . . . .18
1.83 "Restructuring Agreement". . . . . . . . . . . . . .18
1.84 "RI". . . . . . . . . . . . . . . . . . . . . . . . 19
1.85 "RI Common Stock". . . . . . . . . . . . . . . . . .19
1.86 "Schedules". . . . . . . . . . . . . . . . . . . . .19
1.87 "Secured Claims". . . . . . . . . . . . . . . . . . 19
1.88 "Secured Guaranty". . . . . . . . . . . . . . . . . 19
1.89 "Senior Noteholder Claims". . . . . . . . . . . . . 19
1.90 "SPA". . . . . . . . . . . . . . . . . . . . . . . .19
1.91 "SPV Reeves". . . . . . . . . . . . . . . . . . . . 19
1.92 "SPV Reeves Guarantees". . . . . . . . . . . . . . .20
1.93 "SPV Reeves LLC Agreement". . . . . . . . . . . . . 20
1.94 "Stockholders Agreement". . . . . . . . . . . . . . 20
1.95 "Subordinated Debentureholder Claims". . . . . . . .20
1.96 "Tax Allocation Agreements" . . . . . . . . . . . 21
1.97 "Termination Date" . . . . . . . . . . . . . . . . .21
1.98 "Voting Trust Agreement . . . . . . . . . . . . . . 21
ARTICLE II
CLASSIFICATION OF CLAIMS AND INTERESTS . . . . . . .. . . . .21
2.1 Criterion of Class . . . . . . . . . . . . . . . . 21
2.2 Allowed Claims and Equity Interests . . . . . . . . 22
2.3 Allowance of Claims . . . . . . . . . . . . . . . . 23
ARTICLE III
IDENTIFICATION OF CLASSES OF
CLAIMS AND INTERESTS IMPAIRD
NOT IMPAIRED UNDER THIS PLAN . . . . . . .. . . . . . . . . . 23
3.1 Deemed Acceptance by Unimpaired Classes . . . . . . 23
3.2 Holders of Claims and Equity Interests Entitled te. 24
3.3 Elimination of Classes . . . . . . . . . . . . . . .24
ARTICLE IV
PAYMENT OF ALLOWED ADMINISTRATIVE CLAIMS
AND ALLOWED PRIORITY TAX CLAIMS . . . . . . . . . . .. . . . .24
4.1 Non-Classification . . . . . . . . . . . . . . . . .24
4.2 Administrative Claims . . . . . . . . . . . . . . . 25
4.3 Priority Tax Claims . . . . . . . . . . . . . . . . 26
4.4 Professional Fees . . . . . . . . . . . . . . . . . 26
ARTICLE V
PROVISIONS FOR TREATMENT OF CLAIMS AGAINST
AND EQUITY INTERESTS IN THE DEBTOR . . . . . . . . .. . . . . 27
5.1 Class 1 (Priority Claims). . . . . . . . . . . . . .27
5.2 Class 2 (General Secured Claims). . . . . . . . . . 27
5.3 Class 3 (General Unsecured Claims). . . . . . . . . 27
5.4 Class 4A (Senior Noteholder Claims). . . . . . . . .28
5.5 Class 4B (Subordinated Debentureholder Claims) . . .28
5.6 Class 5 (Affiliate Claims). . . . . . . . . . . . . 29
5.7 Class 6 (Equity Interests). . . . . . . . . . . . . 29
ARTICLE VI
MEANS OF EXECUTION . . . . . . . . . . . . . . . . . . . . . .30
6.1 Plan Funding . . . . . . . . . . . . . . . . . . . .30
6.2 Plan Documents . . . . . . . . . . . . . . . . . . .30
6.3 Issuance of New Senior Notes and New Structurally
Subordinated Notes . . . . . . . . . . . . . . . . .30
6.4 New Reeves Charter . . . . . . . . . . . . . . . . .30
6.5 New RI Charter and RI Common Stock. . . . . . . . . 31
6.6 Post-Reorganization Board of Directors and Officers 31
6.7 RI Board of Directors and Officers . . . . . . . . .32
6.8 Arrangement Fee Note . . . . . . . . . . . . . . . .32
6.9 Fenchurch Tax Sharing Note . . . . . . . . . . . . .33
6.10 Employment Agreements, Consulting Agreements,
SPV Reeves Guarantees.. . . . . . . . . . . . . . . 33
6.11 Payment to the Internal Revenue Service. . . . . . .34
6.12 Provisions Regarding Exchange of Debt Instruments
and Securities.. . . . . . . . . . . . . . . . . . . . . 34
6.13 Disbursement of Funds and Delivery of Distribution. 34
6.14 Distribution Record Date . . . . . . . . . . . . . .36
6.15 Surrender of Canceled Instruments or Securities . . 37
6.16 Disputed Claims . . . . . . . . . . . . . . . . . . 38
6.17 Disputed Payments . . . . . . . . . . . . . . . . . 38
6.18 Unclaimed Property . . . . . . . . . . . . . . . . .39
6.19 Set-Offs . . . . . . . . . . . . . . . . . . . . . .39
6.20 Withholding Taxes . . . . . . . . . . . . . . . . . 39
6.21 Revesting . . . . . . . . . . . . . . . . . . . . . 40
6.22 Discharge . . . . . . . . . . . . . . . . . . . . . 40
6.23 Waiver of Contractual Subordination Rights . . . . .41
6.24 Additional Releases . . . . . . . . . . . . . . . . 42
6.25 Injunctions . . . . . . . . . . . . . . . . . . . . 44
6.26 Exculpation . . . . . . . . . . . . . . . . . . . . 45
6.27 Carrying Out of Terms of This Plan and Issuance of
Debt Instruments . . . . . . . . . . . . . . . . . .45
6.28 Section 1146 Exemption . . . . . . . . . . . . . . .46
6.29 Reorganized Debtor's Authority . . . . . . . . . . .47
6.30 Full and Final Satisfaction . . . . . . . . . . . . 47
6.31 Fractional Cents . . . . . . . . . . . . . . . . . .47
6.32 Fractional Distributions; Round Lots . . . . . . . .47
6.33 Indenture Trustee Charging Lien . . . . . . . . . . 47
ARTICLE VII
EXECUTORY CONTRACTS, INDEMNIFICATION CLAIMS,
RETIREE BENEFITS, POST-CONFIRMATION FEES AND FINAL DECREE . . 48
7.1 Executory Contracts and Unexpired Leases . . . . . .48
7.2 Indemnification Claims . . . . . . . . . . . . . . .49
7.3 Retiree Benefits . . . . . . . . . . . . . . . . . .49
7.4 Post-Confirmation Fees, Final Decree . . . . . . . .49
ARTICLE VIII
CONDITIONS PRECEDENT TO
EFFECTIVENESS OF THIS PLAN . . . . . . . . . . . . . . . . . .50
8.1 Conditions to Effective Date . . . . . . . . . . . .50
8.2 Waiver of Conditions . . . . . . . . . . . . . . . .51
ARTICLE IX
RETENTION OF JURISDICTION . . . . . . . . . . . . . . . . . . 51
9.1 Retention of Jurisdiction . . . . . . . . . . . . . 51
ARTICLE X
MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . .52
10.1 Termination of Committees . . . . . . . . . . . . . 53
10.2 Revocation of Plan . . . . . . . . . . . . . . . . .53
10.3 Avoidance and Recovery Actions . . . . . . . . . . .54
10.4 Headings . . . . . . . . . . . . . . . . . . . . . .54
10.5 Defects, Omissions and Amendments . . . . . . . . . 54
10.6 Governing Law . . . . . . . . . . . . . . . . . . . 54
10.7 Notices . . . . . . . . . . . . . . . . . . . . . . 54
10.8 Severability . . . . . . . . . . . . . . . . . . . .55
10.9 Implementation . . . . . . . . . . . . . . . . . . .55
10.10 Inconsistency . . . . . . . . . . . . . . . . .56
Exhibit B of Exhibit T3E
Best Interests Test
Pursuant to section 1129(a)(7) of the Bankruptcy Code (the
so-called "Best Interests Test"), to confirm the Plan, the
Bankruptcy Court must determine that each non-accepting Holder of
an Impaired Claim or Impaired Interest will receive or retain
property with a value, as of the Effective Date of the Plan, at
least equal to the amount that such Holder would receive or
retain on account of such Claim or Interest if the Debtor and its
subsidiaries were liquidated under chapter 7 of the Bankruptcy
Code. Accordingly, the Debtor has prepared the chapter 7
liquidation analysis set forth below. The comparison of
recoveries for Impaired Classes indicates that recoveries under
the Plan are equal to or better than those in a liquidation under
chapter 7, therefore satisfying the Best Interests Test. See "--
Chapter 7 Liquidation Analysis" below.
Chapter 7 Liquidation Analysis
As indicated above, the Debtor believes that under the Plan,
Holders of Impaired Claims and Impaired Interests will receive
property with a value equal to or in excess of the value such
Holder would receive in a liquidation of the Debtor under chapter
7 of the Bankruptcy Code.
To estimate the likely returns to Holders of Claims and
Interests in a chapter 7 liquidation, the Debtor determined the
amount of liquidation proceeds that might be available for
distribution and the allocation of such proceeds among the
Classes of Claims and Interests based on their relative priority.
In order to estimate the liquidation proceeds, as discussed under
"--Liquidation Value of Debtor and Comparative Analysis of
Estimated Distributions - Nature and Timing of the Liquidation
Process" below, the Debtor assumed that the Reeves Industries,
Inc. ("RII") case was converted to chapter 7, and, because the
Debtor is a holding company, that its chapter 7 case would result
in the filing of a bankruptcy case by its operating subsidiary,
Reeves Brothers, Inc. ("RBI") which would simultaneously
liquidate either under chapter 11 or under chapter 7. The Debtor
assumed disposition of the RBI businesses and other assets in
multiple transactions, rather than disposition of the Company as
an entirety or a piecemeal liquidation of the RBI operating
assets, and windup of its affairs, over a 12 month period ending
December 31, 1998. If the Debtor's case were converted to
chapter 7, RBI would lose the support of its employees,
customers, and suppliers and accordingly would be unable to
operate over an extended period of time. The analysis therefore
assumed that each business would be sold as a going concern
within six months, which the Debtor believes would result in
greater proceeds than a straight liquidation of such assets.
There can be no assurance, however, that all or any of the
businesses can be sold as going concerns. See "--Liquidation
Value of Debtor and Comparative Analysis of Estimated
Distributions - Estimated Liquidation Proceeds" and "--
Liquidation Value of Debtor and Comparative Analysis of Estimated
Distributions - Nature and Timing of the Liquidation Process".
The relative priority of distribution of liquidation
proceeds with respect to any Claim or Interest depends on (1) its
status as secured, priority unsecured or nonpriority unsecured
and (2) its relative subordination (including contractual
subordination). It is assumed that the secured revolving credit
loan to RBI provided by General Electric Capital Corporation
("GECC") would be converted to a Debtor-in-Possession ("DIP")
loan. It is also assumed that the bankruptcy court would enter
an order granting the financing super priority status, and
affirming the validity of liens and guarantees.
In general, as to each entity, liquidation proceeds would be
allocated in the following priority: (1) first, to the Claims of
secured creditors to the extent of the value of their collateral;
(2) second, to the costs, fees, and expenses of the liquidation,
as well as other administrative expenses of the applicable
Debtor's chapter 7 case, including tax liabilities: (3) third, to
the unpaid Administrative Claims of the particular chapter 11
case; (4) fourth, to Priority Tax Claims and other Claims
entitled to priority in payment under the Bankruptcy Code; and
(5) fifth, to unsecured claims. The Debtor's liquidation costs
in each chapter 7 case would include the compensation of a
bankruptcy trustee, as well as compensation of counsel and of
other professionals retained by such trustee, asset disposition
expenses, applicable taxes, litigation costs, Claims arising from
the operation of the Debtor during the pendency of the chapter 7
cases and all unpaid Administrative Claims incurred by the Debtor
during the chapter 11 case (if commenced) that are allowed in the
chapter 7 case. The liquidation itself might trigger certain
Priority Claims, such as Claims for severance pay, and would
likely accelerate or, in the case of taxes, make it likely that
the Internal Revenue Service would assert all of its claims as
Priority Tax Claims rather than assessing them in due course as
is expected to occur under chapter 11 cases. These Priority
Claims would be paid in full out of the net liquidation proceeds,
after payment of secured Claims, chapter 7 costs of
administration and other Administrative Claims, before the
balance would be made available to pay unsecured Claims or to
make any distribution in respect of Interests.
The general unsecured claims of RII, the 11% Senior Notes
due 2002, and the 13-3/4% Subordinated Debentures due 2001
represent obligations of RII. Holders of these claims would
receive no distribution from the liquidation of RBI assets
including its divisions and subsidiaries until RBI creditors were
satisfied in full.
As set forth in the following table, management estimates
that gross liquidation proceeds from the sale or other
disposition of RBI and RII assets would aggregate approximately
$137.0 million. Based upon the priorities outlined above,
management believes that approximately $49.5 million would remain
after satisfaction of the Secured Claim held by GECC, cost of
administration, any priority tax claims, and non-priority
unsecured claims against RBI.
The Debtor is issuing new securities with a blended interest
rate of approximately 12% and a face value of approximately $149
million. The Company believes that the value of the new
securities substantially exceeds the $49.5 million that would be
available to creditors of the Debtor on a liquidation. In
addition, under the Plan, existing holders of interests will
receive stock equal to 75% of the Reorganized Debtor's parent
company. Under a liquidation, shareholders would receive no
distribution.
The following chapter 7 liquidation analysis is provided
solely to discuss the potential results of a hypothetical chapter
7 liquidation of the Debtor and is subject to the assumptions set
forth herein. The chapter 7 liquidation analysis has not been
independently audited or verified.
<PAGE>
Liquidation Value of the Debtor and Comparative Analysis of
Estimated Distributions
The following table details the computation of the Debtor's
liquidation value and sets forth a comparison of the estimated
distributions to Holders of Impaired Claims and Impaired
Interests under the Plan and the estimated recoveries of such
Holders in a chapter 7 liquidation of the Debtor, for purposes of
demonstrating that the Plan satisfies the requirements of the
Best Interests Test under section 1129(a)(7) of the Bankruptcy
Code. This analysis is based upon a number of estimates and
assumptions that are inherently subject to significant
uncertainties and contingencies, many of which would be beyond
the control of the Debtor. Accordingly, while the analyses that
follow are necessarily presented with numerical specificity,
there can be no assurance that the values assumed would be
realized if the Debtor were in fact liquidated. Actual
liquidation proceeds could be materially lower or higher than the
amounts set forth below; no representation or warranty can be or
is being made with respect to the actual proceeds that could be
received in a chapter 7 liquidation of the Debtor. The
liquidation valuations have been prepared solely for purposes of
estimating proceeds available in a chapter 7 liquidation of the
Debtor's estate and do not represent values that may be
appropriate for any other purpose. Nothing contained in these
valuations is intended or may constitute a concession or
admission of the Debtor for any other purpose.
In addition to the specific assumptions described in the
footnotes to the table below, the following general assumptions
were used in formulating the liquidation analysis:
Estimated Liquidation Proceeds
All operating divisions of RBI, with the exception of the
Apparel Textile Group ("ATG"), are assumed to be sold as going
concerns, with the buyers thereof purchasing all related
operating assets and assuming all related working capital
liabilities. The business operations of the ATG division were
terminated in August 1997 and a liquidation of its assets was
commenced at that time. It is believed that the sale of the RBI
operating businesses on a going concern basis would result in
greater proceeds to the Debtor than a straight liquidation sale
of the associated assets of the operating businesses.
The Debtor did not solicit inquiries with respect to an
acquisition of the operating businesses of RBI or any of their
business assets, and it did not engage an investment banker to
perform formal valuation analyses of the businesses. The
following information and factors, not listed in order of
importance, were among the factors considered by the Debtor in
estimating the proceeds which might be received from the
liquidation sales:
(a) The historical financial statements,
relevant historical operating
information and projected financial and
operating performance.
(b) The results of prior efforts to sell the
divisions including:
o The perceived attractiveness of
each of the operating divisions to
potential buyers.
o The limited number of potential
buyers who expressed serious
interest.
o Prior purchase offers received by
the Company from potential buyers.
(c) The potential impact of a chapter 7 case
upon the RBI operating businesses as
well as potential buyers' pricing
strategies.
(d) The relative timing of the potential
sales of the RBI operating divisions.
(e) Analysis of the liabilities and
obligations of the RBI operating
divisions.
In estimating the liquidation proceeds and applying the
foregoing factors and considerations to make such estimate, both
the general economic environment as well as current condition of
the Debtor's businesses were considered.
Impact on the Debtor's Operations of the Conversion to a
Chapter 7 Liquidation
Management believes that the announcement of a conversion to
a chapter 7 liquidation and marketing of the businesses would
significantly impair the Debtor's operating subsidiary's ability
to maintain adequate working capital and would adversely affect
the morale of the Debtor's operating subsidiary's management and
employees. In addition, a chapter 7 liquidation would have a
severe impact on the Debtor's operating subsidiary's ability to
procure new work and to service existing projects as customers
became aware of the operating subsidiary's potential inability to
continue as a going concern. Accordingly, expenses were
increased to incorporate incentives to retain key personnel, the
businesses were assumed sold on an accelerated time frame, and
the potential realizable values were discounted to reflect the
urgency and possible deterioration in operations.
Nature and Timing of the Liquidation Process
Under section 704 of the Bankruptcy Code, a chapter 7
trustee must, among other duties, collect and convert the
property of the debtor's estate to cash and close the estate as
expeditiously as is compatible with the best interests of the
parties in interest. As noted above, the Debtor has assumed that
the Chapter 7 trustee would be authorized to operate RBI's
businesses so as to sell them as going concerns. Solely for
purposes of preparing this liquidation analysis, it is assumed
that RII would file a Chapter 11 petition on November 21, 1997
(the "filing date") but would be unable to confirm the Plan filed
concurrently therewith. As a consequence, for purposes of the
Best Interests Test, it is assumed that RBI and RII would be
liquidated in a chapter 7 and RBI would be liquidated under
either Chapter 11 or Chapter 7 beginning on December 31, 1997.
Said liquidations would be limited to the bankruptcy estates; the
liquidation analysis does not contemplate the consummation of a
merger or any other business combination. RBI's operating
divisions and other material individual assets are assumed to be
sold within six months following the conversion of the case and
the liquidation is completed by December 31, 1998. Management
believes that is it unlikely that the actual sale periods would
be shorter than those assumed, and there can be no assurance that
the actual sale periods would not be longer than those assumed.
Management believes that if the sale periods for the RBI's
operating divisions were longer, the sale proceeds would be
significantly diminished due to continuing deterioration in the
operations and liquidity constraints.
Certain Tax Matters
Management believes that it is unlikely that any taxable
gains would be triggered through a liquidation of the Debtor's
assets. Based on the projected level of liquidation proceeds,
the liquidation would result in a net tax gain to the estate.
However, this taxable gain from the liquidation of the Debtor's
assets would be reduced to zero by the Debtor's Net Operating
Loss carryforward. In addition, it is assumed that real estate,
and similar non income-tax obligations would be discharged by the
purchaser of the related assets.
Additional Liabilities and Reserves
The Debtor believes that in addition to the expenses that
would be incurred in a chapter 11 reorganization, there would be
certain actual and contingent liabilities and expenses for which
provision would be required in a chapter 7 liquidation before
distributions could be made to creditors, including: (a)
liabilities that are not dischargeable pursuant to the Bankruptcy
Code; (b) Administrative Claims including the fees of a trustee,
counsel and other professionals (including financial advisors and
accountants) and other liabilities (including retirement,
vacation pay, and other employee-related administrative costs and
liabilities) that would be funded from continuing operations if
the Debtor were reorganized as a going concern; (c) certain
administrative costs; and (d) liabilities arising from drawdowns
of certain of the Debtor's and RBI's existing letters of credit.
Management believes that there is significant uncertainty as to
the reliability of the Debtor's estimates of the amounts related
to the foregoing that have been assumed in the liquidation
analysis.
Distributions; Absolute Priority
Under a chapter 7 liquidation, all secured claims are
required to be satisfied from the proceeds of the collateral
securing such claims before any such proceeds would be
distributed to any other creditors. The following analysis
assumes the application of the rule of absolute priority of
distributions with respect to the remaining proceeds of the
Debtor. Under that rule, no junior creditor receives any
distribution until all senior creditors are paid in full. To the
extent that proceeds remain after satisfaction of all secured
claims, the proceeds would first be distributed to the Holders of
Administrative Claims and Priority Claims and then to the
Unsecured Claims. Based on the liquidation assumptions of the
Debtor's management, the proceeds generated from the liquidation
of the Debtor's assets would not be sufficient to pay in full the
Holders of the 11% Senior Notes due 2002 and the 13-3/4%
Subordinated Debentures due 2001. Existing holders of interests
who, on the Effective Date, will receive 75% of the common stock
of the parent company of Reorganized Reeves, would receive no
distribution under a liquidation. It is assumed that the GECC
debtor-in-possession financing would be sufficient to finance the
working capital requirements of the RBI operating divisions until
these divisions are sold.
Conclusion
In summary, the Debtor believes that a chapter 7 liquidation
of the Debtor would result in a substantial diminution in the
value to be realized by the Holders of Claims. The Debtor
believes that the Holders of Claims other than the RBI claims
would receive a lesser value in a liquidation of the Debtor under
chapter 7 of the Bankruptcy Code than would be received in the
Plan of Reorganization. The Holders of the 11% Senior Notes due
2002 and the 13-3/4% Subordinated Debentures due 2001 are
expected to receive recoveries under the Plan in excess of that
shown in a chapter 7 liquidation. Consequently, the Debtor
believes that the Plan, which provides for the continuation of
the Debtor's businesses, will provide a substantially greater
ultimate return to Holders of Claims and Interests than would a
chapter 7 liquidation.
Hypothetical Liquidation Analysis
Estimated
Claim Percentage
Proceeds of Liquidation Amount Amount Recovery
($ in millions)
Net liquidation proceeds $137.0
(Note 1)
Less: Amounts required for (50.1) 100%
DIP Financing (Note 2)
Less: Trustee, Professional (12.0) 100%
Fees and other Chapter 7
Administrative costs (Note 3)
Overhead wind-down 7/1/98- (2.0) 100%
12/31/98 (Note 4)
Other Priority and non- Approx.
priority Unsecured Claims $23.4 (23.4) 100%
of RBI (Note 5) ______
Liquidation Proceeds available $49.5
for distribution to holders of =====
RII Unsecured Claims (Note 6)
11% Senior Notes (Note 7) $134.1 $49.5 37%
13-3/4% Subordinated $11.9 $0 0%
Debentures (Note 8) _____
Total Distribution to Holders $49.5
of Claims against RII =====
Distribution to Holders 0 75% of RI
of Interests = new common
stock
subject to
dilution)
Comparison with Recoveries Under Plan - The Debtor is issuing new
debt securities with a blended interest rate of approximately 12%
and a face value of approximately $149 million, which is equal to
the principal and accrued interest under its Old Senior Notes and
Subordinated Debentures. In addition, the Bondholders are
receiving 25% of the New Common Stock under the Plan on the
Effective Date. Given the foregoing, the Debtor believes that
the value of the securities issued under the Plan substantially
exceeds the $49.5 million available to creditors of the Debtor on
a liquidation. Further, in a liquidation, it is unlikely that
the existing holder of equity interests, who pursuant to the Plan
will retain 75% of RI Common Stock, would receive any
distribution under the Plan.
1. Includes assumed net proceeds from the sale of RBI
operating divisions. The total proceeds assume that
the RBI operating divisions would be sold at a discount
from prior bids received by the Company as follows:
RAM 40%, PBG- domestic 25%, and SpA 10%. Projected
gross proceeds have been reduced by a 2% sales
commission. Additionally, proceeds have been reduced
by $2.0 million for stay bonuses for key division
management positions and $0.5 million for severance pay
to terminated employees.
2. The amount required for the DIP Financing Facility was
estimated assuming the projected loan balance of
approximately $48.8 million at June 30, 1998 plus
outstanding letters of credit for approximately $1.3
million.
3. Trustee fees of $4.1 million are assumed to be 3
percent of the gross proceeds collected from the
liquidation of the assets. Professional fees of $7.9
million are estimated for the Trustee's professionals,
and any unsecured creditors' committee professionals,
based on increased costs of a bankruptcy of a complex
worldwide operating company such as RBI.
4. Represents projected wind-down expenses to be incurred
by the Company from July 1, 1998 - December 31, 1998.
5. Other priority and non-priority unsecured claims
represent management's best estimate of the total
corporate expenses of RBI outstanding at the filing
date (the assumption was made that the purchaser of
each of the businesses would assume all assets and
liabilities with the exception of corporate
liabilities). Included in this amount are accounts
payable and accrued expenses of approximately $12
million; $8.4 million for estimated equipment leases
damages; and approximately $3.0 million in accrued
franchise and state taxes payable.
6. For the purposes of this analysis, it has been assumed
that 100% of the 13-3/4% Subordinated Debentures are
subordinated to the 11% Senior Notes. To the extent
that some portion of the 13-3/4% Subordinated
Debentures may be pari passu with the 11% Senior Notes,
the distribution of proceeds and percentage recovery
would change. Other unsecured claims of RII are
assumed to be nominal.
7. The 11% Senior Notes due 2002 are assumed to aggregate
$134.1 million (which represents $122.5 million in
principal and approximately $11.6 million in
outstanding accrued interest at November 21, 1997).
8. The 13-3/4% Subordinated Debentures due 2001 are
assumed to aggregate $11.9 million at January 15, 1998
(which represents $11.0 million in principal and
approximately $0.9 million in outstanding accrued
interest at November 21, 1997).
Exhibit C of Exhibit T3E
Description of the Business
Reeves, Inc. ("RI") is a holding company that owns 100% of
the stock of Reeves Industries, Inc. Reeves Industries, Inc.
("Industries", "Debtor", or "RII") is a holding company whose
principal asset is the common stock of its wholly-owned
subsidiary, Reeves Brothers, Inc. ("Brothers" and hereinafter
with Industries collectively referred to as "Reeves" or "RBI").
Brothers is a diversified industrial manufacturing company that
through its divisions and a wholly owned subsidiary is engaged in
the manufacture and sale of offset printing blankets, other
graphic art products for industrial applications, and specialty
coated rubber and synthetic fabrics (e.g. fabrics for automotive
airbags, truck tarpaulins, gaskets and gas meter diaphragms).
The products of Reeves are sold in the United States and in
foreign countries primarily through Reeves' merchandising and
sales personnel through a network of independent distributors to
a variety of customers including the United States Government,
industrial users and contractors. Sales offices are maintained
in New York, New York; Dallas, Texas; Los Angeles, California;
Spartanburg, South Carolina; and Lodivecchio, Italy.
Purpose of Financial Information
As a condition to confirmation of a plan of reorganization,
section 1129 of the Bankruptcy Code requires, among other things,
that the bankruptcy court determine that confirmation is not
likely to be followed by the liquidation or need for further
financial reorganization of the debtor. In connection with the
development of the Plan, and for purposes of determining whether
the Plan satisfies this feasibility standard, the Debtor has
analyzed the ability of Reorganized RII to meet future
obligations under the Plan with sufficient liquidity and capital
resources to conduct its businesses.
In this regard, the Debtor has developed, and periodically
refined, a Business Plan and prepared certain projections of the
Debtor's operating profit, cash flow, and certain other items for
the three-year period (the "Projection Period") commencing on
January 1, 1998. The portion of such projections that the Debtor
believes to be material and the terms of the Plan and various
assumptions (collectively, the "Projections" or the "Company
Projections") are summarized below. The Debtor intends to comply
with all of its contractual financial reporting obligations
(including those under the New Senior Note Indenture and New
Structurally Subordinated Note Indenture) and any financial
reporting required under applicable law.
During the Projection Period, the Company anticipates that
it will realize a "net loss" from continuing operations due in
large measure to recording the payment in kind interest expense
(See assumption 5 - Assumptions used in the Unaudited Financial
Projections). This is also reflected in the Projections as an
increase in the New 13% Structurally Subordinated Notes (See the
Reeves, Inc. Unaudited Pro Forma Balance Sheet). During the same
period of time, the Projections indicate an increase in Cash and
a decrease in the Revolving Loan Payable to Banks as a result of
improved liquidity generated by the operation of Reorganized
Reeves.
The financial information included in the Projections
reflects the Debtor's judgment as to the information that is
material under the circumstances. The projections should be read
in conjunction with the assumptions, qualifications, and
explanations set forth herein and in the Disclosure Statement,
and the financial information.
The Debtor does not generally publish its business plans and
strategies or make external projections or forecasts of their
anticipated financial positions or results of operations.
Accordingly, the Debtor does not anticipate that it will, and
disclaims any obligation to, furnish updated business plans or
projections to holders of Claims or Interests prior to the
Effective Date, or to debtholders after the Effective Date, or
otherwise make such information public in the future. <PAGE>
Projected Consolidated Financial Statements
The projected consolidated financial statements have been
prepared on the assumption that the Effective Date of the Plan
will be March 1, 1998 (the "Effective Date") and that the Debtor
will report on a fiscal year ending December 31.
RI's Projected Balance Sheet as of the Effective Date set
forth below presents: (a) the projected consolidated financial
position of Reorganized RI immediately prior to the assumed
confirmation and consummation of transactions contemplated by the
Plan; (b) projected adjustments to such projected consolidated
financial position required to reflect confirmation and the
consummation of the transactions contemplated by the Plan
(collectively, the "Plan Adjustments"). The various Plan
Adjustments are described in greater detail in the Notes
Summary of Plan Adjustments.
Reorganized RI's Projected Balance Sheets at December 31,
1998, 1999, 2000, present the projected consolidated financial
position of Reorganized RI, after giving effect to the
confirmation and consummation of the transactions contemplated by
the Plan, as of the end of each fiscal year included in the
Projection Period.
The projections should only be read in conjunction with the
assumptions, qualifications, and explanations set forth under
"Unaudited Projected Financial Information" and "Assumptions Used
in the Unaudited Financial Projections" and in the Disclosure
Statement.
For the reasons set forth above, while the projections are
necessarily presented with numerical specificity, the actual
results achieved by Reorganized RI throughout the projection
period will vary from the projected results. These variations
may be material. Accordingly, no representation can be, or is
being made, by the Debtor or the Debtor's professionals with
respect to the accuracy of the projections or the ability of the
Debtor to achieve the projected results. <PAGE>
Unaudited Projected Financial Information
The following projected consolidated financial statements
(the "Projections") include the accounts and results of
operations of RI and its subsidiaries (the "Company").
The Projections are based on estimates and assumptions
regarding future events that affect the projected future
financial condition, results of operations and cash flows of the
Company. Sensitive estimates and assumptions include, among
others, the ability of the Company to obtain new business, profit
margins, and potential sales values of certain non-core assets.
Other factors that could affect the Company's future operations
include realizing certain contingent liabilities at amounts
greater or less than related reserves and the potential for the
realizable value of certain assets to be more or less than book
value.
The Projections assume the Plan will be implemented in
accordance with its terms, and present the anticipated effects of
the consummation of the Plan and various other factors on the
Debtor's financial condition and results of operations following
the Effective Date. The assumptions and estimates underlying the
Projections are inherently uncertain and are subject to a wide
variety of significant business, economic and competitive risks
and uncertainties that could cause actual results to differ
materially from those projected. Accordingly, the Projections
are not necessarily indicative of the future financial condition
or results of operations of the Company, which may vary
significantly from those set forth in the Projections.
Consequently, the unaudited projected combined Company
information contained herein should not be regarded as a
representation by the Debtor, its respective advisors, or any
other person that the projected condition or results can or will
be achieved.
The Debtor has prepared and is disseminating the Projections
solely for the purpose of enabling the Bankruptcy Court to
determine the feasibility of the Plan. The Debtor does not intend
to repeat this process in the future, or to update or otherwise
revise the projections.
The Projections, which present the Company's projected
financial condition as of December 31, 1998, 1999, and 2000 and
the Company's projected results of operations for each of the
three fiscal years ending on such dates are based upon specific
economic assumptions as described under "Assumptions Used in the
Financial Projections".
The independent auditors for the Debtor have not examined or
compiled the Projections presented herein and, accordingly,
assume no responsibility for them. Moreover, the Projections
have not been prepared with a view to compliance with published
guidelines of the Commission regarding projections or the
guidelines established by the American Institute of Certified
Public Accountants regarding projections.
Assumptions Used in the Unaudited Financial Projections
Additional information relating to the principal assumptions
used in preparing the Projections is set forth below.
1. Effective Date; Plan Terms: The Effective Date is
assumed to be March 1, 1998. The projections assume confirmation
in accordance with the terms of the Plan, and that all
transactions contemplated by the Plan will be consummated by the
Effective Date.
2. General Economic Conditions: Current economic
conditions within each of the Debtor's operating divisions were
assumed to continue throughout the Projection Period.
3. Revenues: Revenues for consolidated Reeves in 1998
reflect an assumed increase in revenues of approximately 7% from
1997 to 1998, 4% from 1998 to 1999, and 5% from 1999 to 2000.
The assumed increases in revenues were projected by each of
Brothers' operating groups and are based upon the assumptions as
to general economic conditions referred to above, certain growth
rate assumptions, a sales and marketing push into mature markets,
and through current and future new product development.
4. Operating Income: Projected operating income is based
upon projected revenues, current profit margins, expected market
conditions and historical performance of Brothers' principal
operating divisions. Profit margins are assumed to remain
relatively constant throughout the Projection Period.
5. Interest Expense: Projected interest expense consists
of interest on the working capital facility and interest due to
holders of Notes pursuant to the Plan. Interest expense on the
New 11% Senior Notes is paid in cash semi-annually; interest on
the New 13% Structurally Subordinated Notes is paid-in-kind
semi-annually.
6. Income tax expense: The Debtor anticipates having
substantial NOL carryforwards on the Effective Date, which will
be used to offset future domestic income. Projected tax expense
is related taxes payable on foreign income.
7. Balance Sheet Considerations: Projected accounts
receivable, inventories, and accounts payable are based on
historic levels and relationships of such accounts to revenue,
modified, where appropriate, to recognize specific projected
balance sheet item changes.
Capital Expenditures
The projections assume that capital expenditures will be
made for the normal maintenance and upkeep of the Company's
capital assets. There are no major capital expenditures planned.
Other Balance Sheet Accounts
The projections assume that all other balance sheet changes
reflect normal amortizations and/or seasonal trends consistent
with historical data.
REEVES, INC.
UNAUDITED PRO FORMA BALANCE SHEET REFLECTING
REORGANIZATION ADJUSTMENTS
($ in thousands)
<TABLE>
Estimated Estimated
Pre- Plan Post
12/31/96 Consumption Adjustments (*) Consummation 12/31/98 12/31/99 12/31/00
<S> <C> <C> <C> <C> <C> <C> <C>
Assets
Current assets
Cash and cash $2,504 $2,439 $2,439 $1,896 $3,500 $3,780
equivalents
Accounts receivable 25,970 28,169 28,169 28,440 29,519 30,723
Inventories 19,174 20,974 20,974 22,391 23,434 24,638
Prepaid assets 2,154 1,786 1,786 1,640 1,612 1,619
Deferred income taxes 1,100 1,100 1,100 1,100 1,100 1,100
Investment in
discontinued
operations 4,663 0
55,565 54,468 0 54,468 55,467 59,165 61,860
Total current assets
Property, plant and
equipment - net of
accumulated
depreciation 48,907 42,103 42,103 39,311 35,530 31,759
Unamortized financ-
ing costs 3,052 2,577 2,577 1,795 980 588
Goodwill 14,719 13,655 13,655 12,905 1,872 2,810
Deferred income
taxes 1,872 1,872 2,810 2,810 2,810
Other assets 1,573 432 432 260 379 129
Total assets $123,816 $115,107 $0 $115,107 $112,548 $110,862 $108,237
Liabilities and Stockholders' Equity
Current liabilities
Revolving loan
payable to banks $31,600 $48,600 $48,600 $47,300 $ 45,300 $ 41,700
Accounts payable 14,143 17,663 17,663 17,817 19,109 19,978
Accrued expenses and
other liabilities 11,972 17,569 17,569 18,763 21,210 21,534
Accrued interest payable
on old Senior
Notes and Old Subordinated
Debenture through
1/15/98 6,766 14,505 (14,505) 0
Income tax accrual 3,834 3,958 3,958 3,123 4,587 5,340
Liabilities related to investment
in discontinued
operations 11,078 4,128 4,128
Total current
liabilities 79,393 106,423 (14,505) 91,918 87,003 90,206 88,552
Old 11% Senior
Notes 122,500 122,500 (122,500) 0
Unamortized
discount (483) (382) 382 0
Old 13% Structurally
Subordinated Notes
11,000 11,000 (11,000) 0
Unamortized discount (38) (16) 16 0
Long term debt - Fenchurch
1,250 1,250 (1,250) 0
New 11% Senior Notes 75,500 75,500 75,500 75,500 75,500
New 13% Structurally
Subordinated Notes 73,005 73,005 82,471 92,603 105,032
New Long Term Debt - Fenchurch 1,250 1,250 1,418 1,608 1,824
Deferred income
taxes 1,726 1,726 1,726 1,726 1,726 1,726
Other long term
liabilities 8,220 8,647 8,647 14,907 13,879 13,787
Total liabilities 223,568 251,148 898 251,546 262,525 275,022 285,921
Shareholder's equity (deficit)
Common stock 350 0 0 0 0 0 0
Additional Paid
in Capital 5,099 5,449 5,449 5,449 5,449 5,449
Retained earnings (103,624) (133,282) (382) (134,180) (147,217) (161,400) (174,924)
(16)
(500)
Foreign currency
translation (1,577) (8,208) (8,208) (8,209) (8,209) (8,209)
Total stockholders' equity
(deficit) (99,752) (136,041) (898) (136,439) (149,977) (164,160) (177,684)
Total liabilities
and stockholders'
equity $123,816 $115,107 $0 $115,107 $112,548 $110,862 $108,237
</TABLE>
REORGANIZED REEVES, INC.
STATEMENTS OF INCOME
(Unaudited, in thousands of dollars)
For the Year Ended
12/31/98 12/31/99 12/31/00
Net Sales $155,025 $161,731 $169,488
Cost of Sales 138,473 143,439 149,238
Gross profit on sales 16,552 18,292 20,250
Selling, general and
administrative expenses 4,215 4,571 4,571
Operating income 12,337 13,721 15,679
Other expense (income) (110) (115) (120)
Reorganization Expense 3,200
Interest Expense 23,062 23,328 24,419
Amortization expense 2,275 1,545 1,299
Loss from continuing
operations before income
taxes (16,090) (11,037) (9,919)
Income tax
(benefit)/Expense 2,132 3,146 3,605
Net income -
continuing operations ($18,222) ($14,183) ($13,524)
- -------------
(1) Includes paid in kind interest under the New Structurally
Subordinated Notes.
REORGANIZED REEVES, INC.
CONSOLIDATED PRO FORMA PROJECTED
STATEMENTS OF CASH FLOWS
(Unaudited, in thousands of dollars)
For the Year Ended
12/31/98 12/31/99 12/31/00
Cash flows from operating activities:
Net income (18,222) (14,183) (13,524)
Reconciliation of net income to net cash
provided by operating activities:
Depreciation and amortization 7,363 7,463
7,553
Deferred income taxes (756) 0 0
Changes in assets and liabilities
(excluding sold assets):
Changes in accounts
receivable (1,256) (1,079)
(1,204)
Changes in inventories (1,641) (1,043)
(1,204)
Changes in other current assets (20) 28 (7)
Changes in other assets 103 (119) 250
Changes in accounts payable (1,875) 1,292
869
Changes in accrued expenses
and other liabilities (2,699) 3,698
1,377
Equity adjustments from translation (275) 0
0
Net cash provided by
operating activities (19,278) (3,943) (5,890)
Cash flows from investing activities (including
discontinued operations):
Purchases of property, plant,
and equipment (2,775) (2,775) (2,875)
Net cash used by discontinued
operations (5,028) 0 0
Net cash provided by
investing activities (7,803) (2,775)
(2,875)
Cash flows from financing activities:
Net borrowings on revolving loans 2,000 (2,000)
(3,600)
Increase in long-term debt 24,374 10,322
12,645
Net cash provided by
financing activities 26,374 8,322
9,045
Net change in cash (707) 1,604 280
Cash at the beginning of the year 2,603 1,896
3,500
Cash at the end of the year $1,896 $3,500
$3,780
REEVES, INC.
UNAUDITED PRO FORMA BALANCE SHEET REFLECTING
REORGANIZATION ADJUSTMENTS
NOTES - SUMMARY OF PLAN ADJUSTMENTS
(In thousands)
Account Debit Credit Description
Old 11% Senior Notes $122,500 To eliminate
the principal
amount of the old 11%
Senior
Notes.
Old 13.75% 11,000 To eliminate
the principal
Subordinated Notes amount of the
old 13.75%
Subordinated Debentures.
Accrued interest payable 14,505 Represents
accrued but
on old Senior Notes and Old unpaid interest
outstanding
Subordinated Debentures on the old 11%
senior
notes, the old 13.75%
Subordinated Debentures
per
the Restructuring
Agreement.
New 11% Senior Notes $75,500 To record the
issuance of the
New 11% Senior Notes per
the Restructuring
Agreement.
New 13% Structurally 73,005 To record
the issuance of the
Subordinated Notes of the New 13.75%
Subordinated Debentures
per
the Restructuring
Agreement.
Unamortized discount - 11% 382 To write-off of
the remaining
Senior Notes unamortized discount
on
the old 11% Senior Notes.
Unamortized discount - 13.75% 16 To
write-off of the remaining
Subordinated Debentures unamortized
discount on the old
13.75% Senior Notes.
Restructuring charge 500 To record the
expense related
to the Arrangement Fee
Note to
Oaktree Capital
Management,
LLC in the Principal
amount of
$500,000.
Restructuring charge 382 To record the
expense related
to the write-off of the
unamortized discount
amount
on the 11% Senior Notes.
Restructuring charge 16 To record the
expense related
to the write-off of the
unamortized discount
amount
on the 13.75%
Subordinated
Debentures.
Old Long term debt- Fenchurch 1,250 To
eliminate the old
note payable Fenchurch note
payable in
accordance with the
Fenchurch
note.
New long term debt - 1,250 To record
the new Fenchurch
Fenchurch note payable note payable of
$1,250,000 in
accordance with the
Fenchurch
note.
$150,153 $150,153
Exhibit H of Exhibit T3E
RESTATED CERTIFICATE OF INCORPORATION
of
REEVES, INC.
(Originally Incorporated on July 16, 1997 as Reeves
Holdings, Inc.)
REEVES, INC., a corporation organized and existing
under the laws of the State of Delaware (hereinafter called the
"Corporation"), hereby certifies pursuant to Sections 242 and 245
of the General Corporation Law of the State of Delaware (the
"General Corporation Law") as follows:
FIRST: The Corporation's name is Reeves, Inc.
SECOND: A petition for reorganization under Chapter
11 of the Bankruptcy Code, 11 U.S.C. SS 101 et seq., having been
filed on November 20, 1997 in the United States Bankruptcy Court,
Southern District of New York, and under the Amended Joint Plan
of Reorganization dated January 12, 1998, as the same may be
modified or amended, from time to time, and inter alia, Sections
1123 and 1129 of the Bankruptcy Code, 11 U.S.C. SS 1123 and 1129,
in accordance with Section 303 of the General Corporation Law of
the State of Delaware and pursuant to the order of said court
dated March 10, 1998, this Restated Certificate of Incorporation
restates and further amends the provisions of the Certificate of
Incorporation of the Corporation.
THIRD: The text of the Certificate of Incorporation of
the Corporation, as heretofore amended or supplemented, is hereby
restated and further amended to read in its entirety as follows:
I. Name. The name of the corporation is Reeves, Inc.
II. Address; Registered Office and Agent. The address
of the Corporation's registered office is Corporation Trust
Center, 1209 Orange Street, in the City of Wilmington, County of
New Castle, State of Delaware, 19801; and its registered agent at
such address is The Corporation Trust Company.
III. Purposes. The purpose of the Corporation is to
engage in, carry on and conduct any lawful act or activity for
which corporations may be organized under the General Corporation
Law.
IV. Capital Stock.
A. Authorized Capital Stock. The total number
of shares of stock that the Corporation shall have the authority
to issue is three million (3,000,000) shares, consisting of (a)
one million (1,000,000) shares of Class A Common Stock; and (b)
two million (2,000,000) shares of Class B Common Stock. The
Class A Common Stock and the Class B Common Stock shall
hereinafter collectively be called the "Common Stock." All Class
B Common Stock shall be subject to the Voting Trust Agreement.
B. Terms of Common Stock. All shares of Common
Stock will be identical in all respects and will entitle the
holders thereof to the same rights and privileges, except as
otherwise provided herein.
1. Voting Rights. The holders of shares of
Common Stock shall have the following voting rights:
(a) Each share of Class A Common Stock
shall entitle the holder thereof to one vote in person or by
proxy on all matters submitted to a vote of the stockholders
of the Corporation.
(b) Each share of Class B Common Stock
shall entitle the holder thereof to one vote in person or by
proxy on all matters submitted to a vote of the stockholders
of the Corporation.
(c) Except as otherwise required by
applicable law, the holders of shares of Common Stock shall
vote together as one class on all matters submitted to a
vote of stockholders of the Corporation.
2. Dividends and Distributions. The
holders of shares of Common Stock shall be entitled to receive
such dividends and other distributions in cash, property or
shares of stock of the Corporation as may be declared thereon by
the board of directors of the Corporation (the "Board of
Directors") from time to time out of assets or funds of the
Corporation legally available therefor; provided, that, subject
to the provisions of this Section 4.2(b), the Corporation shall
not pay dividends or make distributions to any holders of any
class of Common Stock unless simultaneously with such dividend or
distribution, as the case may be, the Corporation makes the same
dividend or distribution with respect to each outstanding share
of Common Stock regardless of class. In the case of dividends or
other distributions payable in Common Stock, including
distributions pursuant to stock splits or divisions of Common
Stock which occur after the first date upon which the Corporation
has issued shares of either Class A Common Stock or Class B
Common Stock, only shares of Class A Common Stock shall be
distributed with respect to Class A Common Stock and only shares
of Class B Common Stock shall be distributed with respect to
Class B Common Stock. Whenever a dividend or distribution,
including distributions pursuant to stock splits or divisions of
the Common Stock, is payable in shares of Common Stock, the
number of shares of Class A and Class B Common Stock payable per
share of such class of Common Stock shall be equal in number.
The Corporation shall not declare or pay any dividends consisting
of securities of the Corporation except as provided in the two
immediately preceding sentences. Any shares of Class B Common
Stock issued pursuant to this Section 4.2(b) shall be subject to
the restrictions and requirements of that Voting Trust Agreement
among the Corporation, holders of the Class B Common Stock and
the Class B Voting Trustee named therein or its successor serving
thereunder (the "Voting Trust Agreement").
3. Exchange Rights of Class A Common Stock.
(a) Whenever a holder of the New
Structurally Subordinated Notes receives shares of Class A
Common Stock in accordance with the terms of the New
Subordinated Indenture, such Class A Common Stock shall,
immediately and without further action by the Corporation,
for all purposes be deemed exchanged for Class B Common
Stock and the Corporation shall, in furtherance of the
foregoing and for ease of administration, upon request from
such holder (or the trustee of the New Subordinated
Indenture (the "Trustee") on behalf of such holder) and
surrender of the certificate or certificates representing
such Class A Common Stock, immediately issue a certificate
for the same number of fully paid and non-assessable shares
of Class B Common Stock. Such right shall be exercised by
the surrender of the certificate or certificates
representing the shares of Class A Common Stock so exchanged
to the Corporation at any time during normal business hours
at the principal executive offices of the Corporation or at
the office of the transfer agent of the Corporation (the
"Transfer Agent") accompanied by a written notice of the
holder of such shares (or the Trustee on behalf of such
holder) stating that such holder (or the Trustee on behalf
of such holder) desires to exchange such shares, or a stated
number of the shares represented by such certificate or
certificates, into an equal number of shares of the Class B
Common Stock, and (if so required by the Corporation or the
Transfer Agent) by instruments of transfer, in form
satisfactory to the Corporation and to the Transfer Agent,
duly executed by such holder, the Trustee or such holder's
duly authorized attorney. Neither the holder nor the
Trustee shall be required to pay any transfer or other tax
in connection with such exchange. Any such taxes or any
other fees or expenses in connection with such exchange
shall be paid by the Corporation.
(b) As promptly as practicable
following the surrender for exchange of a certificate
representing shares of Class A Common Stock in the manner
provided in Section 4.2(c)(i), the Corporation will deliver
or cause to be delivered on behalf of such holder to the
Class B Voting Trustee under the Voting Trust Agreement, a
certificate or certificates representing the number of full
shares of Class B Common Stock issuable upon such exchange,
issued in the name of the Class B Voting Trustee. Upon the
date any such exchange is made or deemed effected, all
rights of the holder of such shares as a holder of Class A
Common Stock shall cease, and such holder shall (subject to
the right of the Class B Voting Trustee pursuant to the
Voting Trust Agreement) be treated as the holder of such
shares of Class B Common Stock. The Corporation shall give
effect to such exchange in connection with the setting of
any record date for any stockholder action without regard to
whether certificates for the Class B Common Stock issuable
in connection with the exchange described above have
actually been issued.
(c) The Corporation shall at all times
reserve and keep available, free of preemptive rights, out
of its authorized but unissued Class B Common Stock, solely
for the purpose of issuance and delivery upon the payment,
pursuant to the New Subordinated Indenture, of Additional
Interest and upon exchange of the outstanding shares of
Class A Common Stock, the maximum number of shares of Class
B Common Stock that may be issuable upon the payment,
pursuant to the New Subordinated Indenture, of Additional
Interest and upon the exchange of all outstanding shares of
Class A Common Stock. If any shares of Class B Common Stock
require registration with or approval of any governmental
authority under any federal or state law before such shares
of Class B Common stock may be issued, the Corporation will
cause such shares to be duly registered or approved, as the
case may be. All shares of Class B Common Stock that shall
be issued upon the payment, pursuant to the New Subordinated
Indenture, of Additional Interest and upon exchange of Class
A Common Stock will, upon issue, be validly issued, fully
paid and non-assessable and free from all taxes, liens and
charges.
(d) Shares of Class A Common Stock that
are exchanged for shares of Class B Common Stock as provided
herein shall continue to be authorized shares of Class A
Common Stock and available for reissue by the Corporation;
provided, however, that no shares of Class A Common Stock
shall be reissued except as expressly permitted by Sections
4.2(b), 4.2(c), 4.2(d) and 4.2(e) of this Restated
Certificate of Incorporation.
(e) Except as provided in the first
sentence of clause (i) of this Section 4.2(c), no shares of
Class A Common Stock shall be convertible or converted into
Class B Common Stock.
4. Stock Splits. The Corporation shall not
in any manner subdivide (by any stock split, stock dividend,
reclassification, recapitalization or otherwise) or combine (by
reverse stock split, reclassification, recapitalization or
otherwise) the outstanding shares of one class of Common Stock
unless the outstanding shares of all classes of Common Stock
shall be proportionately subdivided or combined. Any shares of
Class B Common Stock issued pursuant to this Section 4.2(d) shall
be subject to the Voting Trust Agreement.
5. Options, Rights or Warrants.
Notwithstanding Section 4.2(g) hereof, the Corporation shall not
issue any options, rights or warrants to acquire shares of Class
B Common Stock. If the Corporation issues any options, rights or
warrants to acquire shares of any class or classes of capital
stock (other than Class B Common Stock) to holders of a class of
Common Stock, then the Corporation shall simultaneously make an
identical issuance to all holders of the other classes of Common
Stock (including Class B Common Stock) other than to any class of
Common Stock the holders of a majority of the outstanding shares
of such class, voting as a separate class, determine that such
issuance need not be made to such class. All such options,
rights or warrants offerings shall offer the respective holders
of Class A Common Stock and Class B Common Stock the right to
issuances at the same rate per share and on the same terms. Any
shares of Class B Common Stock issued pursuant to this Section
4.2(e) shall be subject to Section 1 of the Voting Trust
Agreement.
6. Liquidation Rights. In the event of any
dissolution, liquidation or winding up of the affairs of the
Corporation, whether voluntary or involuntary, after payment or
provision for payment of the debts and other liabilities of the
Corporation, the remaining assets and funds of the Corporation,
if any, shall be divided among and paid ratably to the holders of
the shares of the Class A Common Stock and the Class B Common
Stock treated as a single class.
7. Restrictions on Issuance. Other than
Additional Interest under the New Subordinated Indenture and as
provided in Section 4.2(b), (c), (d) or (e) hereof, the
Corporation shall not issue or sell any shares of Class B Common
Stock or any securities (including, without limitation, any
rights, options, warrants or other securities) convertible,
exchangeable or exercisable into shares of Class B Common Stock
without the approval of the holders of a majority of the
outstanding shares of Class B Common Stock. Any issuance or sale
of shares of Class B Common Stock (or securities convertible
into, or exchangeable or exercisable for, shares of Class B
Common Stock) in violation of this Section 4.2(g) shall be null
and void ab initio.
V. Certain Definitions. As used in this Restated
Certificate of Incorporation, unless the context otherwise
requires, the term:
"Additional Interest" means the interest payable in the
form of Common Stock pursuant to the New Subordinated Indenture
upon the failure by the Corporation to redeem the New
Structurally Subordinated Notes in full as of the second, third,
fourth, fifth, sixth or seventh anniversaries of the Effective
Date.
"Affiliate" means, with respect to any Person, any
other
Person controlling, controlled by, or under direct or indirect
common control with, such Person. For the purposes of this
definition "control," when used with respect to any specified
Person, shall mean the power to direct or cause the direction of
the management and policies of such Person, directly or
indirectly, whether through ownership of voting securities or
partnership or other ownership interests, by contract or
otherwise; and the terms "controlling" and "controlled" shall
have meanings correlative to the foregoing.
"Amended and Restated Tax Note" means the 13% note of
the Corporation due November 15, 2004, to be issued to Fenchurch,
Inc. in the aggregate principal amount of $1,250,000 included in
the Plan Supplement relating to the Plan.
"Bank Revolving Credit Facility" means the line of
credit extended to Reeves Brothers, Inc. pursuant to that certain
Credit Agreement dated as of November 6, 1997, among RBI, RII,
General Electric Capital Corporation and the other Credit Parties
and Lenders (each as defined therein) now or hereafter parties
thereto, and any agreement governing indebtedness incurred to
refinance or refund the entirety of the borrowings and
commitments then outstanding or permitted to be outstanding under
the Bank Revolving Credit Facility, in each case, together with
any notes, guarantees, collateral documents, hedge agreements,
instruments and agreements executed from time to time in
connection therewith.
"Bankruptcy Law" means Title 11, U.S. Code, as amended,
or any similar federal, state or foreign law for the relief of
debtors.
"Base Period" means any period during which the Class A
Common Stock (other than Retained Class A Shares) constitutes a
majority of the Common Stock outstanding.
"Class A Common Stock" means the shares of Class A
Common Stock, $.01 par value per share, of the Corporation, as
adjusted to reflect any merger, consolidation, recapitalization,
reclassification, split-up, stock dividend, rights offering,
reverse stock split or other action made, declared or effected
with respect to the Class A Common Stock.
"Class B Common Stock" means the shares of Class B
Common Stock, $.01 par value per share, of the Corporation, as
adjusted to reflect any merger, consolidation, recapitalization,
reclassification, split-up, stock dividend, rights offering,
reverse stock split or other action made, declared or effected
with respect to the Class B Common Stock.
"Consulting Agreements" means the consulting agreements
dated as of October 17, 1997 between James W. Hart, James W.
Hart, Jr. and Douglas B. Hart, respectively, and SPA, and those
two letter agreements dated the effective date of the Plan and
October 17, 1997, respectively, and executed in connection with
such consulting agreements by the same parties and filed with the
court prior to the hearing on confirmation of the Plan.
"Effective Date" means the effective date of the
Amended Joint Plan of Reorganization of Reeves Industries, Inc.
and the Corporation, dated January 12, 1997 under Chapter 11 of
the United States Bankruptcy Code, as the same may be amended,
modified, or supplemented from time to time in accordance with
the terms thereof.
"Employment Agreements" means the consulting agreements
dated as of October 17, 1997 between James W. Hart, James W.
Hart, Jr. and Douglas B. Hart, respectively, and SPA, and those
two letter agreements dated the effective date of the Plan and
October 17, 1997, respectively, and executed in connection with
such consulting agreements by the same parties and filed with the
court prior to the hearing on confirmation of the Plan.
"Hart Associate" means (a) James W. Hart, Sr., James W.
Hart, Jr., Douglas B. Hart or Jennifer Fray or any member of the
immediate family of any of James W. Hart, Sr., James W. Hart,
Jr., Douglas B. Hart or Jennifer Fray (all of such individuals
and such members of their immediate families are collectively
referred to as the "Harts") (b) any corporation or organization
(other than the Corporation or any of its subsidiaries) of which
a Hart is an executive officer or partner or of which a Hart is,
directly or indirectly, the beneficial owner of 10% or more of
any class of equity securities or (c) any trust or other estate
in which a Hart has a beneficial interest or as to which a Hart
serves as trustee or in a similar capacity. For the purposes of
this definition, a Person's "immediate family" includes that
Person's spouse, parents, children, siblings, mothers and
fathers-in-law, daughters and sons-in-law and brothers and
sisters-in-law.
"Indebtedness" means, with respect to any Person,
without duplication, (i) all liabilities, contingent or
otherwise, of such Person (a) for 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), (b) evidenced by bonds,
notes, debentures, drafts accepted or similar instruments or
letters of credit or representing the balance deferred and unpaid
of the purchase price of any property or (c) for the payment of
money relating to the amount of the liability in respect of a
capital lease that would at such time be required to be
capitalized on a balance sheet in accordance with Generally
Accepted Accounting Principles; (ii) obligations under
reimbursement agreements of such Person with respect to letters
of credit; (iii) obligations of such Person with respect to any
swap agreement, collar agreement or other similar agreement or
arrangement designed to protect such Person or any of its
Subsidiaries against fluctuations in interest rates, currency
exchange rates, or other prices; (iv) all liabilities of others
of the kind described in the preceding clause (i), (ii) or (iii)
that (a) such Person has guaranteed, directly or indirectly, in
any manner, (b) have been incurred by a partnership in which it
is a general partner (to the extent such Person is liable,
contingently or otherwise therefor) or (c) are otherwise its
legal liability (other than endorsements for collection in the
ordinary course of business); and (v) all obligations of others
secured by a lien to which any of the properties or assets
(including, without limitation, leasehold interests and any other
tangible or intangible property rights) of such Person are
subject, whether or not the obligations secured thereby shall
have been assumed by such Person or shall otherwise be such
Person's legal liability; provided, however, that notwithstanding
anything in the foregoing that may be deemed to be to the
contrary, Indebtedness shall not include (A) liabilities arising
from agreements providing for indemnification or adjustment of
purchase price or from guarantees securing any obligations of the
Corporation or any Subsidiary pursuant to such agreements,
incurred or assumed in connection with the disposition of any
business, assets or Subsidiary of the Corporation (other than
guarantees or similar credit support by the Corporation or any
Subsidiary of Indebtedness incurred by any Person acquiring all
or any portion of such business, assets or Subsidiary for the
purpose of financing such acquisition or Indebtedness relating to
any sale and leaseback transaction), so long as the maximum
aggregate liability in respect of the foregoing permitted
pursuant to this clause (A) shall at no time exceed the net cash
proceeds actually received from the sale of such business, assets
or Subsidiary; (B) any accounts payable or any other indebtedness
or monetary obligation to trade creditors created, assumed or
guaranteed by a Person arising in the ordinary course of business
of such Person in connection with the acquisition of goods and
services and any other accrued current liabilities incurred in
the ordinary course of business as the deferred purchase price of
property acquired in the ordinary course of business; (C)
liabilities arising from guarantees to suppliers, lessors,
licensees, contractors, franchisees or customers incurred in the
ordinary course of business (exclusive of obligations for the
payment of money borrowed); or (D) liabilities in respect of
performance bonds provided by the Corporation or its Subsidiaries
in the ordinary course of business. The amount of Indebtedness
of any Person at any date shall be, without duplication, (y) the
outstanding balance at such date of all unconditional obligations
as described above and the maximum liability of any such
contingent obligations at such date and (z) in the case of
Indebtedness of others secured by a lien to which the property or
assets owned or held by such Person is subject but which is
otherwise nonrecourse to such Person, the lesser of the fair
market value at such date of any assets subject to a lien
securing the Indebtedness of others and the amount of the
Indebtedness secured.
"Investor Director" means a director designated for
election to the Board of Directors by the Investors pursuant to
the Stockholders Agreement.
"Investors" means the Persons listed on Schedule I to
the Stockholders Agreement, together with their permitted
transferees.
"New Senior Indenture" means the Indenture for the New
Senior Notes, between RII and IBJ Schroder Bank & Trust, as
trustee, as the same may be amended, supplemented or modified
from time to time.
"New Senior Notes" means the 11% Senior Notes of RII in
the aggregate principal amount of $75,500,000, due [November 15,
2002], issued pursuant to the New Senior Indenture.
"New Structurally Subordinated Notes" means the 13%
Senior Notes of the Corporation, due November 15, 2004 and issued
pursuant to the New Subordinated Indenture.
"New Subordinated Indenture" means the Indenture for
the New Structurally Subordinated Notes of the Corporation,
between the Corporation and First Trust National Association, as
trustee, as the same may be amended, supplemented or modified
from time to time.
"NOLs" means "net operating loss carryovers" within the
meaning of Section 172 of the Internal Revenue Code of 1986, as
amended.
"Plan" means the Amended Joint Plan of Reorganization
of RII and the Corporation, dated January 12, 1998 under Chapter
11 of the United States Bankruptcy Code, as the same may be
amended, modified, or supplemented from time to time in
accordance with the terms thereof.
"RBI" means Reeves Brothers, Inc., a Delaware
corporation.
"RII" means Reeves Industries, Inc., a Delaware
corporation.
"SPA" means Reeves S.p.A., an Italian corporation.
"Stockholders" means stockholders of the Corporation.
"Stockholders Agreement" means the Stockholders
Agreement among the Corporation and the stockholders of the
Corporation named therein.
"Subsidiary" means, with respect to any Person, any
corporation or other entity directly or indirectly controlled by
such Person or in which such Person owns more than 50% of the
outstanding common stock or other equity securities of such
Person.
"Tax Allocation Agreements" means, collectively (a) the
tax allocation agreement dated as of the first day of May 1986
entered into by and among Schick Incorporated (later renamed Hart
Holding Company), Newreeveco, Inc. (later renamed Reeves
Industries, Inc.), RBI, Cinderella Knitting Mills, Inc., and
Turner Trucking Company (later renamed Turner Freight Systems,
Inc.), effective for taxable periods through December 31, 1991,
as amended by agreement dated November 5, 1997 and (b) the tax
allocation agreement effective as of the first day of the
consolidated return year beginning January 1, 1992, by and among
Hart Holding Company Incorporated (later renamed Fenchurch,
Inc.), Fenchurch, Inc. (subsequently merged into Hart Holding
Company Incorporated), RII, RBI, Turner Freight Systems, Inc.,
Reeves Penna, Inc., A.R.A. Manufacturing Company, Hart
Investments Properties Corporation, Hart Capital Corporation and
Reeves Holdings, Inc., as amended on November 21, 1995, and as
further amended by agreement made and entered into as of November
5, 1997.
"Transfer" means any transfer, sale, assignment,
pledge, lease, hypothecation, mortgage, gift or creation of
security interest, lien or trust (voting or otherwise) or other
encumbrance or other disposition of any Common Stock or interest
therein; provided that the issuance of Class B Common Stock
pursuant to the New Subordinated Indenture shall not be deemed to
be a Transfer. "Transferor" and "Transferee" have correlative
meanings and, in addition, shall mean any Person who, in the case
of a Transferor, issues securities and, in the case of a
Transferee, acquires securities so issued.
VI. Stockholder Approvals Required for Certain Action
by the Corporation. Notwithstanding that a lesser or no vote of
the Stockholders may be required by law, and in addition to any
vote of Stockholders that may be required by law or this Restated
Certificate of Incorporation, the following actions if taken
during the Base Period but only so long as the Investors, in the
aggregate, hold more than 10% of the Common Stock outstanding and
any of the New Senior Notes or the New Structurally Subordinated
Notes remain outstanding, shall require the approval of
Stockholders holding not less than 85% of the shares of Common
Stock outstanding (80% if Additional Interest has been paid on
the second anniversary of the Effective Date):
A. any merger of the Corporation or a
Subsidiary, consolidation of the Corporation or a Subsidiary,
recapitalization of the Corporation or a Subsidiary, other form
of business combination by the Corporation or a Subsidiary, sale
of all or any substantial assets by the Corporation or a
Subsidiary or any liquidation, winding up or dissolution of the
Corporation or any of its Subsidiaries, unless all of the net
proceeds of such transaction (other than all necessary reserves
for liabilities or contingent liabilities) will be used to (i)
permanently retire all or any portion of the Indebtedness
outstanding under the Bank Revolving Credit Facility, and/or (ii)
redeem all or any portion of the (x) New Senior Notes and/or (y)
New Structurally Subordinated Notes;
B. any creation, incurrence or assumption of
Indebtedness by the Corporation or any of its Subsidiaries in
excess of an aggregate of $10,000,000 at any time outstanding,
unless all of the net proceeds from the creation, incurrence or
assumption of such Indebtedness are used to redeem outstanding
New Senior Notes and/or New Structurally Subordinated Notes;
C. any acquisition of any business, assets
(other than the procurement of supplies, machinery and equipment
in the ordinary course of business), capital stock, equity
interest or other security of, or other investment in, any Person
or Persons, in each case, by the Corporation or any of its
Subsidiaries, in any transaction or transactions (whether or not
related), if the aggregate consideration paid in any calendar
year exceeds $5,000,000, but without carrying over any unutilized
portion of such $5,000,000 to any subsequent year;
D. any issuance by the Corporation of any
capital stock of the Corporation (other than as Additional
Interest under the New Subordinated Indenture or as provided by
section 4.2(c) hereof), or the issuance of any option, warrant,
put, call, convertible security or other arrangement of any kind
to purchase or otherwise receive from the Corporation any such
securities, except where all of the net proceeds of such issuance
will be used to (i) to retire permanently all or any portion of
the Indebtedness outstanding under the Bank Revolving Credit
Facility, and/or (ii) redeem all or any portion of the
outstanding (x) New Senior Notes and/or (y) New Structurally
Subordinated Notes; provided, however, that any issuance by the
Corporation of any Class B Common Stock to any Person (other than
an Investor or the Permitted Transferee of an Investor who is not
a Hart Associate) shall also require the approval of the holders
of a majority of the outstanding Class B Common Stock;
E. any issuance by any Subsidiary of the
Corporation of any capital stock of such Subsidiary, or the
issuance of any option, warrant, put, call, convertible security
or other arrangement of any kind to purchase or otherwise receive
from any Subsidiary of the Corporation any such securities (other
than issuances by a wholly-owned Subsidiary of the Corporation to
the Corporation or another wholly-owned Subsidiary);
F. any amendment to this Restated Certificate of
Incorporation (including resolutions of the Board of Directors
setting forth the terms of any new class or series of capital
stock or any change in par value of any existing class or series
of capital stock) or the By-laws of the Corporation or any of its
Subsidiaries;
G. any transaction or series of transactions by
the Corporation or a Subsidiary of the Corporation, on one hand,
and an Affiliate of the Corporation or a Subsidiary of the
Corporation or a Hart Associate, on the other hand, other than
for (i) the performance of the Employment Agreements and the
Consulting Agreements, (ii) payments made pursuant to the Tax
Allocation Agreement or the Amended and Restated Tax Note and
(iii) transactions between or among any of the Corporation and
its wholly-owned Subsidiaries;
H. any issuance or Transfer of capital stock of
the Corporation or any of its Subsidiaries, if as a result of
such issuance or Transfer, (i) the payment of Additional Interest
at the then maximum levels set forth in the New Subordinated
Indenture would result in a limitation on the use of the
Corporation's and any of its Subsidiaries' "net operating loss
carryovers" within the meaning of Section 172 of the Internal
Review Code of 1986, as amended ("NOLs"), or (ii) such issuance
or transfer would result in a limitation on the use of the
Corporation's or any of its Subsidiaries' NOLs; or
I. the entry into any agreement or arrangement
to do any of the foregoing.
VII. Special Approval for Bankruptcy Filing.
Notwithstanding that a lesser or no vote of the Board of
Directors may be required by law, and in addition to any vote of
the Board of Directors that may be required by law or this
Restated Certificate of Incorporation, the Corporation shall not
authorize the filing by the Corporation or consent by the
Corporation to relief under any Bankruptcy Law unless (i) there
shall be at least one Investor Director in office, unless such
Investor Director has resigned and no successor Investor Director
has been appointed, and (ii) such authorization or consent is
unanimously approved by the Board of Directors.
VIII. Liability of Directors. No director of the
Corporation shall be liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as
a director, provided that this provision shall not eliminate or
limit the liability of a director (a) for any breach of the
director's duty of loyalty to the Corporation or its
stockholders, (b) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of
law, (c) under section 174 of the General Corporation Law or (d)
for any transaction from which the director derived any improper
personal benefits. Any amendment, modification or repeal of the
foregoing sentence shall not adversely affect any right or
protection of a director of the Corporation hereunder in respect
of any act or omission occurring prior to the time of such
amendment, repeal or modification.
XI. Indemnification. To the extent not prohibited by
law, the Corporation shall indemnify any person who is or was
made, or threatened to be made, a party to any threatened,
pending or completed action, suit or proceeding (a "Proceeding"),
whether civil, criminal, administrative or investigative,
including, without limitation, an action by or in the right of
the Corporation to procure a judgment in its favor, by reason of
the fact that such person, or a person of whom such person is the
legal representative, is or was a director or officer of the
Corporation, or, at the request of the Corporation, is or was
serving, while a director or officer of the Corporation, as a
director or officer of any other corporation or in a capacity
with comparable authority or responsibilities for any
partnership, joint venture, trust, employee benefit plan or other
enterprise (an "Other Entity"), against judgments, fines,
penalties, excise taxes, amounts paid in settlement and costs,
charges and expenses (including attorneys' fees, disbursements
and other charges). Persons who are not directors or officers of
the Corporation (or otherwise entitled to indemnification
pursuant to the preceding sentence) may be similarly indemnified
in respect of service to the Corporation or to an Other Entity at
the request of the Corporation to the extent the Board at any
time specifies that such persons are entitled to the benefits of
this Section 9.
IN WITNESS WHEREOF, this Restated Certificate of
Incorporation of the Corporation, which restates, integrates and
amends the provisions of the certificate of incorporation of the
Corporation, has been executed by _______________________, acting
in his capacity as ___________________ of the Corporation, this
___th day of _____________, 1998.
REEVES, INC.
__________________________________
Name:
Office:<PAGE>
[PWRW&G Draft 3/6/98]
BY-LAWS
of
REEVES, INC.
(A Delaware Corporation)
________________________
ARTICLE 1
DEFINITIONS
As used in these By-laws, unless the context otherwise
requires, the Term:
"Assistant Secretary" means an Assistant Secretary of
the Corporation.
"Assistant Treasurer" means an Assistant Treasurer of
the Corporation.
"Board" means the Board of Directors of the
Corporation.
"By-laws" means the initial by-laws of the Corporation,
as amended from time to time.
"Certificate of Incorporation" means the initial
certificate of incorporation of the Corporation, as amended,
supplemented or restated from time to time.
"Chairman" means the Chairman of the Board of Directors
of the Corporation.
"Class A Common Stock" means the shares of Class A
Common Stock, $.01 par value per share, of the Company, as
adjusted to reflect any merger, consolidation, recapitalization,
reclassification, split-up, stock dividend, rights offering,
reverse stock split or other action made, declared or effected
with respect to the Class A Common Stock.
"Class B Common Stock" means the shares of Class B
Common Stock, $.01 par value per share, of the Company, as
adjusted to reflect any merger, consolidation, recapitalization,
reclassification, split-up, stock dividend, rights offering,
reverse stock split or other action made, declared or effected
with respect to the Class B Common Stock.
"Common Stock" means the Class A Common Stock and Class
B Common Stock, collectively.
"Company" or "Corporation" means Reeves, Inc.
"Directors" means directors of the Corporation.
"Entire Board" means all directors of the Corporation
in office, whether or not present at a meeting of the Board, but
disregarding vacancies.
"General Corporation Law" means the General Corporation
Law of the State of Delaware, as amended from time to time.
"Office of the Corporation" means the executive office
of the Corporation, anything in Section 131 of the General
Corporation Law to the contrary notwithstanding.
"President" means the President of the Corporation.
"Secretary" means the Secretary of the Corporation.
"Stockholders" means stockholders of the Corporation.
"Stockholders Agreement" means that certain
Stockholders Agreement, dated as of [____________] among the
Company and the Stockholders named therein.
"Treasurer" means the Treasurer of the Corporation.
"Vice President" means a Vice President of the
Corporation.
ARTICLE 2
STOCKHOLDERS
2.1 Place of Meetings. Every meeting of Stockholders
shall be held at the Office of the Corporation or at such other
place within or without the State of Delaware as shall be
specified or fixed in the notice of such meeting or in the waiver
of notice thereof.
2.2 Annual Meeting. The annual meeting of the
Stockholders of the Corporation for the election of Directors and
the transaction of such other business as may properly come
before the meeting shall be held in such place within or without
the State of Delaware at such hour and on such business day in
May or June or as may be specified in the notice of meeting.
2.3 Deferred Meeting for Election of Directors, Etc.
If the annual meeting of Stockholders for the election of
Directors and the transaction of other business is not held
within the months specified in Section 2.2 hereof, the Board
shall call a meeting of Stockholders for the election of
Directors and the transaction of other business as soon
thereafter as convenient.
2.4 Other Special Meetings. A special meeting of
Stockholders (other than a special meeting for the election of
Directors), unless otherwise prescribed by statute, may be called
at any time by the Board, the President, the Secretary or
Stockholders holding more than 10% of the outstanding Common
Stock. At any special meeting of Stockholders only such business
may be transacted as is related to the purpose or purposes of
such meeting set forth in the notice thereof given pursuant to
Section 2.6 hereof or in any waiver of notice thereof given
pursuant to Section 2.7 hereof.
2.5 Fixing Record Date. For the purpose of (a)
determining the Stockholders entitled (i) to notice of or to vote
at any meeting of Stockholders or any adjournment thereof, (ii)
unless otherwise provided in the Certificate of Incorporation, to
express consent to corporate action in writing without a meeting
or (iii) to receive payment of any dividend or other distribution
or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock; or (b)
any other lawful action, the Board may fix a record date, which
record date shall not precede the date upon which the resolution
fixing the record date was adopted by the Board and which record
date shall not be (x) in the case of clause (a)(i) above, more
than sixty nor less than ten days before the date of such
meeting, (y) in the case of clause (a)(ii) above, more than 10
days after the date upon which the resolution fixing the record
date was adopted by the Board and (z) in the case of clause
(a)(iii) or (b) above, more than sixty days prior to such action.
If no such record date is fixed:
2.5.1 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;
2.5.2 the record date for determining
Stockholders entitled to express consent to corporate action
in writing without a meeting (unless otherwise provided in
the Certificate of Incorporation), when no prior action by
the Board is required under the General Corporation Law,
shall be the first day on which a signed written consent
setting forth the action taken or proposed to be taken is
delivered to the Corporation by delivery to its registered
office in the State of 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; and when prior action by the
Board is required under the General Corporation Law, the
record date for determining Stockholders entitled to consent
to corporate action in writing without a meeting shall be at
the close of business on the date on which the Board adopts
the resolution taking such prior action; and
2.5.3 the record date for determining
Stockholders for any purpose other than those specified in
Sections 2.5.1 and 2.5.2 shall be at the close of business
on the day on which the Board adopts the resolution relating
thereto.
When a determination of Stockholders entitled to notice of or to
vote at any meeting of Stockholders has been made as provided in
this Section 2.5, such determination shall apply to any
adjournment thereof unless the Board fixes a new record date for
the adjourned meeting. Delivery made to the Corporation's
registered office in accordance with Section 2.5.2 shall be by
hand or by certified or registered mail, return receipt
requested.
2.6 Notice of Meetings of Stockholders. Except as
otherwise provided in Sections 2.5 and 2.7 hereof, whenever under
the provisions of any statute, the Certificate of Incorporation
or these By-laws, Stockholders are required or permitted to take
any action at a meeting, written notice shall be given stating
the place, date and hour of the meeting and, in the case of a
special meeting, the purpose or purposes for which the meeting is
called. Unless otherwise provided by any statute, the
Certificate of Incorporation or these By-laws, a copy of the
notice of any meeting shall be given, personally or by mail, not
less than ten nor more than sixty days before the date of the
meeting, to each Stockholder entitled to notice of or to vote at
such meeting. If mailed, such notice shall be deemed to be given
when deposited in the United States mail, with postage prepaid,
directed to the Stockholder at his, her or its address as it
appears on the records of the Corporation. An affidavit of the
Secretary or an Assistant Secretary or of the transfer agent of
the Corporation that the notice required by this Section 2.6 has
been given shall, in the absence of fraud, be prima facie
evidence of the facts stated therein. When a meeting is
adjourned to another time or place, notice need not be given of
the adjourned meeting if the time and place thereof are announced
at the meeting at which the adjournment is taken, and at the
adjourned meeting any business may be transacted that might have
been transacted at the meeting as originally called. If,
however, the adjournment is for more than thirty days, or if
after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be
given to each Stockholder of record entitled to vote at the
meeting.
2.7 Waivers of Notice. Whenever the giving of any
notice is required by statute, the Certificate of Incorporation
or these By-laws, a waiver thereof, in writing, signed by the
Stockholder or Stockholders entitled to said notice, whether
before or after the event as to which such notice is required,
shall be deemed equivalent to notice. Attendance by a
Stockholder at a meeting 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 on the ground that
the meeting has not been 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 unless so required by statute, the
Certificate of Incorporation or these By-laws.
2.8 List of Stockholders. The Secretary shall prepare
and make, or cause to be prepared and made, at least ten days
before every meeting of Stockholders, a complete list of the
Stockholders entitled to vote at the meeting, 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 Corporation shall maintain the Stockholder list in
written form or in another form capable of conversion into
written form within a reasonable time. Upon the willful neglect
or refusal of the Directors to produce such a list at any meeting
for the election of Directors, they shall be ineligible for
election to any office at such meeting. The stock ledger shall
be the only evidence as to who are the Stockholders entitled to
examine the stock ledger, the list of Stockholders or the books
of the Corporation, or to vote in person or by proxy at any
meeting of Stockholders.
2.9 Quorum of Stockholders; Adjournment. Except as
otherwise provided by any statute, the Certificate of
Incorporation or these By-laws, the holders of a majority of all
outstanding shares of stock entitled to vote at any meeting of
Stockholders, present in person or represented by proxy, shall
constitute a quorum for the transaction of any business at such
meeting. When a quorum is once present to organize a meeting of
Stockholders, it is not broken by the subsequent withdrawal of
any Stockholders. The holders of a majority of the shares of
stock present in person or represented by proxy at any meeting of
Stockholders, including an adjourned meeting, whether or not a
quorum is present, may adjourn such meeting to another time and
place. If the adjournment is for 30 days or longer, or if after
the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each
Stockholder of record entitled to vote at the meeting. Shares of
its own stock belonging to the Corporation or to another
corporation, if a majority of the shares entitled to vote in the
election of directors of such other corporation is held, directly
or indirectly, by the Corporation, shall neither be entitled to
vote nor be counted for quorum purposes; provided, however, that
the foregoing shall not limit the right of the Corporation to
vote stock, including but not limited to its own stock, held by
it in a fiduciary capacity.
2.10 Voting; Proxies. Unless otherwise provided in the
Certificate of Incorporation, every Stockholder of record shall
be entitled at every meeting of Stockholders to one vote for each
share of capital stock standing in his or her name on the record
of Stockholders determined in accordance with Section 2.5 hereof.
If the Certificate of Incorporation provides for more or less
than one vote for any share on any matter, each reference in the
By-laws or the General Corporation Law to a majority or other
proportion of stock shall refer to such majority or other
proportion of the votes of such stock. The provisions of
Sections 212 and 217 of the General Corporation Law shall apply
in determining whether any shares of capital stock may be voted
and the persons, if any, entitled to vote such shares; but the
Corporation shall be protected in assuming that the persons in
whose names shares of capital stock stand on the stock ledger of
the Corporation are entitled to vote such shares. Holders of
redeemable shares of stock are not entitled to vote after the
notice of redemption is mailed to such holders and a sum
sufficient to redeem the stocks has been deposited with a bank,
trust company, or other financial institution under an
irrevocable obligation to pay the holders the redemption price on
surrender of the shares of stock. At any meeting of Stockholders
(at which a quorum was present to organize the meeting), all
matters, except as otherwise provided by statute, the rules or
regulations of any stock exchange or quotation system applicable
to the Corporation, the Certificate of Incorporation or these By-
laws, shall be decided by a majority of the votes cast at such
meeting by the holders of shares present in person or represented
by proxy and entitled to vote thereon, whether or not a quorum is
present when the vote is taken. Upon the demand of any
Stockholder entitled to vote, the vote at any election of
Directors, or the vote upon any question before a meeting, shall
be by ballot; but otherwise the method of voting shall be
discretionary with the presiding officer at the meeting. In
voting on any other question on which a vote by ballot is
required by law or is demanded by any Stockholder entitled to
vote, the voting shall be by ballot. Each ballot shall be signed
by the Stockholder voting or the Stockholder's proxy and shall
state the number of shares voted at any time prior to the
meeting.
Each Stockholder entitled to vote at a meeting of
Stockholders or to express consent or dissent to corporate action
in writing without a meeting may authorize another person or
persons to act for such Stockholder by proxy; but no proxy shall
be voted on after 3 years from its date, unless such proxy
provides for a longer period. The validity and enforceability of
any proxy shall be determined in accordance with Section 212 of
the General Corporation Law. A Stockholder may revoke any proxy
that is not irrevocable by attending the meeting and voting in
person or by filing an instrument in writing revoking the proxy
or by delivering a proxy in accordance with applicable law
bearing a later date to the Secretary at any time prior to the
meeting.
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.
2.11 Voting Procedures and Inspectors of Election at
Meetings of Stockholders. The Board, in advance of any meeting
of Stockholders, may appoint one or more inspectors to act at the
meeting and make a written report thereof. The Board may
designate one or more persons as alternate inspectors to replace
any inspector who fails to act. If no inspector or alternate has
been appointed or is able to act at a meeting, the person
presiding at the meeting may appoint, and on the request of any
Stockholder entitled to vote thereat shall appoint, one or more
inspectors to act at the meeting. Each inspector, before
entering upon the discharge of his or her duties, shall take and
sign an oath faithfully to execute the duties of inspector with
strict impartiality and according to the best of his or her
ability. The inspectors shall (a) ascertain the number of shares
outstanding and the voting power of each, (b) determine the
shares represented at the meeting and the validity of proxies and
ballots, (c) count all votes and ballots, (d) determine and
retain for a reasonable period a record of the disposition of any
challenges made to any determination by the inspectors, and (e)
certify their determination of the number of shares represented
at the meeting and their count of all votes and ballots. The
inspectors may appoint or retain other persons or entities to
assist the inspectors in the performance of their duties. Unless
otherwise provided by the Board, the date and time of the opening
and the closing of the polls for each matter upon which the
Stockholders will vote at a meeting shall be determined by the
person presiding at the meeting and shall be announced at the
meeting. No ballot, proxies or votes, or any revocation thereof
or change thereto, shall be accepted by the inspectors after the
closing of the polls unless the Court of Chancery of the State of
Delaware upon application by a Stockholder shall determine
otherwise.
2.12 Organization. At each meeting of Stockholders,
the Chairman, or if there is no Chairman or if there be one and
the Chairman is absent, the President, or in the absence of the
President, a Vice President, and in case more than one Vice
President shall be present, that Vice President designated by the
Board (or in the absence of any such designation, the most senior
Vice President, based on age, present), shall act as chairman of
the meeting. The Secretary, or in his or her absence one of the
Assistant Secretaries, shall act as secretary of the meeting. In
case none of the officers above designated to act as chairman or
secretary of the meeting, respectively, shall be present, a
chairman or a secretary of the meeting, as the case may be, shall
be chosen by a majority of the votes cast at such meeting by the
holders of shares of capital stock present in person or
represented by proxy and entitled to vote at the meeting.
2.13 Order of Business. The order of business at all
meetings of Stockholders shall be as determined by the chairman
of the meeting, but the order of business to be followed at any
meeting at which a quorum is present may be changed by a majority
of the votes cast at such meeting by the holders of shares of
capital stock present in person or represented by proxy and
entitled to vote at the meeting.
2.14 Written Consent of Stockholders Without a Meeting.
Unless otherwise provided in the Certificate of Incorporation,
any action required or permitted by the General Corporation Law
to 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 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
and shall be delivered (by hand or by certified or registered
mail, return receipt requested) to the Corporation by delivery to
its registered office in the State of 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. Every written consent shall bear the
date of signature of each Stockholder who signs the consent and
no written consent shall be effective to take the corporate
action referred to therein unless, within 60 days of the earliest
dated consent delivered in the manner required by this Section
2.14, written consents signed by a sufficient number of holders
to take action are delivered to the Corporation as aforesaid.
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 who, if
the action had been taken at a meeting, would have been entitled
to notice of the meeting if the record date for such meeting had
been the date that the requisite number of consents were
delivered to the Corporation pursuant to this Section 2.14.
ARTICLE 3
Directors
3.1 General Powers. Except as otherwise provided in
the Certificate of Incorporation, these By-laws or the
Stockholders Agreement, the business and affairs of the
Corporation shall be managed by or under the direction of the
Board. The Board may adopt such rules and regulations, not
inconsistent with the Certificate of Incorporation, these By-laws
or the Stockholders Agreement or applicable laws, as it may deem
proper for the conduct of its meetings and the management of the
Corporation. In addition to the powers expressly conferred by
these By-laws, the Board may exercise all powers and perform all
acts that are not inconsistent with the Stockholders Agreement
and are not required, by these By-laws, the Certificate of
Incorporation, the Stockholders Agreement or by statute, to be
exercised and performed by the Stockholders.
3.2 Number; Qualification; Term of Office. The Board
shall consist of four members. Directors need not be
Stockholders. Each Director shall hold office until a successor
is elected and qualified or until the Director's death,
resignation or removal.
3.3 Election. Directors shall, except as otherwise
required by statute or by the Certificate of Incorporation, be
elected annually by a plurality of the votes cast at a meeting of
Stockholders by the holders of shares entitled to vote in the
applicable election. If for any reason any annual election of
Directors shall not be held on the day designated by these By-
laws, the Directors shall cause such election to be held as soon
thereafter as convenient. Except as otherwise provided by law,
the term of office of each Director shall be from the time of his
election and qualification until the annual meeting of
Stockholders next succeeding his election and until his successor
shall have been duly elected and shall have qualified.
3.4 Newly Created Directorships and Vacancies. Unless
otherwise provided in the Certificate of Incorporation, newly
created directorships resulting from an increase in the number of
Directors and vacancies occurring in the Board for any other
reason, including the removal of Directors with or without cause,
may be filled by the affirmative vote of a majority of the Entire
Board, although less than a quorum, or by a sole remaining
Director, or may be elected by a plurality of the votes cast by
the holders of shares of capital stock entitled to vote in the
election at a meeting of Stockholders called for that purpose. A
Director elected to fill a vacancy shall be elected to hold
office until a successor is elected and qualified, or until the
Director's earlier death, resignation or removal.
3.5 Resignation. Any Director may resign at any time
by written notice to the Corporation. Such resignation shall
take effect at the time therein specified, and, unless otherwise
specified in such resignation, the acceptance of such resignation
shall not be necessary to make it effective.
3.6 Removal. Subject to the provisions of Section
141(k) of the General Corporation Law, any or all of the
Directors may be removed with or without cause by vote of the
holders of a majority of the shares then entitled to vote at the
election of the Director.
3.7 Compensation. Each Director, in consideration of
his or her service as such, shall be entitled to receive from the
Corporation such amount per annum or such fees for attendance at
Directors' meetings, or both, as the Board may from time to time
determine, together with reimbursement for the reasonable out-of-
pocket expenses, if any, incurred by such Director in connection
with the performance of his or her duties. Each Director who
shall serve as a member of any committee of Directors in
consideration of serving as such shall be entitled to such
additional amount per annum or such fees for attendance at
committee meetings, or both, as the Board may from time to time
determine, together with reimbursement for the reasonable out-of-
pocket expenses, if any, incurred by such Director in the
performance of his or her duties. Nothing contained in this
Section 3.7 shall preclude any Director from serving the
Corporation or its subsidiaries in any other capacity and
receiving proper compensation therefor.
3.8 Times and Places of Meetings. Except as otherwise
determined by the Board, all special and regular meetings of the
Board shall be held at the principal office of the Corporation.
The times and places for holding meetings of the Board may be
fixed from time to time by resolution of the Board or (unless
contrary to a resolution of the Board) in the notice of the
meeting.
3.9 Annual Meetings. On the day when and at the place
where the annual meeting of Stockholders for the election of
Directors is held, and as soon as practicable thereafter, the
Board may hold its annual meeting, without notice of such
meeting, for the purposes of organization, the election of
officers and the transaction of other business. The annual
meeting of the Board may be held at any other time and place
specified in a notice given as provided in Section 3.11 hereof
for special meetings of the Board or in a waiver of notice
thereof.
3.10 Regular Meetings. The Board shall hold regular
meetings at least quarterly and shall send a written notice of
each regular meeting to each Director at least ten business days'
prior to such regular meeting.
3.11 Special Meetings. Special meetings of the Board
may be called at any time on at least three business days' prior
notice by the President or a majority of the Directors.
3.12 Telephone Meetings. Members of the Board or
members of any committee designated by the Board may participate
in a meeting of the Board or of such committee by means of
conference telephone or similar communications equipment by means
of which all persons participating in the meeting can hear each
other, and participation in a meeting in such manner shall
constitute presence in person at such meeting.
3.13 Adjourned Meetings. A majority of the Directors
present at any meeting of the Board, including an adjourned
meeting, whether or not a quorum is present, may adjourn such
meeting to another time and place. At least one day's notice of
any adjourned meeting of the Board shall be given to each
Director whether or not present at the time of the adjournment,
if such notice shall be given by one of the means specified in
Section 3.14 hereof other than by mail, or at least three days'
notice if by mail. Any business may be transacted at an
adjourned meeting that might have been transacted at the meeting
as originally called.
3.14 Notice Procedure. Whenever notice is required to
be given to any Director, such notice shall be deemed given
effectively if given in person or personally to such Director by
telephone, telegram, telex, telecopy or similar means addressed
to such Director at such Director's address, telephone number or
telecopier number as it appears on the records of the
Corporation. All actions by the Board or any committee thereof
shall be reflected in the minutes of such meeting.
3.15 Waiver of Notice. Whenever the giving of any
notice is required by statute, the Certificate of Incorporation
or these By-laws, a waiver thereof, in writing, signed by the
person or persons entitled to said notice, whether before or
after the event as to which such notice is required, shall be
deemed equivalent to notice. Attendance by a person at a meeting
shall constitute a waiver of notice of such meeting except when
the person attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of
any business on the ground that the meeting has not been lawfully
called or convened. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the
Directors or a committee of Directors need be specified in any
written waiver of notice unless so required by statute, the
Certificate of Incorporation or these By-laws.
3.16 Organization. At each meeting of the Board, the
Chairman, or in the absence of the Chairman the President, shall
preside. The Secretary shall act as secretary at each meeting of
the Board. In case the Secretary shall be absent from any
meeting of the Board, an Assistant Secretary shall perform the
duties of secretary at such meeting; and in the absence from any
such meeting of the Secretary and all Assistant Secretaries, the
person presiding at the meeting may appoint any person to act as
secretary of the meeting.
3.17 Quorum of Directors. A quorum of any meeting of
the Board shall require the presence of a majority of the
authorized number of Directors (including vacancies and unfilled
newly-created directorships). No action at any meeting may be
taken by the Board unless a quorum is present. No resolution,
action or decision required or permitted to be taken, adopted or
made by the Board shall be so taken, adopted or made without a
vote of a majority of all Directors present.
3.18 Action by Majority Vote. Except as otherwise
expressly required by statute, the Certificate of Incorporation
or these By-laws, the act of a majority of the Directors present
at a meeting at which a quorum is present shall be the act of the
Board.
3.19 Action Without Meeting. Unless otherwise
restricted by the Certificate of Incorporation or these By-laws,
any action required or permitted to be taken at any meeting of
the Board or of any committee thereof may be taken without a
meeting if all Directors or members of such 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 4
COMMITTEES OF THE BOARD
The Board may by resolution passed by a vote of the
Entire 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 such committee. If a member of a committee
shall be absent from any meeting, or disqualified from voting
thereat, the remaining member or members present and not
disqualified from voting, whether or not such member or members
constitute a quorum, may, by a unanimous vote, appoint another
member of the Board to act at the meeting in the place of any
such absent or disqualified member. Any such committee, to the
extent provided in the resolution of the Board passed as
aforesaid and to the extent permitted by applicable law, shall
have and may exercise all the powers and authority of the Board
in the management of the business and affairs of the Corporation,
and may authorize the seal of the Corporation to be impressed on
all papers that may require it, but no such committee shall have
the power or authority of the Board in reference to amending the
Certificate of Incorporation, adopting an agreement of merger or
consolidation under section 251 or section 252 of the General
Corporation Law, recommending to the Stockholders (a) the sale,
lease or exchange of all or substantially all of the
Corporation's property and assets, or (b) a dissolution of the
Corporation or a revocation of a dissolution, or amending the By-
laws of the Corporation; and, unless the resolution designating
it expressly so provides, no such committee shall have the power
and authority to declare a dividend, to authorize the issuance of
stock or to adopt a certificate of ownership and merger pursuant
to Section 253 of the General Corporation Law. Unless otherwise
specified in the resolution of the Board designating a committee,
at all meetings of such committee a majority of the total number
of members of the committee shall constitute a quorum for the
transaction of business, and the vote of a majority of the
members of the committee present at any meeting at which there is
a quorum shall be the act of the committee. Each committee shall
keep regular minutes of its meetings. Unless the Board otherwise
provides, each committee designated by the Board may make, alter
and repeal rules for the conduct of its business. In the absence
of such rules each committee shall conduct its business in the
same manner as the Board conducts its business pursuant to
Article 3 of these By-laws.
No action by any committee of the Board shall be valid
unless (i) taken at a meeting for which notice is given in the
same manner as provided in Article 3 of these By-laws has been
duly given to, or waived by, the members of such committee or
(ii) effected by an action by written consent signed by each of
the members of such committee. Any such notice of meeting shall
include a description of the general nature of the business to be
transacted at the meeting.
ARTICLE V.
OFFICERS
5.1 Positions. The officers of the Corporation shall
be a President, a Secretary, a Treasurer and such other officers
as the Board may appoint, including a Chairman, one or more Vice
Presidents and one or more Assistant Secretaries and Assistant
Treasurers, who shall exercise such powers and perform such
duties as shall be determined from time to time by the Board.
The Board may designate one or more Vice Presidents as Executive
Vice Presidents and may use descriptive words or phrases to
designate the standing, seniority or areas of special competence
of the Vice Presidents elected or appointed by it. Any number of
offices may be held by the same person unless the Certificate of
Incorporation or these By-laws otherwise provide.
5.2 Appointment. The officers of the Corporation
shall be chosen by the Board at its annual meeting or at such
other time or times as the Board shall determine.
5.3 Compensation. The compensation of all officers of
the Corporation shall be fixed by the Board. No officer shall be
prevented from receiving a salary or other compensation by reason
of the fact that the officer is also a Director.
5.4 Term of Office. Each officer of the Corporation
shall hold office for the term for which he or she is elected and
until such officer's successor is chosen and qualifies or until
such officer's earlier death, resignation or removal. Any
officer may resign at any time upon written notice to the
Corporation. Such resignation shall take effect at the date of
receipt of such notice or at such later time as is therein
specified, and, unless otherwise specified, the acceptance of
such resignation shall not be necessary to make it effective.
The resignation of an officer shall be without prejudice to the
contract rights of the Corporation, if any. Any officer elected
or appointed by the Board may be removed at any time, with or
without cause, by vote of a majority of the Entire Board. Any
vacancy occurring in any office of the Corporation shall be
filled by the Board. The removal of an officer without cause
shall be without prejudice to the officer's contract rights, if
any. The election or appointment of an officer shall not of
itself create contract rights.
5.5 Fidelity Bonds. The Corporation may secure the
fidelity of any or all of its officers or agents by bond or
otherwise.
5.6 Chairman. The Chairman shall preside at all
meetings of the Board and shall exercise such powers and perform
such other duties as shall be determined from time to time by the
Board.
5.7 President. The President shall be the Chief
Executive Officer of the Corporation and shall have general
supervision over the business of the Corporation, subject,
however, to the control of the Board and of any duly authorized
committee of Directors. The President shall preside at all
meetings of the Stockholders and of the Board at which the
Chairman is not present. The President may sign and execute in
the name of the Corporation deeds, mortgages, bonds, contracts
and other instruments except in cases in which the signing and
execution thereof shall be expressly delegated by the Board or by
these By-laws to some other officer or agent of the Corporation
or shall be required by statute otherwise to be signed or
executed and, in general, the President shall perform all duties
incident to the office of President of a corporation and such
other duties as may from time to time be assigned to the
President by the Board.
5.8 Vice Presidents. At the request of the President,
or, in the President's absence, at the request of the Board, the
Vice Presidents shall (in such order as may be designated by the
Board or, in the absence of any such designation, in order of
seniority based on age) perform all of the duties of the
President and, in so performing, shall have all the powers of,
and be subject to all restrictions upon, the President. Any Vice
President may sign and execute in the name of the Corporation
deeds, mortgages, bonds, contracts or other instruments, except
in cases in which the signing and execution thereof shall be
expressly delegated by the Board or by these By-laws to some
other officer or agent of the Corporation, or shall be required
by statute otherwise to be signed or executed, and each Vice
President shall perform such other duties as from time to time
may be assigned to such Vice President by the Board or by the
President.
5.9 Secretary. The Secretary shall attend all
meetings of the Board and of the Stockholders and shall record
all the proceedings of the meetings of the Board and of the
Stockholders in a book to be kept for that purpose, and shall
perform like duties for committees of the Board, when required.
The Secretary shall give, or cause to be given, notice of all
special meetings of the Board and of the Stockholders and shall
perform such other duties as may be prescribed by the Board or by
the President, under whose supervision the Secretary shall be.
The Secretary shall have custody of the corporate seal of the
Corporation, and the Secretary, or an Assistant Secretary, shall
have authority to impress the same on any instrument requiring
it, and when so impressed the seal may be attested by the
signature of the Secretary or by the signature of such Assistant
Secretary. The Board may give general authority to any other
officer to impress the seal of the Corporation and to attest the
same by such officer's signature. The Secretary or an Assistant
Secretary may also attest all instruments signed by the President
or any Vice President. The Secretary shall have charge of all
the books, records and papers of the Corporation relating to its
organization and management, shall have charge of the stock
certificate book, transfer book and stock ledger, shall see that
the reports, statements and other documents required by statute
are properly kept and filed and, in general, shall perform all
duties incident to the office of Secretary of a corporation and
such other duties as may from time to time be assigned to the
Secretary by the Board or by the President.
5.10 Treasurer. The Treasurer shall have charge and
custody of, and be responsible for, all funds, securities and
notes of the Corporation; receive and give receipts for moneys
due and payable to the Corporation from any sources whatsoever;
deposit all such moneys and valuable effects in the name and to
the credit of the Corporation in such depositaries as may be
designated by the Board; against proper vouchers, cause such
funds to be disbursed by checks or drafts on the authorized
depositaries of the Corporation signed in such manner as shall be
determined by the Board and be responsible for the accuracy of
the amounts of all moneys so disbursed; regularly enter or cause
to be entered in books or other records maintained for the
purpose full and adequate account of all moneys received or paid
for the account of the Corporation; have the right to require
from time to time reports or statements giving such information
as the Treasurer may desire with respect to any and all financial
transactions of the Corporation from the officers or agents
transacting the same; render to the President or the Board,
whenever the President or the Board shall require the Treasurer
so to do, an account of the financial condition of the
Corporation and of all financial transactions of the Corporation;
exhibit at all reasonable times the records and books of account
to any of the Directors upon application at the office of the
Corporation where such records and books are kept; disburse the
funds of the Corporation as ordered by the Board; and, in
general, perform all duties incident to the office of Treasurer
of a corporation and such other duties as may from time to time
be assigned to the Treasurer by the Board or the President.
5.11 Assistant Secretaries and Assistant Treasurers.
Assistant Secretaries and Assistant Treasurers shall perform such
duties as shall be assigned to them by the Secretary or by the
Treasurer, respectively, or by the Board or by the President. In
the absence or inability of the Secretary or Treasurer to act,
any Assistant Secretary or Assistant Treasurer may perform all of
the duties and exercise all the powers of the Secretary and
Treasurer, respectively.
5.12 Other Officers. Other officers shall perform such
duties and have such powers as may from time to time be assigned
to them by the Board.
5.13 Delegation of Duties. In case of the absence of
any officer of the Corporation, or for any other reason that the
Board may deem sufficient, the Board may confer, for the time
being, the powers or duties, or any of them, of such officer upon
any other officer, or upon any Director.
ARTICLE 6
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
6.1 Execution of Contracts. The Board, except as
otherwise provided in these By-laws, may prospectively or
retroactively authorize any officer or officers, employee or
employees or agent or agents, in the name and on behalf of the
Corporation, to enter into any contract or execute and deliver
any instrument, and any such authority may be general or confined
to specific instances, or otherwise limited.
6.2 Loans. The Board may prospectively or
retroactively authorize the President or any other officer,
employee or agent of the Corporation to effect loans and advances
at any time for the Corporation from any bank, trust company or
other institution, or from any firm, corporation or individual,
and for such loans and advances the person so authorized may
make, execute and deliver promissory notes, bonds or other
certificates or evidences of indebtedness of the Corporation,
and, when authorized by the Board so to do, may pledge and
hypothecate or transfer any securities or other property of the
Corporation as security for any such loans or advances. Such
authority conferred by the Board may be general or confined to
specific instances, or otherwise limited.
6.3 Checks, Drafts, Etc. All checks, drafts and other
orders for the payment of money out of the funds of the
Corporation and all evidences of indebtedness of the Corporation
shall be signed on behalf of the Corporation in such manner as
shall from time to time be determined by resolution of the Board.
6.4 Deposits. The funds of the Corporation not
otherwise employed shall be deposited from time to time to the
order of the Corporation with such banks, trust companies,
investment banking firms, financial institutions or other
depositaries as the Board may select or as may be selected by an
officer, employee or agent of the Corporation to whom such power
to select may from time to time be delegated by the Board.
ARTICLE 7
STOCK AND DIVIDENDS
7.1 Certificates Representing Shares. The shares of
capital stock of the Corporation shall be represented by
certificates in such form (consistent with the provisions of
Section 158 of the General Corporation Law) as shall be approved
by the Board. Such certificates shall be signed by the Chairman,
the President or a Vice President and by the Secretary or an
Assistant Secretary or the Treasurer or an Assistant Treasurer,
and may be impressed with the seal of the Corporation or a
facsimile thereof. The signatures of the officers upon a
certificate may be facsimiles, if the certificate is
countersigned by a transfer agent or registrar other than the
Corporation itself or its employee. In case any officer,
transfer agent or registrar who has signed or whose facsimile
signature has been placed upon any certificate shall have ceased
to be such officer, transfer agent or registrar before such
certificate is issued, such certificate may, unless otherwise
ordered by the Board, 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.
7.2 Transfer of Shares. Transfers of shares of
capital stock of the Corporation shall be made only on the books
of the Corporation by the holder thereof or by the holder's duly
authorized attorney appointed by a power of attorney duly
executed and filed with the Secretary or a transfer agent of the
Corporation, and on surrender of the certificate or certificates
representing such shares of capital stock properly endorsed for
transfer and upon payment of all necessary transfer taxes. Every
certificate exchanged, returned or surrendered to the Corporation
shall be marked "Canceled," with the date of cancellation, by the
Secretary or an Assistant Secretary or the transfer agent of the
Corporation. A person in whose name shares of capital stock
shall stand on the books of the Corporation shall be deemed the
owner thereof to receive dividends, to vote as such owner and for
all other purposes as respects the Corporation. No transfer of
shares of capital stock shall be valid as against the
Corporation, its Stockholders and creditors for any purpose,
except to render the transferee liable for the debts of the
Corporation to the extent provided by law, until such transfer
shall have been entered on the books of the Corporation by an
entry showing from and to whom transferred.
7.3 Transfer and Registry Agents. The Corporation may
from time to time maintain one or more transfer offices or agents
and registry offices or agents at such place or places as may be
determined from time to time by the Board.
7.4 Lost, Destroyed, Stolen and Mutilated
Certificates. The holder of any shares of capital stock of the
Corporation shall immediately notify the Corporation of any loss,
destruction, theft or mutilation of the certificate representing
such shares, and the Corporation may issue a new certificate to
replace the certificate alleged to have been lost, destroyed,
stolen or mutilated. The Board may, in its discretion, as a
condition to the issue of any such new certificate, require the
owner of the lost, destroyed, stolen or mutilated certificate, or
his or her legal representatives, to make proof satisfactory to
the Board of such loss, destruction, theft or mutilation and to
advertise such fact in such manner as the Board may require, and
to give the Corporation and its transfer agents and registrars,
or such of them as the Board may require, a bond in such form, in
such sums and with such surety or sureties as the Board may
direct, to indemnify the Corporation and its transfer agents and
registrars against any claim that may be made against any of them
on account of the continued existence of any such certificate so
alleged to have been lost, destroyed, stolen or mutilated and
against any expense in connection with such claim.
7.5 Rules and Regulations. The Board may make such
rules and regulations as it may deem expedient, not inconsistent
with these By-laws or with the Certificate of Incorporation,
concerning the issue, transfer and registration of certificates
representing shares of its capital stock.
7.6 Restriction on Transfer of Stock. A written
restriction on the transfer or registration of transfer of
capital stock of the Corporation, if permitted by Section 202 of
the General Corporation Law and noted conspicuously on the
certificate representing such capital stock, may be enforced
against the holder of the restricted capital stock or any
successor or transferee of the holder, including an executor,
administrator, trustee, guardian or other fiduciary entrusted
with like responsibility for the person or estate of the holder.
Unless noted conspicuously on the certificate representing such
capital stock, a restriction, even though permitted by Section
202 of the General Corporation Law, shall be ineffective except
against a person with actual knowledge of the restriction. A
restriction on the transfer or registration of transfer of
capital stock of the Corporation may be imposed either by the
Certificate of Incorporation or by an agreement among any number
of Stockholders or among such Stockholders and the Corporation.
No restriction so imposed shall be binding with respect to
capital stock issued prior to the adoption of the restriction
unless the holders of such capital stock are parties to an
agreement or voted in favor of the restriction.
7.7 Dividends, Surplus, Etc. Subject to the
provisions of the Certificate of Incorporation and of law, the
Board:
7.7.1 may declare and pay dividends or make other
distributions on the outstanding shares of capital stock in
such amounts and at such time or times as it, in its
discretion, shall deem advisable giving due consideration to
the condition of the affairs of the Corporation;
7.7.2 may use and apply, in its discretion, any
of the surplus of the Corporation in purchasing or acquiring
any shares of capital stock of the Corporation, or purchase
warrants therefor, in accordance with law, or any of its
bonds, debentures, notes, scrip or other securities or
evidences of indebtedness; and
7.7.3 may set aside from time to time out of such
surplus or net profits such sum or sums as, in its
discretion, it may think proper, as a reserve fund to meet
contingencies, or for equalizing dividends or for the
purpose of maintaining or increasing the property or
business of the Corporation, or for any purpose it may think
conducive to the best interests of the Corporation.
ARTICLE 8
INTERESTED DIRECTORS AND OFFICERS
No contract or transaction between the Corporation and
one or more of its Directors or officers, or between the
Corporation and any other corporation, partnership, association,
or other organization in which one or more of its Directors or
officers are Directors or officers, or have a financial interest,
shall be void or voidable solely for this reason, or solely
because the Director or officer is present at or participates in
the meeting of the Board or committee thereof which authorizes
the contract or transaction, or solely because his or their votes
are counted for such purpose, if:
(a) the material facts as to his relationship or
interest and as to the contract or transaction are disclosed or
are known to the Board or the committee, and the Board or
committee in good faith authorizes the contract or transaction by
the affirmative votes of a majority of the disinterested
Directors, even though the disinterested Directors be less than a
quorum; or
(b) the material facts as to his relationship or
interest and as to the contract or transaction are disclosed or
are known to the Stockholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by
vote of the Stockholders; or
(c) the contract or transaction is fair as to the
Corporation as of the time it is authorized, approved or ratified
by the Board, a committee thereof or the Stockholders.
Common or interested Directors may be counted in
determining the presence of a quorum at a meeting of the Board or
of a committee which authorizes the contract or transaction.
ARTICLE 9.
INDEMNIFICATION
9.1 Indemnity Undertaking. To the extent not
prohibited by law, the Corporation shall indemnify any person who
is or was made, or threatened to be made, a party to any
threatened, pending or completed action, suit or proceeding (a
"Proceeding"), whether civil, criminal, administrative or
investigative, including, without limitation, an action by or in
the right of the Corporation to procure a judgment in its favor
(an "Indemnitee"), by reason of the fact that such person, or a
person of whom such person is the legal representative, is or was
a Director or officer of the Corporation, or, at the request of
the Corporation, is or was serving, while a Director or officer
of the Corporation, as a director or officer of any other
corporation or in a capacity with comparable authority or
responsibilities for any partnership, joint venture, trust,
employee benefit plan or other enterprise (an "Other Entity"),
against judgments, fines, penalties, excise taxes, amounts paid
in settlement and costs, charges and expenses (including
attorneys' fees, disbursements and other charges). Persons who
are not directors or officers of the Corporation (or otherwise
entitled to indemnification pursuant to the preceding sentence)
may be similarly indemnified in respect of service to the
Corporation or to an Other Entity at the request of the
Corporation to the extent the Board at any time specifies that
such persons are entitled to the benefits of this Article 9.
9.2 Advancement of Expenses. The Corporation shall,
from time to time, reimburse or advance to any Director or
officer or other person entitled to indemnification hereunder the
funds necessary for payment of expenses, including attorneys'
fees and disbursements, incurred in connection with defending any
Proceeding, in advance of the final disposition of such
Proceeding; provided, however, that such expenses incurred by or
on behalf of any Director or officer or other person shall be
paid in advance of the final disposition of a Proceeding, if
required by the General Corporation Law, only upon receipt by the
Corporation of an undertaking, by or on behalf of such Director
or officer (or other person indemnified hereunder), to repay any
such amount so advanced if it shall ultimately be determined by
final judicial decision from which there is no further right of
appeal that such Director, officer or other person is not
entitled to be indemnified for such expenses.
9.3 Rights Not Exclusive. The rights to
indemnification and reimbursement or advancement of expenses
provided by, or granted pursuant to, this Article 9 shall not be
deemed exclusive of any other rights to which a person seeking
indemnification or reimbursement or advancement of expenses may
have or hereafter be entitled under any statute, the Certificate
of Incorporation, these By-laws, any agreement, any vote of
Stockholders or disinterested Directors or otherwise, both as to
action in his or her official capacity and as to action in
another capacity while holding such office.
9.4 Continuation of Benefits. The rights to
indemnification and reimbursement or advancement of expenses
provided by, or granted pursuant to, this Article 9 shall
continue as to a person who has ceased to be a Director or
officer (or other person indemnified hereunder) and shall inure
to the benefit of the executors, administrators, legatees and
distributees of such person.
9.5 Insurance. The Corporation shall have power to
purchase and maintain insurance on behalf of any person who is or
was a Director, officer, employee or agent of the Corporation, or
is or was serving, while a Director or officer of the Corporation
and at the request of the Corporation as a director, officer,
employee or agent of an Other Entity, against any liability
asserted against such person and incurred by such person in any
such capacity, or arising out of such person's status as such,
whether or not the Corporation would have the power to indemnify
such person against such liability under the provisions of this
Article 9, the Certificate of Incorporation or under section 145
of the General Corporation Law or any other provision of law.
9.6 Binding Effect. The provisions of this Article 9
shall be a contract between the Corporation, on the one hand, and
each Director and officer who serves in such capacity at any time
while this Article 9 is in effect and any other person entitled
to indemnification hereunder, on the other hand, pursuant to
which the Corporation and each such Director, officer or other
person intend to be, and shall be legally bound. No repeal or
modification of this Article 9 shall affect any rights or
obligations with respect to any state of facts then or
theretofore existing or any proceeding theretofore or thereafter
brought or threatened based in whole or in part upon any such
state of facts.
9.7 Procedural Rights. The rights to indemnification
and reimbursement or advancement of expenses provided by, or
granted pursuant to, this Article 9 shall be enforceable by any
person entitled to such indemnification or reimbursement or
advancement of expenses in any court of competent jurisdiction.
The burden of proving that such indemnification or reimbursement
or advancement of expenses is not appropriate shall be on the
Corporation. Neither the failure of the Corporation (including
its Board of Directors, its independent legal counsel and its
Stockholders) to have made a determination prior to the
commencement of such action that such indemnification or
reimbursement or advancement of expenses is proper in the
circumstances nor an actual determination by the Corporation
(including its Board of Directors, its independent legal counsel
and its Stockholders) that such person is not entitled to such
indemnification or reimbursement or advancement of expenses shall
constitute a defense to the action or create a presumption that
such person is not so entitled. Such a person shall also be
indemnified for any expenses incurred in connection with
successfully establishing his or her right to such
indemnification or reimbursement or advancement of expenses, in
whole or in part, in any such proceeding.
9.8 Service Deemed at Corporation's Request. Any
Director or officer of the Corporation serving in any capacity
(a) with respect to another corporation of which a majority of
the shares entitled to vote in the election of its directors is
held, directly or indirectly, by the Corporation or (b) with
respect to any employee benefit plan of the Corporation or any
corporation referred to in clause (a) shall be deemed to be doing
so at the request of the Corporation.
9.9 Election of Applicable Law. Any person entitled
to be indemnified or to reimbursement or advancement of expenses
as a matter of right pursuant to this Article 9 may elect to have
the right to indemnification or reimbursement or advancement of
expenses interpreted on the basis of the applicable law in effect
at the time of the occurrence of the event or events giving rise
to the applicable Proceeding, to the extent permitted by law, or
on the basis of the applicable law in effect at the time such
indemnification or reimbursement or advancement of expenses is
sought. Such election shall be made, by a notice in writing to
the Corporation, at the time indemnification or reimbursement or
advancement of expenses is sought; provided, however, that if no
such notice is given, the right to indemnification or
reimbursement or advancement of expenses shall be determined by
the law in effect at the time indemnification or reimbursement or
advancement of expenses is sought.
ARTICLE 10
BOOKS AND RECORDS
10.1 Books and Records. There shall be kept at the
principal office of the Corporation correct and complete records
and books of account recording the financial transactions of the
Corporation and minutes of the proceedings of the Stockholders,
the Board and any committee of the Board. The Corporation shall
keep at its principal office, or at the office of the transfer
agent or registrar of the Corporation, a record containing the
names and addresses of all Stockholders, the number and class of
shares held by each and the dates when they respectively became
the owners of record thereof.
10.2 Form of Records. Any records maintained by the
Corporation in the regular course of its business, including its
stock ledger, books of account, and minute books, may be kept on,
or be in the form of, punch cards, magnetic tape, photographs,
microphotographs, or any other information storage device,
provided that the records so kept can be converted into clearly
legible written form within a reasonable time. The Corporation
shall so convert any records so kept upon the request of any
person entitled to inspect the same.
10.3 Inspection of Books and Records. Except as
otherwise provided by law, the Board shall determine from time to
time under what conditions and regulations the accounts, books,
minutes and other records of the Corporation, or any of them,
shall be open to the Stockholders for inspection.
ARTICLE 11
SEAL
The corporate seal shall have inscribed thereon the
name of the Corporation, the year of its organization and the
words "Corporate Seal, Delaware." The seal may be used by
causing it or a facsimile thereof to be impressed or affixed or
otherwise reproduced.
ARTICLE 12
FISCAL YEAR
The fiscal year of the Corporation shall be fixed, and
may be changed, by resolution of the Board.
ARTICLE 13
PROXIES AND CONSENTS
Unless otherwise directed by the Board and subject to
the terms of the Stockholders Agreement, the Chairman, the
President, any Vice President, the Secretary or the Treasurer, or
any one of them, may execute and deliver on behalf of the
Corporation proxies respecting any and all shares or other
ownership interests of any Other Entity owned by the Corporation
appointing such person or persons as the officer executing the
same shall deem proper to represent and vote the shares or other
ownership interests so owned at any and all meetings of holders
of shares or other ownership interests, whether general or
special, and/or to execute and deliver consents respecting such
shares or other ownership interests; or any of the aforesaid
officers may attend any meeting of the holders of shares or other
ownership interests of such Other Entity and thereat vote or
exercise any or all other powers of the Corporation as the holder
of such shares or other ownership interests.
ARTICLE 14
PREDOMINANCE OF STOCKHOLDERS AGREEMENT
Every provision of the By-laws shall be construed so as
to permit full application of and give full effect to the
provisions of the Stockholders Agreement. In the event that the
terms of these By-laws shall conflict with any provision of the
Stockholders Agreement, the terms of such Stockholders Agreement
shall prevail.
