<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 29, 1998
REGISTRATION NO. -
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(B) OR (G) OF
THE SECURITIES EXCHANGE ACT OF 1934
----------------
EBS PENSION, L.L.C.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 42-1466520
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
----------------
NORWEST BANK MINNESOTA, N.A.
CORPORATE TRUST SERVICES, LEGAL MARKETS GROUP
SIXTH AND MARQUETTE
MINNEAPOLIS, MINNESOTA 55479-0069
(612) 667-4803
ATTN: LON P. LECLAIR, VICE PRESIDENT
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
None
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Class A Membership Units
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
FORWARD-LOOKING STATEMENTS
This Registration Statement of the Class A Membership Units of EBS Pension,
L.L.C. (the "Company") contains forward-looking statements. Forward-looking
statements are typically identified by the words "believe," "expect,"
"anticipate," "intend," "seek," "estimate," "project" and similar expressions.
These forward-looking statements are subject to a number of risks and
uncertainties, many of which are beyond the Company's control. Actual results
could differ materially from those contemplated by these forward-looking
statements as a result of factors including those described below. In light of
these risks and uncertainties, there can be no assurance that the results and
events contemplated by the forward-looking information contained in this
Registration Statement will in fact transpire. Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as
of their respective dates.
ITEM 1. BUSINESS
Unless otherwise noted, references to the "Company" shall mean EBS Pension,
L.L.C., a Delaware limited liability company.
BACKGROUND
On September 9, 1997, the United States Bankruptcy Court for the District of
Delaware (the "Bankruptcy Court") entered an order in accordance with section
1129 of the Bankruptcy Code, 11 U.S.C. (S)(S) 101-1330, et seq., (the
"Bankruptcy Code") confirming the Amended Joint Plan of Reorganization Under
Chapter 11 of the Bankruptcy Code (the "Plan") filed by Edison Brothers
Stores, Inc. ("Edison") and its affiliated debtors in possession (collectively
with Edison, the "Debtors"). The Plan became effective on September 26, 1997
(the "Effective Date").
The Company was established pursuant to the Plan and the EBS Pension, L.L.C.
Members Agreement (the "Members Agreement"). Under the Plan, each holder of an
Allowed General Unsecured Claim (as defined in the Plan) against Edison was
entitled to receive a distribution on account of such claim which included,
among other consideration, the holder's pro rata share of Class A Membership
Units in the Company. The initial distribution date under the Plan occurred on
or about December 12, 1997. Accordingly, in late December of 1997, holders of
Allowed General Unsecured Claims began receiving membership certificates
evidencing their ownership of Class A Membership Units in the Company. As of
June 30, 1998, there were 9,467,217 Class A Membership Units and 532,783 Class
B Membership Units of the Company issued and outstanding. Between September
25, 1997 and June 30, 1998, no transfers of beneficial ownership of Class A
Membership Units in the Company were recorded on the membership register
maintained by Norwest Bank Minnesota, N.A. (in such capacity, the "Transfer
Agent"). See "Item 11. Description of Registrant's Securities to be Registered"
for a description of the Class A Membership Units.
The Plan further provided for the Debtors' transfer to the Company of their
right to receive the Pension Plan Proceeds, which the Plan defines as the cash
proceeds (the "Pension Plan Proceeds") to be received by the Debtors as a
result of the termination of the Edison Brothers Stores, Inc. Pension Plan
(the "Pension Plan"), net of (a) the Pension Plan assets transferred to a
qualified replacement pension plan; (b) all costs, fees and expenses
(collectively, the "Pension Plan Termination Costs") relating to termination
of the Pension Plan and establishment of the replacement plan; and (c) all
applicable taxes incurred, or for which a reserve (the "Pension Plan Tax
Reserve") is established by Edison, in connection with termination of the
Pension Plan.
COMPANY FORMATION AND SUMMARY OF CERTAIN PROVISIONS OF THE MEMBERS AGREEMENT
Formation
In accordance with the Plan, the Certificate of Formation of the Company was
filed on September 24, 1997 with the office of the Delaware Secretary of
State, for the purpose of forming the Company as a limited liability company
under the provisions and subject to the requirements of the State of Delaware,
in particular the Delaware Limited Liability Company Act, Del. Code Ann.
tit.6, ch. 18 (the "Delaware Act"). The Certificate of Formation became
effective, thereby providing for the formation of the Company, on September
25, 1997 (the "Inception Date").
2
<PAGE>
Purposes
The Company is organized for the exclusive purposes of (a) receiving and
administering the "Company Assets," which the Members Agreement defines as all
Pension Plan Proceeds as well as any other property or proceeds acquired by
the Company and; (b) distributing the Company Assets to holders of Membership
Units pursuant to the terms of the Members Agreement. The Company has no
objective to engage in the conduct of any trade or business. In essence, then,
the Company constitutes a vehicle for receiving the Pension Plan Proceeds and
then allocating and distributing all net funds to holders of Membership Units
in the Company. See "--Term of the Company."
Administration and the Manager
The Company Assets are administered, and the affairs of the Company are
managed, by the Manager. The Manager of the Company, as duly designated by the
Official Committee of Unsecured Creditors appointed in the Debtors' Chapter 11
Case (the "Creditors' Committee"), is Norwest Bank Minnesota, N.A. (in such
capacity, the "Manager"). As contemplated by the Members Agreement, the
principal office of the Company is maintained at the principal office of the
Manager, which is located at Sixth and Marquette Streets, Minneapolis,
Minnesota 55479-0069, Attn: Lon P. LeClair. The telephone number is (612) 667-
4803.
In furtherance of the Company's purposes and subject to the retained
jurisdiction of the Bankruptcy Court as provided for in the Plan, the Manager
is to make continuing efforts to (i) receive the Pension Plan Proceeds, and
(ii) make distributions of any Pension Plan Proceeds to the Members; in each
case in an expeditious but orderly manner intended reasonably to maximize the
value of such distributions to the Members, but subject to the judgment and
discretion of the Manager and the provisions of the Members Agreement. The
Manager will not be liable to the Company or to any Member for any action or
inaction, except in the case of its willful breach of a material provision of
the Members Agreement or gross negligence in connection with the performance
of its duties under the Members Agreement. See "Item 12. Indemnification of
Officers and Directors."
The Manager is empowered to retain (and make reasonable compensation and
reimbursement from the Company Assets to) such independent experts and
advisors (including, but not limited to, law firms, tax advisors, consultants,
or other professionals) as the Manager may select to aid in the performance of
its duties and responsibilities and to perform such other functions as may be
appropriate in furtherance of the intent and purposes of the Members
Agreement. The Manager has selected the law firm of Jones, Day, Reavis & Pogue
("Jones Day") to serve as counsel to the Company. Prior to the Effective Date,
Jones Day served as counsel to the Creditors' Committee. The Manager has
selected PricewaterhouseCoopers LLP to provide the Company with financial
reporting and consulting services as well as tax-related services. Norwest
Bank Minnesota, N.A., which also serves as the Disbursing Agent under the Plan
and the Transfer Agent under the Members Agreement, maintains the ownership
registers of the Company and, at the direction of the Manager, coordinates
distributions to Members of the Company and performs related administrative
duties. Rubin, Brown, Gornstein & Company, LLP serves as the Company's
independent auditors.
The Members Agreement also requires the Manager to designate one of the
Members as the "Tax Matters Partner" (as defined in the Section 6231 of the
Internal Revenue Code). The Tax Matters Partner is required to represent the
Company (at the Company's expense) in connection with all examinations of the
Company's affairs by tax authorities and to expend Company funds for
professional services associated therewith. The Tax Matters Partner also
arranges for the preparation and timely filing of all returns required to be
filed by the Company and the distribution of Form K-1 or other similar forms
to all Members. In accordance with the Members Agreement, the Manager has
designated Citibank, N.A., through its authorized representative Randolph I.
Thornton, Jr., to serve as the Tax Matters Partner of the Company.
Subject to the retained jurisdiction of the Bankruptcy Court as provided for
in the Plan, but without prior or further authorization, the Manager may
control and exercise authority over the Company Assets, over the acquisition,
management and disposition thereof and over the management and conduct of the
Company to the
3
<PAGE>
extent necessary to enable the Manager to fulfill the intent and purposes of
the Members Agreement. No person dealing with the Company is obligated to
inquire into the authority of the Manager in connection with the acquisition,
management or disposition of the Company Assets. In connection with the
administration of the Company Assets and the management of the Company's
affairs, the Manager has the power to take any and all actions as, in the
Manager's sole discretion, are necessary or advisable to effectuate the
purposes of the Company, including, without limitation, the power and
authority to (i) distribute the Company Assets to Members in accordance with
the terms of the Members Agreement, (ii) sell, convey, transfer, assign,
liquidate or abandon the Company Assets, or any part thereof or any interest
therein, upon such terms and for such consideration as the Manager, in its
sole discretion, may deem desirable, (iii) endorse the payment of notes or
other obligations of any person or to make contracts with respect thereto,
(iv) borrow such sums of money, at any time and from time to time, for such
periods of time, upon such terms and conditions, from such persons, for such
purposes as may be deemed advisable, and (v) appoint, engage, supervise and
compensate such officers, employees and agents of the Company and such other
persons, as may be deemed necessary or desirable. The Manager will not at any
time, on behalf of the Company or the Members, enter into or engage in any
trade or business, and no part of the Company Assets will be used or disposed
of by the Manager in furtherance of any such trade or business. All decisions
and actions taken by the Manager under the authority of the Members Agreement
will be binding upon all of the Members and the Company. Without the consent
of all of the Members, the Manager may not (i) take any action in
contravention of the Members Agreement; (ii) take any action which would make
it impossible to carry on the activities of the Company; or (iii) possess
property of the Company or assign the Company's rights in specific property
for other than Company purposes.
Term of the Company; Dissolution
The Company's existence will terminate (unless dissolved earlier) on the
third anniversary of the Effective Date unless extended by the Manager (with
the approval of the Bankruptcy Court) for one or more successive periods of
two years each if the Company Assets have not been fully liquidated and
distributed or all Disputed General Unsecured Claims (as defined in the Plan)
have not been resolved. The Company will be dissolved only upon the earlier to
occur of: (i) termination of the Company's existence; (ii) the entry of a
final judgment, order or decree of a court of competent jurisdiction
adjudicating the Company to be bankrupt and the expiration without appeal of
the period, if any, allowed by applicable law in which to appeal; or (iii) the
unanimous written agreement of all Members. In the event of the Company's
dissolution, following the payment of, or provision for, all debts and
liabilities of the Company and all expenses of liquidation, and subject to the
right of the Liquidating Agent (as defined in the Members Agreement) to set up
reasonable cash reserves for any contingent or unforeseen liabilities or
obligations of the Company, all assets of the Company (or the proceeds
thereof) will be distributed to the General Members in accordance with their
respective Capital Account balances. No Member will have any recourse against
Edison or any other Member for any distributions with respect to such Member's
Capital Account balances.
OPERATIONS OF THE COMPANY SINCE ITS FORMATION
The Pension Plan Refund
The Pension Plan was terminated as of May 31, 1997. Data provided to the
Company by Edison indicates that Edison received a cash refund of $51.41
million on account of the Pension Plan termination. After deducting Pension
Plan Termination Costs of $1.68 million and establishing a Pension Plan Tax
Reserve of $5.74 million, on January 23, 1998, Edison remitted Pension Plan
Proceeds totaling $43,985,315 to the Company.
Initial Distribution to Members
The Members Agreement obligates the Manager to facilitate the prompt
distribution of Pension Plan Proceeds to holders of Class A Membership Units
in the Company. Accordingly, on February 13, 1998, the Manager, after
establishing the reserves and making the calculations discussed below,
distributed the aggregate
4
<PAGE>
sum of $39,429,208.19 to holders of record of Class A Membership Units in the
Company as of February 11, 1998. This aggregate distribution was calculated as
follows:
<TABLE>
<S> <C>
Total Pension Plan Proceeds Received...................... $43,985,315.40
January Interest Earned................................... $ 35,197.54
TOTAL FUNDS ON DEPOSIT (2/11/98).......................... $44,020,512.94
less:
Reserve for Litigation Indemnification.................... $ 1,500,000.00
Reserve for Administrative Expenses....................... $ 300,000.00
Tax Distribution to Edison................................ $ 959.58
TOTAL AMOUNT AVAILABLE FOR FIRST DISTRIBUTION TO MEMBERS.. $42,219,553.36
less:
Reserve for Disputed Claims and Claims Not Yet Eligible
for Distribution......................................... $ 2,792,397.04
TOTAL DISTRIBUTED TO HOLDERS OF CLASS A MEMBERSHIP UNITS
ON FEBRUARY 13, 1998..................................... $39,427,156.32
</TABLE>
The reserve for litigation indemnification (the "Indemnification Reserve")
was established in accordance with the Plan and the Members Agreement. See
"Item 2. Financial Information--Management's Discussion and Analysis of
Financial Condition and Results of Operations".
See "Item 11. Description of Registrant's Securities to be Registered" for a
description of tax distributions to Edison.
STATUS AS OF JUNE 30, 1998
As of June 30, 1998, the balance in the Company's operating account was
$372,528. Following satisfaction of administrative expenses, any funds
remaining on deposit would be available for distribution to holders of Class A
Membership Units in the Company. In addition, any remaining balance of the
$1.5 million Indemnification Reserve ultimately would be available for such
distribution.
An additional potential component of a future distribution is the Pension
Plan Tax Reserve currently being held by Edison. Edison has sought a private
letter ruling (the "Tax Ruling") from the Internal Revenue Service ("IRS") to
the effect that any income realized by Edison as a result of the Pension Plan
termination will be available to offset certain deductions realized by the
Debtors in the same taxable year. If the Tax Ruling is obtained, the amount of
tax to be paid from the Pension Plan Tax Reserve is expected to aggregate $1
million or less, leaving net Pension Plan Proceeds of approximately $4.5
million which would be released from Edison's Pension Plan Tax Reserve to the
Company for distribution to holders of Class A Membership Units in the
Company. There can be no assurance, however, that the Tax Ruling will be
obtained. If the Tax Ruling is not obtained, the Pension Plan Tax Reserve may
be utilized to satisfy Edison's income tax obligations relating to termination
of the Pension Plan, in which case such funds would not be available for
distribution to the Company or holders of Class A Membership Units.
In light of the foregoing, the Manager estimates that a second distribution
to holders of Class A Membership Units in the Company could range from an
aggregate of $100,000 to $8.2 million. Given the contingencies associated with
certain components of future distributions, however, there can be no
assurances that any future distribution will be made, or in what amount. See
"Item 2. Financial Information--Management's Discussion and Analysis of
Financial Condition and Results of Operations".
Reserved Amounts (as hereinafter defined) totaled approximately $2.28
million as of June 30, 1998.
5
<PAGE>
ITEM 2. FINANCIAL INFORMATION
Selected Consolidated Financial Data
The following table sets forth selected financial information of the Company
as of and for the period ended December 31, 1997 since the Inception Date and
as of and for the three months ended March 31, 1998. The selected consolidated
financial data as of and for the period ended December 31, 1997 has been
derived from the Company's financial statements, which were audited by Rubin,
Brown, Gornstein & Company, LLP. The selected consolidated financial data as
of and for the three months ended March 31, 1998 have been derived from the
Company's unaudited financial statements. The following information should be
read in conjunction with the Company's financial statements and notes thereto
included elsewhere herein and "Management's Discussion and Analysis of
Financial Condition and Results of Operations," presented below.
<TABLE>
<CAPTION>
THREE MONTHS
PERIOD ENDED ENDED
DECEMBER 31, 1997(1) MARCH 31, 1998
-------------------- --------------
(UNAUDITED)
<S> <C> <C>
OPERATING STATEMENT DATA:
Income...................................... $ 0 154,062
General and administrative expenses......... 51,910 48,590
Net income (loss)........................... (51,910) 105,472
Distribution per Class A Membership Unit.... 0 4.22
BALANCE SHEET DATA (AT PERIOD END):
Cash........................................ 0 4,686,501
Interest Receivable......................... 0 7,099
Due from Edison............................. $43,985,315 0
Total assets................................ 43,985,315 4,693,600
Accrued Expenses............................ 51,910 81,879
Members' equity............................. 43,933,405 4,611,721
</TABLE>
- --------
(1) The Company's inception was September 25, 1997.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
The following is a discussion and analysis of the financial condition at,
and results of operations of the Company for, the period ended December 31,
1997 and the three months ended March 31, 1998, and of certain factors that
may affect the Company's prospective financial condition and results of
operations. The following should be read in conjunction with the Company's
financial statements and notes thereto appearing elsewhere herein. References
herein to the period ended December 31, 1997 are to the period from September
25, 1997 to December 31, 1997.
The Company, which was formed pursuant to the Plan and the Members
Agreement, is a limited purpose entity which may not engage in any business.
The Company was organized for the exclusive purposes of (a) receiving and
administering the Company Assets and (b) distributing the Company Assets to
holders of the Company's Class A Membership Units pursuant to the terms of the
Members Agreement.
On January 23, 1998, the Company received from Edison the Pension Plan
Proceeds totaling $44.0 million. The Company recognizes income from interest
earned on its funds. The Company invests such funds in a money market fund
investing solely in direct obligations of the United States Government. The
Members Agreement permits all funds received by the Company to be temporarily
invested in United States treasury bills and notes with maturities of 12 months
or less, institutional money market funds and demand or time deposits and
certificates of deposit with U.S. federal or state commercial banks having
primary capital of not less than $500 million. During the period ended December
31, 1997, the Company did not recognize any interest income
6
<PAGE>
because it did not receive the Pension Plan Proceeds until January 1998.
During the three months ended March 31, 1998, the Company recognized $154,000
of interest income. The amount of interest income recognized by the Company in
future periods will be dependent on, among other things, (i) fluctuations in
interest rates, (ii) the amounts and timing of any amounts received in the
future from the Pension Plan Tax Reserve (described below), (iii) the amounts
and timing of any distributions to holders of Class A Membership Units, and
(iv) the amount and timing of the Company's expenses. The Company may in the
future receive funds currently held in the Pension Plan Tax Reserve pending
the outcome of the requested Tax Ruling. If the Tax Ruling is obtained, the
amount of tax to be paid from the Pension Plan Tax Reserve is expected to be
$1 million or less, leaving net Pension Plan Proceeds of approximately $4.5
million to be distributed to the Company from the Pension Plan Tax Reserve
and, in turn, distributed to holders of Class A Membership Units. There can be
no assurance that the Tax Ruling will be obtained or that any funds will be
distributed to the Company from the Pension Plan Tax Reserve.
The Company's expenses consist primarily of fees payable to the Transfer
Agent, the Manager, and the Company's lawyers and accountants expenses. The
Company had expenses of $51,900 and $49,000 for the period ended December 31,
1997 and the three months ended March 31, 1998, respectively. These expenses
are expected to fluctuate in future periods based on, among other factors, the
volume of transfers of Class B and Class A Membership Units. The periodic
reporting requirements imposed on the Company under the Securities Exchange
Act of 1934 is expected to result in an increase in legal and accounting fees
in future periods.
The Company, together with EBS Litigation, L.L.C. (another limited liability
company formed pursuant to the Plan), has agreed to indemnify the Debtors and
their present or former officers, directors and employees from and against any
losses, claims, damages or liabilities by reason of any actions arising from
or relating to the Company and any actions taken or proceeding commenced by
EBS Litigation, L.L.C. (other than with respect to any Unresolved Avoidance
Claims (as defined in the Plan) that EBS Litigation, L.L.C. may have against
such persons other than in their capacities as officers, directors or
employees of the Debtors. Pursuant to the Plan, the Company established the
Litigation Reserve ($1.5 million) from the Pension Plan Proceeds for the
benefit of these indemnified persons. Indemnification must first be sought
from any applicable officers' and directors' insurance policy and then from
the Indemnification Reserve. Although to date there has not been any
indemnification claim, there can be no assurance such a claim will not be made
in the future. All liabilities of the Company, including the foregoing
indemnification obligations, will be satisfied from the Company Assets.
At December 31, 1997, the Company had no cash or cash equivalents. At March
31, 1998, the Company had cash and cash equivalents of $4.7 million, after the
$39.4 million distribution to holders of Class A Membership Units in February
1998. When determining the amount and timing of the February distribution, the
Manager considered, among other things, (i) the terms of the Members Agreement
governing distributions (see "Item 11. Description of Registrant's Securities
to be Registered--Distributions of Pension Plan Proceeds"), and (ii) the
anticipated amount of necessary reserves and future administrative expenses.
At the time of the February distribution, in accordance with the Members
Agreement, the Company reserved $2.79 million for distribution to persons who
could become holders of Class A Membership Units after February 11, 1998. As
of June 30, 1998, the Company had cash and cash equivalents of $4.17 million.
The amount and timing of any future distributions of Pension Plan Proceeds
will be determined by the Manager in accordance with the terms of the Members
Agreement. There can be no assurance that any further distributions will be
made.
The Company is classified as a partnership for federal income tax purposes
and, therefore, does not pay any taxes. Instead, the Members pay taxes on
their proportionate share of the Company's income. See "Item 10.--Taxation".
ITEM 3. PROPERTIES
The Company does not own or lease any properties.
7
<PAGE>
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Class A Membership Units of persons owning of
record or known to the Company to be the beneficial owner of more than five
percent of the outstanding Class A Membership Units as of June 30, 1998. The
Manager of the Company owns 110 Class A Membership Units.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL NUMBER OF CLASS A NATURE OF
OWNER MEMBERSHIP UNITS BENEFICIAL OWNERSHIP PERCENT
- ------------------------------ ----------------- ---------------------- -------
<S> <C> <C> <C>
Citibank, N.A................. 798,811 Sole Voting/Investment 7.99%
Hare & Co..................... 522,787 Sole Voting/Investment 5.23%
Morgens Waterfall Overseas
Partners..................... 614,739 Sole Voting/Investment 6.15%
Nomura Holding America, Inc... 718,035 Sole Voting/Investment 7.18%
Principal Mutual Life......... 766,665 Sole Voting/Investment 7.67%
Swiss Bank Corporation........ 1,522,582 Sole Voting/Investment 15.23%
</TABLE>
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
The Company does not have any directors and the Manager acts as the
Company's sole executive officer. The Manager may resign at any time or be
removed by the Designation Members (defined below), with or without cause, at
any time, such resignation or removal to be effective upon the appointment of
a successor Manager. In the event of the resignation or removal of the
Manager, the Designation Members may appoint a successor Manager that is not
affiliated with Edison. If such appointment does not occur within 90 days, the
Manager may petition the Bankruptcy Court for the appointment of a successor
Trustee. The "Designation Members" means the three Members who, at the
applicable date for any action to be taken by Designation Members, constitute
the holders of record of the three largest amounts of Class A Membership Units
provided that (i) affiliated persons are treated as a single person for these
purposes; (ii) no affiliate of Edison may be a Designation Member; and (iii)
any person may notify the Company that it does not wish to be a Designation
Member.
ITEM 6. EXECUTIVE COMPENSATION
The Manager is to receive reasonable compensation for services rendered to
and on behalf of the Company, as well as reimbursement for the reasonable
expenses incurred in connection with the performance of its duties under the
Members Agreement.
With respect to services rendered from the Inception Date to December 31,
1997, the Company did not accrue for such services rendered by the Manager, as
this amount was not yet determined. With respect to services rendered during the
three months ended March 31, 1998, the Company accrued approximately $38,000 on
its financial statements for services rendered by,and reimbursements due to,
the Manager.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
ITEM 8. LEGAL PROCEEDINGS
None.
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
There is no established public trading market for the Company's Class A
Membership Units. As of June 30, 1998, there were 1,872 certificated holders
of record of the Class A Membership Units. See "Item 4. Security Ownership of
Certain Beneficial Owners and Management" for more information. See "Item 1.
Business--Operations of the Company since September 25, 1997," for a
discussion of the initial distribution to Members on February 13, 1998, and
"Item 11. Description of Registrant's Securities to be Registered" for a
discussion of distribution provisions in the Members Agreement.
8
<PAGE>
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
No securities of the Company which were not registered under the Securities
Act of 1933 (the "Securities Act") have been issued or sold by the Company
within the past three years, except that in connection with the Plan, as of
June 30, 1998, the Company had issued 10,000,000 Class B Membership Units to
Edison pursuant to the Plan. As of June 30, 1998, the Company had issued
9,467,217 Class A Membership Units upon the cancellation of equivalent number
of Class B Membership Units. Section 1145(a)(1) of the Bankruptcy Code exempts
the offer and sale of securities under a plan of reorganization from
registration under the Securities Act and state securities laws if certain
requirements are met. The Company believes that it is a "successor" to Edison
under Section 1145(a)(1) of the Bankruptcy Code and that the offer and sale of
the Class A Membership Units pursuant to the Plan otherwise satisfies all of
the requirements of Section 1145(a)(1).
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
The following summarizes certain provisions of the Members Agreement
relating to the Class A and Class B Membership Units. This summary does not
purport to be complete, and is subject to, and is qualified in its entirety by
reference to, all of the provisions of the Members Agreement, which has been
filed as an exhibit to this Registration Statement.
The Members and the Membership Units
The owners of the Company are known as Members. The ownership interest of a
Member is designated as a "Membership Unit." The Company has the following
classes of Membership Units: (i) "Class B Membership Units," which initially
represented all of the Company's ownership interests and which were and are
held by Edison pending the surrender thereof by Edison for cancellation from
time to time in exchange for an equivalent number of Class A Membership Units
to be distributed by Edison pursuant to the Plan, and (ii) "Class A Membership
Units," which have been and will continue to be distributed by Edison from
time to time to holders of Allowed General Unsecured Claims pursuant to the
Plan. Holders of Class A Membership Units are sometimes referred to herein as
"General Members." Membership Units may be issued only as specifically
provided for in the Members Agreement and there shall be outstanding a total
of 10,000,000 ownership interests (whether Class A Membership Units or Class B
Membership Units) throughout the term of the Company's existence. Membership
Units constitute personal property and no Member has a claim to or interest in
specific property of the Company.
Each Class B Membership Unit is represented solely by an entry in the books
for registration and transfer provided for in the Members Agreement. Each
Class A Membership Unit, including without limitation any Class A Membership
Unit that may be issued upon transfer of a Class A Membership Unit, will be
evidenced by, and subject to the terms of, a Membership Unit certificate (a
"Membership Certificate") in substantially the form set forth in the Members
Agreement, with such changes, marks of identification or designation, and such
legends, summaries, or endorsements printed thereon as the Company may deem
appropriate and are not inconsistent with the provisions of the Members
Agreement, or as may be required to comply with any applicable law or with any
rule or regulation made pursuant thereto. The Membership Certificates will be
executed on behalf of the Company by the manual or facsimile signature of the
Manager.
The Company is entitled to treat the registered holder of any Membership
Certificate as the sole owner of the Class A Membership Units represented
thereby.
Distributions of Membership Units
In connection with each distribution of Class A Membership Units required to
be made pursuant to the Plan, Edison first instructs the Company or the
Transfer Agent that Edison desires to surrender for cancellation a specified
number of Class B Membership Units in exchange for the issuance and delivery
to Edison of a like number of Class A Membership Units, to be evidenced by
Membership Certificates in such denominations and
9
<PAGE>
registered in the names of such holders of Allowed General Unsecured Claims
(or the designees thereof) as may be specified in such instruction. Following
issuance of the requested Class A Membership Units, the Transfer Agent cancels
the appropriate number of Class B Membership Units and distributes the Class A
Membership Certificates, in accordance with Edison's instruction, to the
requested holders of Allowed General Unsecured Claims. All Class A Membership
Units transferred by Edison to holders of Allowed General Unsecured Claims
issued pursuant to the Plan on any distribution date are deemed to have been
issued in exchange for Class B Membership Units and distributed at the end of
the last day of the preceding fiscal quarter. All holders of Class A
Membership Units agree to file all federal, state, and local tax returns in a
manner that is consistent with the preceding sentence.
Capital Contributions; Capital Accounts
On the Effective Date, the Debtors transferred to the Company, in accordance
with the Plan, all of their respective rights, title and interest in and to the
Pension Plan Proceeds. In consideration for such initial contribution or the
obligations of the Debtors to make such additional contributions, 10,000,000
Class B Membership Units were issued to Edison on the Commencement Date.
From and after the Effective Date, Class A Membership Units have been and
will continue to be issued and delivered to Edison for distribution to holders
of Allowed General Unsecured Claims in accordance with the Plan and the
Members Agreement. Upon such issuance and delivery the persons in whose name
such Class A Membership Units are registered are admitted to the Company as
General Members. Similarly, each Person to whom record ownership of a Class A
Membership Unit is subsequently transferred in accordance with the Members
Agreement is admitted to the Company as a General Member upon the registration
of such transfer. See "--Transfers and Exchanges of Membership Units;
Restrictions on Transfers" below for a discussion of the transfer restrictions
with respect to the Class A Membership Units.
No General Member has any obligation to, nor will any General Member be
entitled to, make any additional contributions to the capital of the Company.
No Member is entitled to withdraw any portion of its contribution or Capital
Account, or to receive any distribution from the Company, except as otherwise
provided in the Members Agreement.
A Capital Account is maintained for each Member, in accordance with the
Members Agreement, for purposes of calculating taxes payable by each Member
with respect to the Company's activities. See "--Taxation."
Distributions of Pension Plan Proceeds
Subject to the application of funds and reserve provisions described below,
the Members Agreement requires the Manager to distribute to holders of Class A
Membership Units, in proportion to their respective Class A Sharing
Percentages (i.e., the percentage of all Class A Membership Units held by
them), any Pension Plan Proceeds (together with interest and proceeds thereon)
promptly following the Company's receipt thereof. Amounts available for
distribution are first applied to (i) pay related taxes and any administrative
and professional expenses, (ii) fund the Indemnification Reserve, (iii) make
certain payments to Edison with respect to taxable income allocated to Edison
(described below), (iv) repay any outstanding loans, and (v) reserve for the
amount of future administrative expenses for the term of the Company. In
addition, at any time at which Class B Membership Units remain outstanding,
the Manager must withhold from amounts distributed to holders of Class A
Membership Units a percentage of the amounts available equal to the percentage
of Membership Units represented by outstanding Class B Membership Units
("Reserved Amounts"). All Reserved Amounts are held by the Manager separately
for the benefit of Class A Membership Units thereafter transferred pursuant to
the Plan and are paid out of such separate account (in proportion to the
percentage of Class B Membership Units to be transferred on such date) as
Class A Membership Units are issued. The Manager is entitled to establish
record dates for purposes of determining the Members entitled to receive
distributions.
10
<PAGE>
The Company is obligated to make distributions to Edison with respect to
taxable income of the Company allocated to Edison on account of its ownership
of Class B Membership Units.
Transfer and Exchanges of Membership Units; Restrictions on Transfer
Except as described below, any Membership Certificate may be transferred,
split up, combined, or exchanged for another Membership Certificate or
Membership Certificates. Any Member desiring to transfer, split up, combine,
or exchange any such Membership Certificate must make such request in writing
delivered to the Manager, and must surrender the Membership Certificate or
Membership Certificates to be transferred, split up, combined, or exchanged,
with a form of assignment duly executed by the Member thereof, at the
principal office of the Company or the Transfer Agent. Thereupon or as
promptly as practicable thereafter, the Company or the Transfer Agent will
prepare, execute, and deliver the Membership Certificate or Membership
Certificates, as the case may be, as so requested. Neither the Company nor the
Transfer Agent will be required to issue or deliver any Membership
Certificates in connection with any transfer, split up, combination, or
exchange of Membership Certificates unless and until the Member requesting the
issuance or delivery thereof has paid to the Manager the amount of any tax or
governmental charge that may be payable in connection with such transfer,
split up, combination, or exchange or has established to the satisfaction of
the Manager that any tax or governmental charge has been paid.
Upon receipt by the Company and the Manager of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a
Membership Certificate, and, in case of loss, theft, or destruction, of
indemnity or security reasonably satisfactory to them, and reimbursement to
the Company and the Manager of all reasonable expenses incidental thereto, and
upon surrender to the Manager and cancellation of the Membership Certificate
if mutilated, the Manager will prepare, execute, and deliver a new Membership
Certificate of like tenor to the Member in lieu of the Membership Certificate
so lost, stolen, destroyed, or mutilated.
All Membership Certificates surrendered for the purpose of transfer, split-
up, combination or exchange will be delivered to the Company or the Transfer
Agent for cancellation and will be canceled by the Company or the Transfer
Agent, and no Membership Certificates will be issued in lieu thereof except as
expressly provided in the Members Agreement.
A General Member may not transfer any beneficial interest in its Class A
Membership Unit, other than in an Unrestricted Transfer (as defined below).
Any purported transfer of a Class A Membership Unit by a General Member in
violation of the restriction of the Members Agreement are null and void.
Any Member may, upon providing (i) such evidence to the Company as the
Manager may reasonably require (including, if required by the Manager, an
opinion of counsel reasonably satisfactory to the Manager), to the effect that
such transfer will not result in the Company ceasing to be classified as a
partnership for federal income tax purposes, and (ii) such assurances as the
Manager may reasonably require with respect to the reimbursement of any
expenses that may be incurred by the Company in connection with such transfer,
transfer all or any portion of the record or beneficial interests in the Class
A Membership Units owned by such General Member to any person. Subject to the
foregoing and to applicable law, the following transfers constitute
"Unrestricted Transfers":
(i) A transfer or series of transfers by a Member within a thirty-day
period which involves the transfer of more than 2% of the outstanding
Class A Membership Units;
(ii) A transfer or series of related transfers by one or more Members
(acting together) which involves the transfer of 50% or more of the
outstanding Class A Membership Units;
(iii) Transfers of Class A Membership Units effected through a qualified
matching service (within the meaning of Treasury Regulation (S) 1.7704-
1(g)(2)); or
(iv) Transfers in which the basis of the Membership Unit in the hand of the
transferee is determined, in whole or in part, by reference to its
basis in the hands of the transferor.
11
<PAGE>
The Members have agreed that irreparable damage would occur in the event
that any Member transfers, or attempts to transfer, any equity interest in the
Company in violation of the Members Agreement and that the Company shall be
entitled to specific performance with respect to these transfer restrictions
in addition to recovering attorney's fees from the breaching party and any
other remedy at law or equity.
Taxation
The Company is classified as a partnership for federal income tax purposes
and the Members may not make any election or take any action that would cause
the relationship of the Members under the Members Agreement to be treated as
other than a partnership for federal income tax purposes. Each Member's
Capital Account is increased by certain amounts, including such Member's share
of the Company's income and gain, and decreased by certain amounts, including
distributions to such Member. No Member with a deficit balance in its Capital
Account is obligated to restore or repay such deficit balance. The Company's
income and loss for any fiscal year is allocated to the Members as follows:
(i) first, all items of income consisting of interest or other earnings on
Reserved Amounts is allocated to the Class B Membership Units in proportion to
their respective Class B Sharing Percentages (i.e. the percentage of all Class
B Membership Units owned by them); and (ii) second, all other income and loss
is allocated to the Members in proportion to their Overall Sharing Percentages
(i.e. the percentage of all Class A and Class B Membership Units owned them).
No interest is paid by the Company with respect to the balance of any Capital
Account.
Withdrawal
No member may resign from the Company or effect a partial or complete
withdrawal from the Company.
Reports to Members
The Company will furnish to the Members, promptly after filing thereof with
the Securities and Exchange Commission (the "SEC") each Annual Report on Form
10-K filed by the Company with the SEC (or, if the Company is not required to
file an Annual Report on Form 10-K in respect of a particular fiscal year,
will furnish to the Members, within a comparable time frame following the end
of such fiscal year, an annual report containing information substantially
identical to that which would have been included in an Annual Report on Form
10-K).
Jurisdiction and Venue
Except with respect to the matters specified in the Members Agreement for
which the Bankruptcy Court has retained jurisdiction, any action or other
legal proceeding brought under the Members Agreement will be subject to the
jurisdiction of the State of Delaware or the courts of the United States
located in the State of Delaware. Each of the Members has consented to the
jurisdiction of Delaware for actions or legal proceedings brought by any other
Member or the Company arising out of or relating to the Members Agreement and
has waived any objection which it may have to the laying of the venue of such
suit, action or proceeding in any of such courts.
Legal Proceedings; Indemnification
No Member has any right by virtue of any provision of the Members Agreement
to institute any action or proceeding in law or in equity against Edison or
any party other than the Company upon or under or with respect to the Company
Assets. If any Member becomes involved in legal proceedings unrelated to the
business of the Company in which Edison or the Company is called upon to
provide information, the Member will indemnify and hold harmless Edison, the
Company and the Manager against all costs and expenses, including, without
limitation, fees and expenses of attorneys and other advisors, incurred by
Edison, the Company or the Manager in preparing or producing the required
information or in resisting any request for production or obtaining a
protective order limiting the availability of the information actually
provided by the Company or the Manager.
12
<PAGE>
Waivers
Each of the Members has irrevocably waived any right or power that such
Member might have to: (i) cause the Company or any of the Company Assets to be
partitioned; (ii) cause the appointment of a receiver for all or any portion
of the Company Assets; (iii) compel any sale of all or any portion of the
Company Assets; and (iv) file a complaint, or to institute proceeding at law
or in equity, to cause the dissolution or liquidation of the Company.
Meetings of Members
Meetings of the Members may be called and held at the Company's expense for
any purpose by the Designation Members in which event the Designation Members
will designate any place, within or without the State of Delaware, as the
place for such meeting. A written or printed notice stating the place, day and
hour of the meeting and the purpose or purposes for which such meeting is
called, will be delivered by the Company to each Member not less than ten (10)
days nor more than fifty (50) days before the meeting. If all of the Members
meet at any time and place, either within or without the State of Delaware,
and consent to the holding of a meeting at such time and place, such meeting
shall be valid without call or notice, and at such meeting any Company action
may be taken.
At each meeting of the Members, the holders of record of a majority of the
Class A Membership Units, present in person or by proxy, shall constitute a
quorum for the transaction of Company business. In the absence of a quorum any
Member present at such meeting in person or by proxy shall have the power to
adjourn such meeting until a quorum shall be constituted. Unless otherwise
provided by law or this Agreement, the affirmative vote of the holders of
record of a majority of the Class A Membership Units represented at a meeting
at which a quorum is present shall constitute an act of the Members. At any
meeting of the Members, a Member may vote by proxy executed in writing by such
Member or by his duly authorized representative. Such proxy shall be filed
with the Company before or at the time of the meeting. No proxy shall be valid
after eleven (11) months from the date of its execution, unless otherwise
provided in such proxy. Members may participate in any meeting through
telephonic or similar communications equipment by means of which all persons
participating in the meeting can hear one another, and such participation
shall constitute presence in person at such meeting.
Any action required to, or which may, be taken by the Members may be taken
without a meeting if consent thereto in writing, setting forth the action so
taken, shall be signed by the holders of record of a majority of the Class A
Membership Units. A written consent may be in one or more instruments, each of
which may be signed by one or more Members. No notice need be given of action
proposed to be taken by written action, or an approval given by written
action, unless specifically required by the Delaware Act.
The Manager is entitled to establish record dates for purposes of
determining the Members entitled to receive notices or exercise voting rights.
There have been no meetings of Members through June 30, 1998.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The following summarizes certain provisions of the Members Agreement
relating to the indemnity of the Manager. This summary does not purport to be
complete, and is subject to, and is qualified in its entirety by reference to,
all of the provisions of the Members Agreement, which has been filed as an
exhibit to this Registration Statement.
To the fullest extent permitted by the Delaware Act, the Company, to the
extent of its assets legally available for that purpose, will indemnify and
hold harmless the Manager from and against any and all loss, cost, damage,
expense (including without limitation fees and expenses of attorneys and other
advisors and any court costs incurred by the Manager) or liability by reason
of anything the Manager does or refrains from doing for, or in connection
with, the affairs of, the Company, except to the extent that it is finally
judicially determined
13
<PAGE>
by a court of competent jurisdiction that the loss, cost, damage, expense or
liability resulted primarily from the Manager's gross negligence or willful
breach of a material provision of the Members Agreement which in either event
causes actual material damage to the Company. The Company may pay in advance
or reimburse reasonable expenses (including advancing reasonable costs of
defense) incurred by the Manager who is or is threatened to be named or made a
defendant or a respondent in a proceeding concerning the affairs of the
Company.
To the extent future enactments or judicial decisions permit an expansion of
the rights of indemnification afforded to the Manager by the Company, then the
Members have expressed their intention and agreement to automatically amend
the Members Agreement to permit and authorize the indemnification of the
Manager by the Company to the maximum extent permitted by law. The Members
Agreement authorizes the Manager to execute, on behalf of all Members, such
amendments to the Members Agreement as may be appropriate to give further
effect to the agreement described in this paragraph.
To the extent commercially reasonable, the Manager will cause the Company to
purchase and maintain insurance, to the extent and in such amounts as the
Manager, in its sole discretion, deems reasonable, on behalf of the Manager,
against any liability that may be asserted against, or expenses that may be
incurred by, the Manager in connection with the activities of the Company,
regardless of whether the Company would have the power to indemnify the
Manager against such liability under the provisions of the Members Agreement.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Item 15 and pages F-1 to F-8.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
Financial Statement and Schedules
Financial Statements. The following Financial Statements of the Company and
the Report of Independent Auditors are included at pages F-2 through F-8 of
this Registration Statement.
<TABLE>
<S> <C>
Independent Auditor's Report............................................... F-2
EBS Pension, L.L.C.
Balance Sheet at December 31, 1997 and March 31, 1998 (unaudited).......... F-3
EBS Pension, L.L.C.
Statement of Income for the period ended December 31, 1997 and for the
three months ended
March 31, 1998 (unaudited)................................................ F-4
EBS Pension, L.L.C.
Statement of Changes in Members' Equity for the period ended December 31,
1997 and for the three months ended March 31, 1998 (unaudited)............ F-5
EBS Pension, L.L.C.
Statement of Cash Flows for the period ended December 31, 1997 and for the
three months ended
March 31, 1998 (unaudited)................................................ F-6
EBS Pension, L.L.C.
Notes to Financial Statements.............................................. F-7
</TABLE>
14
<PAGE>
Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER ITEM
------- ----
<S> <C>
2.1 Amended Joint Plan of Reorganization of Edison Brothers Stores, Inc.
3.1 EBS Pension, L.L.C. Certificate of Formation
3.2 EBS Pension, L.L.C. Membership Agreement
23.1 Consent of Independent Public Accountants
27.1 Financial Data Schedule
</TABLE>
15
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 12 OF THE SECURITIES EXCHANGE ACT OF
1934, THE REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN MINNEAPOLIS,
MINNESOTA, ON JULY 29, 1998.
EBS Pension, L.L.C.
(Registrant)
By: NORWEST BANK MINNESOTA, N.A., in
its
capacity as Manager of EBS
Pension, L.L.C.
By: /s/ Lon P. LeClair
----------------------------------
Lon P. LeClair
Vice President
16
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Independent Auditors' Report............................................... F-2
EBS Pension, L.L.C. Balance Sheet at December 31, 1997 and March 31, 1998
(unaudited)............................................................... F-3
EBS Pension, L.L.C. Statement of Operations for the Period ended December
31, 1997 and for three months ended March 31, 1998 (unaudited)............ F-4
EBS Pension, L.L.C. Statement of Changes in Members' Equity for the period
ended December 31, 1997 and for three months ended March 31, 1998
(unaudited) F-5
EBS Pension, L.L.C. Statement of Cash Flows for the Period ended December
31, 1997 and for three months ended March 31, 1998 (unaudited)............ F-6
Notes to Financial Statements.............................................. F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Rubin, Brown, Gornstein & Co., LLP
230 SOUTH BEMISTON AVENUE
ST. LOUIS, MO 63105
Members
EBS Pension, L.L.C.
St. Louis, Missouri
We have audited the accompanying balance sheet of EBS Pension, L.L.C., a
Delaware limited liability company, as of December 31, 1997 and the related
statements of operations, changes in members' equity and cash flows for the
period beginning September 25, 1997 and ended December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of EBS Pension, L.L.C. as of
December 31, 1997, and the results of its operations and its cash flows for
the period beginning September 25, 1997 and ended December 31, 1997, in
conformity with generally accepted accounting principles.
/s/ RUBIN, BROWN, GORNSTEIN & Co. LLP
July 1, 1998
F-2
<PAGE>
EBS PENSION, L.L.C.
BALANCE SHEET
DECEMBER 31, 1997 AND MARCH 31, 1998
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS:
Cash................................................ $ -- $4,686,501
Interest receivable................................. -- 7,099
Due from Edison Brothers Stores, Inc................ 43,985,315 --
----------- ----------
Total assets...................................... $43,985,315 $4,693,600
=========== ==========
LIABILITIES:
Accrued expenses.................................... $ 51,910 $ 81,879
----------- ----------
Total liabilities................................. 51,910 81,879
----------- ----------
MEMBERS' EQUITY:
Membership Units (Class A--10,000,000 authorized,
9,058,041 and 9,338,601 issued and outstanding at
December 31, 1997 and March 31, 1998, respectively;
Class B--941,659 and 661,399 authorized, issued and
outstanding at December 31, 1997 and March 31,
1998, respectively)
Paid-in capital..................................... 43,985,315 4,558,159
Retained earnings................................... (51,910) 53,562
----------- ----------
Total members' equity............................. 43,933,405 4,611,721
----------- ----------
Total liabilities and members' equity............. $43,985,315 $4,693,600
=========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
EBS PENSION, L.L.C.
STATEMENT OF INCOME
FOR THE PERIODS ENDED DECEMBER 31, 1997 AND MARCH 31, 1998
<TABLE>
<CAPTION>
FOR THE
FOR THE THREE MONTHS
PERIOD ENDED ENDED
DECEMBER 31, 1997 MARCH 31, 1998
----------------- --------------
(UNAUDITED)
<S> <C> <C>
Income:........................................ $ -- $154,062
General and administrative expenses............ 51,910 48,590
-------- --------
Net income (loss).......................... $(51,910) $105,472
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
EBS PENSION, L.L.C.
STATEMENT OF CHANGES IN MEMBERS' EQUITY
FOR THE PERIOD ENDED DECEMBER 31, 1997 AND MARCH 31, 1998
<TABLE>
<CAPTION>
CLASS A CLASS B
MEMBERSHIP MEMBERSHIP PAID IN RETAINED
UNITS UNITS CAPITAL EARNINGS TOTAL
---------- ---------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C>
Balance, September 25,
1997................... -- -- $ -- $ -- $ --
Original capital
contribution........... -- 10,000,000 43,985,315 -- 43,985,315
Units transferred....... 9,058,041 (9,058,041) -- -- --
Current period loss..... -- -- -- (51,910) (51,910)
--------- ---------- ------------ -------- ------------
Balance, December 31,
1997................... 9,058,041 941,959 $ 43,985,315 $(51,910) $ 43,933,405
Capital distribution
(unaudited)............ -- -- (39,427,156) -- (39,427,156)
Units transferred
(unaudited)............ 280,560 (280,560) -- -- --
Current period income
(unaudited)............ -- -- -- 105,472 105,472
--------- ---------- ------------ -------- ------------
Balance, March 31, 1998
(unaudited)............ 9,338,601 661,399 $ 4,558,159 $ 53,562 $ 4,611,721
========= ========== ============ ======== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
EBS PENSION, L.L.C.
STATEMENT OF CASH FLOWS
FOR THE PERIODS ENDED DECEMBER 31, 1997 AND MARCH 31, 1998
<TABLE>
<CAPTION>
FOR THE FOR THE
PERIOD THREE MONTHS
ENDED ENDED
DECEMBER 31, MARCH 31,
1997 1998
------------ ------------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)................................. $ (51,910) $ 105,472
Reconciliation of net income (loss) to cash flows
provided by operating activities:
Decrease in due from Edison Brothers, Inc......... 43,985,315
Increase in interest receivable................... (7,099)
Increase in liabilities........................... 51,910 29,969
----------- ------------
Cash flows provided by operating activities....... -- 44,113,657
----------- ------------
Cash flows from financing activities:
Capital distribution.............................. (39,427,156)
Cash flows used by financing activities........... -- (39,427,156)
Net increase in cash................................ -- 4,686,501
Cash at beginning of period......................... -- --
----------- ------------
Cash at end of period............................... $ -- $ 4,686,501
=========== ============
Supplemental disclosure of noncash financing
activities:
Contribution of net cash pension proceeds (Due from
Edison Brothers Stores, Inc.)...................... $43,985,315 $ --
=========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
EBS PENSION, L.L.C.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND MARCH 31, 1998
1. DESCRIPTION OF BUSINESS
EBS Pension, L.L.C. (the "Company") is governed by a Members Agreement,
dated as of September 25, 1997 (the "Members Agreement"). Pursuant to the
Members Agreement, the Company is organized for the exclusive purposes of (a)
receiving and administering the cash proceeds (the "Pension Plan Proceeds") to
be received by Edison Brothers Stores, Inc. ("Edison") and its affiliated
debtors in possession (collectively with Edison, the "Debtors") as a result of
the termination of the Edison Brothers Stores, Inc. Pension Plan (the "Pension
Plan"), net of (i) the Pension Plan assets transferred to a qualified
replacement pension plans, (ii) all costs, fees and expenses relating to
termination of the Pension Plan and establishment of the replacement Plan, and
(iii) all applicable taxes incurred or for which a reserve is established in
connection with termination of the Pension Plan, and (b) distributing such
assets to holders of Class A Membership Units (the "Members") in accordance
with the Members Agreement.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies is presented to assist in
evaluating the Company's financial statements included in this report. These
principles conform to generally accepted accounting principles. The
preparation of financial statements in conformity with generally accepted
accounting principles requires that management make estimates and assumptions
which impact the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Basis of Presentation
These financial statements include the accounts of the Company for the
periods from September 25, 1997 through December 31, 1997 and January 1, 1998
through March 31, 1998.
Accrued Expenses
Accrued expenses includes amounts for legal, tax, accounting and transfer
agent fees. Amounts are payable within one year.
Expenses
All expenses of the Company are recorded on the accrual basis of accounting.
Income Taxes
The Company is not subject to taxes. Instead, the Members report their
distributive share of the Company's profits and losses on their respective
income tax returns.
3. MEMBERS' EQUITY
On September 25, 1997, Edison transferred the right to receive net cash
proceeds from the termination of the Pension Plan in exchange for 10,000,000
Class B Membership Units of the Company, which represented all of the
outstanding Membership Units of the Company. The net cash proceeds amounted to
$43.9 million at December 31, 1997 and were due from Edison at that date. An
additional amount of $5.7 million is being held by Edison for certain fees and
tax liabilities of Edison. Some portion of this amount may ultimately be
distributed by Edison to the Company, however the amount of such distribution
(if any) cannot be determined at this time.
F-7
<PAGE>
EBS PENSION, L.L.C.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
On December 12, 1997, in accordance with the Members Agreement and the Plan
of Reorganization, Edison exchanged 9,058,041 Class B Membership Units for
9,058,041 Class A Membership Units of the Company and simultaneously
distributed such Class A Membership Units to holders of Allowed General
Unsecured Claims.
In January 1998, Edison paid $43.9 million to the Company related to the
settlement of the Company's receivable recorded at December 31, 1997. Of this
amount, $39.4 million was distributed to Class A Members in February 1998. Of
the remaining amount, $2.7 million is being held back for future holders of
Class B Membership Units, $1.5 million is held back for the anticipated cost
of legal indemnification of the officers of Edison, and $0.3 million is held
back for other anticipated expenses expected to be incurred by the Company.
During February 1998, Edison exchanged an additional 280,560 Class B
Membership Units for 280,560 Class A Membership Units of the Company and
simultaneously distributed such units to holders of Allowed General Unsecured
Claims. All outstanding Class B Membership Units will eventually be exchanged
and an equivalent number of Class A Membership Units distributed to the
holders of Allowed General Unsecured Claims as required by the Members
Agreement and the Plan of Reorganization. At March 31, 1998, Edison held
661,399 Class B Membership Units.
4. SUBSEQUENT EVENTS (UNAUDITED)
Transfer of Membership Units
During June 1998, Edison exchanged an additional 128,616 Class B Membership
Units for 128,616 Class A Membership Units of the Company and simultaneously
distributed such units to holders of Allowed General Unsecured Claims.
Distribution to Members
During June 1998, the Company distributed $0.6 million of reserved amounts
to the holders of the Class A Membership Units that were distributed in June
1998.
F-8
<PAGE>
EXHIBIT 2.1
UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
- ------------------------------------------X
:
In re : CHAPTER 11
:
EDISON BROTHERS STORES, INC., et al., : Case No. 95-1354 (PJW)
-- -- :
Debtors. : JOINTLY ADMINISTERED
:
- ------------------------------------------X
DEBTORS' AMENDED JOINT PLAN OF REORGANIZATION
UNDER CHAPTER 11 OF THE BANKRUPTCY CODE, AS MODIFIED
----------------------------------------------------
Edison Brothers Stores, Inc. and its 65 affiliate Debtors propose the
following joint plan of reorganization under section 1121(a) of title 11 of the
United States Code:
ARTICLE I.
DEFINITIONS AND CONSTRUCTION OF TERMS
-------------------------------------
Definitions. As used herein, the following terms have the respective
-----------
meanings specified below, unless the context otherwise requires:
1.1. Administrative Expense Claim means any right to payment constituting
----------------------------
a cost or expense of administration of any of the Chapter 11 Cases under
sections 503(b) and 507(a)(1) of the Bankruptcy Code, including, without
limitation, any actual and necessary costs and expenses of preserving the
estates of the Debtors, any actual and necessary costs and expenses of operating
the business of the Debtors, any indebtedness or obligations incurred or assumed
by the Debtors in Possession in connection with the conduct of their business,
including, without limitation, for the acquisition or lease of property or an
interest in property or the rendition of services, all compensation and
reimbursement of expenses to the extent Allowed by the Bankruptcy Court under
section 330 or 503 of the Bankruptcy Code, any Administrative Reclamation Claim,
and any fees or charges assessed against the estates of the Debtors under
section 1930 of chapter 123 of title 28 of the United States Code.
A-1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I.
DEFINITIONS AND CONSTRUCTION OF TERMS.....................................................A-1
1.1. Administrative Expense Claim...............................................A-1
1.2. Administrative Reclamation Claim...........................................A-1
1.3. Allowed....................................................................A-1
1.4. Amended Edison Bylaws......................................................A-2
1.5. Amended Edison Certificate of Incorporation................................A-2
1.6. Authorized Denominations...................................................A-2
1.7. Avoidance Claims...........................................................A-2
1.8. Ballot.....................................................................A-2
1.9. Bankruptcy Code............................................................A-2
1.10. Bankruptcy Court...........................................................A-2
1.11. Bankruptcy Rules...........................................................A-2
1.12. Bond Counsel...............................................................A-2
1.13. Business Day...............................................................A-2
1.14. Cash.......................................................................A-2
1.15. Cash Distribution Pool.....................................................A-2
1.16. Causes of Action...........................................................A-2
1.17. Chapter 11 Cases...........................................................A-2
1.18. Claim......................................................................A-2
1.19. Claims Resolution Committee................................................A-2
1.20. Class......................................................................A-3
1.21. Class A Membership Units...................................................A-3
1.22. Class B Membership Units...................................................A-3
1.23. Collateral.................................................................A-3
1.24. Commencement Date..........................................................A-3
1.25. Confirmation Date..........................................................A-3
1.26. Confirmation Hearing.......................................................A-3
1.27. Confirmation Order.........................................................A-3
1.28. Convenience Claim..........................................................A-3
1.29. Corporate Headquarters Building............................................A-3
1.30. Corporate Headquarters Building Lease......................................A-3
1.31. Corporate Headquarters Building Proceeds...................................A-3
</TABLE>
A-i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
1.32. Creditors' Committee........................................................A-3
1.33. D&B Common Stock............................................................A-3
1.34. D&B Spinoff.................................................................A-3
1.35. D&B Spinoff Release Minimum Rights..........................................A-3
1.36. D&B Spinoff Release Minimum Purchase Price..................................A-4
1.37. D&B Spinoff Release Rights Multiplier.......................................A-4
1.38. D&B Spinoff Release Shortfall Amount........................................A-4
1.39. D&B Spinoff Settlement......................................................A-4
1.40. D&B Spinoff Settlement Period...............................................A-4
1.41. D&B Spinoff Settlement Expiration Date......................................A-4
1.42. D&B Spinoff Settlement Notice...............................................A-4
1.43. D&B Spinoff Settlement Offer................................................A-4
1.44. D&B Spinoff Settlement Proceeds.............................................A-4
1.45. D&B Spinoff Stockholders....................................................A-4
1.46. Debtors.....................................................................A-4
1.47. Debtors in Possession.......................................................A-4
1.48. Director Options............................................................A-5
1.49. Director Stock Option Plan..................................................A-5
1.50. Disbursing Agent............................................................A-5
1.51. Disclosure Statement........................................................A-5
1.52. Disputed....................................................................A-5
1.53. Disputed Claim Amount.......................................................A-5
1.54. EBS Building, L.L.C.........................................................A-5
1.55. EBS Building LLC Members Agreement..........................................A-5
1.56. EBS Litigation, L.L.C.......................................................A-5
1.57. EBS Litigation LLC Members Agreement........................................A-5
1.58. EBS Pension, L.L.C..........................................................A-5
1.59. EBS Pension LLC Members Agreement...........................................A-5
1.60. Edbro Missouri..............................................................A-5
1.61. Edbro Missouri Facility.....................................................A-5
1.62. Edison......................................................................A-5
1.63. Edison Equity Interest......................................................A-5
1.64. Effective Date..............................................................A-6
1.65. Employment Contracts........................................................A-6
1.66. Equity Committee............................................................A-6
1.67. Equity Interest.............................................................A-6
1.68. Final Order.................................................................A-6
1.69. Funding Escrow..............................................................A-6
</TABLE>
A-ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
1.70. Funding Escrow Assets.......................................................A-6
1.71. Funding Escrow Agent........................................................A-6
1.72. Funding Escrow Agreement....................................................A-6
1.73. Funding Escrow Mortgages....................................................A-6
1.74. Funding Escrow Properties...................................................A-6
1.75. General Unsecured Claim.....................................................A-6
1.76. Initial Distribution Date...................................................A-7
1.77. Insured Claim...............................................................A-7
1.78. Issuer......................................................................A-7
1.79. Lien........................................................................A-7
1.80. LLC Funding Amount..........................................................A-7
1.81. Management Options..........................................................A-7
1.82. Membership Certificates.....................................................A-7
1.83. Mercantile..................................................................A-7
1.84. New Common Stock............................................................A-7
1.85. New Common Stock Distribution Pool..........................................A-7
1.86. New Notes...................................................................A-7
1.87. New Notes Distribution Amount...............................................A-7
1.88. New Notes Indentures........................................................A-7
1.89. Original Bondholder.........................................................A-7
1.90. Original Bonds..............................................................A-7
1.91. Other Priority Claim........................................................A-7
1.92. Other Secured Claim.........................................................A-7
1.93. Pension Plan................................................................A-7
1.94. Pension Plan Payment Date...................................................A-7
1.95. Pension Plan Proceeds.......................................................A-8
1.96. Plan........................................................................A-8
1.97. Plan Supplement.............................................................A-8
1.98. Priority Tax Claim..........................................................A-8
1.99. Pro Rata Share..............................................................A-8
1.100. Quarter.....................................................................A-8
1.101. Record Date.................................................................A-8
1.102. Registration Rights Agreement...............................................A-8
1.103. Released D&B Spinoff Stockholder............................................A-8
1.104. Remarketing Agent...........................................................A-8
1.105. Reorganized Debtors.........................................................A-8
1.106. Reorganized Edbro Missouri..................................................A-8
1.107. Reorganized Edison..........................................................A-8
</TABLE>
A-iii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
1.108. Reorganized Subsidiaries....................................................A-8
1.109. Reserve.....................................................................A-8
1.110. Restricted Stock............................................................A-8
1.111. Restricted Stock Agreements.................................................A-9
1.112. Resolved Avoidance Claims...................................................A-9
1.113. Resolved Avoidance Claims Proceeds..........................................A-9
1.114. Rights......................................................................A-9
1.115. Rights Agent................................................................A-9
1.116. Rights Aggregate Consideration..............................................A-9
1.117. Rights Exercise Instructions................................................A-9
1.118. Rights Exercise Notice......................................................A-9
1.119. Rights Exercise Period......................................................A-9
1.120. Rights Exercise Price.......................................................A-9
1.121. Rights Exercise Proceeds....................................................A-9
1.122. Rights Expiration Date......................................................A-9
1.123. Schedules...................................................................A-9
1.124. Secured Claim...............................................................A-9
1.125. Secured Series 1977 Bondholder Claim........................................A-9
1.126. Secured Series 1985 Bondholder Claim........................................A-9
1.127. Secured Tax Claim...........................................................A-9
1.128. Series 1977 Bond Documents.................................................A-10
1.129. Series 1977 Bond Ordinance.................................................A-10
1.130. Series 1977 Bondholder Claim...............................................A-10
1.131. Series 1977 Bondholders....................................................A-10
1.132. Series 1977 Bonds..........................................................A-10
1.133. Series 1977 Guaranty.......................................................A-10
1.134. Series 1977 Lease Agreement................................................A-10
1.135. Series 1985 Bank Agreement.................................................A-10
1.136. Series 1985 Bond Documents.................................................A-10
1.137. Series 1985 Bond Indenture.................................................A-10
1.138. Series 1985 Bondholder Claim...............................................A-10
1.139. Series 1985 Bondholders....................................................A-10
1.140. Series 1985 Bonds..........................................................A-10
1.141. Series 1985 Guaranty.......................................................A-10
1.142. Series 1985 Lease Agreement................................................A-10
1.143. Series 1997 A Bondholders..................................................A-10
1.144. Series 1997 B Bondholders..................................................A-11
1.145. Series 1997 A Bonds........................................................A-11
</TABLE>
A-iv
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
1.146. Series 1997 B Bonds.........................................................A-11
1.147. Series 1997 Bond Indenture..................................................A-11
1.148. Series 1997 Bondholders.....................................................A-11
1.149. Series 1997 Bonds...........................................................A-11
1.150. Series 1997 Collateral Documents............................................A-11
1.151. Series 1997 Guaranty........................................................A-11
1.152. Series 1997 Loan............................................................A-11
1.153. Series 1997 Loan Agreement..................................................A-11
1.154. Series 1997 Loan Documents..................................................A-11
1.155. Series 1997 Note............................................................A-11
1.156. Series 1997 Refunding Conditions............................................A-11
1.157. Stock Option Plan...........................................................A-11
1.158. Subsequent Distribution Date................................................A-11
1.159. Subsidiary..................................................................A-11
1.160. Subsidiary Equity Interest..................................................A-11
1.161. Surplus Distributions.......................................................A-11
1.162. Tort Claim..................................................................A-11
1.163. Trustee.....................................................................A-12
1.164. Unresolved Avoidance Claims.................................................A-12
1.165. Unsecured Claim.............................................................A-12
1.166. Warrants....................................................................A-12
1.167. Warrant Distribution Pool...................................................A-12
ARTICLE II.
TREATMENT OF ADMINISTRATIVE
EXPENSE CLAIMS AND PRIORITY TAX CLAIMS.....................................................A-12
2.1. Administrative Expense Claims...............................................A-12
2.2. Professional Compensation and Reimbursement Claims..........................A-12
2.3. Priority Tax Claims.........................................................A-12
ARTICLE III.
CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS..............................................A-13
ARTICLE IV.
TREATMENT OF CLAIMS AND EQUITY INTERESTS...................................................A-13
</TABLE>
A-v
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
4.1. CLASS 1 -- OTHER PRIORITY CLAIMS............................................A-13
4.2. CLASS 2 -- SECURED SERIES 1977 BONDHOLDER CLAIMS............................A-13
4.3. CLASS 3 -- SECURED SERIES 1985 BONDHOLDER CLAIMS............................A-14
4.4. CLASS 4 -- SECURED TAX CLAIMS...............................................A-14
4.5. CLASS 5 -- OTHER SECURED CLAIMS.............................................A-15
4.6. CLASS 6 -- CONVENIENCE CLAIMS...............................................A-15
4.7. CLASS 7 -- GENERAL UNSECURED CLAIMS.........................................A-15
4.8. CLASS 8 -- EDISON EQUITY INTERESTS..........................................A-15
ARTICLE V.
ESTABLISHMENT OF LIMITED LIABILITY
COMPANIES AND FUNDING ESCROW; PENSION PLAN.................................................A-16
5.1. EBS Litigation, L.L.C., EBS Pension, L.L.C. and EBS Building, L.L.C.........A-16
5.2. Funding Escrow..............................................................A-17
5.3. Pension Plan................................................................A-18
ARTICLE VI.
PROVISIONS REGARDING VOTING AND DISTRIBUTIONS
UNDER THE PLAN AND TREATMENT OF DISPUTED,
CONTINGENT AND UNLIQUIDATED ADMINISTRATIVE
EXPENSE CLAIMS, CLAIMS AND EQUITY INTERESTS................................................A-18
6.1. Voting of Claims and Equity Interests.......................................A-18
6.2. Nonconsensual Confirmation..................................................A-18
6.3. Method of Distributions Under the Plan......................................A-18
6.4. General Unsecured Claims....................................................A-19
6.5. Objections to and Resolution of Administrative Expense Claims, Claims and
Equity Interests............................................................A-21
6.6. Distributions Relating to Allowed Insured Claims............................A-21
6.7. Cancellation and Surrender of Existing Securities and Agreements............A-22
6.8. Registration of New Common Stock............................................A-22
6.9. Listing of New Common Stock, New Notes and Warrants.........................A-22
6.10. Full Recovery for Holders of Allowed General Unsecured Claims...............A-22
ARTICLE VII.
EXECUTORY CONTRACTS AND UNEXPIRED LEASES...................................................A-22
</TABLE>
A-vi
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
7.1. Assumption or Rejection of Executory Contracts and Unexpired Leases.........A-22
7.2. Releases....................................................................A-23
7.3. Indemnification Obligations.................................................A-24
7.4. Compensation and Benefit Programs...........................................A-24
7.5. Retiree Benefits............................................................A-24
ARTICLE VIII.
CONSOLIDATION OF EDISON AND THE SUBSIDIARIES...............................................A-24
8.1. Substantive Consolidation...................................................A-24
8.2. Merger of Corporate Entities................................................A-24
ARTICLE IX.
PROVISIONS REGARDING CORPORATE GOVERNANCE
AND MANAGEMENT OF THE REORGANIZED DEBTORS..................................................A-25
9.1. General.....................................................................A-25
9.2. Meetings of Reorganized Edison Stockholders.................................A-25
9.3. Directors and Officers of Reorganized Debtors...............................A-25
9.4. Amended Bylaws and Amended Certificates of Incorporation....................A-25
9.5. Issuance of New Securities..................................................A-25
9.6. Stock Option Plan...........................................................A-26
9.7. Director Stock Option Plan..................................................A-26
9.8. Restricted Stock Agreements.................................................A-26
9.9. Employment Contracts........................................................A-26
9.10. Retention/Performance Bonuses...............................................A-26
ARTICLE X.
IMPLEMENTATION AND EFFECT OF CONFIRMATION OF PLAN..........................................A-27
10.1. Procedures for Exercise of Rights...........................................A-27
10.2. The D&B Spinoff Settlement Offer............................................A-28
10.3. Term of Bankruptcy Injunction or Stays......................................A-29
10.4. Revesting of Assets.........................................................A-29
10.5. Causes of Action............................................................A-29
10.6. Discharge of Debtors........................................................A-29
10.7. Injunction..................................................................A-29
</TABLE>
A-vii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE XI.
EFFECTIVENESS OF THE PLAN..................................................................A-30
11.1. Conditions Precedent to Effectiveness.......................................A-30
11.2. Effect of Failure of Conditions.............................................A-30
11.3. Waiver of Conditions........................................................A-30
ARTICLE XII.
RETENTION OF JURISDICTION..................................................................A-31
ARTICLE XIII.
MISCELLANEOUS PROVISIONS...................................................................A-32
13.1. Effectuating Documents and Further Transactions.............................A-32
13.2. Corporate Action............................................................A-32
13.3. Exemption from Transfer Taxes...............................................A-32
13.4. Injunction Regarding Worthless Stock Deduction..............................A-32
13.5. Exculpation.................................................................A-32
13.6. Termination of Committees...................................................A-32
13.7. Claims Resolution Committee.................................................A-33
13.8. Post-Confirmation Date Fees and Expenses....................................A-33
13.9. Payment of Statutory Fees...................................................A-33
13.10. Amendment or Modification of the Plan.......................................A-33
13.11. Severability................................................................A-34
13.12. Revocation or Withdrawal of the Plan........................................A-34
13.13. Binding Effect..............................................................A-34
13.14. Notices.....................................................................A-34
13.15. Governing Law...............................................................A-35
13.16. Withholding and Reporting Requirements......................................A-35
13.17. Plan Supplement.............................................................A-35
13.18. Allocation of Plan Distributions Between Principal and Interest.............A-35
13.19. Headings....................................................................A-35
13.20. Exhibits/Schedules..........................................................A-35
13.21. Filing of Additional Documents..............................................A-36
</TABLE>
A-viii
<PAGE>
INDEX OF SCHEDULES AND EXHIBITS
Exhibit A..............Summary of Terms of Corporate Headquarters Building Lease
Exhibit B..........................................Summary of Terms of New Notes
Exhibit C...........................................Summary of Terms of Warrants
Schedule 1.........................................Issuance of Series 1997 Bonds
Schedule 2......................................Series 1997 Refunding Conditions
Schedule 3..........................................Terms of Series 1997 A Bonds
Schedule 4..........................................Terms of Series 1997 B Bonds
A-ix
<PAGE>
1.2. Administrative Reclamation Claim means any Claim under section 546(c)
--------------------------------
of the Bankruptcy Code, which, at the election of the holder thereof pursuant to
an order of the Bankruptcy Court dated June 4, 1996, is deemed an Administrative
Expense Claim under the Plan.
1.3. Allowed means, with reference to any Claim or Equity Interest, (a)
-------
any Claim against or Equity Interest in the Debtors which has been listed by the
Debtors in their Schedules, as such Schedules may be amended by the Debtors from
time to time in accordance with Bankruptcy Rule 1009, as liquidated in amount
and not disputed or contingent and for which no contrary proof of claim or
interest has been filed, (b) any Claim or Equity Interest allowed hereunder, (c)
any Claim or Equity Interest which is not Disputed, or (d) any Claim or Equity
Interest which, if Disputed, (i) as to which, pursuant to the Plan or a Final
Order of the Bankruptcy Court, the liability of the Debtors and the amount
thereof are determined by a final order of a court of competent jurisdiction
other than the Bankruptcy Court, or (ii) has been Allowed by Final Order;
provided, however, that any Claims or Equity Interests allowed solely for the
- -------- -------
purpose of voting to accept or reject the Plan pursuant to an order of the
Bankruptcy Court shall not be considered "Allowed Claims" or "Allowed Equity
Interests" hereunder. Unless otherwise specified herein or by order of the
Bankruptcy Court, "Allowed Administrative Expense Claim," "Allowed Claim," or
"Allowed Equity Interest" shall not, for purposes of computation of
distributions under the Plan, include interest on such Administrative Expense
Claim, Claim or Equity Interest from and after the Commencement Date.
1.4. Amended Edison Bylaws means the amended and restated Bylaws of
---------------------
Reorganized Edison, which shall be in substantially the form contained in the
Plan Supplement.
1.5. Amended Edison Certificate of Incorporation means the amended and
-------------------------------------------
restated Certificate of Incorporation of Reorganized Edison, which shall be in
substantially the form contained in the Plan Supplement.
1.6. Authorized Denominations means $4,000 or any integral multiple of
------------------------
$250 in excess thereof.
1.7. Avoidance Claims means all fraudulent transfer Causes of Action under
----------------
sections 544, 548 and 550 of the Bankruptcy Code or otherwise applicable state
law that one or more of the Debtors or Debtors in Possession may have in
connection with or arising out of the D&B Spinoff.
1.8. Ballot means the form distributed to each holder of an impaired Claim
------
or Equity Interest on which is to be indicated acceptance or rejection of the
Plan.
1.9. Bankruptcy Code means title 11 of the United States Code, as amended
---------------
from time to time, as applicable to the Chapter 11 Cases.
2
<PAGE>
1.10. Bankruptcy Court means the United States District Court for the
----------------
District of Delaware having jurisdiction over the Chapter 11 Cases and, to the
extent of any reference under section 157 of title 28 of the United States Code,
the unit of such District Court under section 151 of title 28 of the United
States Code.
1.11. Bankruptcy Rules means the Federal Rules of Bankruptcy Procedure as
----------------
promulgated by the United States Supreme Court under section 2075 of title 28 of
the United States Code, and any Local Rules of the Bankruptcy Court.
1.12. Bond Counsel means an attorney or firm of attorneys of nationally
------------
recognized standing in matters pertaining to the validity and enforceability of,
and the tax-exempt nature of interest on, obligations issued by states and/or
cities and their political subdivisions or authorities.
1.13. Business Day means any day other than a Saturday, Sunday or any other
------------
day on which commercial banks in New York, New York are required or authorized
to close by law or executive order.
1.14. Cash means legal tender of the United States of America and
----
equivalents thereof.
1.15. Cash Distribution Pool means $119,000,000 (a) plus the sum of (i) the
----------------------
Pension Plan Proceeds to the extent received by the Debtors prior to the
Effective Date, (ii) the Corporate Headquarters Building Proceeds to the extent
received by the Debtors prior to the Effective Date, (iii) the Resolved
Avoidance Claims Proceeds and (iv) the Rights Exercise Proceeds, if any, and (b)
minus the LLC Funding Amount; provided, however, that the Debtors shall have the
-------- -------
right, at or prior to the Confirmation Hearing, (i) in their sole discretion,
upon notice to the Creditors' Committee, to reduce the amount of the Cash
Distribution Pool by up to $15,000,000, in $5,000,000 increments, and (ii) with
the consent of the Creditors' Committee, to reduce the Cash Distribution Pool by
an additional $5,000,000, provided that, as a consequence of any such reduction
and contemporaneously therewith, the New Notes Distribution Amount shall be
increased by the amount of such reduction.
1.16. Causes of Action means, without limitation, any and all actions,
----------------
causes of action, liabilities, obligations, rights, suits, debts, sums of money,
damages, judgments, claims and demands whatsoever, whether known or unknown, in
law, equity or otherwise.
1.17. Chapter 11 Cases means the cases under chapter 11 of the Bankruptcy
----------------
Code commenced by the Debtors, styled In re Edison Brothers Stores, Inc. et al.,
Chapter 11 Case No. 95-1354 (PJW), Jointly Administered, currently pending in
the Bankruptcy Court.
1.18. Claim has the meaning set forth in section 101 of the Bankruptcy
-----
Code.
3
<PAGE>
1.19. Claims Resolution Committee means the committee to be established
---------------------------
pursuant to Section 13.7 of the Plan.
1.20. Class means a category of holders of Claims or Equity Interests as
-----
set forth in Article III of the Plan.
1.21. Class A Membership Units means 10,000,000 Class A Membership Units in
------------------------
the EBS Litigation, L.L.C., 10,000,000 Class A Membership Units in the EBS
Pension, L.L.C. and 10,000,000 Class A Membership Units in the EBS Building,
L.L.C.
1.22. Class B Membership Units means 10,000,000 Class B Membership Units in
------------------------
the EBS Litigation, L.L.C., 10,000,000 Class B Membership Units in the EBS
Pension, L.L.C. and 10,000,000 Class B Membership Units in the EBS Building,
L.L.C.
1.23. Collateral means any property or interest in property of the estates
----------
of the Debtors subject to a Lien to secure the payment or performance of a
Claim, which Lien is not subject to avoidance under the Bankruptcy Code or
otherwise invalid under the Bankruptcy Code or applicable state law.
1.24. Commencement Date means November 3, 1995, the date on which the
-----------------
Debtors commenced the Chapter 11 Cases.
1.25. Confirmation Date means the date on which the Clerk of the Bankruptcy
-----------------
Court enters the Confirmation Order on the docket.
1.26. Confirmation Hearing means the hearing held by the Bankruptcy Court
--------------------
to consider confirmation of the Plan pursuant to section 1129 of the Bankruptcy
Code, as such hearing may be adjourned or continued from time to time.
1.27. Confirmation Order means the order of the Bankruptcy Court confirming
------------------
the Plan pursuant to section 1129 of the Bankruptcy Code.
1.28. Convenience Claim means any Unsecured Claim in the amount of $1,000
-----------------
or less and any Unsecured Claim that is reduced to $1,000 by the election of the
holder thereof on such holder's Ballot.
1.29. Corporate Headquarters Building means the Debtors' corporate
-------------------------------
headquarters building located at 501 North Broadway in St. Louis, Missouri.
1.30. Corporate Headquarters Building Lease means the lease for the
-------------------------------------
Corporate Headquarters Building between the EBS Building, L.L.C., as lessor, and
Reorganized Edison, as
4
<PAGE>
lessee, on the terms and subject to the conditions described in Exhibit A
annexed hereto, which shall be in substantially the form contained in the Plan
Supplement.
1.31. Corporate Headquarters Building Proceeds means the Cash proceeds
----------------------------------------
received by the Debtors or Reorganized Debtors as a consequence of the sale,
sale/leaseback or other disposition of the Corporate Headquarters Building, net
of all costs and expenses incurred by the Debtors or Reorganized Debtors in
connection with such sale, sale/leaseback or other similar disposition,
including, without limitation, all applicable taxes, brokers' fees, advertising
fees, legal fees and filing fees.
1.32. Creditors' Committee means the statutory committee of unsecured
--------------------
creditors appointed in the Chapter 11 Cases pursuant to section 1102 of the
Bankruptcy Code.
1.33. D&B Common Stock means, collectively, the 4,417,498 shares of common
----------------
stock in Dave & Buster's, Inc. (a Missouri corporation) which D&B Spinoff
Stockholders were entitled to receive in connection with the D&B Spinoff.
1.34. D&B Spinoff means the June 29, 1995 distribution by Edison of its 85%
-----------
equity interest in Dave & Buster's, Inc. (a Missouri corporation), as a stock
dividend, to holders of Edison common stock as of June 19, 1995 and all related
transactions.
1.35. D&B Spinoff Release Minimum Rights means, when used with reference to
----------------------------------
a particular D&B Spinoff Stockholder, a number of Rights equal to the product of
(a) the D&B Spinoff Release Rights Multiplier and (b) the number of shares of
D&B Common Stock that such D&B Spinoff Stockholder was entitled to receive in
connection with the D&B Spinoff.
1.36. D&B Spinoff Release Minimum Purchase Price means, when used with
------------------------------------------
reference to a particular D&B Spinoff Stockholder, an amount equal to the
product of (a) $5.6593 and (b) the number of shares of D&B Common Stock that
such D&B Spinoff Stockholder was entitled to receive in connection with the D&B
Spinoff.
1.37. D&B Spinoff Release Rights Multiplier means 2.2637, determined by
-------------------------------------
dividing the aggregate number of Rights (10,000,000) by the aggregate number of
shares of D&B Common Stock (4,417,498).
1.38. D&B Spinoff Release Shortfall Amount means, when used with reference
------------------------------------
to a particular D&B Spinoff Stockholder, an amount determined in accordance with
the following formula:
(5.6593) x ((D&B Spinoff Release Minimum Rights - Number of Rights Exercised by
D&B Spinoff Stockholder) divided by (D&B Spinoff Release Rights Multiplier))
5
<PAGE>
1.39. D&B Spinoff Settlement means the settlement, the terms of which are
----------------------
set forth in Section 10.2 of the Plan, between (a) the EBS Litigation, L.L.C.
and (b) each Released D&B Spinoff Stockholder, pursuant to which each Released
D&B Spinoff Stockholder will be released from any and all Avoidance Claims
against such Released D&B Spinoff Stockholder.
1.40. D&B Spinoff Settlement Period means the period commencing on or about
-----------------------------
the Effective Date and concluding on the D&B Spinoff Settlement Expiration Date.
1.41. D&B Spinoff Settlement Expiration Date means 5:00 p.m., Eastern Time
--------------------------------------
on the day that is 30 days after the Effective Date or, if such day is not a
Business Day, the next following Business Day.
1.42. D&B Spinoff Settlement Notice means the form of notice that will
-----------------------------
provide for the participation in the D&B Spinoff Settlement by certain D&B
Spinoff Stockholders in accordance with Section 10.2 of the Plan, which notice
shall contain instructions for the proper completion and due execution of such
notice and timely delivery thereof, together with other requirements relating to
the valid and effective exercise of the right to participate in the D&B Spinoff
Settlement.
1.43. D&B Spinoff Settlement Offer means the offer by the EBS Litigation,
----------------------------
L.L.C. to all D&B Spinoff Stockholders, pursuant to Section 10.2 of the Plan, to
participate in the D&B Spinoff Settlement.
1.44. D&B Spinoff Settlement Proceeds means the aggregate Cash proceeds
-------------------------------
generated by the D&B Spinoff Settlement Offer, excluding any Rights Exercise
Proceeds.
1.45. D&B Spinoff Stockholders means, collectively, the record holders of
------------------------
Edison common stock, determined in accordance with Edison's books and records,
as of the June 19, 1995 record date used to determine the holders of Edison
common stock entitled to participate in the D&B Spinoff.
1.46. Debtors means, collectively, Edison, Edison Brothers Apparel Stores,
-------
Inc., Edison Brothers Shoe Stores, Inc., Edison Paymaster, Inc., Edison Brothers
Redevelopment Corporation, Edbro Missouri, Edison Alabama Stores, Inc., Edison
Arkansas Stores, Inc., Edison Colorado Stores, Inc., Edison Brothers Company,
Edison Hawaii Stores, Inc., Edison Illinois Stores, Inc., Edison Kansas Stores,
Inc., Edison Kentucky Stores, Inc., Edison Louisiana Stores, Inc., Edison
Maryland Stores, Inc., Edison Massachusetts Stores, Inc., Edison Michigan
Stores, Inc., Edison Minnesota Stores, Inc., Edison Mississippi Stores, Inc.,
Edison Nebraska Stores, Inc., Edison New Jersey Stores, Inc., Edison New Mexico
Stores, Inc., Edison New York Stores, Inc., Edison Ohio Stores, Inc., Edison
Oklahoma Stores, Inc., Edison Oregon Stores, Inc., Edison Pennsylvania Stores,
Inc., Edison Tennessee Stores, Inc., Edison Texas Stores, Inc., Edison Utah
Stores, Inc., Edbro Ohio Realty, Inc., EBSS-Montana, Inc., EBSS-North Central,
Inc., EBSS-Indiana, Inc., EBSS-Iowa, Inc., EBSS-Kansas, Inc., EBSS-Wisconsin,
Inc., EBSS-Northeast, Inc., EBSS-South, Inc., EBSS-Mideast,
6
<PAGE>
Inc., EBSS-Michigan, Inc., EBSS-East, Inc., EBSS-Ohio, Inc., EBSS-Pennsylvania,
Inc., EBSS-Texas, Inc., EBSS-West, Inc., Edison Puerto Rico Stores, Inc.,
Ebscat, Inc., Edison Brothers Mall Entertainment, Inc., Horizon Entertainment,
Inc., Edison Brothers Stores International, Inc., Edisur, Inc., EBS Holdings
Corp., Edison Whittier Warehouse, Inc., Edbro California USG -- 2, Inc., Edbro
Missouri USG -- 2, Inc., Edbro California USG -- 1, Inc., Industrial Design,
Inc., Webster Clothes, Inc., Z&Z Fashions, Ltd., Webster-Rossville, Inc., Time-
Out Family Amusement Centers, Inc., Tofac of Puerto Rico, Inc., Sacha Shoes Ltd.
and Mandel's of California.
1.47. Debtors in Possession means the Debtors in their capacity as debtors
---------------------
in possession in the Chapter 11 Cases pursuant to sections 1101, 1107(a) and
1108 of the Bankruptcy Code.
1.48. Director Options shall have the meaning set forth in Section 9.7 of
----------------
the Plan.
1.49. Director Stock Option Plan means the Edison Brothers Stores, Inc.
--------------------------
1997 Director Stock Option Plan, which shall be in substantially the form
annexed to the Disclosure Statement as Exhibit F.
1.50. Disbursing Agent shall have the meaning set forth in Section 6.4(g)
----------------
of the Plan.
1.51. Disclosure Statement means the disclosure statement relating to
--------------------
the Plan, including, without limitation, all exhibits and schedules thereto, as
approved by the Bankruptcy Court pursuant to section 1125 of the Bankruptcy
Code.
1.52. Disputed means, with reference to any Claim or Equity Interest, any
--------
Claim or Equity Interest proof of which was timely and properly filed and which
has been or hereafter is listed on the Schedules as unliquidated, disputed or
contingent, and in either case or in the case of an Administrative Expense
Claim, any Administrative Expense Claim, Claim or Equity Interest which is
disputed under the Plan or as to which the Debtors or, if not prohibited by the
Plan, any other party in interest has interposed a timely objection and/or
request for estimation in accordance with section 502(c) of the Bankruptcy Code
and Bankruptcy Rule 3018, which objection and/or request for estimation has not
been withdrawn or determined by a Final Order, and any Claim or Equity Interest
proof of which was required to be filed by order of the Bankruptcy Court but as
to which a proof of claim or interest was not timely or properly filed.
1.53. Disputed Claim Amount means the amount set forth in the proof of
---------------------
claim relating to a Disputed Claim or, if an amount is estimated in respect of a
Disputed Claim in accordance with section 502(c) of the Bankruptcy Code and
Bankruptcy Rule 3018 for purposes of, among other things, Section 6.4(c)(i) of
the Plan, the amount so estimated pursuant to an order of the Bankruptcy Court.
7
<PAGE>
1.54. EBS Building, L.L.C. means the Delaware limited liability company
-------------------
formed pursuant to the EBS Building LLC Members Agreement.
1.55. EBS Building LLC Members Agreement means that certain Members
----------------------------------
Agreement to govern the EBS Building, L.L.C., which shall be in substantially
the form contained in the Plan Supplement.
1.56. EBS Litigation, L.L.C. means the Delaware limited liability company
---------------------
formed pursuant to the EBS Litigation LLC Members Agreement.
1.57. EBS Litigation LLC Members Agreement means that certain Members
------------------------------------
Agreement to govern the EBS Litigation, L.L.C., which shall be in substantially
the form contained in the Plan Supplement.
1.58. EBS Pension, L.L.C. means the Delaware limited liability company
-------------------
formed pursuant to the EBS Pension LLC Members Agreement.
1.59. EBS Pension LLC Members Agreement means that certain Members
---------------------------------
Agreement to govern the EBS Pension, L.L.C., which shall be in substantially the
form contained in the Plan Supplement.
1.60. Edbro Missouri means Edbro Missouri Realty Company, Inc., a Missouri
--------------
corporation.
1.61. Edbro Missouri Facility means all land and improvements presently
-----------------------
leased to Edbro Missouri pursuant to the Series 1977 Lease Agreement or the
Series 1985 Lease Agreement, together with any fixtures appurtenant thereto and
any personalty located thereon and related to the foregoing which is owned by
Edbro Missouri or leased by Edbro Missouri under the terms of the Series 1977
Lease Agreement and/or the Series 1985 Lease Agreement.
1.62. Edison means Edison Brothers Stores, Inc., a Delaware corporation.
------
1.63. Edison Equity Interest means any share of common stock or other
----------------------
instrument evidencing a present ownership interest in Edison, whether or not
transferable, and any option, warrant or right, contractual or otherwise, to
acquire any such interest.
1.64. Effective Date means the first Business Day on which the conditions
--------------
specified in Section 11.1 of the Plan have been satisfied or waived.
1.65. Employment Contracts means the employment contracts or amended
--------------------
employment contracts entered into between the Reorganized Debtors and certain of
their key executives, which shall be in substantially the form annexed to the
Disclosure Statement as Exhibit F.
8
<PAGE>
1.66. Equity Committee means the committee of equity security holders
----------------
appointed in the Chapter 11 Cases pursuant to section 1102 of the Bankruptcy
Code.
1.67. Equity Interest means any share of common stock or other instrument
---------------
evidencing an ownership interest in any of the Debtors, whether or not
transferable, and any option, warrant or right, contractual or otherwise, to
acquire any such interest.
1.68. Final Order means an order of the Bankruptcy Court as to which the
-----------
time to appeal, petition for certiorari, or move for reargument or rehearing has
----------
expired and as to which no appeal, petition for certiorari, or other proceedings
----------
for reargument or rehearing shall then be pending or as to which any right to
appeal, petition for certiorari, reargue, or rehear shall have been waived in
----------
writing in form and substance satisfactory to the Debtors or the Reorganized
Debtors or, in the event that an appeal, writ of certiorari, or reargument or
----------
rehearing thereof has been sought, such order of the Bankruptcy Court shall have
been determined by the highest court to which such order was appealed, or
certiorari, reargument or rehearing shall have been denied and the time to take
- ----------
any further appeal, petition for certiorari or move for reargument or rehearing
----------
shall have expired; provided, however, 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.
1.69. Funding Escrow means the escrow established pursuant to Section 5.2
--------------
of the Plan and governed by the Funding Escrow Agreement.
1.70. Funding Escrow Assets means (a) $16,000,000, (b) the documents of
---------------------
title to the Funding Escrow Properties and (c) anything deposited in or
transferred to or earned by the Funding Escrow on or after the Effective Date;
provided, however, that if the Debtors have, prior to the Effective Date,
- -------- -------
entered into a contract to sell, sell and lease back or otherwise dispose of one
or more of the Funding Escrow Properties, the Cash proceeds of such transaction
or, if such Cash proceeds have not been received prior to the Effective Date,
the right to receive such Cash proceeds, shall be transferred into the Funding
Escrow in lieu of the Funding Escrow Property or Funding Escrow Properties
disposed of.
1.71. Funding Escrow Agent means the escrow agent appointed pursuant to
--------------------
Section 5.2 of the Plan and the Funding Escrow Agreement.
1.72. Funding Escrow Agreement means the escrow agreement governing the
------------------------
Funding Escrow, which shall be in substantially the form contained in the Plan
Supplement.
1.73. Funding Escrow Mortgages means the mortgages on the Funding Escrow
------------------------
Properties, which shall be in substantially the form contained in the Plan
Supplement.
9
<PAGE>
1.74. Funding Escrow Properties means the following properties owned by
-------------------------
the Debtors: (a) a parcel of land containing a 13-story building with
accompanying driveways and parking facility located at 400 South 14th Street,
St. Louis, Missouri; (b) a parcel of land containing a five-story building plus
basement comprising the whole of Block 282 of the City of St. Louis located at
1230 North Second Street, St. Louis, Missouri; (c) a parcel of land containing a
four-story building plus basement located in Cook County, Illinois at 131-133
South State Street, Chicago, Illinois; (d) a parcel of land containing
approximately 15.02 acres together with a building thereon containing
approximately 309,444 square feet of ground floor space with accompanying
parking facility and truck areas located at 1351 Redmond Road, Rome, Georgia;
and (e) a parcel of land in Princeton, Potaka County, Illinois, containing
approximately 41.19 acres together with a building thereon containing
approximately 369,000 square feet of ground floor space with accompanying
parking facility and truck areas located at U.S. 41 and Highway 100, Princeton,
Indiana.
1.75. General Unsecured Claim means any Unsecured Claim other than a
-----------------------
Convenience Claim.
1.76. Initial Distribution Date means the date that is 60 days subsequent
-------------------------
to the Effective Date, or as soon thereafter as is practicable.
1.77. Insured Claim means any Claim arising from an incident or occurrence
-------------
that is covered under the Debtors' insurance policies.
1.78. Issuer means the City of Washington, Franklin County, Missouri, as
------
the issuer of the Original Bonds or the Series 1997 Bonds, as applicable.
1.79. Lien has the meaning set forth in section 101 of the Bankruptcy Code.
----
1.80. LLC Funding Amount means an amount determined in the sole discretion
------------------
of the Creditors' Committee and specified in a writing provided to the Debtors
by no later than 10 days prior to the date of the Confirmation Hearing;
provided, however, that such amount shall in no event be greater than the Cash
- -------- -------
Distribution Pool.
1.81. Management Options shall have the meaning set forth in Section 9.6 of
------------------
the Plan.
1.82. Membership Certificates means, collectively, the certificates which
-----------------------
will be delivered to each person who is to receive a distribution under the Plan
(including distributions to be made following an exercise of Rights) of Class A
Membership Units.
1.83. Mercantile means Mercantile Bank National Association (f/k/a
----------
Mercantile Bank of St. Louis, National Association, f/k/a Mercantile Trust
Company National Association).
10
<PAGE>
1.84. New Common Stock means the common stock of Reorganized Edison
----------------
authorized and to be issued pursuant to the Plan. The New Common Stock shall
have a par value of $.01 per share and such rights with respect to dividends,
liquidation, voting and other matters as are provided for by applicable
nonbankruptcy law or in the Amended Edison Certificate of Incorporation and the
Amended Edison Bylaws.
1.85. New Common Stock Distribution Pool means 10,000,000 shares of New
----------------------------------
Common Stock minus the number of shares of New Common Stock issuable as a
consequence of valid exercises of Rights pursuant to Section 10.1 of the Plan.
1.86. New Notes means the promissory notes authorized and to be issued
---------
pursuant to the Plan on the terms and subject to the conditions described in
Exhibit B annexed hereto.
1.87. New Notes Distribution Amount means $100,000,000 in principal amount
-----------------------------
of New Notes; provided, however, that the principal amount of the New Notes may
be increased as described in Section 1.15 of the Plan.
1.88. New Notes Indentures means the trust indenture and first supplemental
--------------------
trust indenture between Reorganized Edison, as issuer, and the indenture
trustee, which shall be in substantially the form contained in the Plan
Supplement.
1.89. Original Bondholder means any of the Series 1977 Bondholders or any
------------------
of the Series 1985 Bondholders.
1.90. Original Bonds means, collectively, the Series 1977 Bonds and Series
--------------
1985 Bonds.
1.91. Other Priority Claim means any Claim, other than an Administrative
--------------------
Expense Claim or a Priority Tax Claim, entitled to priority in right of payment
under section 507(a) of the Bankruptcy Code.
1.92. Other Secured Claim means any Secured Claim, other than a Secured
-------------
Series 1977 Bondholder Claim, a Secured Series 1985 Bondholder Claim or a
Secured Tax Claim.
1.93. Pension Plan means the Edison Brothers Stores Pension Plan, as the
------------
same may have been or may be amended, modified, revised or restated.
1.94. Pension Plan Payment Date means the date upon which there is a
-------------------------
final distribution of assets from the Pension Plan.
1.95. Pension Plan Proceeds means the Cash proceeds received by the Debtors
---------------------
or Reorganized Debtors as a consequence of the termination of the Pension
11
<PAGE>
Plan , net of (a) the Pension Plan assets transferred to a qualified replacement
plan within the meaning of section 4980(d)(2) of the Internal Revenue Code
(which assets in excess of accrued benefits are not to exceed the statutory
minimum required to limit excise taxes relating to the termination of the
Pension Plan to 20%), (b) all costs, fees and expenses incurred or for which a
reserve is established in connection with, arising from or related to such
termination and the establishment of a replacement pension plan, (c) all excise
taxes arising from or related to the termination of the Pension Plan and (d) all
applicable income taxes, if any, incurred in connection with, or arising from or
related to the termination of the Pension Plan for which a reserve in the amount
of $7,000,000 is established.
1.96. Plan means this chapter 11 plan of reorganization, including,
----
without limitation, the Plan Supplement and all exhibits, supplements,
appendices and schedules hereto, either in its present form or as the same may
be altered, amended or modified from time to time.
1.97. Plan Supplement means the forms of documents specified in Section
---------------
13.17 of the Plan.
1.98. Priority Tax Claim means any Claim of a governmental unit of the
------------------
kind specified in sections 502(i) and 507(a)(8) of the Bankruptcy Code.
1.99. Pro Rata Share means a proportionate share, so that the ratio of
--------------
the consideration distributed on account of an Allowed Claim or Allowed Equity
Interest in a Class to the amount of such Allowed Claim or Allowed Equity
Interest is the same as the ratio of the amount of the consideration distributed
on account of all Allowed Claims or Allowed Equity Interests in such Class to
the amount of all Allowed Claims or Allowed Equity Interests in such Class.
1.100. Quarter means the period beginning on the Effective Date and ending
-------
on the next of October 31, January 31, April 30 and July 31, and each three
month period thereafter.
1.101. Record Date means the day that is five days from and after the
-----------
Confirmation Date.
1.102. Registration Rights Agreement means a registration rights agreement
-----------------------------
to be entered into pursuant to Section 6.8 of the Plan between Reorganized
Edison and any person or entity entitled to become a party to such registration
rights agreement under Section 6.8 of the Plan, which shall be in substantially
the form contained in the Plan Supplement.
1.103. Released D&B Spinoff Stockholder means a D&B Spinoff Stockholder (a)
--------------------------------
who exercises, in accordance with Section 10.1 of the Plan, a number of Rights
greater than or equal to the D&B Spinoff Release Minimum Rights (and elects to
participate in the D&B Spinoff Settlement in respect of each Right exercised),
(b) who pays, in accordance with Section 10.2 of the Plan, an amount greater
than or equal to the D&B Spinoff Release Minimum Purchase Price or (c) who (i)
exercises a number of Rights less than the D&B Spinoff Release Minimum Rights
(and elects to participate in the D&B Spinoff Settlement in respect of each
Right exercised) and (ii) pays, in
12
<PAGE>
accordance with Section 10.2 of the Plan, an amount equal to the D&B Spinoff
Release Shortfall Amount.
1.104. Remarketing Agent shall have the meaning ascribed to such term in
-----------------
Schedule 4 to the Plan.
1.105. Reorganized Debtors means Reorganized Edison and each of the
-------------------
Reorganized Subsidiaries.
1.106. Reorganized Edbro Missouri means Edbro Missouri, or any successor
--------------------------
thereto by merger, consolidation or otherwise, on and after the Effective Date.
1.107. Reorganized Edison means Edison, or any successor thereto by merger,
------------------
consolidation or otherwise, on and after the Effective Date.
1.108. Reorganized Subsidiaries means each of the Subsidiaries, or any
------------------------
successors thereto by merger, consolidation or otherwise, on and after the
Effective Date.
1.109. Reserve shall have the meaning set forth in Section 6.4(c)(i) of the
-------
Plan.
1.110. Restricted Stock shall have the meaning set forth in Section 9.8 of
----------------
the Plan.
1.111. Restricted Stock Agreements means the agreements entered into
---------------------------
between Edison and certain of its key executives with respect to the award by
Edison of Restricted Stock to such key executives, which shall be in
substantially the form annexed to the Disclosure Statement as Exhibit F.
1.112. Resolved Avoidance Claims means all Avoidance Claims that are, prior
-------------------------
to the Effective Date, the subject of a compromise and settlement approved
pursuant to Bankruptcy Rule 9019 by Final Order or otherwise resolved,
discontinued, abandoned or dismissed.
1.113. Resolved Avoidance Claims Proceeds means the Cash proceeds received
----------------------------------
by the Debtors or Reorganized Debtors prior to the Effective Date as a
consequence of the Resolved Avoidance Claims.
1.114. Rights means 10,000,000 uncertificated, transferable rights,
------
exercisable in the aggregate to purchase the Rights Aggregate Consideration,
which rights shall be issued to holders of Allowed Edison Equity Interests
pursuant to Section 4.8 of the Plan and be exercisable in accordance with the
provisions of Section 10.1 of the Plan.
13
<PAGE>
1.115. Rights Agent means the person designated by the Debtors as the
------------
Rights agent by no later than 10 days prior to the date of the Confirmation
Hearing.
1.116. Rights Aggregate Consideration means the New Common Stock
------------------------------
Distribution Pool and the Class A Membership Units in EBS Litigation, L.L.C.
1.117. Rights Exercise Instructions means the instructions which will
----------------------------
accompany the Rights Exercise Notice and which will include instructions for the
proper completion and due execution of the Rights Exercise Notice and timely
delivery thereof, together with other requirements relating to the valid and
effective exercise of the Rights.
1.118. Rights Exercise Notice means the form of exercise notice which will
----------------------
provide for the exercise of the Rights by each holder thereof.
1.119. Rights Exercise Period means the period commencing on or about the
----------------------
Effective Date and concluding on the Rights Expiration Date.
1.120. Rights Exercise Price means $16.40 per Right.
---------------------
1.121. Rights Exercise Proceeds means the aggregate Cash proceeds generated
------------------------
by the exercise of the Rights pursuant to Section 10.1 of the Plan.
1.122. Rights Expiration Date means 5:00 p.m., Eastern Time on the day that
----------------------
is 30 days after the Effective Date or, if such day is not a Business Day, the
next following Business Day.
1.123. Schedules means the schedules of assets and liabilities, the list
---------
of holders of Equity Interests and the statements of financial affairs filed by
the Debtors under section 521 of the Bankruptcy Code and Bankruptcy Rule 1007,
and all amendments and modifications thereto through the Confirmation Date.
1.124. Secured Claim means any Claim, to the extent reflected in the
-------------
Schedules or a proof of claim as a Secured Claim, which is secured by a Lien on
Collateral to the extent of the value of such Collateral, as determined in
accordance with section 506(a) of the Bankruptcy Code, or, in the event that
such Claim is subject to setoff under section 553 of the Bankruptcy Code, to the
extent of such setoff.
1.125. Secured Series 1977 Bondholder Claim means any Series 1977
------------------------------------
Bondholder Claim to the extent such Claim is a Secured Claim.
1.126. Secured Series 1985 Bondholder Claim means any Series 1985
------------------------------
Bondholder Claim to the extent such Claim is a Secured Claim.
14
<PAGE>
1.127. Secured Tax Claim means any Secured Claim which, absent its secured
-----------------
status, would be entitled to priority in right of payment under section
507(a)(8) of the Bankruptcy Code.
1.128. Series 1977 Bond Documents means, collectively, the Series 1977
--------------------------
Bonds, the Series 1977 Bond Ordinance, the Series 1977 Lease Agreement, the
Series 1977 Guaranty and each of the other documents, instruments, certificates
or agreements executed and delivered in connection with any of the foregoing
documents or otherwise with respect to the issuance of the Series 1977 Bonds, as
heretofore amended, supplemented, restated and/or modified.
1.129. Series 1977 Bond Ordinance means that certain Ordinance No. 4930
--------------------------
adopted by the Issuer on June 9, 1977, pursuant to which the Series 1977 Bonds
were issued.
1.130. Series 1977 Bondholder Claim means any Claim filed by the City on
----------------------------
behalf of all Series 1977 Bondholders, against Edbro Missouri or Edison arising
under or relating to the Series 1977 Bond Documents.
1.131. Series 1977 Bondholders means the person or persons in whose name
-----------------------
or names any Series 1977 Bond shall be registered on the books of the Issuer or
paying agent therefor, kept for that purpose in accordance with the terms of the
Series 1977 Bond Ordinance.
1.132. Series 1977 Bonds means the City of Washington, County of Franklin,
-----------------
State of Missouri Industrial Revenue Bonds, Series of 1977, issued in the
original aggregate principal amount of $3,950,000.
1.133. Series 1977 Guaranty means, collectively, that certain Guaranty,
--------------------
dated December 15, 1976, executed by Edison, and that certain Guaranty, dated
June 6, 1977, executed by Edison, each securing the obligations of Edbro
Missouri under the Series 1977 Lease Agreement.
1.134. Series 1977 Lease Agreement means that certain Agreement of Lease
---------------------------
and Option to Purchase, dated December 15, 1976, between the Issuer and Edbro
Missouri, as amended by that certain First Amendment of Lease and Option to
Purchase, dated June 6, 1977, between the Issuer and Edbro Missouri.
1.135. Series 1985 Bank Agreement means that certain Bank Agreement, dated
--------------------------
as of November 15, 1985, between Edison and Mercantile, in its capacity as the
holder of all Series 1985 Bonds.
1.136. Series 1985 Bond Documents means, collectively, the Series 1985
--------------------------
Bonds, the Series 1985 Bond Indenture, the Series 1985 Lease Agreement, the
Series 1985 Bank Agreement, the Series 1985 Guaranty and each of the other
documents, instruments, certificates or agreements executed
15
<PAGE>
and delivered in connection with any of the foregoing documents or otherwise
with respect to the issuance of the Series 1985 Bonds, as heretofore amended,
supplemented, restated and/or modified.
1.137. Series 1985 Bond Indenture means that certain Indenture of Trust
--------------------------
dated as of November 15, 1985, between the Issuer and the Trustee, pursuant to
which the Series 1985 Bonds were issued, together with any supplements thereto.
1.138. Series 1985 Bondholder Claim means any Claim by the City or the
----------------------------
Trustee, on behalf of all Series 1985 Bondholders, against Edbro Missouri or
Edison arising under or relating to the Series 1985 Bond Documents.
1.139. Series 1985 Bondholders means the person or persons in whose name
-----------------------
or names any Series 1985 Bond shall be registered on the books of the Trustee
kept for that purpose in accordance with the terms of the Series 1985 Bond
Indenture.
1.140. Series 1985 Bonds means the City of Washington, Franklin County,
-----------------
Missouri Industrial Revenue Refunding Bonds (Edbro Missouri Realty Company, Inc.
Project) Series of 1985, issued in the original aggregate principal amount of
$5,500,000.
1.141. Series 1985 Guaranty means that certain Guaranty Agreement, dated
--------------------
as of November 15, 1985, among the Issuer, Trustee and Edison, securing the
obligations of Edbro Missouri under the Series 1985 Lease Agreement.
1.142. Series 1985 Lease Agreement means that certain Amended Lease
---------------------------
Agreement, dated November 15, 1985, between the Issuer and Edbro Missouri, as
amended by that certain Amendment to Amended Lease Agreement, dated November 28,
1994, between the Issuer and Edbro Missouri.
1.143. Series 1997 A Bondholders means the registered holders of the Series
-------------------------
1997 A Bonds.
1.144. Series 1997 B Bondholders means the registered holders of the Series
-------------------------
1997 B Bonds.
1.145. Series 1997 A Bonds means those certain tax-exempt industrial
-------------------
development revenue refunding bonds in the aggregate principal amount of
$2,482,000 issued by the Issuer for the purpose of refunding a portion of the
outstanding Series 1977 Bonds in an aggregate principal amount equal to the
Allowed Secured Series 1977 Bondholder Claim, which Series 1997 A Bonds shall
have the interest rate, maturity and other terms as more specifically described
on Schedule 3 to the Plan.
1.146. Series 1997 B Bonds means those certain tax-exempt industrial
-------------------
development revenue refunding bonds in the aggregate principal amount of
$4,235,000 issued by the Issuer for the purpose of refunding a portion of the
outstanding Series 1985 Bonds in an aggregate principal amount equal
16
<PAGE>
to the Allowed Secured Series 1985 Bondholder Claim, which Series 1997 B Bonds
shall have the interest rate, maturity and other terms as more specifically
described on Schedule 4 to the Plan.
1.147. Series 1997 Bond Indenture shall have the meaning ascribed to such
--------------------------
term in Schedule 1 to the Plan.
1.148. Series 1997 Bondholders means, collectively, the Series 1997 A
-----------------------
Bondholders and the Series 1997 B Bondholders.
1.149. Series 1997 Bonds means, collectively, the Series 1997 A Bonds and
-----------------
Series 1997 B Bonds.
1.150. Series 1997 Collateral Documents shall have the meaning ascribed to
--------------------------------
such term in Schedule 2 to the Plan.
1.151. Series 1997 Guaranty shall have the meaning ascribed to such term in
--------------------
Schedule 2 to the Plan.
1.152. Series 1997 Loan shall have the meaning ascribed to such term in
----------------
Schedule 1 to the Plan.
1.153. Series 1997 Loan Agreement shall have the meaning ascribed to such
--------------------------
term in Schedule 1 to the Plan.
1.154. Series 1997 Loan Documents means, collectively, the Series 1997
--------------------------
Loan Agreement, the Series 1997 Note, the Series 1997 Collateral Documents, and
any other agreements, instruments, certificates, statements, or other documents
executed by Reorganized Edbro Missouri, Reorganized Edison, or any of the other
Reorganized Debtors in connection with any of the foregoing documents and/or the
making of the Series 1997 Loan and the issuance of the Series 1997 Bonds.
1.155. Series 1997 Note shall have the meaning ascribed to such term in
----------------
Schedule 1 to the Plan.
1.156. Series 1997 Refunding Conditions means the conditions described on
--------------------------------
Schedule 2 to the Plan.
1.157. Stock Option Plan means the Edison Brothers Stores, Inc. 1997 Stock
-----------------
Option Plan, which shall be in substantially the form annexed to the Disclosure
Statement as Exhibit F.
1.158. Subsequent Distribution Date means the twentieth day after the end
----------------------------
of the Quarter following the Quarter in which the Initial Distribution Date
occurs and the twentieth day after the
17
<PAGE>
end of each subsequent Quarter; provided, however, that solely for purposes of
-------- -------
Sections 4.7(b)(ii) and 6.4(e) of the Plan, the first and second Subsequent
Distribution Date shall occur on the twentieth day after the end of the second
and fourth Quarters, respectively, following the Quarter in which the Initial
Distribution Date occurs.
1.159. Subsidiary means any Debtor of which Edison owns directly or
----------
indirectly all of the outstanding capital stock.
1.160. Subsidiary Equity Interest means any share of common stock or other
--------------------------
instrument evidencing a present ownership interest in any of the Subsidiaries,
whether or not transferable, and any option, warrant or right, contractual or
otherwise, to acquire any such interest.
1.161. Surplus Distributions shall have the meaning set forth in Section
---------------------
6.4(e) of the Plan.
1.162. Tort Claim means any Claim relating to personal injury, property
----------
damage or products liability or other similar Claim asserted against any of the
Debtors that has not been compromised and settled or otherwise resolved.
1.163. Trustee means, (i) with respect to the Series 1985 Bonds, Mercantile
-------
in its capacity as trustee under the Series 1985 Bond Indenture and (ii) with
respect to the Series 1997 Bonds, the trust company or bank (which shall be
acceptable to Edbro Missouri) which is initially appointed by the Issuer as
Trustee under the Series 1997 Bond Indenture.
1.164. Unresolved Avoidance Claims means all Avoidance Claims that are not,
---------------------------
prior to the Effective Date, the subject of a compromise and settlement approved
pursuant to Bankruptcy Rule 9019 by Final Order or otherwise resolved,
discontinued, abandoned or dismissed.
1.165. Unsecured Claim means any Claim that is not a Secured Claim,
---------------
Administrative Expense Claim, Priority Tax Claim or Other Priority Claim.
1.166. Warrants means warrants to purchase New Common Stock, on the terms
--------
and subject to the conditions described in Exhibit C annexed hereto, to be
distributed to the holders of Allowed Edison Equity Interests pursuant to
Section 4.8 of the Plan.
1.167. Warrant Distribution Pool means approximately 1,008,791 Warrants.
-------------------------
Interpretation; Application of Definitions and Rules of Construction.
--------------------------------------------------------------------
Wherever from the context it appears appropriate, each term stated in either the
singular or the plural shall include both the singular and the plural and
pronouns stated in the masculine, feminine or neuter gender shall include the
masculine, feminine and neuter. Unless otherwise specified, all section,
article, schedule or exhibit references in the Plan are to the respective
Section in, Article of, Schedule to, or Exhibit
18
<PAGE>
to, the Plan. The words "herein," "hereof," "hereto," "hereunder" and other
words of similar import refer to the Plan as a whole and not to any particular
section, subsection or clause contained in the Plan. The rules of construction
contained in section 102 of the Bankruptcy Code shall apply to the construction
of the Plan. A term used herein that is not defined herein, but that is used in
the Bankruptcy Code, shall have the meaning ascribed to that term in the
Bankruptcy Code. The headings in the Plan are for convenience of reference only
and shall not limit or otherwise affect the provisions of the Plan.
ARTICLE II.
TREATMENT OF ADMINISTRATIVE
EXPENSE CLAIMS AND PRIORITY TAX CLAIMS
--------------------------------------
2.1. Administrative Expense Claims. Except to the extent that any entity
-----------------------------
entitled to payment of any Allowed Administrative Expense Claim agrees to a
different treatment, each holder of an Allowed Administrative Expense Claim
shall receive Cash in an amount equal to such Allowed Administrative Expense
Claim on the later of the Effective Date and the date such Administrative
Expense Claim becomes an Allowed Administrative Expense Claim, or as soon
thereafter as is practicable; provided, however, that Allowed Administrative
-------- -------
Expense Claims representing liabilities incurred in the ordinary course of
business by the Debtors in Possession or liabilities arising under loans or
advances to or other obligations incurred by the Debtors in Possession, to the
extent authorized and approved by the Bankruptcy Court if such authorization and
approval was required under the Bankruptcy Code, shall be paid in full and
performed by the Reorganized Debtors in the ordinary course of business in
accordance with the terms and subject to the conditions of any agreements
governing, instruments evidencing or other documents relating to, such
transactions.
2.2. Professional Compensation and Reimbursement Claims. All entities
--------------------------------------------------
seeking an award by the Bankruptcy Court of compensation for services rendered
or reimbursement of expenses incurred through and including the Confirmation
Date under sections 503(b)(2), 503(b)(3), 503(b)(4) or 503(b)(5) of the
Bankruptcy Code (a) shall file their respective final applications for
allowances of compensation for services rendered and reimbursement of expenses
incurred through the Confirmation Date by the date that is 60 days after the
Effective Date or such other date as may be fixed by the Bankruptcy Court and,
(b) if granted such an award by the Bankruptcy Court, shall be paid in full in
such amounts as are Allowed by the Bankruptcy Court (i) on the date such
Administrative Expense Claim becomes an Allowed Administrative Expense Claim, or
as soon thereafter as is practicable or (ii) upon such other terms as may be
mutually agreed upon between such holder of an Administrative Expense Claim and
the Debtors in Possession or, on and after the Effective Date, the Reorganized
Debtors.
19
<PAGE>
2.3. Priority Tax Claims. Except to the extent that a holder of an
-------------------
Allowed Priority Tax Claim has been paid by the Debtors prior to the Effective
Date or agrees to a different treatment, each holder of an Allowed Priority Tax
Claim shall receive, at the sole option of Reorganized Edison, (a) Cash in an
amount equal to such Allowed Priority Tax Claim on the later of the Effective
Date and the date such Priority Tax Claim becomes an Allowed Priority Tax Claim,
or as soon thereafter as is practicable, or (b) equal annual Cash payments in an
aggregate amount equal to such Allowed Priority Tax Claim, together with
interest at a fixed annual rate equal to 8 1/4%, over a period through the sixth
anniversary of the date of assessment of such Allowed Priority Tax Claim, or
upon such other terms determined by the Bankruptcy Court to provide the holder
of such Allowed Priority Tax Claim deferred Cash payments having a value, as of
the Effective Date, equal to such Allowed Priority Tax Claim.
ARTICLE III.
CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS
---------------------------------------------
Claims, other than Administrative Expense Claims and Priority Tax Claims,
and Equity Interests are classified for all purposes, including voting,
confirmation and distribution pursuant to the Plan, as follows:
<TABLE>
<CAPTION>
Class Status
- ----- ------
<S> <C>
Class 1 -- Other Priority Claims................................Unimpaired
Class 2 -- Secured Series 1977 Bondholder Claims..................Impaired
Class 3 -- Secured Series 1985 Bondholder Claims..................Impaired
Class 4 -- Secured Tax Claims.....................................Impaired
Class 5 -- Other Secured Claims.................................Unimpaired
Class 6 -- Convenience Claims.....................................Impaired
Class 7 -- General Unsecured Claims...............................Impaired
Class 8 -- Edison Equity Interests................................Impaired
</TABLE>
20
<PAGE>
ARTICLE IV.
TREATMENT OF CLAIMS AND EQUITY INTERESTS
----------------------------------------
4.1. CLASS 1 -- OTHER PRIORITY CLAIMS.
--------------------------------
(a) Impairment and Voting. Class 1 is unimpaired by the Plan. Each holder
---------------------
of an Allowed Other Priority Claim is conclusively presumed to have accepted the
Plan and is not entitled to vote to accept or reject the Plan.
(b) Distributions. Each holder of an Allowed Other Priority Claim shall
-------------
receive Cash in an amount equal to such Allowed Other Priority Claim on the
later of the Effective Date and the date such Allowed Other Priority Claim
becomes an Allowed Other Priority Claim, or as soon thereafter as is
practicable.
4.2. CLASS 2 -- SECURED SERIES 1977 BONDHOLDER CLAIMS.
------------------------------------------------
(a) Impairment and Voting. Class 2 is impaired by the Plan. The beneficial
---------------------
holders of the Secured Series 1977 Bondholder Claims are the Series 1977
Bondholders. Consequently, each Series 1977 Bondholder shall be entitled to vote
to accept or reject the Plan.
(b) Distributions. On the Effective Date and upon satisfaction of each of
-------------
the Series 1997 Refunding Conditions, Reorganized Edbro Missouri shall cause the
Series 1997 A Bonds to be issued by the Issuer in the original aggregate
principal amount of $2,482,000 and shall cause the distribution of the Series
1997 A Bonds to or on behalf of the Series 1977 Bondholders as of the Record
Date in satisfaction of all Allowed Secured Series 1977 Bondholder Claims. The
Series 1997 A Bonds shall be issued for the purpose of refunding a portion of
the Series 1977 Bonds in an aggregate principal amount equal to the Allowed
Secured Series 1977 Bondholder Claims. Each Series 1977 Bondholder shall receive
Series 1997 A Bonds in Authorized Denominations, in an aggregate principal
amount equal to 85% of the principal amount of the Series 1977 Bonds held by
such Series 1977 Bondholder as of the Record Date. The Series 1997 A Bonds will
contain such terms and shall be issued pursuant to such documents as more
particularly described on Schedules 1, 2 and 3 attached hereto and made a part
hereof.
(c) Lien Priority. The Trustee, on behalf of and for the benefit of all
-------------
Series 1997 Bondholders, shall have a first lien on the Edbro Missouri Facility
to secure the Series 1997 Loan and the other obligations of Reorganized Edbro
Missouri under the Series 1997 Loan Documents. There shall be no priority in
payment or lien rights of the Series 1997 A Bondholders over the payment or lien
rights of the Series 1997 B Bondholders but such payment and lien rights shall
be pari passu with respect to each series of Series 1997 Bonds.
21
<PAGE>
4.3. CLASS 3 -- SECURED SERIES 1985 BONDHOLDER CLAIMS.
------------------------------------------------
(a) Impairment and Voting. Class 3 is impaired by the Plan. The beneficial
---------------------
holders of the Secured Series 1985 Bondholder Claims are the Series 1985
Bondholders. Consequently, each Series 1985 Bondholder shall be entitled to vote
to accept or reject the Plan.
(b) Distributions. On the Effective Date and upon satisfaction of each of
-------------
the Series 1997 Refunding Conditions, Reorganized Edbro Missouri shall cause the
Series 1997 B Bonds to be issued by the Issuer in the original aggregate
principal amount of $4,235,000 and shall cause the distribution of the Series
1997 B Bonds to or on behalf of the Series 1985 Bondholders as of the Record
Date in satisfaction of all Allowed Secured Series 1985 Bondholder Claims. The
Series 1997 B Bonds shall be issued for the purpose of refunding a portion of
the Series 1985 Bonds in an aggregate principal amount equal to the Allowed
Secured Series 1985 Bondholder Claims. Each Series 1985 Bondholder shall receive
Series 1997 B Bonds in Authorized Denominations, in an aggregate principal
amount equal to 77% of the principal amount of the Series 1985 Bonds held by
such Series 1985 Bondholder as of the Record Date. The Series 1997 B Bonds will
contain such terms and shall be issued pursuant to such documents as more
particularly described on Schedules 1, 2 and 3 attached hereto and made a part
hereof.
(c) Lien Priority. The Trustee, on behalf of and for the benefit of all
-------------
Series 1997 Bondholders, shall have a first lien on the Edbro Missouri Facility
to secure the Series 1997 Loan and the other obligations of Reorganized Edbro
Missouri under the Series 1997 Loan Documents. There shall be no priority in
payment or lien rights of the Series 1997 A Bondholders over the payment or lien
rights of the Series 1997 B Bondholders but such payment and lien rights shall
be pari passu with respect to each series of Series 1997 Bonds.
4.4. CLASS 4 -- SECURED TAX CLAIMS.
-----------------------------
(a) Impairment and Voting. Class 4 is impaired by the Plan. Each holder of
---------------------
an Allowed Secured Tax Claim is entitled to vote to accept or reject the Plan.
(b) Distributions. Except to the extent that a holder of an Allowed
-------------
Secured Tax Claim has been paid by the Debtors prior to the Effective Date or
agrees to a different treatment, each holder of an Allowed Secured Tax Claim
shall receive, at the sole option of Reorganized Edison, (i) Cash in an amount
equal to such Allowed Secured Tax Claim, including any interest on such Allowed
Secured Tax Claim required to be paid pursuant to section 506(b) of the
Bankruptcy Code, on the later of the Effective Date and the date such Allowed
Secured Tax Claim becomes an Allowed Secured Tax Claim, or as soon thereafter as
is practicable, or (ii) equal annual Cash payments in an aggregate amount equal
to such Allowed Secured Tax Claim, together with interest at a fixed annual rate
equal to 8 1/4%, over a period through the sixth anniversary of the date of
assessment of such Allowed Secured Tax Claim, or upon such other terms
determined by the Bankruptcy Court to
22
<PAGE>
provide the holder of such Allowed Secured Tax Claim deferred Cash payments
having a value, as of the Effective Date, equal to such Allowed Secured Tax
Claim.
(c) Retention of Liens. Each holder of an Allowed Secured Tax Claim shall
------------------
retain the Liens (or replacement Liens as may be contemplated under
nonbankruptcy law) securing its Allowed Secured Tax Claim as of the Effective
Date until full and final payment of such Allowed Secured Tax Claim is made as
provided herein, and upon such full and final payment, such Liens shall be
deemed null and void and shall be unenforceable for all purposes.
4.5. CLASS 5 -- OTHER SECURED CLAIMS.
-------------------------------
(a) Impairment and Voting. Class 5 is unimpaired by the Plan. Each holder
---------------------
of an Allowed Other Secured Claim is conclusively presumed to have accepted the
Plan and is not entitled to vote to accept or reject the Plan.
(b) Distributions/Reinstatement of Claims. Except to the extent that a
-------------------------------------
holder of an Allowed Other Secured Claim agrees to a different treatment, at the
sole option of Reorganized Edison, (i) each Allowed Other Secured Claim shall be
reinstated and rendered unimpaired in accordance with section 1124(2) of the
Bankruptcy Code, notwithstanding any contractual provision or applicable
nonbankruptcy law that entitles the holder of an Allowed Other Secured Claim to
demand or receive payment of such Allowed Other Secured Claim prior to the
stated maturity of such Allowed Other Secured Claim from and after the
occurrence of a default, (ii) each holder of an Allowed Other Secured Claim
shall receive Cash in an amount equal to such Allowed Other Secured Claim,
including any interest on such Allowed Other Secured Claim required to be paid
pursuant to section 506(b) of the Bankruptcy Code, on the later of the Effective
Date and the date such Allowed Other Secured Claim becomes an Allowed Other
Secured Claim, or as soon thereafter as is practicable, or (iii) each holder of
an Allowed Other Secured Claim shall receive the Collateral securing its Allowed
Other Secured Claim and any interest on such Allowed Other Secured Claim
required to be paid pursuant to section 506(b) of the Bankruptcy Code, in full
and complete satisfaction of such Allowed Other Secured Claim on the later of
the Effective Date and the date such Allowed Other Secured Claim becomes an
Allowed Other Secured Claim, or as soon thereafter as is practicable.
23
<PAGE>
4.6. CLASS 6 -- CONVENIENCE CLAIMS.
-----------------------------
(a) Impairment and Voting. Class 6 is impaired by the Plan. Each holder of
---------------------
an Allowed Convenience Claim is entitled to vote to accept or reject the Plan.
(b) Distributions. Each holder of an Allowed Convenience Claim as of the
-------------
Record Date shall receive Cash in an amount equal to 100% of such Allowed
Convenience Claim on the later of the Effective Date and the date such Allowed
Convenience Claim becomes an Allowed Convenience Claim, or as soon thereafter as
is practicable.
4.7. CLASS 7 -- GENERAL UNSECURED CLAIMS.
-----------------------------------
(a) Impairment and Voting. Class 7 is impaired by the Plan. Each holder of
---------------------
an Allowed General Unsecured Claim is entitled to vote to accept or reject the
Plan.
(b) Distributions.
-------------
(i) On the Initial Distribution Date or as soon thereafter as is
practicable, each holder of an Allowed General Unsecured Claim as of the
Record Date shall receive a Pro Rata Share of (a) the Cash Distribution
Pool less the amount of Cash in the Reserve, (b) the New Notes Distribution
Amount less the aggregate principal amount of New Notes in the Reserve, (c)
the New Common Stock Distribution Pool less the number of shares of New
Common Stock in the Reserve and (d) subject to Sections 5.1(c) and 10.1 of
the Plan and in accordance with Section 6.4(b) of the Plan, the Class A
Membership Units, plus any interest required to be paid pursuant to Section
6.4(a) of the Plan.
(ii) On each Subsequent Distribution Date, each holder of an Allowed
General Unsecured Claim as of the Record Date shall receive a Pro Rata
Share of the amount of Cash, New Notes, New Common Stock and Class A
Membership Units in the Surplus Distributions.
4.8. CLASS 8 -- EDISON EQUITY INTERESTS.
----------------------------------
(a) Impairment and Voting. Class 8 is impaired by the Plan. Each holder of
---------------------
an Allowed Edison Equity Interest is entitled to vote to accept or reject the
Plan.
(b) Distributions. Each holder of an Allowed Edison Equity Interest as of
-------------
the Record Date shall receive a Pro Rata Share of (i) the Warrants in the
Warrant Distribution Pool, on the later of the Initial Distribution Date and the
date such Allowed Edison Equity Interest becomes an Allowed
24
<PAGE>
Edison Equity Interest or as soon thereafter as is practicable and (ii) the
Rights, pursuant to section 10.1 of the Plan, on the Effective Date.
ARTICLE V.
ESTABLISHMENT OF LIMITED LIABILITY
COMPANIES AND FUNDING ESCROW; PENSION PLAN
------------------------------------------
5.1. EBS Litigation, L.L.C., EBS Pension, L.L.C. and EBS Building, L.L.C.
--------------------------------------------------------------------
(a) Creation. Subject to Section 5.1(c) of the Plan, prior to the
--------
Effective Date, (i) the EBS Litigation, L.L.C. shall be established pursuant to
the EBS Litigation LLC Members Agreement and the Plan, (ii) the EBS Pension,
L.L.C. shall be established pursuant to the EBS Pension LLC Members Agreement
and the Plan and (iii) the EBS Building, L.L.C. shall be established pursuant to
the EBS Building LLC Members Agreement and the Plan.
(b) Transfer of Certain Assets to the LLCs.
--------------------------------------
(i) Subject to Section 5.1(c) of the Plan, on the Effective Date,
the Debtors and the Reorganized Debtors shall transfer to the EBS
Litigation, L.L.C. all of their right, title and interest in and to the
Unresolved Avoidance Claims. Subject to Section 5.1(c) of the Plan and
pursuant to Section 10.2 of the Plan, as promptly as is practicable after
the D&B Spinoff Settlement Expiration Date, the Disbursing Agent shall
transfer the D&B Spinoff Settlement Proceeds, if any, to the EBS
Litigation, L.L.C. The EBS Litigation, L.L.C. shall be appointed the
representative of the Debtors' estates for the purpose of retaining and
enforcing the Unresolved Avoidance Claims in accordance with section
1123(b)(3)(B) of the Bankruptcy Code and the EBS Litigation LLC Members
Agreement.
(ii) Subject to Section 5.1(c) of the Plan, on the Effective Date,
the Debtors and the Reorganized Debtors shall transfer to the EBS Pension,
L.L.C. the right to receive the Pension Plan Proceeds from the Reorganized
Debtors within five days after the Pension Plan Payment Date.
(iii) Subject to Section 5.1(c) of the Plan, on the Effective Date,
the Debtors and the Reorganized Debtors will transfer to the EBS Building,
L.L.C.: (a) the right to receive the Corporate Headquarters Building
Proceeds if the Debtors or Reorganized Debtors have, as of the Effective
Date, entered into a contract to sell, sell and lease back or otherwise
dispose of the Corporate Headquarters Building and all of the Corporate
Headquarters Building Proceeds have not been received by the Debtors prior
to the Effective Date;
25
<PAGE>
provided, however, that if such contract does not thereafter result in the
-------- -------
sale or other disposition contemplated thereby within 60 days after the
Effective Date, the Debtors shall promptly transfer the Corporate
Headquarters Building to the EBS Building, L.L.C., or (b) if no such
contract to sell, sell and lease back or otherwise dispose of the Corporate
Headquarters Building has been entered into as of the Effective Date, the
Corporate Headquarters Building.
(c) Exceptions to Transfers. If, prior to the Effective Date, the Debtors
-----------------------
have received the Pension Plan Proceeds, the Pension Plan Proceeds shall be
added to the Cash Distribution Pool pursuant to Section 1.15 hereof and the EBS
Pension, L.L.C. shall be terminated. If, prior to the Effective Date, the
Debtors have received the Corporate Headquarters Building Proceeds, the
Corporate Headquarters Building Proceeds shall be added to the Cash Distribution
Pool pursuant to Section 1.15 hereof and the EBS Building, L.L.C. shall be
terminated. If, as of the Effective Date, there are no Unresolved Avoidance
Claims and the Resolved Avoidance Claims Proceeds have been added to the Cash
Distribution Pool pursuant to Section 1.15 hereof, the EBS Litigation, L.L.C.
shall be terminated.
(d) Funding of the LLCs. On the Effective Date, the Debtors or Reorganized
-------------------
Debtors shall transfer to the EBS Litigation, L.L.C., the EBS Pension, L.L.C.
and the EBS Building, L.L.C. the LLC Funding Amount in the respective amounts
designated to the Debtors by the Creditors' Committee, in writing, within 10
days prior to the Confirmation Date.
(e) Corporate Headquarters Building Lease. Subject to Section 5.1(c) of
-------------------------------------
the Plan, on the Effective Date, the EBS Building, L.L.C., as lessor, and
Reorganized Edison, as lessee, shall enter into the Corporate Headquarters
Building Lease.
(f) Indemnification. Except with respect to any Unresolved Avoidance
---------------
Claims that the EBS Litigation, L.L.C. may have against present or former
officers, directors or employees of the Debtors in their capacities other than
as present or former officers, directors or employees, the EBS Litigation,
L.L.C. and the EBS Pension, L.L.C. shall indemnify, defend and hold harmless the
Reorganized Debtors and their present or former officers, directors and
employees (the "Indemnified Parties") from and against any direct losses,
claims, damages, expenses, liabilities and actions arising from or relating to
the EBS Litigation, L.L.C and any actions taken or proceedings commenced by the
EBS Litigation, L.L.C. (the "LLC Related Claims"); provided, however, that the
-------- -------
foregoing indemnification (except with respect to costs and expenses as provided
in the penultimate sentence of this Section 5.1(f)) shall be satisfied solely
from the funds, if any, received by the EBS Litigation, L.L.C. from the
compromise and settlement or successful prosecution of the Unresolved Avoidance
Claims. As more particularly set forth in the EBS Pension LLC Members Agreement,
the EBS Pension, L.L.C. shall establish a reserve from the Pension Plan Proceeds
for the benefit of the Indemnified Parties in the amount of $1,500,000 to pay
the costs and expenses incurred by the Indemnified Parties in defending against
the LLC Related Claims; provided, however, that the
-------- -------
26
<PAGE>
Indemnified Parties shall, in the first instance, seek payment of the costs and
expenses of defending against the LLC Related Claims from any applicable
officers' and directors' insurance policy, as such costs and expenses are
incurred. Any amounts remaining in the reserve upon the final adjudication,
including any appeals, of the LLC Related Claims or the compromise and
settlement of such claims, shall be released and distributed pursuant to the
terms of the EBS Pension LLC Members Agreement.
5.2. Funding Escrow.
--------------
(a) Creation of the Funding Escrow. On the Effective Date, pursuant to
------------------------------
section 1123(b)(3)(B) of the Bankruptcy Code, the Funding Escrow shall be
created and governed by the Funding Escrow Agreement for the benefit of the
Reorganized Debtors and holders of New Notes.
(b) Funding Escrow Assets. On the Effective Date, Reorganized Edison shall
---------------------
enter into the Funding Escrow Agreement and deposit the Funding Escrow Assets in
the Funding Escrow for the purpose of "prefunding" the interest payments
required to be made by Reorganized Edison under the New Notes through and
including July 31, 2000. Pursuant to the Funding Escrow Agreement, Reorganized
Edison shall (i) have the right in its sole discretion to direct the Funding
Escrow Agent to transfer to Reorganized Edison Cash from the Funding Escrow in
amounts necessary to pay the interest payments required under the New Notes
through and including July 31, 2000, (ii) have the right in its sole discretion
to cause the Funding Escrow Agent to deliver to Reorganized Edison any documents
of title to enable Reorganized Edison to sell, sell and lease back or otherwise
dispose of one or more of the Funding Escrow Properties and retain the proceeds
therefrom in the Funding Escrow, (iii) have the right to use of the Funding
Escrow Properties for no cost at all times during the existence of the Funding
Escrow, unless and until the Funding Escrow Properties are sold, sold and leased
back or otherwise disposed of pursuant to this Section 5.2(b) and the Funding
Escrow Agreement, (iv) be required to pay the taxes relating to and operating
costs of the Funding Escrow Properties, unless and until the Funding Escrow
Properties are sold, sold and leased back or otherwise disposed of pursuant to
this Section 5.2(b) and the Funding Escrow Agreement and (v) have the right in
its sole discretion to substitute $14,000,000 in Cash for the Funding Escrow
Properties at any time during the existence of the Funding Escrow, unless and
until the Funding Escrow Properties are sold, sold and leased back or otherwise
disposed of pursuant to this Section 5.2(b) and the Funding Escrow Agreement;
provided, however, that if the Debtors have, prior to the Effective Date,
- -------- -------
entered into a contract to sell, sell and lease back or otherwise dispose of one
or more of the Funding Escrow Properties, the Cash proceeds of such transaction
or, if such Cash proceeds have not been received prior to the Effective Date,
the right to receive such Cash proceeds, shall be transferred into the Funding
Escrow pursuant to Section 1.70 of the Plan and the amount of Cash that
Reorganized Edison may substitute for the Funding Escrow Properties
($14,000,000) shall be reduced by the Cash proceeds of such transaction or
transactions. Provided that all interest payments required under the New Notes
have been paid by Reorganized Edison through and including July 31, 2000, any
funds in the Funding Escrow that have not been distributed and the Funding
Escrow
27
<PAGE>
Properties that have not been sold or otherwise disposed of by the Funding
Escrow Agent on or before August 1, 2000, shall be returned to Reorganized
Edison by the Funding Escrow Agent free and clear of all claims, liens,
encumbrances and contractually imposed restrictions arising under or related to
the Funding Escrow Agreement and the Plan and any documents or instruments
relating thereto.
(c) Funding Escrow Mortgages. The Funding Escrow Agent shall be granted
------------------------
the Funding Escrow Mortgages to secure the payment of interest by Reorganized
Edison on the New Notes for the first three years; provided, however, that if
-------- -------
the Debtors have, prior to the Effective Date, entered into a contract to sell,
sell and lease back or otherwise dispose of one or more of the Funding Escrow
Properties, there shall be no Funding Escrow Mortgage on such Funding Escrow
Property or Funding Escrow Properties; provided, further, that if such contract
-------- -------
does not thereafter result in the sale or other disposition contemplated thereby
within 60 days after the Effective Date, there shall be a Funding Escrow
Mortgage on such Funding Escrow Property or Funding Escrow Properties. Upon
Reorganized Edison's payment of all interest payments required to be made under
the New Notes through and including July 31, 2000 or upon the consummation by
Reorganized Edison of its right to substitute Cash for the Funding Escrow
Properties, as described in Section 5.2(b) of the Plan, all of the Funding
Escrow Mortgages shall be released. Upon the consummation by Reorganized Edison
of a sale, sale and lease back or other disposition of one of the Funding Escrow
Properties, as described in and subject to Section 5.2(b) of the Plan, the
corresponding Funding Escrow Mortgage shall be released.
(d) Funding Escrow Agent. The Funding Escrow Agent shall be appointed by
--------------------
the Debtors by no later than 10 days prior to the date of the Confirmation
Hearing. The name of the person appointed in that capacity shall be disclosed at
or prior to the Confirmation Hearing. The Funding Escrow Agent shall serve for
the duration of the Funding Escrow subject to his or her earlier death,
resignation, incapacity or removal as provided in the Funding Escrow Agreement.
(e) Powers of Funding Escrow Agent. From and after the Effective Date, the
------------------------------
Funding Escrow Agent's powers shall be as provided for in the Funding Escrow
Agreement.
(f) Distribution of Funding Escrow Assets. The Funding Escrow Assets shall
-------------------------------------
be distributed in accordance with the provisions of the Plan and the Funding
Escrow Agreement.
(g) Term of Funding Escrow. The Funding Escrow and the Funding Escrow
----------------------
Agreement shall terminate on the thirtieth day after the distribution of all of
the Funding Escrow Assets in accordance with the provisions of the Plan and the
Funding Escrow Agreement.
(h) Indemnification. The Funding Escrow shall indemnify, defend and hold
---------------
harmless the Reorganized Debtors and their officers, directors and employees
from and against any losses, claims, damages, expenses, liabilities and actions
arising from or relating to the Funding Escrow.
28
<PAGE>
5.3. Pension Plan. The Debtors and Reorganized Debtors shall take all
------------
actions necessary and appropriate to generate the Pension Plan Proceeds. Except
as provided in Section 5.1(c) of the Plan, the Pension Plan Proceeds shall be
transferred to the EBS Pension, L.L.C. in accordance with Section 5.1(b) of the
Plan.
ARTICLE VI.
PROVISIONS REGARDING VOTING AND DISTRIBUTIONS
UNDER THE PLAN AND TREATMENT OF DISPUTED,
CONTINGENT AND UNLIQUIDATED ADMINISTRATIVE
EXPENSE CLAIMS, CLAIMS AND EQUITY INTERESTS
-------------------------------------------
6.1. Voting of Claims and Equity Interests. Each holder of an Allowed Claim
-------------------------------------
or an Allowed Equity Interest in an impaired Class of Claims or Equity Interests
shall be entitled to vote separately to accept or reject the Plan as provided in
such order as is entered by the Bankruptcy Court establishing certain procedures
with respect to the solicitation and tabulation of votes to accept or reject the
Plan, or any other order or orders of the Bankruptcy Court.
6.2. Nonconsensual Confirmation. If any impaired Class of Claims or Equity
--------------------------
Interests entitled to vote shall not accept the Plan by the requisite statutory
majorities provided in sections 1126(c) or 1126(d) of the Bankruptcy Code, as
applicable, the Debtors reserve the right to amend the Plan in accordance with
Section 13.10 hereof or undertake to have the Bankruptcy Court confirm the Plan
under section 1129(b) of the Bankruptcy Code or both.
6.3. Method of Distributions Under the Plan.
--------------------------------------
(a) In General. Subject to Bankruptcy Rule 9010, all distributions under
----------
the Plan shall be made by Reorganized Edison to the holder of each Allowed Claim
at the address of such holder as listed on the Schedules as of the Record Date,
and to the holder of each Allowed Edison Equity Interest at the address of such
holder as listed in the transfer ledger for Edison Equity Interests as of the
Record Date, unless the Debtors or Reorganized Debtors have been notified in
writing of a change of address, including, without limitation, by the filing of
a proof of Claim or Equity Interest by such holder that provides an address for
such holder different from the address reflected on the Schedules (for holders
of Allowed Claims) or on the transfer ledger as of the Record Date (for holders
of Allowed Edison Equity Interests).
(b) Distributions of Cash. Any payment of Cash made by Reorganized Edison
---------------------
pursuant to the Plan shall be made by check drawn on a domestic bank.
29
<PAGE>
(c) Timing of Distributions. Any payment or distribution required to be
-----------------------
made under the Plan on a day other than a Business Day shall be made on the next
succeeding Business Day.
(d) Hart-Scott-Rodino Compliance. Any shares of New Common Stock to be
----------------------------
distributed under the Plan to any entity required to file a Premerger
Notification and Report Form under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, shall not be distributed until the notification and
waiting periods applicable under such Act to such entity shall have expired or
been terminated.
(e) Minimum Distributions. No payment of Cash less than one-hundred
---------------------
dollars shall be made by Reorganized Edison to any holder of a Claim unless a
request therefor is made in writing to Reorganized Edison.
(f) Fractional Shares, Rights, Warrants or Class A Membership Units;
----------------------------------------------------------------
Multiples of New Notes. No fractional shares of New Common Stock, fractional
- ----------------------
Rights, fractional Warrants or fractional Class A Membership Units or Cash in
lieu thereof shall be distributed under the Plan. When any distribution on
account of an Allowed Claim or Allowed Edison Equity Interest pursuant to the
Plan would otherwise result in the issuance of a number of shares of New Common
Stock, Rights, Warrants or Class A Membership Units that is not a whole number,
the actual distribution of shares of New Common Stock, Rights, Warrants or Class
A Membership Units shall be rounded as follows: (i) fractions of 1/2 or greater
shall be rounded to the next higher whole number and (ii) fractions of less than
1/2 shall be rounded to the next lower whole number. The total number of shares
of New Common Stock, Rights, Warrants or Class A Membership Units to be
distributed to a Class of Claims or Edison Equity Interests, as the case may be,
shall be adjusted as necessary to account for the rounding provided in this
Section 6.3(f). New Notes shall only be issued in multiples of $1,000. Any New
Notes that would otherwise have been distributed in multiples of other than
$1,000 shall be aggregated by the indenture trustee under the New Notes
Indentures or the Disbursing Agent and sold. The Cash proceeds from such sale
shall be distributed on a pro rata basis to those holders of Allowed General
Unsecured Claims that would have been entitled to New Notes in multiples of
other than $1,000.
(g) Unclaimed Distributions. Except with respect to distributions under
-----------------------
the Plan to holders of Allowed General Unsecured Claims, any distributions under
the Plan that are unclaimed for a period of one year after distribution thereof
shall be revested in Reorganized Edison and any entitlement of any holder of any
Claim or Equity Interest to such distributions shall be extinguished and forever
barred. Distributions under the Plan to holders of Allowed General Unsecured
Claims that are unclaimed for a period of one year after distribution thereof
shall be added to the Reserve and any entitlement of such holders of Allowed
General Unsecured Claims to such distributions shall be extinguished and forever
barred.
30
<PAGE>
(h) Distributions to Holders as of the Record Date. As at the close of
----------------------------------------------
business on the Record Date, the claims register (for Claims) and the transfer
ledgers (for Edison Equity Interests) shall be closed, and there shall be no
further changes in the record holders of any Claims or Edison Equity Interests.
Edison and Reorganized Edison shall have no obligation to recognize any transfer
of any Claims or Edison Equity Interests occurring after the Record Date. Edison
and Reorganized Edison shall instead be entitled to recognize and deal for all
purposes under the Plan (except as to voting to accept or reject the Plan
pursuant to Section 6.1 of the Plan) with only those record holders stated on
the claims register (for Claims) and transfer ledgers (for Edison Equity
Interests) as of the close of business on the Record Date.
6.4. General Unsecured Claims.
------------------------
(a) Cash Held Prior to the Initial Distribution Date. On the Effective
------------------------------------------------
Date, Reorganized Edison shall deposit the Cash in the Cash Distribution Pool in
a segregated bank account or accounts. Reorganized Edison shall invest the Cash
held in such account or accounts in a manner consistent with investment
guidelines to be agreed upon by the Debtors and the Creditors' Committee, which
investment guidelines shall be included in the Plan Supplement. Reorganized
Edison shall pay, or cause to be paid, out of the funds held in such account or
accounts, any tax imposed on such account by any governmental unit with respect
to income generated by the property held in such account or accounts. The yield
earned on such invested Cash for the period commencing on the Effective Date and
continuing through and including the Initial Distribution Date (net of
applicable taxes), shall be distributed to each holder of an Allowed General
Unsecured Claim on the Initial Distribution Date, based upon each holders' Pro
Rata Share.
(b) Membership Units. On the Effective Date, Reorganized Edison shall hold
----------------
100% of the Class B Membership Units. In connection with each distribution of
Class A Membership Units under the Plan, Reorganized Edison will surrender for
cancellation a number of Class B Membership Units in each of the EBS Litigation,
L.L.C., the EBS Pension, L.L.C. and the EBS Building, L.L.C. equal to the number
of Class A Membership Units in each such LLC that are to be distributed under
the Plan, and will receive in exchange therefor, for distribution under the
Plan, a like number of Class A Membership Units in such LLC.
(c) Distributions Withheld for Disputed General Unsecured Claims.
------------------------------------------------------------
(i) Establishment and Maintenance of Reserve. On the Initial
----------------------------------------
Distribution Date and each Subsequent Distribution Date, Reorganized Edison
shall reserve from the distributions to be made on such dates to the
holders of Allowed General Unsecured Claims, an amount of Cash, New Notes
and New Common Stock equal to 100% of the distributions to which holders of
Disputed General Unsecured Claims would be entitled under the Plan as of
such dates if such Disputed General Unsecured Claims were Allowed Claims in
their
31
<PAGE>
Disputed Claim Amounts (the "Reserve"). Subject to Section 6.4(b) of the
Plan, Reorganized Edison shall also hold in the Reserve the Class B
Membership Units.
(ii) Property Held in Reserve. Cash held in the Reserve (including
------------------------
interest paid on New Notes held in the Reserve and dividends paid on New
Common Stock held in the Reserve, if any) shall be deposited in a
segregated bank account or accounts in the name of Reorganized Edison and
designated as held in trust for the benefit of holders of Allowed General
Unsecured Claims. Cash held in the Reserve shall not constitute property of
the Reorganized Debtors. Reorganized Edison shall invest the Cash held in
the Reserve in a manner consistent with investment guidelines to be agreed
upon by the Debtors and the Creditors' Committee, which investment
guidelines shall be included in the Plan Supplement. Reorganized Edison
shall pay, or cause to be paid, out of the funds held in the Reserve, any
tax imposed on the Reserve by any governmental unit with respect to income
generated by the property held in the Reserve. The yield earned on such
invested Cash (net of applicable taxes) shall be distributed to each holder
of an Allowed General Unsecured Claim on the last Subsequent Distribution
Date under the Plan, based upon each holders' Pro Rata Share. New Notes,
New Common Stock and Class B Membership Interests held in the Reserve shall
be held in trust by the Reorganized Debtors for the benefit of the
potential claimants of such securities and shall not constitute property of
the Reorganized Debtors.
(d) Distributions Upon Allowance of Disputed General Unsecured Claims. The
-----------------------------------------------------------------
holder of a Disputed General Unsecured Claim that becomes an Allowed Claim
subsequent to the Initial Distribution Date shall receive distributions of Cash,
New Notes and New Common Stock from the Reserve and, in accordance with Section
6.4(b) of the Plan, Class A Membership Units, on the next Subsequent
Distribution Date that follows the Quarter during which such Disputed General
Unsecured Claim becomes an Allowed Claim pursuant to a Final Order. Such
distributions shall be made in accordance with the Plan based upon the
distributions that would have been made to such holder under the Plan if the
Disputed General Unsecured Claim had been an Allowed Claim on or prior to the
Effective Date, without any post-Effective Date interest thereon (without regard
to interest earned on property held in the Reserve pursuant to Section 6.4 of
the Plan).
(e) Surplus Distributions to Holders of Allowed General Unsecured Claims.
--------------------------------------------------------------------
The following consideration shall constitute surplus distributions (the "Surplus
Distributions") pursuant to the Plan: (i) pursuant to Section 6.3(g) of the
Plan, distributions under the Plan to holders of Allowed General Unsecured
Claims that are unclaimed for a period of one year after distribution thereof;
(ii) to the extent that a Disputed General Unsecured Claim is not Allowed or
becomes an Allowed Claim in an amount less than the Disputed Claim Amount, the
excess of the amount of Cash, New Notes and New Common Stock in the Reserve over
the amount of Cash, New Notes and New Common Stock actually distributed on
account of such Disputed General Unsecured Claim; and (iii) to the extent that a
Disputed General Unsecured Claim is not Allowed or becomes an Allowed Claim in
an amount less than the Disputed Claim Amount, a number of Class A
32
<PAGE>
Membership Units equal to the number of Class B Membership Units held in the
Reserve on account of such excess. The Surplus Distributions shall be
distributed to the holders of Allowed General Unsecured Claims pursuant to
Section 4.7(b)(ii) of the Plan; provided, however, that Reorganized Edison shall
-------- -------
not be under any obligation to make any Surplus Distributions on a Subsequent
Distribution Date unless the Cash portion of the Surplus Distributions to be
distributed on a Subsequent Distribution Date aggregates $1,000,000 or more,
unless the distribution is the last distribution under the Plan.
(f) Personal Injury Tort Claims. All personal injury Tort Claims are
---------------------------
Disputed Claims. Any personal injury Tort Claim as to which a proof of claim was
timely filed in the Chapter 11 Cases shall be determined and liquidated in the
administrative or judicial tribunal(s) in which it is pending on the Effective
Date or, if no action was pending on the Effective Date, in any administrative
or judicial tribunal of appropriate jurisdiction, or in accordance with any
alternative dispute resolution or similar proceeding as same may be approved by
order of the Bankruptcy Court. Any personal injury Tort Claim determined and
liquidated (i) pursuant to a judgment obtained in accordance with this Section
6.4(f) and applicable nonbankruptcy law which is no longer appealable or subject
to review, or (ii) in any alternative dispute resolution or similar proceeding
as same may be approved by order of the Bankruptcy Court, shall be deemed an
Allowed Claim in such liquidated amount and satisfied in accordance with the
Plan. Nothing contained in this Section 6.4(f) shall impair the Debtors' right
to seek estimation of any and all personal injury Tort Claims in a court or
courts of competent jurisdiction or constitute or be deemed a waiver of any
Cause of Action that the Debtors may hold against any entity, including, without
limitation, in connection with or arising out of any personal injury Tort Claim.
(g) Disbursing Agent. The Debtors or the Reorganized Debtors will appoint
----------------
a disbursing agent (the "Disbursing Agent") to (i) fulfill the obligations that
the Reorganized Debtors have under the Plan with respect to distributions to
holders of Allowed General Unsecured Claims, including, without limitation,
holding all reserves and accounts pursuant to the Plan, including the Reserve,
and (ii) effectuate the D&B Spinoff Settlement on behalf of the EBS Litigation,
L.L.C., pursuant to Section 10.2 of the Plan.
6.5. Objections to and Resolution of Administrative Expense Claims, Claims
---------------------------------------------------------------------
and Equity Interests.
- --------------------
(a) Except as to applications for allowances of compensation and
reimbursement of expenses under sections 330 and 503 of the Bankruptcy Code, the
Debtors or Reorganized Debtors shall have the exclusive right to make and file
objections to Administrative Expense Claims, Claims and Equity Interests
subsequent to the Confirmation Date. All objections shall be litigated to Final
Order; provided, however, that, subject to Section 6.5(b) of the Plan, the
-------- -------
Reorganized Debtors shall have the authority to compromise, settle, otherwise
resolve or withdraw any objections, without approval of the Bankruptcy Court.
Unless otherwise ordered by the Bankruptcy Court, the Debtors
33
<PAGE>
or Reorganized Debtors shall file all objections to Administrative Expense
Claims that are the subject of proofs of claim or requests for payment filed
with the Bankruptcy Court (other than applications for allowances of
compensation and reimbursement of expenses), Claims and Equity Interests and
serve such objections upon the holder of the Administrative Expense Claim, Claim
or Equity Interest as to which the objection is made as soon as is practicable,
but in no event later than 60 days after the Effective Date or such later date
as may be approved by the Bankruptcy Court.
(b) On the last day of each month or as otherwise agreed to in writing by
the Debtors and the Creditors' Committee, the Reorganized Debtors shall provide
counsel to the Claims Resolution Committee with written notice by overnight
delivery service or facsimile transmission of each Disputed Claim that they
intend to compromise, settle or resolve, other than such compromises,
settlements or resolutions that fall within the parameters of (i) prior orders
of the Bankruptcy Court authorizing the Debtors to compromise or settle certain
Claims without approval of the Bankruptcy Court, (ii) settlement guidelines to
be agreed upon by the Debtors and the Creditors' Committee prior to the
Confirmation Date, or (iii) settlement guidelines to be agreed upon by the
Debtors and the Claims Resolution Committee subsequent to the Effective Date.
Within 15 days after the receipt of such notice, the Claims Resolution Committee
shall provide the Reorganized Debtors with written notice of any such
compromises, settlements or resolutions with which it does not concur. If the
Reorganized Debtors and the Claims Resolution Committee cannot reach agreement
with respect to any such compromise, settlement or resolution, the Claims
Resolution Committee will be permitted to file with the Bankruptcy Court and
serve on the Reorganized Debtors an objection to the reasonableness of any such
compromise, settlement or resolution within 15 days after the date that the
Claims Resolution Committee provides the Reorganized Debtors with written notice
of such compromise, settlement or resolution with which it does not concur, or
within such other time period as may be agreed upon by the Reorganized Debtors
and the Creditors' Committee, and the reasonableness of such compromise,
settlement or resolution shall be determined by the Bankruptcy Court. If the
Claims Resolution Committee fails to timely file and serve an objection to a
compromise, settlement or resolution, such compromise, settlement or resolution
shall be deemed resolved on the terms and subject to the conditions agreed to by
the Reorganized Debtors. Notwithstanding the foregoing, the Claims Resolution
Committee shall have the authority to compromise, settle or resolve any Disputed
Claim without the consent of the Reorganized Debtors.
6.6. Distributions Relating to Allowed Insured Claims. Distributions under
------------------------------------------------
the Plan to each holder of an Allowed Insured Claim shall be in accordance with
the treatment provided under the Plan for the Class in which such Allowed
Insured Claim is classified, but solely to the extent that such Allowed Insured
Claim is not satisfied from proceeds payable to the holder thereof under any
pertinent insurance policies and applicable law. Nothing contained in this
Section 6.6 shall constitute or be deemed a waiver of any Cause of Action that
the Debtors or any entity may hold against any other entity, including, without
limitation, insurers under any policies of insurance.
6.7. Cancellation and Surrender of Existing Securities and Agreements.
----------------------------------------------------------------
34
<PAGE>
(a) On the Effective Date, the promissory notes, share certificates,
bonds and other instruments evidencing any Claim or Edison Equity Interest shall
be deemed cancelled without further act or action under any applicable
agreement, law, regulation, order or rule and the obligations of the Debtors
under the agreements, indentures and certificates of designations governing such
Claims and Edison Equity Interests, as the case may be, shall be discharged.
(b) Each holder of a promissory note, share certificate, bond or other
instrument evidencing a Claim or Edison Equity Interest shall surrender such
promissory note, share certificate, bond or instrument to the Reorganized
Debtors, unless such requirement is waived by the Reorganized Debtors. No
distribution of property hereunder shall be made to or on behalf of any such
holders unless and until such promissory note, share certificate, bond or
instrument is received by the Reorganized Debtors or the unavailability of such
promissory note, share certificate, bond or instrument is established to the
reasonable satisfaction of the Reorganized Debtors or such requirement is waived
by the Reorganized Debtors. The Reorganized Debtors may require any holder that
is unable to surrender or cause to be surrendered any such promissory notes,
share certificates, bonds or instruments to deliver an affidavit of loss and
indemnity and/or furnish a bond in form and substance (including, without
limitation, with respect to amount) reasonably satisfactory to the Reorganized
Debtors. Any holder that fails within the later of one year after the
Confirmation Date and the date of Allowance of its Claim or Edison Equity
Interest (i) if possible, to surrender or cause to be surrendered such
promissory note, share certificate, bond or instrument, (ii) if requested, to
execute and deliver an affidavit of loss and indemnity reasonably satisfactory
to the Reorganized Debtors and (iii) if requested, to furnish a bond reasonably
satisfactory to the Reorganized Debtors, shall be deemed to have forfeited all
rights, claims and Causes of Action against the Debtors and Reorganized Debtors
and shall not participate in any distribution hereunder.
6.8. Registration of New Common Stock. Each person or entity receiving a
--------------------------------
distribution of New Common Stock pursuant to the Plan representing at least 10%
of the aggregate New Common Stock issuable pursuant to the Plan shall be
entitled to become a party to the Registration Rights Agreement.
6.9. Listing of New Common Stock, New Notes and Warrants. Reorganized
---------------------------------------------------
Edison shall use reasonable commercial efforts to cause the shares of New Common
Stock, the New Notes and the Warrants to be listed on a national securities
exchange or the Nasdaq National Market.
6.10. Full Recovery for Holders of Allowed General Unsecured Claims.
-------------------------------------------------------------
Holders of Allowed General Unsecured Claims will not be deemed to have received
100% of the value of their Allowed General Unsecured Claims unless and until the
aggregate value of all distributions to such holders under the Plan equals the
amount of their Allowed General Unsecured Claims, plus interest from the
Commencement Date through and including the Effective Date at a rate of 8.89%.
35
<PAGE>
ARTICLE VII.
EXECUTORY CONTRACTS AND UNEXPIRED LEASES
----------------------------------------
7.1. Assumption or Rejection of Executory Contracts and Unexpired Leases.
-------------------------------------------------------------------
(a) Executory Contracts and Unexpired Leases. Pursuant to sections 365(a)
----------------------------------------
and 1123(b)(2) of the Bankruptcy Code, all executory contracts and unexpired
leases that exist between the Debtors and any person shall be deemed assumed by
the Reorganized Debtors as of the Effective Date, except for any executory
contract or unexpired lease (i) which has been assumed pursuant to an order of
the Bankruptcy Court entered prior to the Confirmation Date, (ii) which has been
rejected pursuant to an order of the Bankruptcy Court entered prior to the
Confirmation Date, (iii) as to which a motion for approval of the rejection of
such executory contract or unexpired lease has been filed and served prior to
the Confirmation Date or (iv) which is set forth in Schedule 7.1(a)(x)
(executory contracts) or Schedule 7.1(a)(y) (unexpired leases), which Schedules
shall be included in the Plan Supplement; provided, however, that the Debtors or
-------- -------
Reorganized Debtors reserve the right, on or prior to the Confirmation Date, to
amend Schedules 7.1(a)(x) or 7.1(a)(y) to delete any executory contract or
unexpired lease therefrom or add any executory contract or unexpired lease
thereto, in which event such executory contract(s) or unexpired lease(s) shall
be deemed to be, respectively, assumed or rejected. The Debtors or Reorganized
Debtors shall provide notice of any amendments to Schedules 7.1(a)(x) or
7.1(a)(y) to the parties to the executory contracts and unexpired leases
affected thereby. The listing of a document on Schedules 7.1(a)(x) and 7.1(a)(y)
shall not constitute an admission by the Debtors or Reorganized Debtors that
such document is an executory contract or an unexpired lease or that the Debtors
or Reorganized Debtors have any liability thereunder.
(b) Schedules of Rejected Executory Contracts and Unexpired Leases;
---------------------------------------------------------------
Inclusiveness. Each executory contract and unexpired lease listed or to be
- -------------
listed on Schedules 7.1(a)(x) or 7.1(a)(y) that relates to the use or occupancy
of real property shall include (i) modifications, amendments, supplements,
restatements, or other agreements made directly or indirectly by any agreement,
instrument, or other document that in any manner affects such executory contract
or unexpired lease, without regard to whether such agreement, instrument or
other document is listed on Schedules 7.1(a)(x) or 7.1(a)(y) and (ii) executory
contracts or unexpired leases appurtenant to the premises listed on Schedules
7.1(a)(x) or 7.1(a)(y), including, without limitation, all easements, licenses,
permits, rights, privileges, immunities, options, rights of first refusal,
powers, uses, usufructs, reciprocal easement agreements, vault, tunnel or bridge
agreements or franchises, and any other interests in real estate or rights in
rem relating to such premises to the extent any of the foregoing are executory
contracts or unexpired leases, unless any of the foregoing agreements previously
have been assumed.
36
<PAGE>
(c) Insurance Policies. Each of the Debtors' insurance policies and any
------------------
agreements, documents or instruments relating thereto, including, without
limitation, any retrospective premium rating plans relating to such policies,
are treated as executory contracts under the Plan. Notwithstanding the
foregoing, distributions under the Plan to any holder of a Claim covered by any
of such insurance policies and related agreements, documents or instruments that
are assumed hereunder, shall be in accordance with the treatment provided under
Article IV and Section 6.6 of the Plan. Nothing contained in this Section 7.1(c)
shall constitute or be deemed a waiver of any Cause of Action that the Debtors
may hold against any entity, including, without limitation, the insurer under
any of the Debtors' policies of insurance.
(d) Approval of Assumption or Rejection of Executory Contracts and
--------------------------------------------------------------
Unexpired Leases. Entry of the Confirmation Order shall constitute (i) the
- ----------------
approval, pursuant to sections 365(a) and 1123(b)(2) of the Bankruptcy Code, of
the assumption of the executory contracts and unexpired leases assumed pursuant
to Section 7.1(a) hereof, (ii) the extension of time, pursuant to section
365(d)(4) of the Bankruptcy Code, within which the Debtors may assume or reject
the unexpired leases specified in Section 7.1(a) hereof through the date of
entry of an order approving the assumption or rejection of such unexpired leases
and (iii) the approval, pursuant to sections 365(a) and 1123(b)(2) of the
Bankruptcy Code, of the rejection of the executory contracts and unexpired
leases rejected pursuant to Sections 7.1(a) hereof.
(e) Cure of Defaults. Except as may otherwise be agreed to by the parties,
----------------
within 60 days after the Effective Date, the Reorganized Debtors shall cure any
and all undisputed defaults under any executory contract or unexpired lease
assumed pursuant to the Plan in accordance with section 365(b)(1) of the
Bankruptcy Code. All disputed defaults that are required to be cured shall be
cured either within 30 days of the entry of a Final Order determining the
amount, if any, of the Debtors' or Reorganized Debtors' liability with respect
thereto, or as may otherwise be agreed to by the parties.
(f) Bar Date for Filing Proofs of Claim Relating to Executory Contracts
-------------------------------------------------------------------
and Unexpired Leases Rejected Pursuant to the Plan. Claims arising out of the
- --------------------------------------------------
rejection of an executory contract or unexpired lease pursuant to Section 7.1 of
the Plan must be filed with the Bankruptcy Court and/or served upon the Debtors
or Reorganized Debtors or as otherwise may be provided in the Confirmation
Order, by no later than 30 days after the later of (i) notice of entry of an
order approving the rejection of such executory contract or unexpired lease,
(ii) notice of entry of the Confirmation Order and (iii) notice of an amendment
to Schedule 7.1(a)(x) or 7.1(a)(y). Any Claims not filed within such time will
be forever barred from assertion against the Debtors, their estates, the
Reorganized Debtors and their property. Unless otherwise ordered by the
Bankruptcy Court, all Claims arising from the rejection of executory contracts
and unexpired leases shall be treated as General Unsecured Claims under the
Plan.
37
<PAGE>
7.2. Releases. The Debtors hereby release and are permanently enjoined
--------
from any prosecution or attempted prosecution of any and all Causes of Action
which they have, may have or claim to have against any present or former
director, officer or employee of the Debtors; provided, however, that the
foregoing shall not operate as a waiver of or release from (i) any Causes of
Action arising out of any express contractual obligation owing by any such
director, officer or employee to the Debtors or any reimbursement obligation of
any such director, officer or employee with respect to a loan or advance made by
the Debtors to such director, officer or employee and (ii) any Avoidance Claims
that any such director, officer or employee may be subject to in their
capacities other than as present or former director, officer or employee.
7.3. Indemnification Obligations. For purposes of the Plan, the obligations
---------------------------
of the Debtors to defend, indemnify, reimburse or limit the liability of their
present and any former directors, officers or employees who were directors,
officers or employees, respectively, on or after the Commencement Date against
any claims or obligations pursuant to the Debtors' certificates of incorporation
or bylaws, applicable state law or specific agreement, or any combination of the
foregoing, shall survive confirmation of the Plan, remain unaffected thereby,
and not be discharged irrespective of whether indemnification, defense,
reimbursement or limitation is owed in connection with an event occurring
before, on or after the Commencement Date.
7.4. Compensation and Benefit Programs. Except as provided in Section
---------------------------------
7.1(a) of the Plan, all employment and severance practices and policies, and all
compensation and benefit plans, policies, and programs of the Debtors applicable
to their directors, officers or employees, including, without limitation, all
savings plans, retirement plans, health care plans, severance benefit plans,
incentive plans, workers' compensation programs and life, disability and other
insurance plans are treated as executory contracts under the Plan and are hereby
assumed pursuant to sections 365(a) and 1123(b)(2) of the Bankruptcy Code.
7.5. Retiree Benefits. Payments, if any, due to any person for the purpose
----------------
of providing or reimbursing payments for retired employees and their spouses and
dependents for medical, surgical, or hospital care benefits, or benefits in the
event of sickness, accident, disability, or death under any plan, fund, or
program (through the purchase of insurance or otherwise) maintained or
established in whole or in part by the Debtors prior to the Commencement Date
shall be continued for the duration of the period the Debtors have obligated
themselves to provide such benefits.
38
<PAGE>
ARTICLE VIII.
CONSOLIDATION OF EDISON AND THE SUBSIDIARIES
--------------------------------------------
8.1. Substantive Consolidation. By order dated May 13, 1997, the Bankruptcy
-------------------------
Court approved the substantive consolidation of the Chapter 11 Cases for all
purposes related to the Plan, including, without limitation, for purposes of
voting, confirmation and distribution. Pursuant to such order, (i) all assets
and liabilities of the Subsidiaries shall be deemed merged or treated as though
they were merged into and with the assets and liabilities of Edison, (ii) no
distributions shall be made under the Plan on account of intercompany claims
among the Debtors, (iii) no distributions shall be made under the Plan on
account of Subsidiary Equity Interests, (iv) all guarantees of the Debtors of
the obligations of any other Debtor shall be deemed eliminated so that any claim
against any Debtor and any guarantee thereof executed by any other Debtor and
any joint or several liability of any of the Debtors shall be deemed to be one
obligation of the consolidated Debtors and (v) each and every Claim filed or to
be filed in the Chapter 11 Case of any of the Debtors shall be deemed filed
against the consolidated Debtors, and shall be deemed one Claim against and
obligation of the consolidated Debtors. Such substantive consolidation shall not
(other than for purposes related to the Plan) affect (i) the legal and corporate
structures of the Reorganized Debtors, subject to the right of the Debtors or
Reorganized Debtors to effect restructurings as provided in Section 8.2 of the
Plan, (ii) intercompany claims by and among the Debtors or Reorganized Debtors,
(iii) Subsidiary Equity Interests and (iv) pre and post Commencement Date
guarantees that are required to be maintained (a) in connection with executory
contracts or unexpired leases that were entered into during the Chapter 11 Cases
or that have been or will be assumed, or (b) pursuant to the Plan.
8.2. Merger of Corporate Entities. On or as of the Effective Date, within
----------------------------
the sole and exclusive discretion of the Debtors, any or all of the Subsidiaries
may be merged into one or more of the Debtors or dissolved. Upon the occurrence
of any such merger, all assets of the merged entities shall be transferred to
and become the assets of the surviving corporation, and all liabilities of the
merged entities, except to the extent discharged, released or extinguished
pursuant to the Plan and the Confirmation Order, shall be assumed by and shall
become the liabilities of the surviving corporation. All mergers and
dissolutions shall be effective as of the Effective Date pursuant to the
Confirmation Order without any further action by the stockholders or directors
of any of the Debtors, the Debtors in Possession or the Reorganized Debtors.
39
<PAGE>
ARTICLE IX.
PROVISIONS REGARDING CORPORATE GOVERNANCE
AND MANAGEMENT OF THE REORGANIZED DEBTORS
-----------------------------------------
9.1. General. On the Effective Date, the management, control and operation
-------
of the Reorganized Debtors shall become the general responsibility of the
respective Boards of Directors of the Reorganized Debtors, who shall,
thereafter, have the responsibility for the management, control and operation of
the Reorganized Debtors.
9.2. Meetings of Reorganized Edison Stockholders. In accordance with the
-------------------------------------------
Amended Edison Certificate of Incorporation and the Amended Edison Bylaws, as
the same may be amended from time to time, the first annual meeting of the
stockholders of Reorganized Edison shall be held on a date in 1998 selected by
the Board of Directors of Reorganized Edison, and subsequent meetings of the
stockholders of Reorganized Edison shall be held at least once annually each
year thereafter.
9.3. Directors and Officers of Reorganized Debtors.
---------------------------------------------
(a) Boards of Directors.
-------------------
(i) Reorganized Edison. The initial Board of Directors of Reorganized
------------------
Edison shall consist of up to nine individuals whose names shall be
disclosed prior to the date of the Confirmation Hearing. Each of the
members of such initial Board of Directors shall serve until the first
annual meeting of stockholders of Reorganized Edison or their earlier
resignation or removal in accordance with the Amended Edison Certificate of
Incorporation or Amended Edison Bylaws, as the same may be amended from
time to time.
(ii) Reorganized Subsidiaries. The initial Board of Directors of each
------------------------
of the Reorganized Subsidiaries shall consist of officers or employees of
Reorganized Edison whose names shall be disclosed prior to the date of the
Confirmation Hearing. Each of the members of each such initial Board of
Directors shall serve until the first meeting of stockholders of the
respective Reorganized Subsidiary or their earlier resignation or removal
in accordance with the certificate of incorporation or bylaws of such
Reorganized Subsidiary.
(b) Officers. The officers of the respective Debtors immediately prior to
--------
the Effective Date shall serve as the initial officers of the respective
Reorganized Debtors on and after the Effective Date. Such officers shall serve
in accordance with any employment agreement with the Reorganized Debtors and
applicable nonbankruptcy law.
40
<PAGE>
9.4. Amended Bylaws and Amended Certificates of Incorporation. The
--------------------------------------------------------
Amended Edison Bylaws, the Amended Edison Certificate of Incorporation and the
certificates of incorporation of each of the Reorganized Subsidiaries shall be
amended and restated as of the Effective Date to the extent necessary (a) to
prohibit the issuance of nonvoting equity securities as required by section
1123(a)(6) of the Bankruptcy Code, subject to further amendment of such
certificates of incorporation and bylaws as permitted by applicable law and (b)
to effectuate the provisions of the Plan, in each case without any further
action by the stockholders or directors of the Debtors, the Debtors in
Possession or the Reorganized Debtors.
9.5. Issuance of New Securities. The issuance of the following
--------------------------
securities and notes by Reorganized Edison, or, as applicable, by the EBS
Litigation, L.L.C., the EBS Pension, L.L.C. and the EBS Building, L.L.C. as
successors in interest to the Debtors with respect to certain Edison assets, is
hereby authorized without further act or action under applicable law,
regulation, order or rule:
(a) 100,000,000 shares of New Common Stock;
(b) the Warrants;
(c) the Rights;
(d) the Series 1997 Bonds;
(e) the New Notes;
(f) the Class A Membership Units and Class B Membership Units;
(g) the Restricted Stock;
(h) the Management Options;
(i) the Director Options; and
(j) 10,000,000 shares of preferred stock.
41
<PAGE>
9.6. Stock Option Plan. If not theretofore adopted by Edison, on the
-----------------
Effective Date, Reorganized Edison shall adopt the Stock Option Plan. Pursuant
and subject to the Stock Option Plan, Reorganized Edison will issue to certain
of its key employees options to purchase in the aggregate approximately 800,000
shares of New Common Stock (the "Management Options"). Management Options to
purchase approximately 500,000 shares of New Common Stock will be issued as of
the Effective Date. The balance of the Management Options to purchase
approximately 300,000 shares of New Common Stock shall be reserved for issuance
by Reorganized Edison within six months following the Effective Date pursuant
and subject to the Stock Option Plan.
9.7. Director Stock Option Plan. If not theretofore adopted by Edison,
--------------------------
on the Effective Date, Reorganized Edison shall adopt the Director Stock Option
Plan. Pursuant and subject to the Director Stock Option Plan, Reorganized Edison
will make available for issuance to its outside directors options to purchase in
the aggregate approximately 200,000 shares of New Common Stock (the "Director
Options"). A Director Option will be granted to all outside Directors of
Reorganized Edison as of the Effective Date entitling each such person to
purchase 3,500 shares of New Common Stock. Each outside Director who is
thereafter elected or appointed also will receive a Director Option to purchase
3,500 shares of New Common Stock. In addition, each such Director who remains a
Director as of the completion of the Annual Meeting of Stockholders of
Reorganized Edison in each calendar year following the calendar year in which
such Director received such Director Option granted initially will receive an
additional Director Option to purchase that number of shares of New Common Stock
(rounded to the nearest whole number) equal to $20,000 divided by the Fair
Market Value (as defined in the Director Stock Option Plan) of a share of New
Common Stock as of such date.
9.8. Restricted Stock Agreements. If not theretofore executed by Edison
---------------------------
and its key executives designated to receive Restricted Stock, on the Effective
Date, Reorganized Edison and such key executives shall execute the Restricted
Stock Agreements. Pursuant and subject to the Restricted Stock Agreements,
Reorganized Edison will issue to certain of its senior executives an aggregate
of 225,000 shares of restricted New Common Stock (the "Restricted Stock"). All
of the Restricted Stock will be issued as of the Effective Date.
9.9. Employment Contracts. As of the Effective Date, the Debtors or
--------------------
Reorganized Debtors will have entered into the Employment Contracts.
9.10. Retention/Performance Bonuses. As of the Effective Date, Edison or
-----------------------------
Reorganized Edison will have adopted a retention bonus program that will result
in payments aggregating approximately $750,000 to certain key executives in
1998, provided that such executives remain employed with Reorganized Edison
through the date of such payments. In addition, as of the Effective Date, in
recognition of the successful restructuring of the Debtors, Edison or
Reorganized
42
<PAGE>
Edison will have adopted a bonus program that will result in payments
aggregating approximately $2,200,000 to certain key executives instrumental to
such restructuring.
ARTICLE X.
IMPLEMENTATION AND EFFECT OF CONFIRMATION OF PLAN
-------------------------------------------------
10.1. Procedures for Exercise of Rights.
---------------------------------
(a) Each Right may be exercised by the holder thereof at any time during
the Rights Exercise Period to purchase, at the Rights Exercise Price, (i) one
share of New Common Stock and (ii) at the election of the holder thereof, (A)
one Class A Membership Unit in the EBS Litigation, L.L.C. or (B) if such holder
is a D&B Spinoff Stockholder, and subject to the terms and conditions of
Sections 10.1(f) and 10.2 of the Plan, the right to participate in the D&B
Spinoff Settlement. All Rights to be exercised by such holder shall be exercised
concurrently. Any exercise of Rights shall be irrevocable.
(b) The Rights shall be registered on the books of Reorganized Edison
maintained at the principal office of the Rights Agent (the "Rights Register")
as they are issued. Reorganized Edison and the Rights Agent shall be entitled to
treat the registered owner of any Right as the owner in fact thereof for all
purposes and shall not be bound to recognize any equitable or other claim to or
interest in such Right on the part of any other person. The Rights Agent shall
initially register ownership of Rights in the Rights Register in accordance with
the written instructions of Reorganized Edison. Subject to the terms of this
Section 10.1, and the receipt of such documentation as the Rights Agent may
reasonably require, the Rights Agent shall, on each Business Day during the
Rights Exercise Period, register the transfer of any outstanding Rights upon the
Rights Register upon tender of a written instrument or instruments of transfer
in form reasonably satisfactory to Reorganized Edison and the Rights Agent, duly
executed by the registered holder(s) thereof or by the duly appointed legal
representative thereof or by a duly authorized attorney.
(c) On the date upon which the Rights Exercise Period commences, the
Rights Agent shall mail to each holder of an Allowed Edison Equity Interest a
Rights Exercise Notice together with the Rights Exercise Instructions. In order
for an exercise of Rights to be valid and effective, the holder of the Rights
seeking to effect such an exercise must deliver to the Rights Agent prior to the
Rights Expiration Date a properly completed and duly executed Rights Exercise
Notice which (i) indicates (A) the number of Rights sought to be exercised and
(B) the holder's election of either Class A Membership Units in EBS Litigation,
L.L.C. or the right to participate in the D&B Spinoff Settlement and (ii) is
accompanied by a certified check or bank draft drawn upon a United States bank
or a wire transfer, in an amount equal to the product of the Rights Exercise
Price and the number of Rights sought to be exercised. The foregoing items will
not be deemed to have been
43
<PAGE>
timely delivered to the Rights Agent (and thus the attempted exercise of Rights
will not be valid or effective) unless they are completed and executed in
conformity with the Rights Exercise Instructions and are actually received by
the Rights Agent, at the address specified therefor in the Rights Exercise
Instructions, on or prior to the Rights Expiration Date.
(d) All determinations as to proper completion, due execution,
timeliness, eligibility and other matters affecting the validity or
effectiveness of any attempted exercise of any Rights shall be made by
Reorganized Edison and the Rights Agent, whose determination shall be final and
binding. The Rights Agent in its sole discretion may waive or reject the
attempted exercise of any Right subject to any such defect or irregularity.
Deliveries required to be received by the Rights Agent in connection with an
attempted exercise of Rights will not be deemed to have been so received or
accepted until actual receipt thereof by the Rights Agent shall have occurred
and any defects or irregularities shall have been waived or cured within such
time as the Rights Agent may determine in its sole discretion. Neither the
Debtors, the Reorganized Debtors or the Rights Agent will have any obligation to
give notice to any holder of a Right of any defect or irregularity in connection
with any attempted exercise thereof or incur any liability as a result of any
failure to give any such notice.
(e) On or as promptly as practicable following the Initial Distribution
Date, the Rights Agent will mail (or cause to be mailed) to each holder of
Rights who has sought to exercise Rights, a written statement specifying the
number of Rights that were validly and effectively exercised by such holder and
the consideration purchased upon such exercise of such Rights, together with (i)
a stock certificate representing the shares of New Common Stock so purchased and
(ii) if elected by the holder, a Membership Certificate representing the Class A
Membership Units in the EBS Litigation, L.L.C. so purchased.
(f) Section 10.2 of the Plan shall govern the release (or retention, as
the case may be) of Unresolved Avoidance Claims against D&B Spinoff Stockholders
who attempt to participate in the D&B Spinoff Settlement through an exercise of
Rights pursuant to this Section 10.1.
10.2. The D&B Spinoff Settlement Offer.
--------------------------------
(a) Subject to the terms and conditions of this Section 10.2, each D&B
Spinoff Stockholder shall have the right, at any time during the D&B Spinoff
Settlement Period, to participate in the D&B Spinoff Settlement by qualifying as
a Released D&B Spinoff Stockholder.
(b) On the date upon which the D&B Spinoff Settlement Period commences,
the Disbursing Agent, on behalf of the EBS Litigation, L.L.C., shall mail to
each D&B Spinoff Stockholder a D&B Spinoff Settlement Notice. In order to
participate in the D&B Spinoff Settlement, a D&B Spinoff Stockholder seeking to
qualify as a Released D&B Spinoff Stockholder must deliver to the Disbursing
Agent, on behalf of the EBS Litigation, L.L.C., prior to the D&B Spinoff
Settlement Expiration Date a properly completed and duly executed D&B Spinoff
44
<PAGE>
Settlement Notice, which (i) if the D&B Spinoff Stockholder has exercised Rights
in accordance with Section 10.1 of the Plan, indicates the number of Rights so
exercised in a manner effecting an election to participate in the D&B Spinoff
Settlement, and if such number is less than the D&B Spinoff Release Minimum
Rights, is accompanied by a certified check or bank draft drawn on a United
States bank or a wire transfer, in an amount equal to the D&B Spinoff Release
Shortfall Amount or (ii) if the D&B Spinoff Stockholder has not exercised any
Rights, is accompanied by a certified check or bank draft drawn upon a United
States bank or a wire transfer, in an amount equal to the D&B Spinoff Release
Minimum Purchase Price. The foregoing items will not be deemed to have been
timely delivered to the Disbursing Agent (and thus the attempted participation
in the D&B Spinoff Settlement will not be valid or effective) unless they are
completed and executed in conformity with the instructions contained in the D&B
Spinoff Settlement Notice and are actually received by the Disbursing Agent, at
the address specified therefor in the D&B Spinoff Settlement Notice, on or prior
to the D&B Spinoff Settlement Expiration Date.
(c) All determinations as to proper completion, due execution,
timeliness, eligibility and other matters affecting the validity or
effectiveness of any attempted participation in the D&B Spinoff Settlement shall
be made by the Disbursing Agent, on behalf of the EBS Litigation, L.L.C., whose
determination shall be final and binding. Deliveries required to be received by
the Disbursing Agent in connection with an attempted participation in the D&B
Spinoff Settlement will not be deemed to have been so received or accepted until
actual receipt thereof by the Disbursing Agent shall have occurred and any
defects or irregularities shall have been waived or cured within such time as
the Disbursing Agent may determine in its sole discretion. Neither the Debtors,
the Reorganized Debtors, the EBS Litigation, L.L.C. or the Disbursing Agent will
have any obligation to give notice to any D&B Spinoff Stockholder of any defect
or irregularity in connection with any attempted participation in the D&B
Spinoff Settlement or incur any liability as a result of any failure to give any
such notice.
(d) On or as promptly as practicable following the Initial Distribution
Date, the Disbursing Agent, on behalf of the EBS Litigation, L.L.C., will mail
(or cause to be mailed) to each D&B Spinoff Stockholder who sought to
participate in the D&B Spinoff Settlement a written statement specifying whether
such D&B Spinoff Stockholder qualifies as a Released D&B Spinoff Stockholder.
The Debtors, the Reorganized Debtors and the EBS Litigation, L.L.C. shall be
deemed, as of the Effective Date, for good and valuable consideration, to have
forever released, waived and discharged each Released D&B Spinoff Stockholder
from any and all Unresolved Avoidance Claims that the Debtors, the Reorganized
Debtors or the EBS Litigation, L.L.C. ever had, now has, hereafter can, shall or
may have against any Released D&B Spinoff Stockholder. Any and all Unresolved
Avoidance Claims against any and all D&B Spinoff Stockholders that do not
constitute Released D&B Spinoff Stockholders are hereby expressly reserved by
the Debtors and the EBS Litigation, L.L.C. Nothing contained herein shall
constitute a release, waiver or discharge of any Unresolved Avoidance Claims
against any person other than a Released D&B Spinoff Stockholder and Unresolved
Avoidance Claims against such other persons are expressly reserved and shall be
45
<PAGE>
transferred to the EBS Litigation, L.L.C. in accordance with section
1123(b)(3)(B) of the Bankruptcy Code, the EBS Litigation LLC Members Agreement
and Section 5.1 of the Plan.
(e) Pursuant to Bankruptcy Rule 9019 and in consideration for the
releases and other benefits provided under this Section 10.2, the provisions of
this Section 10.2 shall constitute a good faith compromise and settlement of all
Unresolved Avoidance Claims against Released D&B Spinoff Stockholders. The entry
of the Confirmation Order shall constitute the Bankruptcy Court's approval of
the compromise or settlement of all Unresolved Avoidance Claims against the
Released D&B Spinoff Stockholders and the Bankruptcy Court's finding that such
compromise or settlement is in the best interests of the Debtors and the
Reorganized Debtors and their estates, the EBS Litigation, L.L.C. and holders of
Claims and Equity Interests, and is fair, equitable and reasonable.
(f) As promptly as is practicable after the D&B Spinoff Settlement
Expiration Date, the Disbursing Agent shall transfer the D&B Spinoff Settlement
Proceeds, if any, to the EBS Litigation, L.L.C.
10.3. Term of Bankruptcy Injunction or Stays. All injunctions or stays
--------------------------------------
provided for in the Chapter 11 Cases under sections 105 or 362 of the Bankruptcy
Code, or otherwise, and in existence on the Confirmation Date, shall remain in
full force and effect until the Effective Date.
10.4. Revesting of Assets.
-------------------
(a) The property of the estates of the Debtors shall revest in the
Reorganized Debtors on the Effective Date, except as provided in Sections 5.1,
5.2 and 10.3 of the Plan.
(b) From and after the Effective Date, the Reorganized Debtors may
operate their businesses, and may use, acquire and dispose of property free of
any restrictions imposed under the Bankruptcy Code.
(c) As of the Effective Date, all property of the Debtors and Reorganized
Debtors shall be free and clear of all liens, claims and interests of holders of
Claims and Equity Interests, except as provided in the Plan.
10.5. Causes of Action. Except as provided in Section 5.1 of the Plan,
----------------
as of the Effective Date, pursuant to section 1123(b)(3)(B) of the Bankruptcy
Code, any and all Causes of Action accruing to the Debtors and Debtors in
Possession, including, without limitation, actions under sections 545, 549, 550
and 551 of the Bankruptcy Code, but excluding avoidance or recovery actions
under sections 544, 547, 548 and 553 of the Bankruptcy Code, shall become assets
of the Reorganized Debtors, and the Reorganized Debtors shall have the authority
to prosecute such Causes of Action for the benefit of the estates of the
Debtors. The Reorganized Debtors shall have the
46
<PAGE>
authority to compromise and settle, otherwise resolve, discontinue, abandon or
dismiss all such Causes of Action without approval of the Bankruptcy Court.
10.6. Discharge of Debtors. The rights afforded herein and the treatment
--------------------
of all Claims and Equity Interests herein shall be in exchange for and in
complete satisfaction, discharge and release of Claims and Equity Interests of
any nature whatsoever, including any interest accrued on such Claims from and
after the Commencement Date, against the Debtors and the Debtors in Possession,
or any of their assets or properties. Except as otherwise provided herein, (a)
on the Effective Date, all such Claims against and Equity Interests in the
Debtors shall be satisfied, discharged and released in full, and (b) all persons
shall be precluded from asserting against the Reorganized Debtors, their
successors, or their assets or properties any other or further Claims or Equity
Interests based upon any act or omission, transaction or other activity of any
kind or nature that occurred prior to the Confirmation Date.
10.7. Injunction. Except as otherwise expressly provided in the Plan,
----------
the Confirmation Order or a separate order of the Bankruptcy Court, all entities
who have held, hold or may hold Claims against or Equity Interests in any or all
of the Debtors, are permanently enjoined, on and after the Effective Date, from
(a) commencing or continuing in any manner any action or other proceeding of any
kind with respect to any such Claim or Equity Interest, (b) the enforcement,
attachment, collection or recovery by any manner or means of any judgment,
award, decree or order against the Debtors on account of any such Claim or
Equity Interest, (c) creating, perfecting or enforcing any encumbrance of any
kind against the Debtors or against the property or interests in property of the
Debtors on account of any such Claim or Equity Interest and (d) asserting any
right of setoff, subrogation or recoupment of any kind against any obligation
due from the Debtors or against the property or interests in property of the
Debtors on account of any such Claim or Equity Interest. Such injunction shall
extend to successors of the Debtors (including, without limitation, the
Reorganized Debtors) and their respective properties and interests in property.
47
<PAGE>
ARTICLE XI.
EFFECTIVENESS OF THE PLAN
-------------------------
11.1. Conditions Precedent to Effectiveness. The Plan shall not become
-------------------------------------
effective unless and until the following conditions shall have been satisfied or
waived pursuant to Section 11.3 of the Plan:
(a) the Confirmation Order, in form and substance reasonably
acceptable to the Debtors and the Creditors' Committee, shall have been signed
by the judge presiding over the Chapter 11 Cases, and there shall not be a stay
or injunction in effect with respect thereto;
(b) the Debtors shall have at least $10,000,000 in Cash as of August
7, 1997, after giving effect to the distributions of Cash projected to be made
under the Plan;
(c) the Reorganized Debtors shall have credit availability under a
working capital credit facility, in form and substance acceptable to the Debtors
and reasonably acceptable to the Creditors' Committee, to provide the
Reorganized Debtors with working capital sufficient to meet their ordinary and
peak requirements;
(d) the New Notes Indentures shall have been qualified under the Trust
Indenture Act of 1939, as amended;
(e) (i) the Funding Escrow shall have been established and the Funding
Escrow Agent under the Funding Escrow Agreement shall have been appointed in
accordance with Section 5.2 of the Plan; and (ii) subject to Section 5.1 of the
Plan, the EBS Litigation, L.L.C., the EBS Pension, L.L.C. and the EBS Building,
L.L.C. shall have been established in accordance with the EBS Litigation LLC
Members Agreement, the EBS Pension LLC Members Agreement and the EBS Building
LLC Members Agreement.
(f) subject to Section 5.1(c) of the Plan, the EBS Building, L.L.C.
shall have entered into the Corporate Headquarters Building Lease with
Reorganized Edison;
(g) all actions, documents and agreements necessary to implement the
Plan shall have been effected or executed;
(h) the Debtors shall have received all authorizations, consents,
regulatory approvals, rulings, letters, no-action letters, opinions or documents
that are determined by the Debtors to be
48
<PAGE>
necessary to implement the Plan, including, without limitation, no-action
letters from the Securities and Exchange Commission and letter or other rulings
from the Internal Revenue Service; and
(i) each of the Amended Edison Certificate of Incorporation, the
Amended Edison Bylaws, the amended certificates of incorporation of the
Reorganized Subsidiaries, the EBS Litigation LLC Members Agreement, the EBS
Pension LLC Members Agreement, the EBS Building LLC Members Agreement, the
Funding Escrow Agreement, the Funding Escrow Mortgages, the Rights documents,
the D&B Spinoff Settlement documents, the New Notes, the New Notes Indentures,
the Corporate Headquarters Building Lease, the Registration Rights Agreement,
the Stock Option Plan, the Director Stock Option Plan, the Employment Contracts
and the Restricted Stock Agreements, in form and substance reasonably acceptable
to the Debtors and the Creditors' Committee, shall have been effected or
executed.
11.2. Effect of Failure of Conditions. In the event that one or more of
-------------------------------
the conditions specified in Section 11.1 of the Plan have not occurred on or
before 60 days after the Confirmation Date, upon notification submitted by the
Debtors to the Bankruptcy Court and counsel for the Creditors' Committee and the
Equity Committee, (a) the Confirmation Order shall be vacated, (b) no
distributions under the Plan shall be made, (c) the Debtors and all holders of
Claims and Equity Interests shall be restored to the status quo ante as of the
------ --- ----
day immediately preceding the Confirmation Date as though the Confirmation Date
never occurred and (d) the Debtors' obligations with respect to the Claims and
Equity Interests shall remain unchanged and nothing contained herein shall
constitute or be deemed a waiver or release of any Claims or Equity Interests by
or against the Debtors or any other person or to prejudice in any manner the
rights of the Debtors or any person in any further proceedings involving the
Debtors.
11.3. Waiver of Conditions. The Debtors may waive, by a writing signed
--------------------
by an authorized representative of the Debtors and subsequently filed with the
Bankruptcy Court, one or more of the conditions precedent to effectiveness of
the Plan set forth in Sections 11.1 (b), (f) and (g) (exclusive of those
documents and agreements set forth in (i)) of the Plan. The Debtors, with the
written consent of the Creditors' Committee (which consent shall not be
unreasonably withheld), may waive, by a writing signed by an authorized
representative of the Debtors and subsequently filed with the Bankruptcy Court,
the conditions precedent to effectiveness of the Plan set forth in Sections
11.1(a), (c), (d), (e), (h) and (i) of the Plan.
49
<PAGE>
ARTICLE XII.
RETENTION OF JURISDICTION
-------------------------
The Bankruptcy Court shall have exclusive jurisdiction of all matters
arising out of, and related to, the Chapter 11 Cases and the Plan pursuant to,
and for the purposes of, sections 105(a) and 1142 of the Bankruptcy Code and
for, among other things, the following purposes:
(a) To hear and determine pending applications for the assumption or
rejection of executory contracts or unexpired leases, if any are pending,
and the allowance of Claims resulting therefrom;
(b) To determine any and all adversary proceedings, applications and
contested matters, including, without limitation, adversary proceedings and
contested matters arising in connection with the prosecution by the EBS
Litigation, L.L.C. of the Unresolved Avoidance Claims.
(c) To resolve all matters arising under or relating to the EBS
Litigation, L.L.C., the EBS Pension, L.L.C. and the EBS Building, L.L.C.,
including, without limitation, all disputes between the Reorganized Debtors
and such entities and with respect to the interpretation of the EBS
Litigation LLC Members Agreement, the EBS Pension LLC Members Agreement and
the EBS Building LLC Members Agreement;
(d) To resolve all matters and issues relating to the Rights and the
D&B Spinoff Settlement;
(e) To resolve all matters arising under or relating to the Funding
Escrow, including, without limitation, all disputes between the Reorganized
Debtors and the Funding Escrow Agent and with respect to the interpretation
of the Funding Escrow Agreement;
(f) To hear and determine any objection to Administrative Expense
Claims, Claims or Equity Interests;
(g) To enter and implement such orders as may be appropriate in the
event the Confirmation Order is for any reason stayed, revoked, modified or
vacated;
(h) To issue such orders in aid of execution and consummation of the
Plan, to the extent authorized by section 1142 of the Bankruptcy Code;
50
<PAGE>
(i) To consider any amendments to or modifications of the Plan, to
cure any defect or omission, or reconcile any inconsistency in any order of
the Bankruptcy Court, including, without limitation, the Confirmation
Order;
(j) To hear and determine all applications for compensation and
reimbursement of expenses of professionals under sections 330, 331 and
503(b) of the Bankruptcy Code;
(k) To hear and determine disputes arising in connection with the
interpretation, implementation or enforcement of the Plan;
(l) To recover all assets of the Debtors and property of the
Debtors' estates, wherever located;
(m) To hear and determine matters concerning state, local and
federal taxes in accordance with sections 346, 505 and 1146 of the
Bankruptcy Code;
(n) To hear any other matter not inconsistent with the Bankruptcy
Code; and
(o) To enter a final decree closing the Chapter 11 Cases.
ARTICLE XIII.
MISCELLANEOUS PROVISIONS
------------------------
13.1. Effectuating Documents and Further Transactions. Each of the
-----------------------------------------------
Debtors or Reorganized Debtors is authorized to execute, deliver, file or record
such contracts, instruments, releases, indentures and other agreements or
documents and take such actions as may be necessary or appropriate to effectuate
and further evidence the terms and conditions of the Plan and any notes or
securities issued pursuant to the Plan.
13.2. Corporate Action. On the Effective Date, all matters provided for
----------------
under the Plan that would otherwise require approval of the stockholders,
directors or members of one or more of the Debtors or Reorganized Debtors or
their successors in interest under the Plan, including, without limitation, the
authorization to issue or cause to be issued preferred stock, the issuance of
New Common Stock, Rights, Restricted Stock, New Notes, Series 1997 Bonds,
Warrants, Management Options, Director Options, Class A Membership Units and
Class B Membership Units, the effectiveness of the Amended Edison Certificate of
Incorporation, the Amended Edison Bylaws and the amended certificates of
incorporation of the Reorganized Subsidiaries, corporate mergers or dissolutions
effectuated pursuant to the Plan, the election or appointment, as the case may
be, of
51
<PAGE>
directors and officers of the Debtors pursuant to the Plan, the authorization
and approval of the D&B Spinoff Settlement Offer, the Employment Contracts, the
Stock Option Plan, the Director Stock Option Plan and the Restricted Stock
Agreements and the creation of the EBS Litigation, L.L.C., the EBS Pension,
L.L.C., the EBS Building, L.L.C., the Funding Escrow and the Funding Escrow
Mortgages shall be deemed to have occurred and shall be in effect from and after
the Effective Date pursuant to the applicable general corporation law of the
states in which the Debtors or Reorganized Debtors are incorporated, without any
requirement of further action by the stockholders or directors of the Debtors or
Reorganized Debtors. On the Effective Date or as soon thereafter as is
practicable, the Reorganized Debtors shall, if required, file their amended
certificates of incorporation with the Secretary of State of the state in which
each Reorganized Debtor is incorporated, in accordance with the applicable
general corporation law of such states.
13.3. Exemption from Transfer Taxes. Pursuant to section 1146(c) of the
-----------------------------
Bankruptcy Code, the issuance, transfer or exchange of notes or equity
securities under the Plan, the creation of any mortgage, deed of trust or other
security interest, the making or assignment of any lease or sublease, or the
making or delivery of any deed or other instrument of transfer under, in
furtherance of, or in connection with the Plan, including, without limitation,
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 shall not be subject to any stamp, real estate transfer, mortgage
recording or other similar tax.
13.4. Injunction Regarding Worthless Stock Deduction. At the Confirmation
----------------------------------------------
Hearing, Edison may request that the Bankruptcy Court include in the
Confirmation Order a provision enjoining any "50-percent shareholder" of Edison
within the meaning of section 382(g)(4)(D) of the Internal Revenue Code of 1986,
as amended, from claiming a worthless stock deduction with respect to its Edison
Equity Interest for any taxable year of such shareholder ending prior to the
Effective Date.
13.5. Exculpation. Neither the Debtors, the Reorganized Debtors, the
-----------
Creditors' Committee or the Equity Committee or any of their respective members,
officers, directors, employees, advisors or agents shall have or incur any
liability to any holder of a Claim or Equity Interest for any act or omission in
connection with, related to, or arising out of, the Chapter 11 Cases, the
pursuit of confirmation of the Plan, the consummation of the Plan or the
administration of the Plan or the property to be distributed under the Plan,
except for willful misconduct or gross negligence, and, in all respects, the
Debtors, the Reorganized Debtors, the Creditors' Committee, the Equity Committee
and each of their respective members, officers, directors, employees, advisors
and agents shall be entitled to rely upon the advice of counsel with respect to
their duties and responsibilities under the Plan; provided, however, that
-------- -------
nothing contained herein shall exculpate, satisfy, discharge or release any
Avoidance Claims against present or former officers, directors or employees of
the Debtors in their capacities other than as present or former officers,
directors or employees.
52
<PAGE>
13.6. Termination of Committees. The appointments of the Creditors'
-------------------------
Committee and the Equity Committee shall terminate on the later of the Effective
Date and the date of the hearing to consider applications for final allowances
of compensation and reimbursement of expenses.
13.7. Claims Resolution Committee.
---------------------------
(a) Function and Composition. Prior to the Effective Date, the Creditors'
------------------------
Committee will have established the Claims Resolution Committee. The functions
of the Claims Resolution Committee will be (i) to monitor the Reorganized
Debtors' progress in (a) reconciling and resolving Disputed Claims and (b)
making distributions on account of such Claims once such Claims become Allowed
Claims, (ii) to compel the Debtors to compromise, settle or otherwise resolve
Disputed Claims and (iii) to review and assert objections to the reasonableness
of compromises, settlements or other resolutions of Disputed Claims, as provided
in Section 6.5(b) of the Plan. The Claims Resolution Committee will consist of
three holders of Claims each of whom previously has served as a member of the
Creditors' Committee.
(b) Procedures. The Claims Resolution Committee will adopt by-laws that
----------
will control its functions. These by-laws, unless modified by the Claims
Resolution Committee, will provide the following: (i) a majority of the Claims
Resolution Committee will constitute a quorum; (ii) one member of the Claims
Resolution Committee will be designated by the majority of its members as its
chairperson; (iii) meetings of the Claims Resolution Committee will be called by
its chairperson on such notice and in such manner as its chairperson may deem
advisable; and (iv) the Claims Resolution Committee will function by decisions
made by a majority of its members in attendance at any meeting.
(c) Employment of Attorneys and Reimbursement of Expenses. The Claims
-----------------------------------------------------
Resolution Committee will be authorized to retain one law firm. The role of the
Claims Resolution Committee's attorneys will be strictly limited to assisting
the Claims Resolution Committee in its functions as set forth herein. The
Reorganized Debtors will pay the actual, necessary, reasonable and documented
fees and expenses of the attorneys retained by the Claims Resolution Committee,
as well as the actual, necessary, reasonable and documented expenses incurred by
each member of the Claims Resolution Committee in the performance of its duties,
in accordance with the Reorganized Debtors' normal business practice for
compensating and reimbursing professionals. Other than as specified in the
preceding sentence, the members of the Claims Resolution Committee will serve
without compensation. If there is any unresolved dispute between the Reorganized
Debtors and the Claims Resolution Committee, its attorneys or its members as to
any fees or expenses, such dispute will be submitted to the Bankruptcy Court for
resolution.
(d) Dissolution. Subject to further order of the Bankruptcy Court, the
-----------
Claims Resolution Committee will dissolve upon the earlier to occur of (i) the
date that an officer of Reorganized Edison files with the Bankruptcy Court and
serves upon counsel to the Claims Resolution
53
<PAGE>
Committee by overnight delivery service or facsimile transmission a
certification that the aggregate Disputed Claim Amount for all remaining
Disputed Claims is equal to or less than $5,000,000 (the "Certification") and
(ii) the third anniversary of the Effective Date. The Claims Resolution
Committee may file with the Bankruptcy Court and serve upon the Reorganized
Debtors an objection to such Certification within 10 days of the receipt
thereof, in which event the aggregate Disputed Claim Amount for all remaining
Disputed Claims will be determined by the Bankruptcy Court. If the Bankruptcy
Court determines that the aggregate Disputed Claim Amount for all remaining
Disputed Claims is greater than $5,000,000, the Claims Resolution Committee will
continue in existence, subject to the conditions set forth in the first sentence
of this subsection. If the Bankruptcy Court determines that the aggregate
Disputed Claim Amount for all remaining Disputed Claims is equal to or less than
$5,000,000, the Claims Resolution Committee will dissolve effective as of the
date that the Certification is served and filed. The attorneys retained by, and
members of, the Claims Resolution Committee, will not be entitled to
compensation or reimbursement of expenses for services rendered after the date
of dissolution of the Claims Resolution Committee.
13.8. Post-Confirmation Date Fees and Expenses. From and after the
----------------------------------------
Confirmation Date, the Debtors and Reorganized Debtors shall, in the ordinary
course of business and without the necessity for any approval by the Bankruptcy
Court, pay the reasonable fees and expenses of professional persons thereafter
incurred by the Debtors and Reorganized Debtors, including, without limitation,
those fees and expenses incurred in connection with the implementation and
consummation of the Plan.
13.9. Payment of Statutory Fees. All fees payable pursuant to section 1930
-------------------------
of the title 28 of the United States Code, as determined by the Bankruptcy Court
at the Confirmation Hearing, shall be paid on the Effective Date.
13.10. Amendment or Modification of the Plan. Alterations, amendments or
-------------------------------------
modifications of the Plan may be proposed in writing by the Debtors at any time
prior to the Confirmation Date, provided that the Plan, as altered, amended or
modified, satisfies the conditions of sections 1122 and 1123 of the Bankruptcy
Code, and the Debtors shall have complied with section 1125 of the Bankruptcy
Code; provided, however, that, prior to the date of the commencement of
-------- -------
solicitation of votes to accept or reject the Plan, no alteration, amendment or
modification of the Plan that would materially and adversely change the
treatment of General Unsecured Claims may be made without prior approval of the
Creditors' Committee, which approval shall not be unreasonably withheld. The
Plan may be altered, amended or modified at any time after the Confirmation Date
and before substantial consummation, provided that the Plan, as altered, amended
or modified, satisfies the requirements of sections 1122 and 1123 of the
Bankruptcy Code and the Bankruptcy Court, after notice and a hearing, confirms
the Plan, as altered, amended or modified, under section 1129 of the Bankruptcy
Code and the circumstances warrant such alterations, amendments or
modifications. A holder of a Claim or Equity Interest that has accepted the Plan
shall be deemed to have accepted the
54
<PAGE>
Plan, as altered, amended or modified, if the proposed alteration, amendment or
modification does not materially and adversely change the treatment of the Claim
or Equity Interest of such holder.
13.11. Severability. In the event that the Bankruptcy Court determines,
------------
prior to the Confirmation Date, that any provision in the Plan is invalid, void
or unenforceable, such provision shall be invalid, void or unenforceable with
respect to the holder or holders of such Claims or Equity Interests as to which
the provision is determined to be invalid, void or unenforceable. The
invalidity, voidness or unenforceability of any such provision shall in no way
limit or affect the enforceability and operative effect of any other provision
of the Plan.
13.12. Revocation or Withdrawal of the Plan. The Debtors reserve the right
------------------------------------
to revoke or withdraw the Plan prior to the Confirmation Date. If the Debtors
revoke or withdraw the Plan prior to the Confirmation Date, then the Plan shall
be deemed null and void. In such event, nothing contained herein shall
constitute or be deemed a waiver or release of any claims by or against the
Debtors or any other person or to prejudice in any manner the rights of the
Debtors or any person in any further proceedings involving the Debtors.
13.13. Binding Effect. The Plan shall be binding upon and inure to the
--------------
benefit of the Debtors, the holders of Claims and Equity Interests, and their
respective successors and assigns, including, without limitation, the
Reorganized Debtors.
13.14. Notices. All notices, requests and demands to or upon the Debtors or
-------
the Reorganized Debtors to be effective shall be in writing and, unless
otherwise expressly provided herein, shall be deemed to have been duly given or
made when actually delivered or, in the case of notice by facsimile
transmission, when received and telephonically confirmed, addressed as follows:
If to the Debtors:
Edison Brothers Stores, Inc.
501 North Broadway
St. Louis, Missouri 63102
Attn: Alan A. Sachs, Esq.
Telephone: (314) 331-6565
Facsimile: (314) 331-6554
55
<PAGE>
with a copy to:
Weil, Gotshal & Manges LLP Young, Conaway, Stargatt & Taylor
767 Fifth Avenue 1110 N. Market Street
New York, New York 10153 P.O. Box 391
Attn: Richard P. Krasnow, Esq. Rodney Square North, 11th Floor
Telephone: (212) 310-8000 Wilmington, Delaware 19801
Facsimile: (212) 310-8007 Attn: Laura Davis Jones, Esq.
Telephone: (302) 571-6600
Facsimile: (302) 571-1253
If to the Creditors' Committee:
Jones, Day, Reavis & Pogue Richards, Layton & Finger, P.A.
77 West Wacker One Rodney Square
Chicago, Illinois 60601 Wilmington, Delaware 19899
Attn: David Kurtz, Esq. Attn: Thomas L. Ambro, Esq.
Telephone: (312) 782-3939 Telephone: (302) 651-7612
Facsimile: (312) 782-8585 Facsimile: (302) 658-6458
If to the Equity Committee:
Paul, Weiss, Rifkind, Wharton & Garrison Duane Morris & Heckscher
1285 Avenue of the Americas 1201 Market Street
New York, New York 10019 Wilmington, Delaware 19801
Attn: Alan W. Kornberg, Esq. Attn: Teresa K.D. Currier, Esq.
Telephone: (212) 373-3209 Telephone: (302) 657-4957
Facsimile: (212) 373-2053 Facsimile: (302) 571-5560
13.15. Governing Law. Except to the extent the Bankruptcy Code, Bankruptcy
-------------
Rules or other federal law is applicable, or to the extent an Exhibit to the
Plan provides otherwise, the rights and obligations arising under this Plan
shall be governed by, and construed and enforced in accordance with, the laws of
the State of New York, without giving effect to the principles of conflicts of
law of such jurisdiction.
13.16. Withholding and Reporting Requirements. In connection with the
--------------------------------------
consummation of the Plan, the Debtors or the Reorganized Debtors, as the case
may be, shall comply with all withholding and reporting requirements imposed by
any federal, state, local or foreign taxing
56
<PAGE>
authority and all distributions hereunder shall be subject to any such
withholding and reporting requirements.
13.17. Plan Supplement. Forms of the documents relating to the Amended
---------------
Edison Certificate of Incorporation, the Amended Edison Bylaws, the EBS
Litigation LLC Members Agreement, the EBS Pension LLC Members Agreement, the EBS
Building LLC Members Agreement, the Funding Escrow Agreement, the Funding Escrow
Mortgages, the New Notes, the New Notes Indentures, the Series 1977 Bonds, the
Rights, the D&B Spinoff Settlement, the investment guidelines referred to in
Sections 6.4(a) and 6.4(c)(ii) of the Plan, Schedules 7.1(a)(x) and 7.1(a)(y)
referred to in Section 7.1 of the Plan, the Warrants (including a Warrant
agreement), the Corporate Headquarters Building Lease and the Registration
Rights Agreement shall be contained in the Plan Supplement and filed with the
Clerk of the Bankruptcy Court at least 10 days prior to the last day upon which
holders of Claims and Equity Interests may vote to accept or reject the Plan.
Upon its filing with the Bankruptcy Court, the Plan Supplement may be inspected
in the office of the Clerk of the Bankruptcy Court during normal court hours.
Holders of Claims or Equity Interests may obtain a copy of the Plan Supplement
upon written request to Edison in accordance with Section 13.14 of the Plan.
13.18. Allocation of Plan Distributions Between Principal and Interest. To
---------------------------------------------------------------
the extent that any Allowed Claim entitled to a distribution under the Plan is
comprised of indebtedness and accrued but unpaid interest thereon, such
distribution shall, for federal income tax purposes, be allocated to the
principal amount of the Claim first and then, to the extent the consideration
exceeds the principal amount of the Claim, to accrued but unpaid interest.
13.19. Headings. Headings are used in the Plan for convenience and
--------
reference only, and shall not constitute a part of the Plan for any other
purpose.
13.20. Exhibits/Schedules. All Exhibits and Schedules to the Plan,
------------------
including the Plan Supplement, are incorporated into and are a part of the Plan
as if set forth in full herein.
57
<PAGE>
13.21. Filing of Additional Documents. On or before substantial
------------------------------
consummation of the Plan, the Debtors shall file with the Bankruptcy Court such
agreements and other documents as may be necessary or appropriate to effectuate
and further evidence the terms and conditions of the Plan.
Dated: Wilmington, Delaware
June 30, 1997, September 8, 1997 (Modified)
EDISON BROTHERS STORES, INC., a Delaware corporation
(for itself and on behalf of each of the Subsidiaries)
By: /s/ Alan D. Miller
----------------------------------------------------
Name: Alan D. Miller
Title: Chairman and Chief Executive Officer
58
<PAGE>
EXHIBIT A TO PLAN
SUMMARY OF TERMS OF CORPORATE HEADQUARTERS LEASE
LESSOR: EBS Building, L.L.C.
LESSEE: Reorganized Edison
TERM: Three years, commencing on the Effective Date, followed by,
at Reorganized Edison's sole option, either (a) a one year
option at $12.00 per square foot or (b) a seven year option
at "Prevailing Market" rent
RENT: Years one through three: $9.00 per square foot
Year four (if one year option is selected): $12.00 per
square foot
Years four through 10 (if seven year option is selected): at
"Prevailing Market" rent as such term is defined in the
Corporate Headquarters Lease
DISPOSITION: Any sale or other disposition of the Corporate Headquarters
Building by the EBS Building, L.L.C. shall be subject to the
Corporate Headquarters Building Lease and such other terms
as are acceptable to Reorganized Edison
The Corporate Headquarters Lease shall be junior to any
mortgage on the Corporate Headquarters Building, provided
that non-disturbance under the Corporate Headquarters Lease
is assured under any such mortgage
OTHER TERMS: Such other terms as may be mutually agreeable to the Debtors
and the Creditors' Committee
59
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
EXHIBIT B TO PLAN
SUMMARY OF TERMS OF NEW NOTES
ISSUER: Reorganized Edison
AMOUNT: $100,000,000, subject to adjustment as provided in Section 1.15
of the Plan
TERM: The later of the tenth anniversary of the Effective Date and July
31, 2007
INTEREST: 11.0% per annum, payable semi-annually on January 31 and July 31.
Interest shall begin accruing on the earlier of the Effective
Date and July 31, 1997. The first interest payment shall be made
on January 31, 1998
MATURITY: 100% of outstanding principal amount payable on the later of the
tenth anniversary of the Effective Date and July 31, 2007
SECURITY: Funding Escrow Mortgages (coverage of portion of interest)
PREFUNDING: Through the Funding Escrow, approximately the first three years
of interest payable shall be prefunded by the Debtors with $16
million in Cash and the Funding Escrow Properties
COVENANTS: Mandatory Principal Prepayment -- 50% of the net proceeds of
------------------------------
extraordinary asset sales (excluding individual sales of assets
for which the consideration received is less that $250,000) not
otherwise required to be paid to working capital facility
lenders; provided, however, that such amount shall not be
distributed unless in excess of $5,000,000
Optional Redemption -- In whole or in part at the option of
-------------------
Reorganized Edison in increments of not less than $5 million in
accordance with the following schedule:
Effective Date - June 30, 1998: 100% of par
July 1, 1998 - June 30, 1999: 104% of par
July 1, 1999 - June 30, 2000: 103% of par
38
<PAGE>
July 1, 2000 - June 30, 2001: 102% of par
July 1, 2001 - June 30, 2002: 101% of par
July 1, 2002 - Maturity: 100% of par
Mandatory Redemption Upon Change of Control -- Upon a "Change in
-------------------------------------------
Control," at 101% of par. The definition of "Change of Control"
is described in the Disclosure Statement
Other Covenants -- Such other covenants as may be mutually
---------------
agreeable to the Debtors and the Creditors' Committee
OTHER TERMS: Such other terms as may be mutually agreeable to the Debtors and
the Creditors' Committee
39
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
EXHIBIT C TO PLAN
SUMMARY OF TERMS OF WARRANTS
WARRANTS: Warrants to purchase 9.0% of the issued New Common Stock,
on a fully diluted basis
EXERCISE PRICE: $16.40
TERM: The Warrants shall expire on the eighth anniversary of
the Effective Date
OTHER TERMS: Such other terms as described in the Disclosure Statement
39
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
SCHEDULE 1 TO PLAN
ISSUANCE OF SERIES 1997 BONDS
-----------------------------
(1) The Series 1977 Bonds are currently outstanding in an aggregate
principal amount of $2,920,000. The Issuer will issue the Series 1997 A Bonds in
an aggregate principal amount of $2,482,000 in exchange for a portion of the
Series 1977 Bonds in an aggregate principal amount equal to the Allowed Secured
Series 1977 Bondholder Claims. The Series 1985 Bonds are currently outstanding
in an aggregate principal amount of $5,500,000. The Issuer will issue the Series
1997 B Bonds in an aggregate principal amount of $4,235,000 in exchange for a
portion of the Series 1985 Bonds in an aggregate principal amount equal to the
Allowed Secured Series 1985 Bondholder Claims.
(2) The Series 1997 Bonds will be issued pursuant to the terms of a trust
indenture between the Issuer and the Trustee in substantially the form attached
to the Plan Supplement with only such changes, additions, or modifications as
shall be approved by the Issuer, the Trustee, on behalf of all Series 1997
Bondholders, and Edbro Missouri (the "Series 1997 Bond Indenture"). In
--------------------------
connection with the issuance of the Series 1997 Bonds, all property currently
leased to Edbro Missouri pursuant to the terms of the Series 1977 Lease
Agreement and/or the Series 1985 Lease Agreement, shall be conveyed by the
Issuer to Reorganized Edbro Missouri by special warranty deed, bill of sale and
other such conveyance documents as provided under the Series 1977 Lease
Agreement and Series 1985 Lease Agreement, subject only to the "Permitted
Encumbrances" (as such term is defined in the Series 1985 Lease Agreement) or as
shall otherwise be approved by Edbro Missouri, and pursuant to such other
documents as may reasonably be required by Edbro Missouri to vest title in all
such property in Reorganized Edbro Missouri. The Series 1977 Lease Agreement and
the Series 1985 Lease Agreement shall each be terminated of record. Upon
issuance of the Series 1997 Bonds, the Issuer shall be deemed to have made a
loan (the "Series 1997 Loan") to Reorganized Edbro Missouri in an amount equal
----------------
to the aggregate principal amount of the Series 1997 Bonds ($6,717,000). In
connection with the issuance of the Series 1997 Bonds, Reorganized Edbro
Missouri shall enter into a Loan Agreement with the Issuer substantially in the
form attached to the Plan Supplement with only such changes, additions, or
modifications as shall be approved by the Issuer, the Trustee, on behalf of all
Series 1997 Bondholders, and Edbro Missouri (the "Series 1997 Loan Agreement")
--------------------------
and shall execute and deliver a promissory note in the aggregate principal
amount of $6,717,000 in favor of the Issuer evidencing the Series 1997 Loan, in
substantially the form attached to the Plan Supplement with only such changes,
additions, or modifications as shall be approved by the Issuer, the Trustee, on
behalf of all Series 1997 Bondholders, and Edbro Missouri (the "Series 1997
-----------
Note"). Pursuant to the terms of the Series 1997 Loan Agreement and the Series
- ----
1997 Note, Reorganized Edbro Missouri shall be obligated to pay to the Issuer
payments on the Series 1997 Loan in the amounts and at the times necessary to
permit the Issuer to make the payments when due of the principal of, premium, if
any, and interest on the Series 1997 Bonds and to timely pay the purchase price
of the Series 1997 B Bonds
40
<PAGE>
tendered for purchase in accordance with the terms of the Series 1997 Bond
Indenture. The Issuer shall assign all of its rights under the Series 1997 Loan
Agreement (except for certain rights of indemnification of the Issuer and the
Issuer's rights to the payment of its reasonable costs, fees, and expenses), the
Series 1997 Note and each of the other Series 1997 Loan Documents to the Trustee
in accordance with the terms of the Series 1997 Bond Indenture. On or prior to
the Effective Date, Reorganized Edbro Missouri shall also execute and deliver or
cause to be executed and delivered each of the Series 1997 Collateral Documents,
and shall satisfy or cause to be satisfied each of the Series 1997 Refunding
Conditions.
(3) The Series 1997 Bonds will be limited obligations of the Issuer and
will be payable solely from and equally and ratably secured, to the extent
provided in the Series 1997 Bond Indenture, by a pledge of (i) all income,
accounts, revenues, proceeds, and other amounts to which the Issuer is entitled,
derived from or in connection with the Series 1997 Loan Documents, including,
without limitation, all payments of the principal of and interest on the Series
1997 Note and all amounts obtained through the exercise of the remedies provided
in the Series 1997 Loan Documents upon the occurrence of any event of default
thereunder and all receipts of the Trustee credited under the provisions of the
Series 1997 Bond Indenture against said amounts payable, and (ii) moneys held in
the funds and accounts under the Series 1997 Bond Indenture, together with
investment earnings thereon (excluding any amounts held in any rebate fund
established under and as provided in the Series 1997 Bond Indenture).
(4) In connection with the issuance of the Series 1997 Bonds, the Issuer,
the Trustee and Reorganized Edbro Missouri shall cause each of the Series 1997
Refunding Conditions to be satisfied.
41
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
SCHEDULE 2 TO PLAN
SERIES 1997 REFUNDING CONDITIONS
--------------------------------
On or prior to the date of issuance of the Series 1997 Bonds and subject to
the provisions of Sections 4.2 and 4.3 of the Plan, each of the following
conditions shall be fully satisfied and each of the following documents,
instruments and agreements shall be delivered in form and content satisfactory
to the Issuer, the Trustee, Edbro Missouri and Edison:
(a) The Issuer shall have adopted an ordinance authorizing the issuance of
the Series 1997 Bonds and a certified copy of such ordinance shall have been
delivered to the Trustee.
(b) The Issuer and the Trustee shall have executed and delivered the
Series 1997 Bond Indenture.
(c) Reorganized Edbro Missouri and the Issuer shall have executed and
delivered the Series 1997 Loan Agreement and an original of same shall have been
delivered to the Trustee.
(d) Reorganized Edbro Missouri shall have executed and delivered the
Series 1997 Notes and the originals shall have been delivered to the Trustee.
(e) Reorganized Edbro Missouri shall have executed, and or caused the
applicable party to have executed, as applicable, and delivered each of the
following collateral documents (collectively, the "Series 1997 Collateral
----------------------
Documents"):
- ---------
(1) a Deed of Trust and Security Agreement made by Reorganized Edbro
Missouri in favor of the Issuer, in substantially in the form attached
to the Plan Supplement, encumbering the Edbro Missouri Facility and
subject only to such encumbrances as shall be approved by the Issuer
and Trustee, (the "Series 1997 Mortgage"); the Series 1997 Mortgage
--------------------
shall have been assigned by the Issuer to the Trustee pursuant to the
Series 1997 Bond Indenture and/or an assignment in form and substance
acceptable to the Trustee (the "Series 1997 Assignment Agreement");
--------------------------------
(2) one or more UCC-1 Financing Statements made by Reorganized Edbro
Missouri, as Debtor, in favor of the Issuer, as secured party, as
necessary to perfect the Issuer's security interest in the collateral
encumbered by the Series 1997 Mortgage (collectively, the "Series 1997
-----------
Financing Statements"); the Series 1997 Financing Statements shall
--------------------
have been assigned by the Issuer to the Trustee pursuant to the Series
1997 Bond Indenture and/or the Series 1997 Assignment Agreement;
41
<PAGE>
(3) a guaranty agreement executed by Reorganized Edison in favor of the
Issuer, in substantially the form attached to the Plan Supplement with
only such changes, additions, or modifications as shall be approved by
the Issuer, the Trustee, on behalf of all Series 1997 Bondholders, and
Reorganized Edison (the "Series 1997 Guaranty"); the Series 1997
Guaranty shall have been assigned by the Issuer to the Trustee
pursuant to the Series 1997 Bond Indenture and/or the Series 1997
Assignment Agreement; and
(4) any other pledge agreements, security agreements, documents,
instruments, or other agreements necessary to pledge, mortgage, lien
or encumber, or to perfect any security interest in the Edbro Missouri
Facility, all payments to be made by Reorganized Edbro Missouri under
the Series 1997 Loan Agreement and Series 1997 Notes and all other
revenues, contract rights, tangible and intangible property and
property rights, all real and personal property, and all other assets
of Reorganized Edbro Missouri to be pledged as security for the
obligations of Reorganized Edbro Missouri as provided in the Series
1997 Loan Agreements, the Series 1997 Bond Indenture and the Series
1997 Loan Documents, subject only to such encumbrances as shall be
approved by the Issuer and Trustee, for the benefit of the Series 1997
Bondholders, and which shall have been assigned by the Issuer to the
Trustee pursuant to the Series 1997 Bond Indenture and/or the Series
1997 Assignment Agreement.
(f) There shall have been delivered to the Trustee, the Issuer and
Reorganized Edbro Missouri, an unqualified favorable opinion of Bond Counsel
with respect to the validity of the Series 1997 Bonds and to the effect that the
interest on the Series 1997 Bonds will not be included in the gross income of
the holders thereof for Federal income tax purposes, dated as of the date of
issuance of the Series 1997 Bonds and addressed to the Issuer, the Trustee and
Reorganized Edbro Missouri; such opinion may contain those qualifications and
exceptions which are customarily incorporated in approving opinions of Bond
Counsel and which are acceptable to the Issuer, the Trustee and Reorganized
Edbro Missouri.
(g) There shall have been delivered to the Trustee and the Issuer, a
favorable opinion of counsel for Reorganized Edbro Missouri and Reorganized
Edison with respect to due authorization, execution and delivery and
enforceability of the Series 1997 Loan Agreement and each of the other Series
1997 Loan Documents executed and delivered by Reorganized Edbro Missouri or
Reorganized Edison and with respect to such other matters as the Trustee or
Issuer may reasonably request, dated as of the date of issuance of the Series
1997 Bonds and addressed to the Trustee and the Issuer.
(h) There shall have been delivered to the Trustee and the Issuer,
governmental certificates, dated the most recent practicable date prior to the
date of issuance of the Series 1997 Bonds, showing that each of Reorganized
Edbro Missouri and Reorganized Edison is organized and in good standing in the
jurisdiction of its organization and is qualified to do business and in good
standing in all other jurisdictions in which the failure to so qualify would
have a material adverse effect on the ability of such entity to perform its
obligations under the Series 1997 Loan Documents.
42
<PAGE>
(i) There shall have been delivered to the Trustee and the Issuer, (i)
copies of the Articles of Incorporation of Reorganized Edbro Missouri and
Reorganized Edison, each certified as of a recent date by the Secretary of State
of the state of organization of Reorganized Edbro Missouri or Reorganized
Edison, as applicable, (ii) a copy of the Bylaws of each of Reorganized Edbro
Missouri and Reorganized Edison, certified as of a recent date by an officer of
each such entity, (iii) a corporate resolution of each of Reorganized Edbro
Missouri and Reorganized Edison authorizing the execution and delivery by such
entity of each of the Series 1997 Loan Documents executed and delivered by such
entity, (iv) certificates of the Secretary of each of Reorganized Edbro Missouri
and Reorganized Edison, dated as of the date of issuance of the Series 1997
Bonds, as to the incumbency and signatures of the officers of each such entity
executing the Series 1997 Loan Documents to be executed and delivered by such
entity, together with evidence of the incumbency of such Secretary.
(j) There shall have been delivered to the Trustee, as-built surveys of
the Edbro Missouri Facility, dated no earlier than 90 days prior to the date of
issuance of the Series 1997 Bonds, in a form and content acceptable to the
Trustee and the title company issuing a mortgagee policy in favor of the Issuer
and Trustee, as their interests may appear.
(k) There shall have been delivered to the Trustee, a title insurance
policy naming the Issuer and Trustee, as their interests may appear, as the
insureds thereunder, issued by a title company acceptable to the Trustee in an
aggregate amount equal to $6,717,000, insuring the validity and priority of the
lien of the Series 1997 Mortgage, subject only to such exceptions as are
approved by the Trustee and containing such endorsements and affirmative
insurance as the Trustee may reasonably require.
(l) There shall have been delivered to the Trustee, evidence that the
insurance policies provided in the Series 1997 Loan Agreement and the Series
1997 Mortgage are in full force and effect and that such policies include the
Trustee as an additional named insured party and loss payee thereunder.
(m) There shall have been delivered to the Trustee and the Issuer such
other documents, instruments and agreements consistent with the terms of the
Plan as shall be reasonably requested by the Trustee or the Issuer.
43
<PAGE>
SCHEDULE 3 TO PLAN
TERMS OF SERIES 1997 A BONDS
----------------------------
Authorized $4,000 or any integral multiple of $1.00 in excess thereof
Denominations:
Interest Rate: Six and twenty-five one-hundredths percent (6.25%) per annum
Maturity: June 1, 2002
Interest Payment
Dates: June 1 and December 1 of each year
Principal
Redemption: Principal redemption payments in the amount of $60,000 will
be due and payable on each June 1 commencing on June 1, 1998
through maturity with a final principal payment of $2,242,000
due on June 1, 2002
Collateral: Issuer shall assign to the Trustee, for the benefit of all
Series 1997 Bondholders, all of its rights (except for
certain rights of indemnification of the Issuer and the
Issuer's rights to the payment of its reasonable costs, fees,
and expenses) under the Series 1997 Loan Documents,
including, without limitation, its right to receipt of
payments made by Reorganized Edbro Missouri on account of the
Series 1997 Loans and its interest as mortgagee under the
Series 1997 Mortgage. As a result of such assignment to the
Trustee, Series 1997 A Bonds and Series 1997 B Bonds shall be
equally and ratably secured, pari passu, by the Series 1997
Loan Documents.
Other Terms: Such other terms as may be mutually agreeable to Edbro
Missouri, the Issuer and the Trustee.
44
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
SCHEDULE 4 TO PLAN
TERMS OF SERIES 1997 B BONDS
----------------------------
Authorized
Denominations: $4,000 or any integral multiple of $250 in excess thereof
Interest Rate: Variable rate equal to seventy-five and eighty-three one
hundredths percent (75.83%) of the interest rate announced
from time to time by Mercantile Bank National Association
as its "prime" rate on commercial loans (which interest
rate shall fluctuate as and when said prime rate shall
change); subject to conversion to a "Subsequent Variable
Rate" or "Fixed Rate", as provided below
Maximum Permitted
Rate: 14% per annum or such higher rate as shall be permitted by
law
Maturity: November 1, 2010
Interest Payment
Dates: Prior to conversion of the interest rate on the Series 1997
B Bonds to a "Subsequent Variable Rate" or "Fixed Rate" (as
such terms are defined in the Series 1997 Bond Indenture),
February 1, May 1, August 1 and November 1 of each year;
after such conversion, May 1 and November 1 of each year
Principal
Redemption: Principal redemption payments in the amount of $847,000
will be due and payable on November 1, 2006 and on each
November 1 thereafter through maturity
Conversion: The interest rate mode on the Series 1997 B Bonds may be
converted, at the option of Reorganized Edbro Missouri, to
a "Subsequent Variable Rate" and/or to a "Fixed Rate" as
more particularly provided in the Series 1997 Bond
Indenture. All Series 1997 B Bonds shall be subject to
mandatory tender for purchase by or on behalf of
Reorganized Edbro Missouri on the date of any such
conversion. All Series 1997 B Bonds so tendered shall be
remarketed by a remarketing agent selected by Reorganized
Edbro Missouri and appointed by the Issuer, upon written
instructions from Reorganized Edbro Missouri (the
"Remarketing Agent"), as provided for and in accordance
-----------------
with the terms of the Series 1997 Bond Indenture.
Tender Option
for Mandatory
Purchase of Series
44
<PAGE>
1997 B Bonds: Prior to any conversion of the interest rate mode on
the Series 1997 B Bonds to a Subsequent Variable Rate
or a Fixed Rate as set forth above and so long as
Mercantile is the sole beneficial owner of the Series
1997 B Bonds, Mercantile will have the option to tender
all of the outstanding Series 1997 B Bonds for
mandatory purchase by or on behalf of Reorganized Edbro
Missouri on January 1, 2000 and, if such option has not
been previously exercised, on any succeeding January 1
until the principal amount of the Series 1997 B Bonds
has been repaid in full, such option to be exercisable
upon 90 days' prior written notice to Reorganized Edbro
Missouri as more particularly provided in the Series
1997 Bond Indenture. All Series 1997 B Bonds so
tendered by Mercantile shall be remarketed by the
Remarketing Agent as provided for and in accordance
with the terms of the Series 1997 Bond Indenture;
provided, however, that the right to exercise such
-------- -------
tender option shall not be subject to or conditioned
upon the successful remarketing of the Series 1997 B
Bonds. The tender option described above shall be for
the exclusive benefit of Mercantile, as the sole
beneficial owner of all of the outstanding Series 1997
B Bonds, for as long as Mercantile is the sole
beneficial owner of all of the outstanding Series 1997
B Bonds and prior to any conversion of the interest
rate mode on the Series 1997 B Bonds to a Subsequent
Variable Rate or Fixed Rate, and shall not be
exercisable by Mercantile or any other Series 1997 B
Bondholder (a) if any of the Series 1997 B Bonds are
held by any Person other than Mercantile, or (b)
following any conversion of the interest rate mode on
the Series 1997 B Bonds to a Subsequent Variable Rate
or Fixed Rate.
Collateral: Issuer shall assign to the Trustee, for the benefit of all
Series 1997 Bondholders, all of its rights (except for certain
rights of indemnification of the Issuer and the Issuer's
rights to the payment of its reasonable costs, fees, and
expenses) under the Series 1997 Loan Documents, including,
without limitation, (i) its right to receipt of payments made
by Reorganized Edbro Missouri on account of the Series 1997
Loan, (ii) its rights under the Series 1997 Guaranty and (iii)
its interest as mortgagee under the Series 1997 Mortgage. As a
result of such assignment to the Trustee, Series 1997 A Bonds
and Series 1997 B Bonds shall be equally and ratably secured,
pari passu, by the Series 1997 Loan Documents.
Other Terms: Such other terms as may be mutually agreeable to Edbro
Missouri, the Issuer and the Trustee.
45
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF FORMATION
OF
EBS PENSION, L.L.C.
The undersigned, an authorized natural person, for the purpose of forming a
limited liability company under the provisions and subject to the requirements
of the State of Delaware (particularly Chapter 18, Title 6 of the Delaware
Code and the acts amendatory thereof and supplemental thereto, and known,
identified, and referred to as the "Delaware Limited Liability Company Act"),
hereby certifies that:
FIRST: The name of the limited liability company (hereinafter called the
"limited liability company") is EBS Pension, L.L.C.
SECOND: The address of the registered office of and the name and the address
of the registered agent for service of process on the limited liability
company required to be maintained by Section 18-104 of the Delaware Limited
Liability Company Act are The Corporation Trust Company, 1209 Orange Street,
in the City of Wilmington, County of New Castle, Delaware 19801.
* * *
This Certificate of Formation shall become effective at 10:00 a.m., Delaware
time (the "Effective Time") on September 25, 1997, and shall not become
effective until such time. The limited liability company shall be formed as of
the Effective Time.
Executed on September 22, 1997.
/s/ David B. Cooper, Jr.
-------------------------------
David B. Cooper, Jr., Authorized
Person
<PAGE>
EXHIBIT 3.2
===============================================================================
MEMBERS AGREEMENT
OF
EBS PENSION, L.L.C.
A LIMITED LIABILITY COMPANY
--------------------------
DATED AS OF
SEPTEMBER 26, 1997
--------------------------
===========================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
I. FORMATION OF THE COMPANY............................................. 1
1.1. Name and Formation........................................... 1
1.2. Membership Units............................................. 1
1.3. Offices...................................................... 3
1.4. Term of the Company.......................................... 3
1.5. Purposes..................................................... 4
1.6. Defined Terms................................................ 4
II. CAPITAL CONTRIBUTIONS, CAPITAL ACCOUNTS.............................. 4
2.1. Initial Capital Contributions................................ 4
2.2. Admission of Additional Members.............................. 4
2.3. Additional Capital Contribution.............................. 4
2.4. No Withdrawal................................................ 4
2.5. Capital Accounts, Allocations and Related Matters............ 4
2.6. Partnership Classification for Tax Purposes.................. 5
III. MANAGEMENT AND OPERATIONS............................................ 5
3.1. Appointment of Manager....................................... 5
3.2. Specific Authority and Responsibilities of the Manager....... 6
3.3. Additional Powers of the Manager............................. 6
3.4. Funding of Company; Operating Accounts....................... 7
3.5. Limitations on Power and Authority of the Manager............ 7
3.6. Reports to Members........................................... 8
3.7. Compensation................................................. 8
3.8. Resignation or Removal of the Manager........................ 8
3.9. Indemnity.................................................... 9
3.10. Additional Indemnity Matters................................. 10
3.11. Actions of Members........................................... 10
3.12. Indemnity of Reorganized Debtor.............................. 10
3.13. Company Liabilities.......................................... 10
3.14. Power of Attorney............................................ 11
3.15. Other Activities of the Manager.............................. 11
IV. DISTRIBUTIONS........................................................ 11
4.1. Distribution of Pension Plan Proceeds........................ 11
4.2. Applications of Proceeds..................................... 11
4.3. Reserve of Proceeds.......................................... 12
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
V. TRANSFER OF MEMBERSHIP UNITS........................................... 14
5.1. Restrictions on Transfer by General Members.................... 14
5.2. Unrestricted Transfers......................................... 14
5.3. Restrictions on Transfers by Edison............................ 14
5.4. After-Acquired Membership Units................................ 14
5.5. Specific Performance........................................... 15
5.6. Records of the Company; Void Transfers......................... 15
5.7. Withdrawal..................................................... 15
VI. DISSOLUTION AND LIQUIDATION............................................ 15
6.1. Dissolution.................................................... 15
6.2. Certificate of Cancellation.................................... 15
6.3. Procedures..................................................... 16
6.4. Termination of this Agreement.................................. 16
VII. FISCAL AND ADMINISTRATIVE MATTERS...................................... 16
7.1. Fiscal Year.................................................... 16
7.2. Deposits....................................................... 16
7.3. Checks, Drafts, Etc............................................ 17
7.4. Books and Records.............................................. 17
7.5. Administrative Matters......................................... 17
7.6. Compliance with Securities Laws................................ 18
VIII. MISCELLANEOUS.......................................................... 18
8.1. Notices........................................................ 18
8.2. Extension Not a Waiver......................................... 19
8.3. Entire Agreement; Amendments; No Third Party Beneficiaries..... 19
8.4. Governing Law.................................................. 19
8.5. Venue.......................................................... 19
8.6. Headings....................................................... 19
8.7. Severability................................................... 19
8.8. Certain Defined Terms.......................................... 20
8.9. Successors..................................................... 21
8.10. No Suits by Members............................................ 21
8.11. Involvement of the Company in Certain Proceedings.............. 22
8.12. Waiver of Partition and Certain Other Rights................... 22
8.13. Member Meetings; Member Approvals.............................. 22
8.14. No Voting Rights............................................... 23
APPENDIX A................................................................... 31
SCHEDULE 2.1................................................................. 42
FORM OF CERTIFICATE OF FORMATION............................................. 43
</TABLE>
ii
<PAGE>
MEMBERS AGREEMENT
-----------------
This Members Agreement ("Agreement"), entered into as of September 26,
1997, is made by and among Edison Brothers Stores, Inc., a Delaware corporation
("Edison"), and those Persons who are from time to time named as additional
members (the "General Members") on the books and records of EBS Pension, L.L.C.,
a Delaware limited liability company (the "Company").
WHEREAS, Edison has caused the Company to be formed in connection with the
reorganization of Edison and its subsidiaries pursuant to a Joint Plan of
Reorganization (as the same may be amended from time to time, the "Plan of
Reorganization") filed in the United States Bankruptcy Court for the District of
Delaware in Case No. 95-1354 (PJW); and
WHEREAS, the Plan of Reorganization provides for (i) the sale, transfer,
conveyance, assignment and delivery by the Debtors or the Reorganized Debtors to
the Company of specified assets in exchange for the issuance to Edison of all of
the Class B Membership Units and (ii) the distribution by Edison of Class A
Membership Units to the holders of Allowed General Unsecured Claims;
NOW, THEREFORE, Edison, as the sole initial Member, and each of the General
Members (upon becoming such) agree as follows:
I. FORMATION OF THE COMPANY
------------------------
1.1. Name and Formation. The name of the Company is EBS Pension, L.L.C.
------------------
The Company is a limited liability company organized under the Delaware Limited
Liability Company Act (Delaware Code Annotated, Title 6, (S)(S) 18-101 through
18-1109) (the "Delaware Act"). The Company is a separate legal entity. The
Company and all ownership interests in the Company will be governed by this
Agreement and, except as modified by this Agreement, by the Delaware Act.
1.2. Membership Units. (a) The owners of the Company will be known as
----------------
Members. The ownership interest of a Member will be designated as a "Membership
Unit." The Company will have the following classes of Membership Units: (i)
"Class B Membership Units", which shall initially represent all of the
Membership Units and which shall be held by Edison pending the surrender thereof
by Edison for cancellation from time to time in exchange for an equivalent
number of Class A Membership Units to be distributed by Edison pursuant to the
Plan of Reorganization, and (ii) "Class A Membership Units", which shall be
distributed by Edison from time to time to holders of Allowed General Unsecured
Claims pursuant to the Plan of Reorganization. Membership Units will be issued
only as specifically provided for in this Agreement and there shall be
outstanding a total of 10,000,000 Membership Units throughout the term of the
Company's existence. Membership Units will constitute personal property and no
Member will have a claim to or interest in specific property of the Company.
Each of the Class
<PAGE>
A Membership Units and Class B Membership Units will have the relative
preferences, rights, limitations or restrictions as set forth in this Agreement.
(b) Each Class B Membership Unit will be represented solely by an
entry in the books for registration and transfer of Membership Units provided
for in Section 1.2(d). Each Class A Membership Unit, including without
limitation any Class A Membership Unit that may be issued upon transfer of a
Class A Membership Unit, will be evidenced by, and subject to the terms of, a
Membership Unit certificate (a "Membership Certificate") in substantially the
form of Exhibit A, with such changes, marks of identification or designation,
---------
and such legends, summaries, or endorsements printed thereon as the Company may
deem appropriate and as are not inconsistent with the provisions of this
Agreement, or as may be required to comply with any applicable law or with any
rule or regulation made pursuant thereto.
(c) The Membership Certificates will be executed on behalf of the
Company by the manual or facsimile signature of the Manager.
(d) The Manager will keep or cause to be kept, at the principal office
of the Company or its agent designated for such purpose, books for registration
and transfer of the Membership Certificates issued hereunder. Such books will
show, in addition to the Class B Membership Units held by Edison, the names and
addresses of the respective holders of the Membership Certificates, the number
of Class A Membership Units evidenced by each of the Membership Certificates,
and the date of each of the Membership Certificates. The Company and its agent
will be entitled to treat the registered holder of any Membership Certificate as
the sole owner of the Class A Membership Units represented by such Membership
Certificate for all purposes and will not be bound to recognize any equitable or
other claim or interest in such Class A Membership Units on the part of any
other Person. The Manager will be entitled to establish such record dates as it
deems appropriate from time to time for purposes of determining the Members
entitled to receive distributions or notices or to exercise voting rights and
for such other purposes as the Manager deems expedient.
(e) In connection with each distribution of Class A Membership Units
required to be made pursuant to the Plan of Reorganization, Edison shall
instruct the Company or its agent designated for such purpose that Edison
desires to surrender for cancellation a specified number of Class B Membership
Units in exchange for the issuance and delivery to Edison of a like number of
Class A Membership Units, to be evidenced by Membership Certificates in such
denominations and registered in the names of such holders of Allowed General
Unsecured Claims (or the designees thereof) as may be specified in such
instruction, to be distributed by Edison pursuant to the Plan of Reorganization.
All Class A Membership Units transferred by Edison to holders of Allowed General
Unsecured Claims pursuant to the Plan of Reorganization on any Subsequent
Distribution Date shall be deemed for purposes of this Agreement to have been
issued in exchange for Class B Membership Units and distributed at the end of
the last day of the preceding fiscal quarter. All General Members agree to file
all federal, state, and local tax returns in a manner that is consistent with
the preceding sentence.
(f) Any Membership Certificate may be transferred, split up, combined,
or exchanged for another Membership Certificate or Membership Certificates. Any
Member
2
<PAGE>
desiring to transfer, split up, combine, or exchange any such Membership
Certificate will make such request in writing delivered to the Manager, and will
surrender the Membership Certificate or Membership Certificates to be
transferred, split up, combined, or exchanged, with a form of assignment duly
executed by the Member thereof, at the principal office of the Company or its
agent designated for such purpose. Thereupon or as promptly as practicable
thereafter, the Company or its agent will prepare, execute, and deliver the
Membership Certificate or Membership Certificates, as the case may be, as so
requested. Neither the Company nor its agent will be required to issue or
deliver any Membership Certificates in connection with any transfer, split up,
combination, or exchange of Membership Certificates unless and until the Member
requesting the issuance or delivery thereof has paid to the Manager the amount
of any tax or governmental charge that may be payable in connection with such
transfer, split up, combination, or exchange or has established to the
satisfaction of the Manager that any tax or governmental charge has been paid.
(g) Upon receipt by the Company and the Manager of evidence reasonably
satisfactory to them of the loss, theft, destruction, or mutilation of a
Membership Certificate, and, in case of loss, theft, or destruction, of
indemnity or security reasonably satisfactory to them, and reimbursement to the
Company and the Manager of all reasonable expenses incidental thereto, and upon
surrender to the Manager and cancellation of the Membership Certificate if
mutilated, the Manager will prepare, execute, and deliver a new Membership
Certificate of like tenor to the Member in lieu of the Membership Certificate so
lost, stolen, destroyed, or mutilated.
(h) All Membership Certificates surrendered for the purpose of
transfer, split-up, combination or exchange will be delivered to the Company or
its agent designated for such purpose for cancellation and will be canceled by
the Company or such agent, and no Membership Certificates will be issued in lieu
thereof except as expressly provided in this Agreement.
1.3. Offices. The initial registered agent of the Company is The
-------
Corporation Trust Company, and the address of the initial registered office of
the Company is 1209 Orange Street, Wilmington, Delaware. The principal office
of the Company will be maintained at the principal office of the Manager.
1.4. Term of the Company. The Company's existence will commence on the
-------------------
date hereof (the "Commencement Date") and will continue until the third
anniversary of the Effective Date, unless sooner terminated in accordance with
Article VI; provided, however, that in the event that (a) the liquidation and
-------- -------
distribution of all Company Assets in accordance with this Agreement shall not
have then been completed or (b) all Disputed General Unsecured Claims shall not
have been resolved, the existence of the Company may be extended by the Manager,
with the approval of the Bankruptcy Court for good cause shown, for one or more
successive periods of two years each. In no event will the Company's existence
continue after the liquidation and distribution of all Company Assets in
accordance with this Agreement shall have been completed and all Disputed
General Unsecured Claims have been resolved.
1.5. Purposes. The Company is organized for the exclusive purposes of
--------
(a) receiving and administering the Company Assets and (b) distributing the
Company Assets to the Members in accordance with this Agreement. The Company
has no objective to engage in or continue the
3
<PAGE>
conduct of a trade or business. Except as otherwise provided in the Delaware Act
or by other applicable law, the Company will have the power to do all things
necessary or convenient to effect any or all of its purposes.
1.6. Defined Terms. In addition to the terms defined elsewhere herein,
-------------
terms used herein which are defined in the Plan of Reorganization will have the
meanings ascribed thereto in the Plan of Reorganization when used in this
Agreement with initial capital letters.
II. CAPITAL CONTRIBUTIONS, CAPITAL ACCOUNTS
---------------------------------------
2.1. Initial Capital Contributions. As of the Commencement Date, Edison
-----------------------------
will make an initial contribution to the capital of the Company in the amount of
$100. On the Effective Date, the Debtors or Reorganized Debtors will transfer
to the Company, in accordance with the Plan of Reorganization, all of their
respective rights, title and interest in and to the Pension Plan Proceeds and
the applicable portion of the LLC Funding Amount, and such transfers shall be
treated as contributions by Edison to the capital of the Company. In
consideration for such initial contribution or the obligations of the Debtors
and the Reorganized Debtors to make such additional contributions, 10,000,000
Class B Membership Units will be issued to Edison on the Commencement Date.
2.2. Admission of Additional Members. From and after the Effective Date,
-------------------------------
Class A Membership Units will be issued and delivered to Edison for distribution
to holders of Allowed General Unsecured Claims in accordance with Section
1.2(e). Upon such issuance and delivery the Persons in whose name such Class A
Membership Units are registered will be admitted to the Company as General
Members. Similarly, each Person to whom record ownership of a Class A
Membership Unit is subsequently transferred in accordance with Section 5.2 will
be admitted to the Company as a General Member upon the registration of such
transfer.
2.3. Additional Capital Contributions. Except as provided for in Section
--------------------------------
2.1, no Member will have any obligation to, nor will any Member be entitled to,
make any additional contributions to the capital of the Company.
2.4. No Withdrawal. No Member will be entitled to withdraw any portion
-------------
of its contribution or Capital Account, or to receive any distribution from the
Company, except as otherwise provided in this Agreement.
2.5. Capital Accounts, Allocations and Related Matters.
-------------------------------------------------
2.5.1. Capital Accounts. A Capital Account will be maintained
----------------
for each Member in the manner set forth in Article II of Appendix A, which is
----------
attached hereto and is a part of this Agreement.
2.5.2. Allocations of Book Income and Loss. Except to the extent
-----------------------------------
modified by the provisions of Article III of Appendix A, the Company's Book
----------
income and Book loss for any fiscal year will be allocated to the Members as
follows:
4
<PAGE>
first, all items of income consisting of interest or other
-----
earnings on Reserved Proceeds shall be allocated to the holders of the
Class B Membership Units in proportion to their respective Class B
Sharing Percentages; and
second, all remaining items of Book income and loss shall be
------
allocated to the Members in proportion to their respective Overall
Sharing Percentages.
2.5.3. Advances from Members. Advances by Members to the Company will
---------------------
not be deemed a capital contribution to, or be reflected on the balance of, any
Capital Account. The amount of any such advance will be a debt due from the
Company to such Member and, except as otherwise expressly provided in this
Agreement or as agreed between such Member and the Manager at the time such
funds are advanced, will be repaid as soon as practicable to such Member.
2.5.4. No Interest. No interest will be paid by the Company on (a)
-----------
any capital contribution, (b) on the balance of any Capital Account, or (c)
unless otherwise agreed to by the Manager, on any advance to the Company from
any Member.
2.6. Partnership Classification for Tax Purposes. Each Member recognizes
-------------------------------------------
and intends that for federal income tax purposes the Company will be classified
as a partnership, and the Members will not make any election or take any action
that would cause the relationship of the Members under this Agreement to be
excluded from the application of all or any part of Subchapter K of Chapter 1 of
Subtitle A of the Code or from any successor provisions to Subchapter K under
the Code or from any similar provisions of applicable state laws.
III. MANAGEMENT AND OPERATIONS
-------------------------
3.1. Appointment of Manager. (a) The Company Assets will be
----------------------
administered, and the business and affairs of the Company will be managed, by
the Person specified in the Confirmation Order as having been designated as such
by the Creditors' Committee (together with any successor Manager appointed
pursuant to Section 3.8, the "Manager"), who will have the specific authority
and responsibilities granted to him/her hereunder. In furtherance of the
Company's purposes, the Manager will make continuing efforts to (i) receive the
Pension Plan Proceeds and (ii) make distributions of any Pension Plan Proceeds
to the Members; in each case in an expeditious but orderly manner intended
reasonably to maximize the value of such distributions to the Members, but
subject to the judgment and discretion of the Manager and the provisions of this
Agreement.
(b) The Manager will not be liable or accountable, in damages or
otherwise, to the Company or to any Member for anything it may do or refrain
from doing, except in the case of its willful breach of a material provision of
this Agreement or gross negligence in connection with the performance of its
duties hereunder.
(c) The Manager may rely, and will be fully protected personally in
acting upon, any resolution, statement, certificate, instrument, opinion,
report, notice, request, consent,
5
<PAGE>
order or other instrument or document that it has no reason to believe to be
other than genuine and to have been signed or presented other than by the proper
party or parties or, in the case of facsimile transmissions, to have been sent
other than by the proper party or parties, in each case without obligation to
satisfy itself that the same was given in good faith and without responsibility
for errors in delivery, transmission or receipt. In the absence of its gross
negligence or willful breach of this Agreement, the Manager may rely as to the
truth of statements and the correctness of the facts and opinions expressed
therein and will be fully protected personally in acting thereon. The Manager
may consult with legal counsel and will be fully protected in respect of any
action taken or suffered by it in accordance with the written opinion of legal
counsel.
3.2. Specific Authority and Responsibilities of the Manager.
------------------------------------------------------
3.2.1. Disbursement of Pension Plan Proceeds. The Manager shall
-------------------------------------
be responsible for arranging the receipt and distribution of all Pension Plan
Proceeds as contemplated by Article IV, providing all notice and services
necessary to carry out such receipt and distribution and performing any
additional duties as specified in this Agreement with respect to the Pension
Plan Proceeds.
3.2.2. Retention of Attorneys, Accountants and Other
---------------------------------------------
Professionals. (a) The Manager may retain such independent experts and advisors
- -------------
(including, but not limited to, law firms, tax advisors, consultants, or other
professionals) as the Manager may select to aid in the performance of its duties
and responsibilities hereunder and to perform such other functions as may be
appropriate in furtherance of the intent and purpose of this Agreement.
(b) The Manager may commit the Company to provide such
professional persons or entities reasonable compensation and reimbursement from
the Company Assets for services rendered and expenses incurred. The Manager will
make all reasonable and customary arrangements for payment or reimbursement of
such compensation and expenses and will pay the same from the Operating Account
as Administrative Expenses.
3.3. Additional Powers of the Manager. (a) Except as otherwise provided
--------------------------------
in this Agreement, the Plan of Reorganization or the Confirmation Order, and
subject to the retained jurisdiction of the Bankruptcy Court as provided for in
the Plan of Reorganization, but without prior or further authorization, the
Manager may control and exercise authority over the Company Assets, over the
acquisition, management and disposition thereof and over the management and
conduct of the Company to the extent necessary to enable the Manager to fulfill
the intent and purposes of this Agreement. No person dealing with the Company
will be obligated to inquire into the authority of the Manager in connection
with the acquisition, management or disposition of the Company Assets.
(b) In connection with the administration of the Company Assets
and the management of the Company's business and affairs, the Manager, except as
otherwise expressly limited in this Agreement, the Plan of Reorganization or the
Confirmation Order, will have, in addition to any powers conferred upon the
Manager by any other provision of this Agreement, the power to take any and all
actions as, in the Manager's sole discretion, are necessary or
6
<PAGE>
advisable to effectuate the purposes of the Company, including, without
limitation, the power and authority (i) to distribute the Company Assets to
Members in accordance with the terms of this Agreement, (ii) to sell, convey,
transfer, assign, liquidate or abandon the Company Assets, or any part thereof
or any interest therein, upon such terms and for such consideration as the
Manager, in its sole discretion, may deem desirable, (iii) to endorse the
payment of notes or other obligations of any Person or to make contracts with
respect thereto, (iv) to borrow such sums of money, at any time and from time to
time, for such periods of time, upon such terms and conditions, from such
Persons, for such purposes as may be deemed advisable, and (v) to appoint,
engage, supervise and compensate such officers, employees and agents of the
Company and such other Persons, as may be deemed necessary or desirable. The
Manager will not at any time, on behalf of the Company or the Members, enter
into or engage in any trade or business, and no part of the Company Assets will
be used or disposed of by the Manager in furtherance of any such trade or
business.
(c) All decisions and actions taken by the Manager under the authority
of Sections 3.2 or this Section 3.3 will be binding upon all of the Members and
the Company.
3.4. Funding of Company; Operating Accounts.
--------------------------------------
3.4.1. Operating Accounts. The Company will maintain in the Operating
------------------
Account all funds received (including loan proceeds received pursuant to Section
3.3(b)(iv)), subject to expenditures in accordance with Section 3.2.2 and
distributions made in accordance with Article IV.
3.4.2. Investment of Company Funds. All funds received by the Company
---------------------------
may be temporarily invested by the Manager in United States treasury bills and
notes with maturities of 12 months or less, institutional money market funds,
and demand or time deposits and certificates of deposit with commercial banks
organized under the laws of the United States, or any State thereof, having
primary capital of not less than $500,000,000.
3.5. Limitations on Power and Authority of the Manager. Without the
-------------------------------------------------
consent of all of the Members, the Manager will not have the authority to do any
of the following:
(a) Take any action in contravention of this Agreement;
(b) Take any action which would make it impossible to carry on the
activities of the Company; or
(c) Possess property of the Company or assign the Company's rights in
specific property for other than Company purposes.
3.6. Reports to Members. The Manager will cause the Company to furnish to
------------------
the Members, promptly after the filing thereof with the Securities and Exchange
Commission (the "SEC"), each Annual Report on Form 10-K filed by the Company
with the SEC (or, if the Company is not required to file an Annual Report on
Form 10-K in respect of a particular fiscal year, to furnish to the Members,
within a comparable time frame following the end of such fiscal
7
<PAGE>
year, an annual report containing information substantially identical to that
which would have been included in an Annual Report on Form 10-K in respect of
such fiscal year prepared in accordance with the rules and regulations of the
SEC).
3.7. Compensation. The Manager will receive compensation for services to
------------
the Company as described in the Confirmation Order or as otherwise determined by
the Designation Members. In addition, the Company will reimburse the Manager
for the reasonable expenses incurred by him in connection with the performance
of his duties hereunder.
3.8. Resignation or Removal of the Manager.
-------------------------------------
3.8.1. Resignation. The Manager may resign as manager by
-----------
executing an instrument in writing and delivering it to the Members; provided,
--------
however, that such Manager will continue to serve as a Manager after his
- -------
resignation until the time when appointment of a successor Manager becomes
effective in accordance with Section 3.8.3.
3.8.2. Removal. The Designation Members may at any time remove
-------
the Manager, with or without cause, in their sole discretion; provided, however,
-------- -------
that the Manager will continue to serve as Manager after his removal until the
time when appointment of a successor Manager will become effective in accordance
with Section 3.8.3.
3.8.3. Appointment of Successor Manager. In the event of the
--------------------------------
death, resignation, incompetency or removal of the Manager, the Designation
Members will have the right to appoint a successor Manager; provided, however,
-------- -------
that no Person who is an affiliate of Edison may be so appointed. Such
appointment will specify the date on which such appointment will be effective;
provided, however, that if a successor Manager is not appointed within 90 days
- -------- -------
of the death, resignation, incompetency or removal of the Manager, the Manager
or the Manager's representative may petition the Bankruptcy Court for the
appointment of a successor Manager. Every successor Manager appointed hereunder
will execute, acknowledge and deliver to the departing Manager an instrument
accepting such appointment, and thereupon such successor Manager, without any
further act, deed or conveyance, will become vested with all the rights, powers
and duties of the departing Manager.
3.8.4. Effect of Resignation or Removal. The death, resignation,
--------------------------------
incompetency or removal of the Manager will not operate to revoke any existing
agency created under the terms of this Agreement or invalidate any action
theretofore taken by such Manager. In the event of the resignation or removal of
the Manager, such Manager will promptly (a) execute and deliver such documents,
instruments and other writings as may be reasonably requested by the successor
Manager to effect the termination of such Manager's capacity under this
Agreement, (b) deliver to the successor Manager all documents, instruments,
records and other writings related to the Company as may be in the possession of
such Manager (provided that such Manager may retain one copy of such documents
for archival purposes), and (c) otherwise assist and cooperate in effecting the
assumption of its obligations and functions by such successor Manager.
8
<PAGE>
3.9. Indemnity.
---------
3.9.1. Indemnity of Managers and Members. To the fullest extent
---------------------------------
permitted by the Delaware Act, the Company, to the extent of its assets legally
available for that purpose, will indemnify and hold harmless the Manager, the
Tax Matters Partner, the Members or any member, partner, shareholder, director,
officer, agent, affiliate and professional or other advisor of any of them
(collectively, the "Indemnified Persons") from and against any and all loss,
cost, damage, expense (including without limitation fees and expenses of
attorneys and other advisors and any court costs incurred by any Indemnified
Person) or liability by reason of anything any Indemnified Person does or
refrains from doing for, or in connection with the business or affairs of, the
Company, except to the extent that it is finally judicially determined by a
court of competent jurisdiction that the loss, cost, damage, expense or
liability resulted primarily from the Indemnified Person's gross negligence or
willful breach of a material provision of this Agreement which in either event
causes actual material damage to the Company. The Company may pay in advance or
reimburse reasonable expenses (including advancing reasonable costs of defense)
incurred by the Indemnified Person who is or is threatened to be named or made a
defendant or a respondent in a proceeding concerning the business and affairs of
the Company.
3.9.2. Future Laws. To the extent future enactments or judicial
-----------
decisions permit an expansion of the rights of indemnification afforded to the
Manager and the Members by the Company, then it is the Members' express
intention and agreement that this Section 3.9 immediately and automatically be
deemed to be amended so as to permit and authorize the indemnification of the
Indemnified Persons by the Company to the maximum extent permitted by law. The
Manager is authorized and empowered to execute, on behalf of all Members, such
amendments to this Agreement as may be appropriate to give further effect to
this Section 3.9.
3.9.3 Insurance. To the extent commercially reasonable, the
---------
Manager will cause the Company to purchase and maintain insurance, to the extent
and in such amounts as the Manager, in its sole discretion, deems reasonable, on
behalf of persons to be covered and such other Persons as the Manager
determines, against any liability that may be asserted against or expenses that
may be incurred by any such Person in connection with the activities of the
Company or such indemnitees, regardless of whether the Company would have the
power to indemnify such Person against such liability under the provisions of
this Agreement. The Manager and the Company may enter into indemnity contracts
with Persons to be covered and adopt written procedures pursuant to which
arrangements are made for the advancement of expenses and the funding of
obligations and containing such other procedures regarding indemnification as
are appropriate.
3.10. Additional Indemnity Matters.
----------------------------
3.10.1. Waiver of Indemnity Rights. Any Indemnified Person may
--------------------------
waive the benefits of indemnification under Section 3.9, but only by an
instrument in writing executed by such Indemnified Person.
3.10.2. Certain Related Rights. The rights to indemnification
----------------------
under Section 3.9 are not exclusive of other rights which any Indemnified Person
may otherwise have at law or in
9
<PAGE>
equity, including without limitation common law rights to indemnification or
contribution. Nothing in Section 3.9 or this Section 3.10 will affect the rights
or obligations of any Person (or the limitations on those rights or obligations)
under any other agreement or instrument to which that Person is a party.
3.11. Actions of Members. Except as otherwise expressly provided for in
------------------
this Agreement, the Members may not act for or bind the Company or participate
in the general management, conduct or control of the Company's business or
affairs. Nothing contained in this Section 3.11 will prohibit any Member or any
partner, shareholder, member, officer, director, employee, agent or other
representative of any Member from serving as an officer or agent of the Company.
3.12. Indemnity of Reorganized Debtor. Except with respect to any
-------------------------------
Unresolved Avoidance Claims that EBS Litigation, L.L.C. may have against persons
who are present or former officers, directors or employees of the Debtors
otherwise than in their capacities as present or former officers, directors or
employees of the Debtors, the Company, together with EBS Litigation, L.L.C.,
will indemnify and hold harmless the Reorganized Debtors and their present or
former officers, directors and employees (collectively, the "Indemnified
Reorganized Debtor Parties") from and against any direct losses, claims,
damages, expenses or liabilities ("Losses") by reason of any actions arising
from or relating to EBS Litigation, L.L.C. and any actions taken or proceedings
commenced by EBS Litigation, L.L.C. (the "LLC Related Claims"). The foregoing
indemnification obligation shall be satisfied solely from the funds, if any,
received by EBS Litigation, L.L.C. from the compromise and settlement or
successful prosecution of the Unresolved Avoidance Claims; provided, however,
-------- -------
that indemnification for any Losses incurred by the Indemnified Reorganized
Debtor Parties in defending against the LLC Related Claims shall be sought first
from any applicable officers' and directors' insurance policy, and then from the
reserve in the amount of $1,500,000 to be established by the Company from the
Pension Plan Proceeds for the benefit of the Indemnified Reorganized Debtor
Parties, pursuant to Section 4.2. Any amounts remaining in the reserve upon the
final adjudication, including any appeals, of the LLC Related Claims or the
compromise and settlement of such claims, shall be released and distributed to
the General Members in accordance with Section 4.1.
3.13. Company Liabilities. All liabilities of the Company, including
-------------------
without limitation indemnity obligations under Sections 3.9 and 3.12, will be
liabilities of the Company as an entity, and will be paid or satisfied from
Company Assets. No liability of the Company will be payable in whole or in part
by Edison or any Member in its capacity as a Member, the Manager in its capacity
as Manager or by any member, partner, shareholder, director, officer, agent,
affiliate or advisor of any Member, the Manager or their affiliates.
3.14. Power of Attorney. (a) General. Each of the Members appoints the
----------------- -------
Manager as its attorney-in-fact, with full power of substitution and
resubstitution, for the sole purpose of executing and delivering in the Member's
name any or all of the following:
(i) The Certificate of Formation of the Company and any amendments to
the Certificate of Formation that the Manager deems appropriate as long as
such amendment would not materially adversely affect the Members' interest
in the Company;
10
<PAGE>
(ii) All certificates and other instruments that may be appropriate
to effect the dissolution and termination of the Company under Article VI;
and
(iii) All reports, forms and schedules that the Manager determines
appropriate to file with any governmental body in connection with any
Company activity.
(b) Irrevocable Grant. The power of attorney granted under this Section
-----------------
3.14 is coupled with an interest and is irrevocable and will survive the death,
dissolution, legal incompetency, bankruptcy and withdrawal from the Company of
any Member or the transfer of its interest in the Company.
3.15. Other Activities of the Manager. The Manager will be free to own or
-------------------------------
otherwise participate directly or indirectly in the ownership or operation of
any property or any activity of any Person, or any professional activity,
whether or not the property or activity competes with or is enhanced by any
property or activity of the Company.
IV. DISTRIBUTIONS
-------------
4.1. Distribution of Pension Plan Proceeds. Subject to the provisions of
-------------------------------------
Sections 4.2 and 4.3, the Manager will distribute any Pension Plan Proceeds
(together with any interest earned thereon or other proceeds thereof), promptly
following the Company's receipt thereof, to the General Members, in proportion
to their respective Class A Sharing Percentages.
4.2. Applications of Proceeds. Prior to making any distribution pursuant
------------------------
to Section 4.1, the Manager will apply amounts otherwise available for
distribution as follows: (a) first, to the payment of any associated taxes and
-----
unpaid administrative expenses, (b) second, to the payment of all unpaid fees
------
and expenses incurred in employing the professional advisors to the Company and
the compensation and fees of the Manager, (c) third, to a reserve in the amount
-----
of $1,500,000 to cover Losses that may be incurred by the Indemnified
Reorganized Debtor Parties in respect of LLC Related Claims, (d) fourth, to the
------
payment of Tax Distributions required to be distributed to Edison pursuant to
Section 4.4, (e) fifth, to the repayment in full of any outstanding loans, and
-----
(f) sixth, to a reserve for the amount of future Administrative Expenses, as
-----
reasonably determined by the Manager, in its sole discretion, for up to the term
of this Agreement.
4.3. Reserve of Proceeds. At any time at which any Class B Membership
-------------------
Units remain outstanding, prior to making any distribution pursuant to Section
4.1, and after giving effect to the application of amounts pursuant to Section
4.2, the Manager will withhold from amounts otherwise available for distribution
an amount equal to the product of (a) the percentage of the aggregate Membership
Units represented by the Class B Membership Units and (b) the amount of such
proceeds otherwise available for distribution. All such amounts that are so
withheld shall constitute "Reserved Proceeds," shall be held by the Manager in a
separate account (the "Reserved Proceeds Account") for the benefit of the
Persons to whom Class A Membership Units shall thereafter be transferred
pursuant to the Plan of Reorganization, and shall be invested in instruments of
the kind specified in Section 3.4.2. All amounts deposited in the Reserved
Proceeds Account, together with all interest thereon, shall be distributed in
accordance with the
11
<PAGE>
following sentence. Each Class A Membership Unit issued pursuant to Section
1.2(e) for distribution pursuant to the Plan of Reorganization at a time at
which funds are held in the Reserved Proceeds Account shall be accompanied by a
payment (by means of a check made payable to the Person in whose name such Class
A Membership Unit is to be registered) in an amount determined by multiplying
the aggregate amount of funds held in the Reserved Proceeds Account immediately
prior to such issuance by a fraction, the numerator of which shall be one and
the denominator of which shall be the aggregate number of Class B Membership
Units outstanding immediately prior to such issuance; provided, however, that no
payment that would require the issuance of a check in an amount less than $1.00
shall be made pursuant to this Section 4.3.
4.4 Tax Distributions. (a) Subject to the terms, conditions and
-----------------
limitations set forth in this Section 4.4, the Company shall have the obligation
to make distributions (the "Tax Distributions") to Edison with respect to
taxable income allocated to Edison.
(b) Following the close of each fiscal quarter or fiscal year, the Company
shall promptly notify Edison in writing of the amount of taxable income or loss
expected to be allocable to Edison for federal and state income tax purposes for
such fiscal quarter or fiscal year.
(c) Within 60 days following the close of each fiscal quarter or fiscal
year in which the Company recognizes taxable income for federal or state income
tax purposes, the Company shall make a Tax Distribution to Edison.
(d) The amount of the Tax Distribution that the Company shall be obligated
to make to Edison shall be subject to all of the following provisions:
(i) The Tax Distribution for each of the first three fiscal quarters
in each fiscal year shall equal the product of (x) the amount of net
taxable income expected to be allocable to Edison for that fiscal quarter,
multiplied by (y) the Effective Tax Rate.
(ii) The Tax Distribution for the fourth fiscal quarter in each fiscal
year shall equal
the product of (x) the amount of net taxable income allocated to
Edison for that fiscal year, multiplied by (y) the Effective Tax Rate
minus
the aggregate amount of Tax Distributions made during the first three
fiscal quarters of that fiscal year.
(iii) In the event that the calculation described in the previous
subsection produces a negative amount (i.e., where Tax Distributions for
the first three fiscal quarters exceed the total amount of Tax
Distributions that should be made for the fiscal year as a whole), Edison
shall promptly return to the Company an amount equal to the absolute value
of the negative amount thus determined, which amount the Company shall
12
<PAGE>
maintain in a segregated reserve account to be applied against any
subsequent Tax Distributions deficiencies.
(iv) Tax Distributions shall not exceed the amount of cash available
to the Company after the application of proceeds pursuant to Section
4.2(a), (b), and (c). In the event that the amount of cash available is
less than the required Tax Distributions, any such deficiencies will be
carried over and paid in full in the next succeeding fiscal quarter in
which sufficient cash is available to make such Tax Distributions.
(v) The Tax Distribution with respect to the last fiscal quarter in
which Edison owns Class B Membership Units (giving effect to the timing
convention set forth in the penultimate sentence in Section 1.2(e)) shall
be determined using the interim closing of the books method under Section
706 of the Code and Treasury regulations promulgated thereunder, so long as
such quarter is one of the first three fiscal quarters in the fiscal year.
For purposes of this Section 4.4(d), taxable income shall be determined under
Section 703 of the Code without regard to Section 703(a)(1) thereof.
(e) For all relevant federal, state, and local tax purposes, the Company
and Edison shall treat each Tax Distribution as having been made pursuant to
section 731 of the Code on account of the Class B Membership Units held by
Edison at the end of the immediately preceding fiscal quarter.
(f) The "Effective Tax Rate" shall mean a rate computed by combining the
highest marginal tax rate imposed on corporations for federal income tax
purposes and the highest marginal tax rate imposed on corporations for purposes
of the state income tax of the State of Missouri, treating the payment of state
income tax as a deduction for federal income tax purposes.
V. TRANSFER OF MEMBERSHIP UNITS
----------------------------
5.1. Restrictions on Transfer by General Members. A General Member may
-------------------------------------------
not Transfer any beneficial interest in its Membership Unit, other than in an
Unrestricted Transfer. Any purported Transfer of a Class A Membership Unit by a
General Member in violation of this Agreement (an "Unauthorized Transfer") will
be null and void.
5.2. Unrestricted Transfers. (a) Any Transfer of Class A Membership
----------------------
Units made in accordance with this Section 5.2 will constitute an "Unrestricted
Transfer" for purposes of this Agreement.
(b) Any General Member may, upon providing (i) such evidence to the
Company as the Manager may reasonably require (including, if required by the
Manager, an opinion of counsel reasonably satisfactory to the Manager), to the
effect that such Transfer will not result in the Company ceasing to be
classified as a partnership for federal income tax purposes, and (ii) such
assurances as the Manager may reasonably require with respect to the
reimbursement of
13
<PAGE>
any expenses that may be incurred by the Company in connection with such
Transfer, Transfer all or any portion of the record or beneficial interests in
the Class A Membership Units owned by such General Member to any Person. Subject
to the foregoing and to applicable law, the following Transfers will constitute
"Unrestricted Transfers":
(i) A Transfer or series of Transfers by a General Member within a
thirty-day period which involve the Transfer of more than 2% of the outstanding
Membership Units;
(ii) A Transfer or series of related Transfers by one or more Members
(acting together) which involves the Transfer of 50% or more of the outstanding
Class A Membership Units;
(iii) Transfers of Class A Membership Units effected through a
Qualified Matching Service; or
(iv) Transfers in which the basis of the Membership Unit in the hand
of the Transferee is determined, in whole or in part, by reference to its basis
in the hands of the Transferor.
5.3. Restrictions on Transfers by Edison. Notwithstanding anything to
-----------------------------------
the contrary in this Agreement, Edison will not Transfer any Class B Membership
Unit to any Person except by operation of law to a Person who shall have
succeeded to Edison's obligations to distribute all previously undistributed
Class A Membership Units (including any related Reserved Proceeds) pursuant to
the Plan of Reorganization.
5.4. After-Acquired Membership Units. All of the provisions of this
-------------------------------
Agreement will apply to and include all the Membership Units issued by the
Company to any Member or acquired by any Person on and after the date hereof.
Any Person who at any time becomes the holder of record of a Membership Unit
will, upon becoming such, be admitted to the Company as a Member and will be
bound by the provisions of this Agreement with the same force and effect as
though such Person were a signatory hereto.
5.5. Specific Performance. The parties hereto agree that irreparable
--------------------
damage would occur in the event that any Member Transfers, or attempts to
Transfer, any equity interest in the Company in violation of this Agreement and
that the Company shall be entitled to specific performance in addition to
recovering attorney's fees from the breaching party and any other remedy at law
or equity.
5.6. Records of the Company; Void Transfers. The Manager will Transfer
--------------------------------------
Membership Units on the Company's books only in accordance with the terms and
conditions of this Agreement. Any Unauthorized Transfer of Membership Units by
a Member will be null and void, and the transferee under any such purported
Transfer will acquire no title or ownership thereby but will hold such
Membership Units for the benefit of the other Members.
5.7. Withdrawal. No Member may resign from the Company or effect a
----------
partial or complete withdrawal from the Company.
14
<PAGE>
VI. DISSOLUTION AND LIQUIDATION
---------------------------
6.1. Dissolution. The Company will be dissolved upon the occurrence of
-----------
any of the following events:
(a) When the period fixed for the existence of the Company (including
any extensions thereof effected in accordance with the terms hereof) expires;
(b) Upon the entry of a final judgment, order, or decree of a court of
competent jurisdiction adjudicating the Company to be bankrupt and the
expiration without appeal of the period, if any, allowed by applicable law in
which to appeal; or
(c) By the unanimous written agreement of all of the Members.
The death, expulsion, bankruptcy or dissolution of any Member, or the occurrence
of any other event which terminates the continued membership of a Member will
not result in the Company's dissolution unless such dissolution is otherwise
required pursuant to the provisions of this Section 6.1.
6.2. Certificate of Cancellation. In accordance with the Delaware Act,
---------------------------
as soon as possible following the occurrence of any of the events specified in
Section 6.1 effecting the dissolution of the Company, the Manager will cause to
be executed and filed a certificate of cancellation to dissolve the Company in
such form as is prescribed by the Secretary of State of Delaware.
6.3. Procedures.
----------
6.3.1. Liquidation of Assets. In the event of the dissolution of the
---------------------
Company, the Manager or the Person required by law to wind up the Company's
affairs (the Manager or other Person being referred to herein as the
"Liquidating Agent") will commence to wind up the affairs of the Company and
liquidate its assets as promptly as is consistent with obtaining the fair value
thereof. In connection with any such winding up and liquidation, a financial
statement of the Company as of the date of dissolution will be prepared and
furnished to all the Members by the Liquidating Agent. The Members will
continue to share profits and losses during the period of liquidation in
accordance with Section 2.5.2 of this Agreement.
6.3.2. Authority of Liquidating Agent. In connection with the
------------------------------
dissolution and winding up of the Company, the Liquidating Agent will have all
of the rights and powers with respect to the assets and liabilities of the
Company that a manager would have pursuant to this Agreement or any other
applicable law.
6.3.3. Distribution of Assets. Following the payment of, or provision
----------------------
for, all debts and liabilities of the Company and all expenses of liquidation,
and subject to the right of the Liquidating Agent to set up such cash reserves
as the Liquidating Agent may deem reasonably necessary for any contingent or
unforeseen liabilities or obligations of the Company,
15
<PAGE>
the proceeds of the liquidation and any other funds (or other remaining Company
Assets) of the Company will be distributed to the General Members in accordance
with their respective Capital Account balances.
6.3.4. No Recourse to Assets of Members. Each Member will look solely
--------------------------------
to the Company Assets for all distributions with respect to such Member's
Capital Account balances, and will have no recourse therefor (upon dissolution
of the Company or otherwise) against Edison or any other Member.
6.4. Termination of this Agreement. Upon the completion of the
-----------------------------
liquidation and distribution of all Company Assets and the resolution of all
Disputed General Unsecured Claims and filing of the certificate of cancellation
as contemplated by Section 6.2, this Agreement will terminate automatically
without any further action on the part of the Members.
VII. FISCAL AND ADMINISTRATIVE MATTERS
---------------------------------
7.1. Fiscal Year. The fiscal year of the Company will begin on the first
-----------
day of January and end on the last day of December of each year.
7.2. Deposits. Consistent with the provisions of Section 3.4.2, all
--------
funds of the Company will be deposited from time to time to the credit of the
Company in such banks, trust companies or other depositories as the Manager may
select.
7.3. Checks, Drafts, Etc. All checks, drafts or other orders for the
--------------------
payment of money, and all notes or other evidences of indebtedness issued in the
name of the Company will be signed by the Manager or any other Person selected
by the Manager.
7.4. Books and Records. The Manager will maintain books and records
-----------------
relating to the assets and income of the Company and the payment of expenses of,
and liabilities or claims against or assumed by, the Company in such detail and
for such period of time as may be necessary to enable it to make full and proper
accounting in respect thereof and to comply with applicable provisions of law.
Nothing in this Agreement is intended to require the Manager to file any
accounting or seek approval of any court with respect to the administration of
the Company, or as a condition for managing any payment or distribution out of
the Company Assets. The Manager will keep or cause to be kept accurate and
complete minutes and records of the Members and books and records of account of
the Company, which will be kept at the principal place of business of the
Company or at such other places, within or without the State of Delaware, as the
Manager will from time to time determine.
7.4.1. Right of Inspection. Edison and any Member of the Company will
-------------------
have the right to examine, at any reasonable time or times for any purpose, the
minutes and records of the Members and the books and records of account of the
Company, and to make copies thereof. Such inspection may be made by any agent or
duly appointed attorney of Edison or the Member making such request, as
applicable. Notwithstanding the foregoing, if the Manager determines that the
disclosure of certain confidential and proprietary information of the Company to
a
16
<PAGE>
Member would cause irreparable harm to the Company or the Members, the Manager,
in the exercise of its good faith judgment, may refuse to disclose such
confidential and proprietary information to such requesting Member.
7.4.2. Financial Records. Subject to the provisions of Appendix A, all
----------------- ----------
books and records of account of the Company will be maintained and reported
based upon generally accepted accounting principles.
7.5. Administrative Matters.
----------------------
7.5.1. "Tax Matters Partner". The Manager will designate one of the
---------------------
Members of the Company, with the consent of such Member, to be the "Tax Matters
Partner" (as defined in Code Section 6231). The Tax Matters Partner is
authorized and required to represent the Company (at the Company's expense) in
connection with all examinations of the Company's affairs by tax authorities,
including administrative and judicial proceedings, and to expend Company funds
for professional services and costs associated therewith. The Manager will, to
the extent requested by the Tax Matters Partner, coordinate and assist the Tax
Matters Partner in the performance of such functions.
7.5.2. Cooperation. Each Member agrees to cooperate with the Tax
-----------
Matters Partner and to do or refrain from doing any or all things reasonably
requested by the Tax Matters Partner with respect to the conduct of such
proceedings and the preparation of all returns pursuant to Section 7.5.3.
7.5.3. Filings. The Tax Matters Partner will arrange for the
-------
preparation and timely filing of all returns required to be filed by the Company
and the distribution of Form K-1 or other similar forms to all Members.
7.5.4. Authorization. The actions of the Tax Matters Partner will be
-------------
deemed to be authorized by the unanimous consent of the Members with respect to
the matters set forth in Section 7.5.1.
7.5.5. Reporting to Members. The Tax Matters Partner will keep the
--------------------
other Members informed of all material matters that may come to its attention in
its capacity as Tax Matters Partner.
7.6. Compliance with Securities Laws. The Manager will file with the
-------------------------------
Securities and Exchange Commission and other applicable federal and state
governmental agencies such reports and other documents, if any, and take any
other actions as may be necessary to comply with federal or state securities
laws.
VIII. MISCELLANEOUS
-------------
17
<PAGE>
8.1. Notices. (a) All notices, requests or other communications
-------
required or permitted to be made in accordance with this Agreement will be in
writing and will be delivered personally or by first class mail, telecopier or
overnight courier:
(i) if to the Manager, at its principal office;
(ii) if to Edison, at:
Edison Brothers Stores, Inc.
501 North Broadway
St. Louis, Missouri 63102
Attn: Alan A. Sachs, Esq.
Telecopier No.: (314) 331-6554
Confirmation No.: (314) 331-6565;
(iii) if to the Members, then to such entities at their
respective addresses set forth in the register of the Company.
(b) All such notices will be deemed to have been duly delivered: at
the time delivered by hand, if personally delivered; five business days after
being deposited in the mail (postage prepaid), if mailed; when receipt is
confirmed, if telecopied; and on the day delivered, if sent by an air courier
guaranteeing overnight delivery.
(c) Any Member may change the address at which it is to receive
notices under this Agreement by furnishing written notice in accordance with the
provisions of this Section 8.1 to the Manager.
(d) Whenever any notice is required to be given by law or this
Agreement, a waiver thereof in writing, signed by the Person entitled to such
notice, whether before or after the time of the event for which notice is to be
given, will be deemed equivalent to such notice.
8.2. Extension Not a Waiver. No delay or omission in the exercise of any
----------------------
power, remedy or right herein provided or otherwise available to any party
hereto will impair or affect the right of such party thereafter to exercise the
same. Any extension of time or other indulgence granted to any party hereunder
will not otherwise alter or affect any power, remedy or right of any other party
hereto, or the obligations of the party to whom such extension or indulgence is
granted.
8.3. Entire Agreement; Amendments; No Third Party Beneficiaries. This
----------------------------------------------------------
Agreement sets forth the entire agreement between the parties relating to the
subject matter hereof and all prior agreements relative thereto that are not
contained herein or therein are terminated. Amendments, variations,
modifications or changes herein may be made effective and binding upon the
parties hereto by, and only by, a written agreement duly executed by each of the
Members and any alleged amendment, variation, modification or change herein
which is not so documented will not be effective as to any party hereto. This
Agreement is for the sole benefit of Edison, the General Members and the Manager
and their permitted assigns and nothing herein
18
<PAGE>
expressed or implied will give or be construed to give to any Person, other than
Edison, the General Members and the Manager and such permitted assigns any legal
or equitable rights hereunder.
8.4. Governing Law. THIS AGREEMENT WILL BE GOVERNED BY, CONSTRUED UNDER
-------------
AND INTERPRETED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE
WITHOUT REGARD TO ITS CONFLICTS OF LAW PRINCIPLES.
8.5. Venue. Except with respect to the matters specified in this
-----
Agreement for which the Bankruptcy Court will have retained jurisdiction, any
action or other legal proceeding brought under this Agreement will be subject to
the jurisdiction of the State of Delaware or the courts of the United States
located in the State of Delaware. Each of the Members consents to the
jurisdiction of Delaware for actions or legal proceedings brought by any other
Member or the Company arising out of or relating to this Agreement and waives
any objection which it may have to the laying of the venue of such suit, action
or proceeding in any of such courts.
8.6. Headings. Sections, subheadings and other headings used in this
--------
Agreement are for convenience only and will not affect the construction of this
Agreement.
8.7. Severability. Any provision of this Agreement which is prohibited
------------
or unenforceable in any jurisdiction will not invalidate the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction will not invalidate or render unenforceable any such provision in
any other jurisdiction.
8.8. Certain Defined Terms. As used in this Agreement, in addition to
---------------------
the terms defined in the Plan of Reorganization or elsewhere herein (including
Appendix A), the following terms have the meanings specified below:
- ----------
"Administrative Expenses" means all costs, expenses and fees incurred in
-----------------------
connection with operating the Company and the Company Assets, including without
limitation, (a) the compensation of the Manager as specified in Section 3.7, (b)
all expenses incurred by the Manager in employing accountants, experts,
advisors, consultants, investigators, appraisers, auctioneers or other
professionals to represent or assist the Managers in carrying out the Manager's
duties under this Agreement, and (c) all sums payable hereunder to any Person
entitled to indemnification pursuant to this Agreement.
"Class A Membership Unit" has the meaning assigned to it in Section 1.2.
-----------------------
"Class A Sharing Percentage" means, for each Member, a percentage computed
--------------------------
by dividing (x) the number of Class A Membership Units owned of record by such
Member by (y) the number of Class A Membership Units owned of record by all
Members.
"Class B Membership Unit" has the meaning assigned to it in Section 1.2.
-----------------------
19
<PAGE>
"Class B Sharing Percentage" means, for each Member, a percentage computed
--------------------------
by dividing (x) the number of Class B Membership Units owned of record by such
Member by (y) the number of Class B Membership Units owned of record by all
Members.
"Company Assets" means (a) all Pension Plan Proceeds, (b) all other assets
--------------
acquired by the Company pursuant to the terms of the Plan of Reorganization or
this Agreement (including funds, if any, contributed to the Company and the
proceeds of any loans to the Company), (c) any investments purchased with
Company Assets, and (d) proceeds of each of the foregoing (including, without
limitation, any interest or other earnings thereon), excluding assets
distributed, expended or otherwise disposed of by the Company.
"Delaware Act" has the meaning assigned to it in Section 1.1.
------------
"Designation Members" means the three Members who, as of the date that any
-------------------
action is to be taken hereunder by the Designation Members, constitute the
holders of record of the three largest amounts of Class A Membership Units
(based on such Members' Class A Sharing Percentages); provided, however, that
(i) any Person and its affiliates will be treated as a single Person for such
purpose; (ii) no Person who is an affiliate of Edison may be a Designation
Member; and (iii) any person who notifies the Company that such Person does not
wish to be a Designation Member shall be disregarded in determining the Persons
entitled to be a Designation Member.
"Effective Tax Rate" has the meaning assigned to it in Section 4.4(f).
------------------
"Indemnified Person" has the meaning assigned to it in Section 3.9.1.
------------------
"Liquidating Agent" has the meaning assigned to it in Section 6.3.1.
-----------------
"Manager" has the meaning assigned to it in Section 3.1.
-------
"Member" has the meaning assigned to it in the introductory paragraph.
------
"Membership Unit" has the meaning assigned to it in Section 1.2.
---------------
"Operating Account" means the separate account maintained by the Manager
-----------------
for the payment of Administrative Expenses and from which distributions to
Members will be made in accordance with Article IV and the Plan of
Reorganization.
"Overall Sharing Percentage" means, for each Member, a percentage computed
--------------------------
by dividing (x) the number of Membership Units owned of record by such Member by
(y) the number of Membership Units owned of record by all Members.
"Person" means an individual or entity.
------
"Qualified Matching Service" means a matching service that satisfies the
--------------------------
requirements of a qualified matching services within the meaning of Treas. Reg.
(S) 1.7704-1(g)(2).
20
<PAGE>
"Reserved Proceeds" has the meaning assigned to it in Section IV.3.
-----------------
"Tax Distribution" has the meaning assigned to it in Section 4.4(a).
----------------
"Tax Matters Partner" has the meaning assigned to it in Section 7.5.1.
-------------------
"Transfer" means any sale, assignment, pledge, hypothecation, encumbrance,
--------
disposition, transfer, gift or attempt to create or grant a security interest in
a Membership Unit (including any economic interest therein) or other property or
contract right or any interest therein or portion thereof, whether voluntary or
involuntary, by operation of law or otherwise, and will include any sale or
other disposition in any one transaction or series of transactions (whether or
not related) of any majority equity interest in any legal entity that owns a
Membership Unit or other property or contractual right that would be the subject
of any provision of this Agreement.
8.9. Successors. This Agreement will bind and inure to the benefit of the
----------
parties hereto and their respective successors.
8.10. No Suits by Members. No Member will have any right by virtue of any
-------------------
provision of this Agreement to institute any action or proceeding in law or in
equity against Edison or any party other than the Company upon or under or with
respect to the Company Assets.
8.11. Involvement of the Company in Certain Proceedings. If any Member
-------------------------------------------------
becomes involved in legal proceedings unrelated to the business of the Company
in which Edison or the Company is called upon to provide information, the Member
will indemnify and hold harmless Edison, the Company and the Manager against all
costs and expenses, including without limitation fees and expenses of attorneys
and other advisors, incurred by Edison, the Company or the Manager in preparing
or producing the required information or in resisting any request for production
or obtaining a protective order limiting the availability of the information
actually provided by Edison, the Company or the Manager.
8.12. Waiver of Partition and Certain Other Rights. Each of the Members
--------------------------------------------
irrevocably waives any right or power that such Member might have:
(a) To cause the Company or any of the Company Assets to be
partitioned;
(b) To cause the appointment of a receiver for all or any portion of
the Company Assets;
(c) To compel any sale of all or any portion of the Company Assets;
and
(d) To file a complaint, or to institute proceeding at law or in
equity, to cause the dissolution or liquidation of the Company.
8.13. Member Meetings; Member Approvals. (a) Meetings of the Members may
---------------------------------
be called and held at the Company's expense for any purpose by the Designation
Members, in which event the Designation Members will designate any place, within
or without the State of
21
<PAGE>
Delaware, as the place for such meeting. Written or printed notice stating the
place, day and hour of the meeting and the purpose or purposes for which such
meeting is called, will be delivered by the Company to each Member not less than
ten (10) days nor more than fifty (50) days before the meeting. If all of the
Members meet at any time and place, either within or without the State of
Delaware, and consent to the holding of a meeting at such time and place, such
meeting shall be valid without call or notice, and at such meeting any Company
action may be taken.
(b) At each meeting of the Members, the holders of record of a
majority of the Class A Membership Units, present in person or by proxy, shall
constitute a quorum for the transaction of Company business. In the absence of a
quorum any Member present at such meeting in person or by proxy shall have the
power to adjourn such meeting until a quorum shall be constituted. Unless
otherwise provided by law or this Agreement, the affirmative vote of the holders
of record of a majority of the Class A Membership Units represented at a meeting
at which a quorum is present shall constitute an act of the Members. At any
meeting of the Members, a Member may vote by proxy executed in writing by such
Member or by his duly authorized representative. Such proxy shall be filed with
the Company before or at the time of the meeting. No proxy shall be valid after
eleven (11) months from the date of its execution, unless otherwise provided in
such proxy. Members may participate in any meeting through telephonic or similar
communications equipment by means of which all persons participating in the
meeting can hear one another, and such participation shall constitute presence
in person at such meeting.
(c) Any action required to, or which may, be taken by the Members
may be taken without a meeting if consent thereto in writing, setting forth the
action so taken, shall be signed by the holders of record of a majority of the
Class A Membership Units. A written consent may be in one or more instruments,
each of which may be signed by one or more Members. No notice need be given of
action proposed to be taken by written action, or an approval given by written
action, unless specifically required by the Delaware Act.
8.14. No Voting Rights. Notwithstanding anything to the contrary
----------------
contained herein, there shall be no voting rights attached to ownership of Class
B Membership Units on any matter for which approval of the Members is required
or requested.
22
<PAGE>
CERTIFICATE OF FORMATION
------------------------
OF
EBS PENSION, L.L.C.
-------------------
The undersigned, an authorized natural person, for the purpose of
forming a limited liability company under the provisions and subject to the
requirements of the State of Delaware (particularly Chapter 18, Title 6 of the
Delaware Code and the acts amendatory thereof and supplemental thereto, and
known, identified, and referred to as the "Delaware Limited Liability Company
Act"), hereby certifies that:
FIRST: The name of the limited liability company (hereinafter
-----
called the "limited liability company") is EBS Pension, L.L.C.
SECOND: The address of the registered office and the name and the
------
address of the registered agent for service of process of the limited liability
company required to be maintained by Section 18-104 of the Delaware Limited
Liability Company Act are The Corporation Trust Company, 1209 Orange Street,
Wilmington, Delaware.
Executed on ___________ ___, 1997.
__________________
______________, Authorized Person
23
<PAGE>
EBS PENSION, L.L.C.
APPENDIX A
TAX MATTERS
-----------
This Appendix is attached to and is a part of the Members Agreement
(the "Agreement") of EBS Pension, L.L.C. (the "Company"). The parties to the
Agreement intend that the Company be classified as a partnership for federal
income tax purposes pursuant to section 7701(a)(2) of the Code and the
regulations thereunder. The provisions of this Appendix are intended to comply
with the requirements of Treas. Reg. (S) 1.704-1(b)(2)(iv) and Treas. Reg. (S)
1.704-2 with respect to maintenance of capital accounts and allocations, and
shall be interpreted and applied accordingly.
ARTICLE I
DEFINITIONS
1.01. Definitions. For purposes of this Appendix, the capitalized
-----------
terms listed below shall have the meanings indicated. Capitalized terms not
listed below and not otherwise defined in this Appendix shall have the meanings
specified in the Agreement.
"Account Reduction Item" means (i) any adjustment described in Treas.
----------------------
Reg. (S) 1.704-1(b)(2)(ii)(d)(4); (ii) any allocation described in Treas. Reg.
(S) 1.704-1(b)(2)(ii)(d)(5), other than a Nonrecourse Deduction or a Member
Nonrecourse Deduction; or (iii) any distribution described in Treas. Reg. (S)
1.704-1(b)(2)(ii)(d)(6), other than a Nonrecourse Distribution or a Member
Nonrecourse Distribution.
"Adjusted Capital Account Balance" means, as of the end of any taxable
--------------------------------
year, a Member's Capital Account balance as of the end of such taxable year
(taking into account all contributions made by such Member and distributions
made to such Member during such taxable year and any special allocations
required by Sections 3.02, 3.03, 3.04(a), (b), and (d), and 3.06), increased by
the sum of (i) such Member's share of Company Minimum Gain and (ii) such
Member's share of Member Nonrecourse Debt Minimum Gain, both determined after
taking into account any such special allocations.
"Adjusted Fair Market Value" of an item of Company property means the
--------------------------
greater of (i) the fair market value of such property or (ii) the amount of any
nonrecourse indebtedness to which such property is subject within the meaning of
section 7701(g) of the Code.
"Book" means the method of accounting prescribed for compliance with
----
the capital account maintenance rules set forth in Treas. Reg. (S) 1.704-
1(b)(2)(iv) as reflected in
<PAGE>
Articles II and III of this Appendix, as distinguished from any accounting
method which the Company may adopt for other purposes such as financial
reporting.
"Book Value" means, with respect to any item of Company property, the
----------
book value of such property within the meaning of Treas. Reg. (S) 1.704-
1(b)(2)(iv)(g)(3); provided, however, that if the Company adopts the remedial
-------- -------
allocation method described in Treas. Reg. (S) 1.704-3(d) with respect to any
item of Company property, the Book Value of such property shall be its book
basis determined in accordance with Treas. Reg. (S) 1.704-3(d)(2).
"Capital Account" means the capital account of a Member maintained in
---------------
accordance with Article II of this Appendix.
"Code" means the Internal Revenue Code of 1986, as amended.
----
References to specific sections of the Code shall be deemed to include
references to corresponding provisions of succeeding internal revenue law.
"Company Minimum Gain" means partnership minimum gain determined
--------------------
pursuant to Treas. Reg. (S) 1.704-2(d) and Section 5.02.
"Deemed Liquidation" means a liquidation of the Company that is deemed
------------------
to occur pursuant to Treas. Reg. (S) 1.708-1(b)(1)(iv) in the event of a
termination of the Company pursuant to section 708(b)(1)(B) of the Code.
"Excess Deficit Balance" means the amount, if any, by which the
----------------------
balance in a Member's Capital Account as of the end of the relevant taxable year
is more negative than the amount, if any, of such negative balance that such
Member is treated as obligated to restore to the Company pursuant to Treas. Reg.
(S) 1.704-1(b)(2)(ii)(c), Treas. Reg. (S) 1.704-1(b)(2)(ii)(h), Treas. Reg. (S)
1.704-2(g)(1), or Treas. Reg. (S) 1.704-2(i)(5). Solely for purposes of
computing a Member's Excess Deficit Balance, such Member's Capital Account shall
be reduced by the amount of any Account Reduction Items that are reasonably
expected as of the end of such taxable year.
"Excess Nonrecourse Liabilities" means excess nonrecourse liabilities
------------------------------
within the meaning of Treas. Reg. (S) 1.752-3(a)(3).
"Exculpatory Liability" means a liability that is recourse to the
---------------------
Company as an entity, and for which no Member or Related Person bears the
economic risk of loss under Treas. Reg. (S) 1.752-2.
"Foreign Person" means a foreign person or entity within the meaning
--------------
of Section 168(h)(2)(A)(3) of the Code.
"Member Nonrecourse Debt" means any liability of the Company to the
-----------------------
extent that (i) the liability is nonrecourse for purposes of Treas. Reg. (S)
1.1001-2 and (ii) a Member or a Related Person bears the economic risk of loss
under Treas. Reg. (S) 1.752-2.
2
<PAGE>
"Member Nonrecourse Debt Minimum Gain" means minimum gain attributable
------------------------------------
to Member Nonrecourse Debt pursuant to Treas. Reg. (S) 1.704-2(i)(3).
"Member Nonrecourse Deduction" means any item of Book loss or
----------------------------
deduction that is a partner nonrecourse deduction within the meaning of Treas.
Reg. (S) 1.704-2(i)(1) and (2).
"Member Nonrecourse Distribution" means a distribution to a Member
-------------------------------
that is allocable to a net increase in such Member's share of Member Nonrecourse
Debt Minimum Gain pursuant to Treas. Reg. (S) 1.704-2(i)(6).
"Nonrecourse Deduction" means, subject to Section 5.02, a nonrecourse
---------------------
deduction determined pursuant to Treas. Reg. (S) 1.704-2(b)(1) and Treas. Reg.
(S) 1.704-2(c).
"Nonrecourse Distribution" means a distribution to a Member that is
------------------------
allocable to a net increase in Company Minimum Gain pursuant to Treas. Reg. (S)
1.704-2(h)(1).
"Pass-through Entity" means an entity that is treated as a partnership
-------------------
for federal income tax purposes.
"Regulatory Allocation" means (i) any allocation made pursuant to
---------------------
Section 3.04(a) to the extent that such allocation is attributable to a prior
distribution that is treated as a Nonrecourse Distribution (after taking into
account Section 5.03(a)); (ii) any allocation made pursuant to Section 3.04(b)
to the extent that such allocation is attributable to a prior distribution that
is treated as a Member Nonrecourse Distribution (after taking into account
Section 5.03(b)); (iii) any reallocation made pursuant to Section 3.04(d) or
(e); or (iv) any allocation or reallocation made pursuant to Section 3.05.
"Related Person" means, with respect to a Member, a person that is
--------------
related to such Member pursuant to Treas. Reg. (S) 1.752-4(b).
"Revaluation Event" means (i) a liquidation of the Company (within the
-----------------
meaning of Treas. Reg. (S) 1.704-1(b)(2)(ii)(g)); or (ii) a contribution of more
than a de minimis amount of money or other property to the Company by a new or
existing Member or a distribution of more than a de minimis amount of money or
other property to a retiring or continuing Member where such contribution or
distribution alters the Overall Sharing Percentage of any Member.
"Section 705(a)(2)(B) Expenditures" means non-deductible expenditures
---------------------------------
of the Company that are described in section 705(a)(2)(B) of the Code, and
organization and syndication expenditures and disallowed losses to the extent
that such expenditures or losses are treated as expenditures described in
section 705(a)(2)(B) of the Code pursuant to Treas. Reg. (S) 1.704-
1(b)(2)(iv)(i).
"Section 751 Property" means unrealized receivables and substantially
--------------------
appreciated inventory items within the meaning of Treas. Reg. (S) 1.751-1(a)(1).
3
<PAGE>
"Tax Basis" means, with respect to any item of Company property, the
---------
adjusted basis of such property as determined in accordance with the Code.
"Tax-exempt Entity" means (i) the United States, any state or
-----------------
political subdivision thereof, any possession of the United States, or any
agency or instrumentality of any of the foregoing; or (ii) any organization
(other than a cooperative described in section 521 of the Code) that is exempt
from federal income tax.
"Treasury Regulation" or "Treas. Reg." means the temporary or final
------------------- -----------
regulation(s) promulgated pursuant to the Code by the U.S. Department of the
Treasury, as amended, and any successor regulation(s).
ARTICLE II
CAPITAL ACCOUNTS
2.01. Maintenance. (a) A single Capital Account shall be maintained
-----------
for each Member in accordance with this Article II.
(b) Each Member's Capital Account shall from time to time be
increased by:
(i) the amount of money contributed by such Member to the
Company (including the amount of any Company liabilities which the Member
assumes (within the meaning of Treas. Reg. (S) 1.704-1(b)(2)(iv)(c)), but
excluding liabilities assumed in connection with the distribution of
Company property and excluding increases in such Member's share of Company
liabilities pursuant to section 752 of the Code);
(ii) the fair market value of property contributed by such
Member to the Company (net of any liabilities secured by such property that
the Company is considered to assume or take subject to pursuant to section
752 of the Code);
(iii) allocations to such Member of Company Book income and gain
(or the amount of any item or items of income or gain included therein);
(iv) upon the revaluation of Company property pursuant to
Section 2.02(a), the Book gain (if any) that would have been allocated to
such Member if such Company property had been sold at its Adjusted Fair
Market Value as of the date of such revaluation; and
(v) upon the distribution of Company property to a Member, if
Company property is not revalued pursuant to Section 2.02(a), the Book gain
(if any) that would have been allocated to such Member if such Company
property had been sold at its Adjusted Fair Market Value immediately prior
to the distribution.
(c) Each Member's Capital Account shall from time to time be reduced
by:
4
<PAGE>
(i) the amount of money distributed to such Member by the
Company (including the amount of such Member's individual liabilities for
which the Company becomes personally and primarily liable but excluding
liabilities assumed in connection with the contribution of property to the
Company and excluding decreases in such Member's share of Company
liabilities pursuant to section 752 of the Code);
(ii) the fair market value of property distributed to such
Member by the Company (net of any liabilities secured by such property that
such Member is considered to assume or take subject to pursuant to section
752 of the Code);
(iii) allocations to such Member of Company Book loss and
deduction (or items thereof);
(iv) upon the revaluation of Company property pursuant to
Section 2.02(a), the Book loss (if any) that would have been allocated to
such Member if such Company property had been sold at its Adjusted Fair
Market Value as of the date of such revaluation; and
(v) upon the distribution of Company property to a Member, if
Company property is not revalued pursuant to Section 2.02(a), the Book loss
(if any) that would have been allocated to such Member if such Company
property had been sold at its Adjusted Fair Market Value immediately prior
to the distribution.
(d) The Company shall make such other adjustments to the Capital
Accounts of the Members as are necessary to comply with the provisions of Treas.
Reg. (S) 1.704-1(b)(2)(iv).
2.02. Revaluation of Company Property. (a) Upon the occurrence of a
-------------------------------
Revaluation Event, the Manager may revalue all Company property (whether
tangible or intangible) for Book purposes to reflect the Adjusted Fair Market
Value of Company property immediately prior to the Revaluation Event. In the
event that Company property is so revalued, the Capital Accounts of the Members
shall be adjusted in accordance with Treas. Reg. (S) 1.704-1(b)(2)(iv)(f).
(b) Upon the distribution of Company property to a Member, if Company
property is not revalued pursuant to Section 2.02(a), the property to be
distributed shall be revalued for Book purposes to reflect the Adjusted Fair
Market Value of such property immediately prior to such distribution, and the
Capital Accounts of all Members shall be adjusted in accordance with Treas. Reg.
(S) 1.704-1(b)(2)(iv)(e).
2.03. Restoration of Negative Balances. No Member with a deficit
--------------------------------
balance in its Capital Account shall have any obligation to the Company, to any
other Member or to any third party to restore or repay said deficit balance.
2.04. Transfers of Interests. (a) Upon the transfer of a Member's
----------------------
entire interest in the Company, the Capital Account of such Member shall carry
over to the transferee.
5
<PAGE>
(b) Upon the transfer of a portion of a Member's interest in the
Company, the portion of such Member's Capital Account attributable to the
transferred portion shall carry over to the transferee. In the event that the
document effecting such transfer specifies the portion of such Member's Capital
Account to be transferred, such portion shall be deemed to be the portion
attributable to the transferred portion of such Member's interest for purposes
of this Section 2.04(b).
ARTICLE III
ALLOCATION OF BOOK INCOME AND LOSS
3.01. Book Income and Loss. (a) The Book income or loss of the
--------------------
Company for purposes of determining allocations to the Capital Accounts of the
Members shall be determined in the same manner as the determination of the
Company's taxable income, except that (i) items that are required by section
703(a)(1) of the Code to be separately stated shall be included; (ii) items of
income that are exempt from inclusion in gross income for federal income tax
purposes shall be treated as Book income, and related deductions that are
disallowed under section 265 of the Code shall be treated as Book deductions;
(iii) Section 705(a)(2)(B) Expenditures shall be treated as deductions; (iv)
items of gain, loss, depreciation, amortization, or depletion that would be
computed for federal income tax purposes by reference to the Tax Basis of an
item of Company property shall be determined by reference to the Book Value of
such item of property; and (v) the effects of upward and downward revaluations
of Company property pursuant to Section 2.02 shall be treated as gain or loss
respectively from the sale of such property.
(b) In the event that the Book Value of any item of Company property
differs from its Tax Basis, the amount of Book depreciation, depletion, or
amortization for a period with respect to such property shall be computed so as
to bear the same relationship to the Book Value of such property as the
depreciation, depletion, or amortization computed for tax purposes with respect
to such property for such period bears to the Tax Basis of such property. If
the Tax Basis of such property is zero, the Book depreciation, depletion, or
amortization with respect to such property shall be computed by using a method
consistent with the method that would be used for tax purposes if the Tax Basis
of such property were greater than zero.
(c) Allocations to the Capital Accounts of the Members shall be based
on the Book income or loss of the Company as determined pursuant to this Section
3.01. Such allocations shall be made as provided in the Agreement except to the
extent modified by the provisions of this Article III.
3.02 Allocation of Nonrecourse Deductions. Notwithstanding any other
------------------------------------
provisions of the Agreement, Nonrecourse Deductions shall be allocated among the
Members in proportion to their respective Overall Sharing Percentages.
3.03. Allocation of Member Nonrecourse Deductions. Notwithstanding
-------------------------------------------
any other provisions of the Agreement, any item of Member Nonrecourse Deduction
with respect to a
6
<PAGE>
Member Nonrecourse Debt shall be allocated to the Member or Members who bear the
economic risk loss for such Member Nonrecourse Debt in accordance with Treas.
Reg. (S) 1.704-2(i).
3.04. Chargebacks of Income and Gain. Notwithstanding any other
------------------------------
provisions of the Agreement:
(a) Company Minimum Gain. In the event that there is a net decrease
--------------------
in Company Minimum Gain for a taxable year of the Company, then before any other
allocations are made for such taxable year, each Member shall be allocated items
of Book income and gain for such year (and, if necessary, for subsequent years)
to the extent required by Treas. Reg. (S) 1.704-2(f).
(b) Member Nonrecourse Debt Minimum Gain. In the event that there is
------------------------------------
a net decrease in Member Nonrecourse Debt Minimum Gain for a taxable year of the
Company, then after taking into account allocations pursuant to paragraph (a)
immediately preceding, but before any other allocations are made for such
taxable year, each Member with a share of Member Nonrecourse Debt Minimum Gain
at the beginning of such year shall be allocated items of Book income and gain
for such year (and, if necessary, for subsequent years) to the extent required
by Treas. Reg. (S) 1.704-2(i)(4).
(c) Application for Waiver. In the event that the Manager
----------------------
determines, in its reasonable discretion, that the application of the provisions
of Section 3.04(a) or Section 3.04(b) would cause a distortion in the economic
arrangement among the Members, the Manager may, on behalf of the Company,
request a waiver of the application of either or both of such provisions
pursuant to Treas. Reg. (S) 1.704-2(f)(4) or Treas. Reg. (S) 1.704-2(i)(4).
(d) Qualified Income Offset. In the event that any Member
-----------------------
unexpectedly receives any Account Reduction Item that results in an Excess
Deficit Balance at the end of any taxable year after taking into account all
other allocations and adjustments under this Agreement other than allocations
under Section 3.04(e), then items of Book income and gain for such year (and, if
necessary, for subsequent years) will be reallocated to each such Member in the
amount and in the proportions needed to eliminate such Excess Deficit Balance as
quickly as possible.
(e) Gross Income Allocation. If, at the end of any taxable year, the
-----------------------
Capital Accounts of any Members have Excess Deficit Balances after taking into
account all other allocations and adjustments under this Agreement, then items
of Book income and gain for such year will be reallocated to such Members in the
amount and in the proportions needed to eliminate such Excess Deficit Balances
as quickly as possible.
3.05 Reallocation to Avoid Excess Deficit Balances. Notwithstanding
---------------------------------------------
any other provisions of the Agreement, no Book loss or deduction shall be
allocated to any Member to the extent that such allocation would cause or
increase an Excess Deficit Balance in the Capital Account of such Member. Such
Book loss or deduction shall be reallocated away from such Member and to the
other Members in accordance with the Agreement, but only to the extent that such
reallocation would not cause or increase Excess Deficit Balances in the Capital
Accounts of such other Members.
7
<PAGE>
3.06. Corrective Allocation. Subject to the provisions of Sections
---------------------
3.02, 3.03, 3.04, and 3.05, but notwithstanding any other provision of the
Agreement, in the event that any Regulatory Allocation is made pursuant to this
Appendix for any taxable year, then remaining Book items for such year (and, if
necessary, Book items for subsequent years) shall be allocated or reallocated in
such amounts and proportions as are appropriate to restore the Adjusted Capital
Account Balances of the Members to the position in which such Adjusted Capital
Account Balances would have been if such Regulatory Allocation had not been
made.
3.07. Other Allocations. (a) If during any taxable year of the
-----------------
Company there is a change in any Member's Class A Sharing Percentage or Class B
Sharing Percentage, allocations of Book income or loss for such taxable year
shall take into account the varying interests of the Members in the Company in a
manner consistent with the requirements of Section 706 of the Code.
(b) If and to the extent that any distribution of Section 751
Property to a Member in exchange for property other than Section 751 Property is
treated as a sale or exchange of such Section 751 Property by the Company
pursuant to Treas. Reg. (S) 1.751-1(b)(2), any Book gain or loss attributable to
such deemed sale or exchange shall be allocated only to Members other than the
distributee Member.
(c) If and to the extent that any distribution of property other than
Section 751 Property to a Member in exchange for Section 751 Property is treated
as a sale or exchange of such other property by the Company pursuant to Treas.
Reg. (S) 1.751-1(b)(3), any Book gain or loss attributable to such deemed sale
or exchange shall be allocated only to Members other than the distributee
Member.
ARTICLE IV
ALLOCATION OF TAX ITEMS
4.01. In General. Except as otherwise provided in this Article IV,
----------
all items of income, gain, loss, and deduction shall be allocated among the
Members for federal income tax purposes in the same manner as the corresponding
allocation for Book purposes.
4.02. Section 704(c) Allocations. In the event that the Book Value
--------------------------
of an item of Company property differs from its Tax Basis, allocations of
depreciation, depletion, amortization, gain, and loss with respect to such
property will be made for federal income tax purposes in a manner that takes
account of the variation between the Tax Basis and Book Value of such property
in accordance with section 704(c)(1)(A) of the Code and Treas. Reg. (S) 1.704-
1(b)(4)(i). The Manager may select any reasonable method or methods for making
such allocations, including, without limitation, any method described in Treas.
Reg. (S) 1.704-3(b), (c), or (d).
4.03. Tax Credits. Tax credits shall be allocated among the Members
-----------
in accordance with Treas. Reg. (S) 1.704-1(b)(4)(ii).
8
<PAGE>
ARTICLE V
OTHER TAX MATTERS
5.01 Excess Nonrecourse Liabilities. For the purpose of determining
------------------------------
the Members' shares of the Company's Excess Nonrecourse Liabilities pursuant to
Treas. Reg. (S)(S) 1.752-3(a)(3) and 1.707-5(a)(2)(ii), and solely for such
purpose, the Members' interests in profits are hereby specified to be their
respective Overall Sharing Percentages.
5.02 Exculpatory Liabilities. The Manager may (a) treat deductions
-----------------------
attributable to Exculpatory Liabilities as deductions that are not Nonrecourse
Deductions, and (b) disregard Exculpatory Liabilities in the determination of
Company Minimum Gain.
5.03 Treatment of Certain Distributions. (a) In the event that (i)
----------------------------------
the Company makes a distribution that would (but for this Subsection (a)) be
treated as a Nonrecourse Distribution; and (ii) such distribution does not cause
or increase a deficit balance in the Capital Account of the Member receiving
such distribution as of the end of the Company's taxable year in which such
distribution occurs; then the Manager may treat such distribution as not
constituting a Nonrecourse Distribution to the extent permitted by Treas. Reg.
(S) 1.704-2(h)(3).
(b) In the event that (i) the Company makes a distribution that would
(but for this Subsection (b)) be treated as a Member Nonrecourse Distribution;
and (ii) such distribution does not cause or increase a deficit balance in the
Capital Account of the Member receiving such distribution as of the end of the
Company's taxable year in which such distribution occurs; then the Manager may
treat such distribution as not constituting a Member Nonrecourse Distribution to
the extent permitted by Treas. Reg. (S) 1.704-2(i)(6).
5.04 Reduction of Basis. In the event that a Member's interest in
------------------
the Company may be treated in whole or in part as depreciable property for
purposes of reducing such Member's basis in such interest pursuant to section
1017(b)(3)(C) of the Code, the Manager may, upon the request of such Member,
make a corresponding reduction in the basis of the Company's depreciable
property with respect to such Member. Such request shall be submitted to the
Company in writing, and shall include such information as may be reasonably
required in order to effect such reduction in basis.
5.05 Withholding. (a) The Company shall withhold any amounts
-----------
required to be withheld pursuant to any applicable provisions of the Code,
including without limitation sections 1441 through 1446 of the Code, or pursuant
to any applicable provisions of state or local law.
(b) Any amounts withheld with respect to a Member's distributive
share of Company income (whether or not distributed) shall be treated by the
Company and by such Member for all purposes as amounts distributed to such
Member. Any amounts withheld with respect to any payment to a Member shall be
treated by the Company and by such Member for all purposes as amounts paid to
such Member. Amounts so treated as distributed or paid to any Member shall
reduce the amount otherwise distributable or payable to such Member.
9
<PAGE>
(c) In the event that the Company withholds with respect to a
Member's distributive share of Company income for a taxable year, and such
distributive share exceeds the amount distributed to such Member in such taxable
year, then subsequent distributions to such Member shall be deemed to be made
first from income with respect to which the Company has already withheld.
5.06 Pass-through Entities as Members. Any Member that is a Pass-
--------------------------------
through Entity shall promptly notify the Company in writing upon any of the
following occurrences:
(a) any event, such as a sale or exchange of an interest in such
Member, that will result in an adjustment to the basis of the assets of such
Member under section 743(b) of the Code pursuant to an election under section
754 of the Code;
(b) any event, such as a distribution of cash or other property by
such Member, that will result in an adjustment to the basis of such Member's
assets under section 734(b) of the Code pursuant to an election under section
754 of the Code; or
(c) any event that will result in the termination of such Member as a
partnership pursuant to section 708(b)(1)(B) of the Code.
5.07 Tax-exempt or Foreign Ownership of Members. In the event that
------------------------------------------
any interest in a Member that is a Pass-through Entity is owned directly or
indirectly by any Tax-exempt Entity or Foreign Person, such Member shall
promptly notify the Company in writing of such Tax-exempt Entity's or Foreign
Person's proportionate share of such Member's items of income and gain
(determined as a percentage pursuant to section 168(h)(6)(C) of the Code) and of
any change in such proportionate share.
5.08 Entity Classification. Neither the Company nor any Member shall
---------------------
file or cause to be filed any election, the effect of which would be to cause
the Company to be classified as other than a partnership for federal income tax
purposes, without the prior written consent of all Members.
[End of Appendix A]
10
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the inclusion of our
report dated July 1, 1998, in this Form 10, and all references to our firm
elsewhere in this Form 10.
/s/ Rubin, Brown, Gornstein & Co. LLP
-------------------------------------
Rubin, Brown, Gornstein & Co. LLP
St. Louis, Missouri
July 29, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
balance sheets and statements of income as of and for the period ended December
31, 1997, and as of and for the three months ended March 31, 1998, respectively
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1998
<PERIOD-START> SEP-25-1997 JAN-01-1998
<PERIOD-END> DEC-31-1997 MAR-31-1998
<CASH> 0 4,686,501
<SECURITIES> 0 0
<RECEIVABLES> 43,985,315 7,099
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 43,985,315 4,693,600
<PP&E> 0 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 43,985,315 4,693,600
<CURRENT-LIABILITIES> 51,910 81,879
<BONDS> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 43,933,405 4,611,721
<TOTAL-LIABILITY-AND-EQUITY> 43,985,315 4,693,600
<SALES> 0 0
<TOTAL-REVENUES> 0 154,062
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 51,910 48,590
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (51,910) 105,472
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (51,910) 105,472
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (51,910) 105,472
<EPS-PRIMARY> (.005) .011
<EPS-DILUTED> (.005) .011
</TABLE>
