UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
In re: ) Chapter 11
)
PRIME SUCCESSION, INC., et al., ) Case No. 00-2969 (PJW)
)
Debtors. ) Jointly Administered
AMENDED DISCLOSURE STATEMENT ACCOMPANYING
JOINT PLAN OF REORGANIZATION OF THE DEBTORS
UNDER CHAPTER 11 OF THE BANKRUPTCY CODE
PAUL, WEISS, RIFKIND, WHARTON & YOUNG CONAWAY STARGATT &
GARRISON TAYLOR, LLP
Alan W. Kornberg Pauline K. Morgan
Jeffrey D. Saferstein Michael R. Nestor
Dana S. Safran 1110 N. Market Street
Nkiruka R. Nwokoye P.O. Box 391
1285 Avenue of the Americas Rodney Square North, 11th Floor
New York, New York 10019-6064 Wilmington, Delaware 19801
(212) 373-3000 (302) 571-6600
Dated: August 21, 2000
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ALL CREDITORS ARE ADVISED AND ENCOURAGED TO READ THIS DISCLOSURE
STATEMENT AND THE PLAN IN THEIR ENTIRETY BEFORE VOTING TO ACCEPT OR REJECT THE
PLAN. PLAN SUMMARIES AND STATEMENTS MADE IN THIS DISCLOSURE STATEMENT, INCLUDING
THE FOLLOWING SUMMARY, ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE PLAN,
OTHER EXHIBITS ANNEXED TO THE PLAN, THE PLAN SUPPLEMENT, AND THIS DISCLOSURE
STATEMENT. THE STATEMENTS CONTAINED IN THIS DISCLOSURE STATEMENT ARE MADE ONLY
AS OF THE DATE HEREOF UNLESS OTHERWISE SPECIFIED, AND THERE CAN BE NO ASSURANCE
THAT THE STATEMENTS CONTAINED HEREIN WILL BE CORRECT AT ANY TIME AFTER SUCH
DATE. ALL CREDITORS AND EQUITY INTEREST HOLDERS SHOULD READ CAREFULLY THE "RISK
FACTORS" SECTION HEREOF BEFORE VOTING FOR OR AGAINST THE PLAN. SEE "CERTAIN RISK
FACTORS" SECTION IX.
THIS DISCLOSURE STATEMENT HAS BEEN PREPARED IN ACCORDANCE WITH SECTION
1125 OF THE BANKRUPTCY CODE AND RULE 3016 OF THE FEDERAL RULES OF BANKRUPTCY
PROCEDURE AND NOT NECESSARILY IN ACCORDANCE WITH FEDERAL OR STATE SECURITIES
LAWS OR OTHER APPLICABLE LAW. THIS DISCLOSURE STATEMENT HAS NEITHER BEEN
APPROVED NOR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC")
NOR HAS THE SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THE STATEMENTS CONTAINED
HEREIN. PERSONS OR ENTITIES TRADING IN OR OTHERWISE PURCHASING, SELLING, OR
TRANSFERRING SECURITIES OF THE DEBTORS SHOULD EVALUATE THIS DISCLOSURE STATEMENT
AND THE PLAN IN LIGHT OF THE PURPOSES FOR WHICH THEY WERE PREPARED.
CERTAIN STATEMENTS CONTAINED IN THIS DISCLOSURE STATEMENT, INCLUDING
PROJECTED FINANCIAL INFORMATION AND OTHER FORWARD-LOOKING STATEMENTS, ARE BASED
ON ESTIMATES AND ASSUMPTIONS. THERE CAN BE NO ASSURANCE THAT SUCH STATEMENTS
WILL REFLECT ACTUAL OUTCOMES.
THE INFORMATION IN THIS DISCLOSURE STATEMENT IS BEING PROVIDED SOLELY
FOR PURPOSES OF VOTING TO ACCEPT OR REJECT THE PLAN. NOTHING IN THIS DISCLOSURE
STATEMENT MAY BE USED BY ANY ENTITY FOR ANY OTHER PURPOSE. THE FACTUAL
INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT, INCLUDING THE DESCRIPTION OF
THE DEBTORS, THEIR BUSINESSES, AND EVENTS LEADING TO THE COMMENCEMENT OF THE
CHAPTER 11 CASES, HAS BEEN OBTAINED FROM VARIOUS DOCUMENTS, AGREEMENTS, AND
OTHER WRITINGS RELATING TO THE DEBTORS. NEITHER THE DEBTORS NOR ANY
(i)
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OTHER PARTY MAKES ANY REPRESENTATION OR WARRANTY REGARDING SUCH INFORMATION.
THE TERMS OF THE PLAN GOVERN IN THE EVENT OF ANY INCONSISTENCY WITH THE
SUMMARIES IN THIS DISCLOSURE STATEMENT. ALL EXHIBITS TO THE DISCLOSURE STATEMENT
ARE INCORPORATED INTO AND ARE A PART OF THIS DISCLOSURE STATEMENT AS IF SET
FORTH IN FULL HEREIN. THE STATEMENTS CONTAINED IN THIS DISCLOSURE STATEMENT ARE
MADE AS OF THE DATE HEREOF UNLESS OTHERWISE SPECIFIED.
AS TO CONTESTED MATTERS, EXISTING LITIGATION INVOLVING THE DEBTORS,
ADVERSARY PROCEEDINGS, AND OTHER ACTIONS OR THREATENED ACTIONS, THIS DISCLOSURE
STATEMENT SHALL NOT CONSTITUTE OR BE CONSTRUED AS AN ADMISSION OF ANY FACT OR
LIABILITY, STIPULATION, OR WAIVER, BUT RATHER AS A STATEMENT MADE WITHOUT
PREJUDICE SOLELY FOR SETTLEMENT PURPOSES, WITH FULL RESERVATION OF RIGHTS, AND
IS NOT TO BE USED FOR ANY LITIGATION PURPOSE WHATSOEVER. AS SUCH, THIS
DISCLOSURE STATEMENT SHALL NOT BE ADMISSIBLE IN ANY NONBANKRUPTCY PROCEEDING
INVOLVING THE DEBTORS, OR ANY OTHER PARTY IN INTEREST, NOR SHALL IT BE CONSTRUED
TO BE CONCLUSIVE ADVICE ON THE TAX, SECURITIES, FINANCIAL OR OTHER EFFECTS OF
THE REORGANIZATION AS TO HOLDERS OF CLAIMS AGAINST OR EQUITY INTERESTS IN THE
DEBTORS.
(ii)
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TABLE OF CONTENTS
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I. INTRODUCTION....................................................................................i
A. HOLDERS OF CLAIMS AND EQUITY INTERESTS
ENTITLED TO VOTE.......................................................................2
B. VOTING PROCEDURES......................................................................3
C. CONFIRMATION HEARING...................................................................4
II. OVERVIEW OF THE PLAN............................................................................5
III. OVERVIEW OF CHAPTER 11..........................................................................8
IV. DESCRIPTION OF THE DEBTORS' BUSINESSES..........................................................8
A. General................................................................................8
B. Properties.............................................................................9
C. The Death Care Industry...............................................................10
D. Operations............................................................................11
E. Management and Employees..............................................................13
F. History and Capital Structure.........................................................13
G. Put/Call Agreement and Related Party Transactions.....................................16
H. Obligations Under Agreements with Former Owners.......................................18
I. Growth ...............................................................................18
J. Competition...........................................................................20
K. Regulation............................................................................21
L. Legal Proceedings.....................................................................21
V. KEY EVENTS LEADING TO COMMENCEMENT OF
THE CHAPTER 11 CASES...........................................................................22
A. Decrease in Overall Performance and Operating Results and
Defaults under the Bank Credit Facilities and Notes...................................22
B. Discussions with Financial Advisors, Regulatory Authorities and
Informal Committee....................................................................23
C. Steps Taken to Strengthen the Debtors' Operations and Financial
Performance...........................................................................24
VI. THE CHAPTER 11 CASES...........................................................................25
A. Disclosure Statement/Plan Confirmation Hearings.......................................25
B. Significant "First Day" Motions During the Chapter 11 Cases...........................25
C. DIP Credit Facility...................................................................25
D. Last Date to File Proofs of Claim.....................................................26
E. Assumption/Rejection of Unexpired Leases
and Executory Contracts...............................................................27
F. The Official Committee of Unsecured Creditors.........................................27
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VII. SUMMARY OF THE PLAN OF REORGANIZATION..........................................................27
A. Introduction..........................................................................27
B. Classification and Treatment of Administrative Claims, Claims and
Equity Interests Under the Plan.......................................................28
1 Unclassified -- Administrative Claims...................................30
2 Unclassified -- Professional Compensation and
Reimbursement Claims....................................................31
3 Unclassified -- Priority Tax Claims.....................................32
4 Class 1 -- Other Priority Claims........................................33
5 Class 2 -- Other Secured Claims.........................................33
6 Class 3 -- Trade Claims.................................................34
7 Class 4 -- Prepetition Lender Claims....................................35
8 Class 5 -- Senior Subordinated Note Claims, Rejected
Former Owner Obligations, Other Rejected Obligations and
Other General Unsecured Claims .........................................35
9 Class 6 -- Old Preferred Stock..........................................36
10 Class 7 -- Other Equity Interests.......................................36
C. Substantive Consolidation.............................................................36
D. Provisions Regarding Corporate Governance and Management of the
Reorganized Debtors...................................................................37
1 Directors and Officers of Reorganized Prime and
Reorganized Prime Holdings..............................................37
(a) The Initial Board of Directors..............................37
(b) Management of Reorganized Prime
Holdings and Reorganized Prime. ...........................37
2 Directors and Officers of the Reorganized Subsidiaries..................38
3 Corporate Action........................................................38
(a) Amended Prime Holdings Certificate of
Incorporation and Amended Prime
Holdings By-Laws............................................38
(b) Amended Prime Certificate of
Incorporation and Amended Prime By-Laws.....................38
(c) Amended Subsidiaries Certificates of
Incorporation and Amended Subsidiaries
By-Laws.....................................................39
4 Securities to Be Issued Pursuant to the Plan............................39
(a) New Common Stock............................................39
(b) New Senior Subordinated Notes...............................39
(c) The New Warrants....................................................41
E. Equity Incentive Plan.................................................................41
1 Reorganized Prime Holdings Equity Incentive Plan........................41
2 Description of Reorganized Prime Holdings Equity Incentive
Plan....................................................................41
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F. Postpetition Financing................................................................42
G. Distributions Under the Plan..........................................................43
1 Method of Distribution Under the Plan...................................43
(a) Date and Delivery of Distributions..........................43
(b) Distribution of Cash........................................44
(c) Distribution of Unclaimed Property..................................44
(d) Saturdays, Sundays, or Legal Holidays.......................44
(e) Fractional Notes and Fractional Shares
and Warrants................................................44
(f) Distributions to Holders as of the
Record Date.................................................45
2 Disputed Trade Claims...................................................45
(a) Distributions Withheld For Disputed
Trade Claims................................................45
H. Objections To And Resolution Of Administrative Claims
and Claims; Administrative and Priority Claims Reserve................................46
1 Objections To And Resolution of Administrative Claims and
Claims..................................................................46
I. Allocation of Consideration...........................................................46
J. Cancellation and Surrender of Existing Securities and Agreement.......................47
K. Implementation of the Plan............................................................47
1 New Senior Subordinated Notes Indenture,
the Amended Prime Certificate of Incorporation, the
Amended Prime By-Laws, the Amended Prime
Holdings By-Laws, the Amended Prime Holdings Certificate
of Incorporation, the Amended Subsidiaries Certificates of
Incorporation, the Amended
Subsidiaries By-Laws, the Amended Subsidiary
Limited Partnership Agreement, the Equity Incentive
Plan, the Warrant Agreement, the New Senior
Management Employment Contracts, the New Exit
Financing Facility Documents and Other
Implementation Documents................................................47
2 The Debtors' Release....................................................48
L. Effect of Confirmation of the Plan....................................................49
1 Continued Corporate Existence and Vesting of
Assets in the Reorganized Debtors.......................................49
2 Discharge of the Debtors................................................49
3 Injunction..............................................................50
4 Release of Collateral...................................................50
5 Preservation of Rights..................................................50
6 Votes Solicited in Good Faith...........................................51
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7 Administrative Claims Incurred after the
Confirmation Date.......................................................51
8 Exculpation and Release of Released Parties;
Injunction..............................................................52
9 Preservation of Insurance...............................................52
10 Term of Bankruptcy Injunction or Stays..................................52
11 Officers' and Directors' Indemnification Rights and
Insurance...............................................................53
12 Limitation of Governmental Release......................................53
M. Retention of Jurisdiction.............................................................53
N. Miscellaneous Provisions..............................................................54
1 Payment of Statutory Fees...............................................54
2 Dissolution of Creditors Committee......................................54
3 Modification of the Plan................................................54
4 Governing Law...........................................................54
5 Filing or Execution of Additional Documents.............................55
6 Withholding and Reporting Requirements..................................55
7 Exemption From Transfer Taxes...........................................55
8 Section 1145 Exemption..................................................55
9 Waiver of Federal Rule of Civil Procedure 62(a).........................55
10 Plan Supplement.........................................................56
O. Executory Contracts and Unexpired Leases..............................................56
P. Benefit Plans.........................................................................57
VIII. PROJECTIONS AND VALUATION ANALYSIS.............................................................57
A. Projections...........................................................................58
B. Valuation.............................................................................60
IX. CERTAIN RISK FACTORS TO BE CONSIDERED..........................................................61
1 Projected Financial Information.........................................62
2 Ability to Refinance Certain Indebtedness and
Restrictions Imposed by Indebtedness....................................62
3 Significant Holders.....................................................63
4 Lack of Established Market for New Common Stock
and New Warrants........................................................63
5 Lack of Trading Market for New Senior
Subordinated Notes......................................................63
6 Dividend Policies.......................................................64
7 Certain Bankruptcy Law Considerations...................................64
(a) Risk of Non-Confirmation of the Plan........................64
(b) Risk of Non-Occurrence of the Effective
Date........................................................64
8 Certain Tax Matters.....................................................64
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X. CONFIRMATION PROCEDURE.........................................................................65
A. Solicitation of Votes.................................................................65
B. The Confirmation Hearing..............................................................66
C. Confirmation..........................................................................66
1 Acceptance..............................................................67
2 Unfair Discrimination and Fair and Equitable Tests......................67
(a) Secured Creditors...........................................67
(b) Unsecured Creditors.........................................67
(c) Equity Interests....................................................67
3 Feasibility.............................................................68
4 Best Interests Test.....................................................69
XI. EFFECTIVENESS OF THE PLAN......................................................................71
A. Conditions Precedent to Effectiveness.................................................71
B. Waiver of Conditions..................................................................71
C. Effect of Failure of Conditions.......................................................71
D. Vacatur of Plan.......................................................................72
XII. SECURITIES LAWS MATTERS........................................................................72
A. Bankruptcy Code Exemptions from Registration Requirements.............................72
1 Initial Offer and Sale of Plan Securities...............................72
2 Subsequent Transfers of Plan Securities.................................73
3 Certain Transactions by Stockbrokers....................................75
XIII. FINANCIAL INFORMATION..........................................................................76
A. Financial Statements..................................................................76
B. Management's Discussion and Analysis of Financial Condition and
Results of Operations.................................................................76
C. Recent Performance....................................................................76
XIV. ALTERNATIVES TO CONFIRMATION AND
CONSUMMATION OF THE PLAN.......................................................................77
A. Liquidation Under Chapter 7...........................................................77
B. Alternative Plan of Reorganization....................................................77
XV. CERTAIN FEDERAL INCOME
TAX CONSEQUENCES OF THE PLAN...................................................................78
A. Consequences to Creditors.............................................................79
1 Tax Securities..........................................................79
2 Claims and Consideration Constituting Tax Securities....................79
3 Claims or Consideration Not Constituting
Tax Securities..........................................................80
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4 Application of OID Rules................................................81
B. Consequences to the Debtors...........................................................83
1 Cancellation of Debt....................................................83
2 Applicable High-Yield Discount Obligations..............................84
3 Alternative Minimum Tax.................................................84
C. Additional Tax Considerations for All Claim Holders...................................84
1 Distributions in Discharge of Accrued Interest..........................84
2 Subsequent Sale of New Senior Subordinated Notes, New
Common Stock, or New Warrants...........................................85
3 Market Discount.........................................................85
4 Withholding ............................................................86
XVI. CONCLUSION.....................................................................................87
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I.
INTRODUCTION
On July 12, 2000 (the "Petition Date"), Prime Succession
Holdings, Inc. ("Holdings"), Prime Succession, Inc. ("Prime") and certain of
Prime's subsidiaries (the "Subsidiary Debtors") listed on Schedule A hereto
(each a "Debtor" and collectively the "Debtors") filed petitions for relief
under chapter 11 of the Bankruptcy Code with the United States Bankruptcy Court
for the District of Delaware. On the same day, the Debtors also filed their
proposed plan of reorganization, dated July 12, 2000 (as it may be amended,
modified, or supplemented, the "Plan") which sets forth the manner in which
Claims against and Equity Interests in the Debtors will be treated. This
Disclosure Statement describes certain aspects of the Plan, the Debtors'
businesses and related matters. Unless otherwise defined herein, all capitalized
terms contained herein have the meanings ascribed to them in the Plan.
After a long and careful review of the Debtors' businesses and
the Debtors' prospects as going concerns, the Debtors, in consultation with
their legal and financial advisors and an informal committee of certain major
holders of Prime's debt securities that was formed prior to the Petition Date
(the "Informal Committee") and the Informal Committee's legal and financial
advisors, concluded that recoveries to creditors and equity holders would be
maximized by the Debtors' continued operation as a going concern under the terms
of the Plan. In other words, the Debtors are worth more to their creditors and
equity holders as a going concern than they would be upon liquidation.
This Disclosure Statement is submitted pursuant to section
1125 of the Bankruptcy Code to holders of Claims against and Equity Interests in
the Debtors in connection with (i) the solicitation of acceptances of the
Debtors' Plan and (ii) the hearing to consider confirmation of the Plan (the
"Confirmation Hearing") scheduled for September 28, 2000, at 2:00 p.m., Eastern
Time.
Attached as Exhibits to this Disclosure Statement are copies
of the following:
o The Plan (Exhibit A);
o An Order of the Court dated August 21, 2000 (the "Disclosure
Statement Order"), among other things, approving the
Disclosure Statement and establishing certain procedures with
respect to the solicitation and tabulation of votes to accept
or reject the Plan (Exhibit B);
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o Prime, et al. 1999 Form 10-K (Exhibit C);
o Prime, et al. Projected Financial Information (Exhibit D);
o Prime, et al. Liquidation Analysis (Exhibit E);
o Prime, et al. March 31, 2000 Form 10-Q (Exhibit F); and
o Prime, et al. Recovery Analysis (Exhibit G).
In addition, a Ballot for the acceptance or rejection of the
Plan is enclosed with the Disclosure Statement submitted to the holders of
Claims and Equity Interests that the Debtors believe are entitled to vote to
accept or reject the Plan.
On August 21, 2000, after notice and a hearing, the Bankruptcy
Court signed the Disclosure Statement Order approving this Disclosure Statement
as containing adequate information of a kind and in sufficient detail to enable
hypothetical, reasonable investors typical of the Debtors' creditors and equity
interest holders to make an informed judgment whether to accept or reject the
Plan. APPROVAL OF THIS DISCLOSURE STATEMENT DOES NOT, HOWEVER, CONSTITUTE A
DETERMINATION BY THE COURT AS TO THE FAIRNESS OR MERITS OF THE PLAN.
The Disclosure Statement Order, a copy of which is annexed
hereto as Exhibit B, sets forth in detail the deadlines, procedures and
instructions for voting to accept or reject the Plan and for filing objections
to confirmation of the Plan, the record date for voting purposes, and the
applicable standards for tabulating Ballots. In addition, detailed voting
instructions accompany each Ballot. Each holder of a Claim or an Equity Interest
entitled to vote on the Plan should read in their entirety the Disclosure
Statement, the Plan, the Disclosure Statement Order and the instructions
accompanying the Ballots before voting on the Plan. These documents contain,
among other things, important information concerning the classification of
Claims and Equity Interests for voting purposes and the tabulation of votes. No
solicitation of votes to accept the Plan may be made except pursuant to section
1125 of the Bankruptcy Code.
A. HOLDERS OF CLAIMS AND EQUITY INTERESTS ENTITLED TO VOTE.
Pursuant to the provisions of the Bankruptcy Code, only
holders of allowed claims or equity interests in classes of claims or equity
interests that are impaired are entitled to vote to accept or reject a proposed
chapter 11 plan. Classes
2
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of claims or equity interests in which the holders of claims or equity interests
are unimpaired under a chapter 11 plan are deemed to have accepted the plan and
are not entitled to vote to accept or reject the plan.
Classes 4 (Prepetition Lender Claims), 5 (Senior Subordinated
Note Claims, Rejected Former Owner Obligations, Other Rejected Obligations and
Other General Unsecured Claims) and 6 (Old Preferred Stock) of the Plan are
impaired. To the extent Claims and Old Preferred Stock in such Classes are
Allowed Claims and Allowed Old Preferred Stock, the holders of such Claims and
Old Preferred Stock are entitled to vote to accept or reject the Plan. Holders
of Other Equity Interests in Class 7 shall receive no distribution under the
Plan and pursuant to section 1126(g) of the Bankruptcy Code are therefore deemed
to have rejected the Plan. Classes 1, 2 and 3 of the Plan are unimpaired.
Holders of Claims in Classes 1, 2 and 3 are conclusively deemed to have accepted
the Plan. Therefore, the Debtors are soliciting acceptances only from holders of
Allowed Claims and Allowed Old Preferred Stock in Classes 4, 5 and 6.
The Bankruptcy Code defines "acceptance" of a plan by a class
of claims as acceptance by creditors in that class that hold at least two-thirds
in dollar amount and more than one-half in number of the claims that cast
ballots for acceptance or rejection of the plan. Acceptance of a plan by a class
of interests requires acceptance by at least two-thirds of the number of shares
in such class that cast ballots for acceptance or rejection of the plan. For a
more detailed description of the requirements for confirmation of the Plan, see
Section X. "Confirmation Procedure."
As the holders of Other Equity Interests in Class 7 are deemed
to reject the Plan, the Debtors intend to request confirmation of the Plan
pursuant to section 1129(b) of the Bankruptcy Code. Section 1129(b) permits the
confirmation of a plan of reorganization notwithstanding the nonacceptance of a
plan by one or more impaired classes of claims or equity interests. Under that
section, a plan may be confirmed by a bankruptcy court if it does not
"discriminate unfairly" and is "fair and equitable" with respect to each
nonaccepting class. The determination as to whether to seek confirmation of the
Plan under such circumstances will be announced before or at the Confirmation
Hearing. For a more detailed description of the requirements for confirmation of
a nonconsensual plan, see Section X.C "Confirmation Procedure" and "Unfair
Discrimination and Fair and Equitable Tests."
B. VOTING PROCEDURES.
If you are entitled to vote to accept or reject the Plan, a
Ballot is enclosed for the purpose of voting on the Plan. If you hold Claims and
Old Preferred
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Stock you will receive separate Ballots which must be used for each separate
Class of Claims or Old Preferred Stock. Please vote and return your Ballot(s)
to:
Donlin, Recano & Co., Inc.
P.O. Box 2034
Murray Hill Station
New York, New York 10156-0701
Attn: Prime Succession, Inc.
Ballot Tabulation
DO NOT RETURN YOUR NOTES OR SECURITIES WITH YOUR BALLOT.
TO BE COUNTED, YOUR BALLOT INDICATING ACCEPTANCE OR REJECTION
OF THE PLAN MUST BE RECEIVED NO LATER THAN 5:00 P.M., EASTERN STANDARD TIME, ON
SEPTEMBER 21, 2000. ANY EXECUTED BALLOT RECEIVED THAT DOES NOT INDICATE EITHER
AN ACCEPTANCE OR REJECTION OF THE PLAN SHALL NOT BE COUNTED.
Any Claim or Old Preferred Stock in an impaired Class as to
which an objection or request for estimation is pending or which is scheduled by
the Debtors as unliquidated, disputed or contingent is not entitled to vote
unless the holder of such Claim or Old Preferred Stock has obtained an order of
the Court temporarily allowing such Claim or Old Preferred Stock for the purpose
of voting on the Plan.
Pursuant to the Disclosure Statement Order, the Court set
August 18, 2000 as the record date for voting on the Plan. Accordingly, only
holders of record as of August 18, 2000 that are otherwise entitled to vote
under the Plan will receive a Ballot and may vote on the Plan.
If you are a holder of a Claim or Old Preferred Stock entitled
to vote on the Plan and did not receive a Ballot, received a damaged Ballot or
lost your Ballot, or if you have any questions concerning the Disclosure
Statement, the Plan or the procedures for voting on the Plan, please call
Donlin, Recano & Co., Inc. at (212) 481-1411 from 10:00 a.m. to 4:00 p.m. Monday
through Friday.
C. CONFIRMATION HEARING.
Pursuant to section 1128 of the Bankruptcy Code, the
Confirmation Hearing will be held on September 28, 2000 at 2:00 p.m., Eastern
Time, before the Honorable Peter J. Walsh, United States Bankruptcy Court,
Marine Midland Plaza, 824 North Market Street, Wilmington, Delaware. The Court
has directed that objections, if any, to confirmation of the Plan be served and
filed so that they are received on or before September 21, 2000 at 4:00 p.m.,
Eastern Time, in the manner
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described below in Section X.B "The Confirmation Hearing." The Confirmation
Hearing may be adjourned from time to time by the Court without further notice
except for the announcement of the adjournment date made at the Confirmation
Hearing or at any subsequent adjourned Confirmation Hearing.
THE DEBTORS BELIEVE THAT THE PLAN WILL ENABLE THEM TO
SUCCESSFULLY REORGANIZE AND TO ACCOMPLISH THE OBJECTIVES OF CHAPTER 11 AND THAT
ACCEPTANCE OF THE PLAN IS IN THE BEST INTERESTS OF THE DEBTORS AND THEIR
CREDITORS AND EQUITY INTEREST HOLDERS. THE DEBTORS URGE CREDITORS AND HOLDERS OF
OLD PREFERRED STOCK TO VOTE TO ACCEPT THE PLAN.
II.
OVERVIEW OF THE PLAN
The following table briefly summarizes the classification and
treatment of Claims and Equity Interests under the Plan.
SUMMARY OF CLASSIFICATION AND TREATMENT
OF CLAIMS AND EQUITY INTERESTS UNDER THE PLAN 1/
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1/ This table is only a summary of the classification and treatment of
Claims and Equity Interests under the Plan. Reference should be made to
the entire Disclosure Statement and the Plan for a complete description
of the classification and treatment of Claims and Equity Interests.
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Type of Claim or Estimated
Class Equity Interest Treatment Recovery
----- ------------------ --------- --------
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-- Administrative Unimpaired; paid in full, in Cash on the 100%
Claims Effective Date, or in accordance with the
terms and conditions of transactions or
agreements relating to obligations
incurred in the ordinary course of
business during the pendency of the
Chapter 11 Cases or assumed by the
Debtors in Possession. The DIP
Financing Claims shall be deemed
Allowed Administrative Claims and the
holders thereof shall receive a Pro Rata
share of the proceeds of the new Exit
Financing Facility Revolving Notes.
-- Priority Tax Unimpaired; at the option of the Debtors 100%
Claims either (i) paid in full, in Cash, or (ii) paid
over a six-year period from the date of
assessment as provided in section
1129(a)(9)(C) of the Bankruptcy Code
with interest at the statutory rate
provided for under applicable federal,
state or local law.
1 Other Priority Unimpaired; paid in full, in Cash on the 100%
Claims Effective Date.
2 Other Secured Unimpaired; at the option of the Debtors 100%
Claims either (i) reinstated by curing all
outstanding defaults with all legal,
equitable and contractual rights
remaining unaltered, (ii) paid in full,
in Cash, plus any interest required to
be paid pursuant to section 506(b) of
the Bankruptcy Code, or (iii) fully and
completely satisfied by delivery or
retention of the collateral securing the
Other Secured Claim and payment of any
interest required to be paid pursuant to
section 506(b) of the Bankruptcy Code.
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Type of Claim or Estimated
Class Equity Interest Treatment Recovery
----- ------------------ --------- --------
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3 Trade Claims2/ Unimpaired; to the extent not paid in the 100%
ordinary course of business, all legal,
equitable and contractual rights will
remain unaltered by the Plan.
4 Prepetition Lender Impaired; distribution of proceeds of the 100%
Claims New Exit Financing Facility Term Notes.
5 Senior Impaired; Distribution of $20 million of 29%
Subordinated Note New Senior Subordinated Notes and
Claims, Rejected 5,000,000 shares of Reorganized Prime
Former Owner Holdings New Common Stock.
Obligations, Other
Rejected
Obligations and
Other General
Unsecured Claims
6 Old Preferred Impaired; distribution of pro rata share of Deminimus
Stock new warrants to purchase in the aggregate
500,000 shares of New Common Stock of
Reorganized Prime Holdings
7 Other Equity Impaired; no distribution shall be made, $0.00
Interests and all existing Other Equity Interests
will be canceled
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2/ "Trade Claim" means an unsecured Claim (other than a Senior
Subordinated Note Claim, Rejected Former Owner Obligation, Other
Rejected Obligation or Other General Unsecured Claim) of an entity
against the Debtors for goods or services provided to the Debtors in
the ordinary course of business; provided, however, that such entity
has continued to provide goods and services to the Debtors before and
after the Petition Date on customary terms and credit, or as otherwise
acceptable to the Debtors.
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III.
OVERVIEW OF CHAPTER 11
Chapter 11 is the principal business reorganization chapter of
the Bankruptcy Code. Under chapter 11, a debtor is authorized to reorganize its
business for the benefit of itself, its creditors and equity interest holders.
In addition to permitting rehabilitation of a debtor, another goal of chapter 11
is to promote equality of treatment for similarly situated creditors and equity
interest holders with respect to the distribution of a debtor's assets.
The commencement of a chapter 11 case creates an estate that
is comprised of all of the legal and equitable interests of the debtor as of the
filing date. The Bankruptcy Code provides that the debtor may continue to
operate its business and remain in possession of its property as a "debtor in
possession."
The consummation of a plan of reorganization is the principal
objective of a chapter 11 reorganization case. A plan of reorganization sets
forth the means for satisfying claims against and interests in the debtor.
Confirmation of a plan of reorganization by the bankruptcy court makes the plan
binding upon a debtor, any issuer of securities under the plan, any person
acquiring property under the plan and any creditor or equity interest holder of
a debtor. Subject to certain limited exceptions, the confirmation order
discharges a debtor from any debt that arose prior to the date of confirmation
of the plan and substitutes therefor the obligations specified under the
confirmed plan.
After a plan of reorganization has been filed, the holders of
claims against or interests in a debtor are permitted to vote to accept or
reject the plan. Before soliciting acceptances of the proposed plan, however,
section 1125 of the Bankruptcy Code requires a debtor to prepare a disclosure
statement containing adequate information of a kind, and in sufficient detail,
to enable a hypothetical reasonable investor to make an informed judgment about
the plan. The Debtors are submitting this Disclosure Statement to holders of
Claims against and Equity Interests in the Debtors to satisfy the requirements
of section 1125 of the Bankruptcy Code.
IV.
DESCRIPTION OF THE DEBTORS' BUSINESSES
A. General
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Prime is one of the leading providers of funeral home and
cemetery merchandise and services in the United States. In addition to providing
merchandise and services at the time of need, it also makes funeral, cemetery
and cremation arrangements on a pre-need basis. Prime, through its subsidiaries
owns or operates 141 funeral homes and 19 cemeteries in 19 states, primarily in
non-urban areas. Prime's principal executive offices are located at 3940 Olympic
Boulevard, Suite 500, Erlanger, Kentucky 41018 and its telephone number is (606)
746-6800.
B. Properties
Set forth in the table below is the number, by state, of
Prime's funeral homes and cemeteries:
State Number of Number of
Funeral Homes Cemeteries
----- ------------- ----------
Alabama 23 8
Arizona 3 0
Arkansas 3 0
California 15 0
Florida 21 4
Georgia 6 1
Illinois 15 0
Indiana 7 0
Iowa 1 0
Kentucky 3 3
Michigan 8 0
Minnesota 10 0
Missouri 5 0
Nebraska 4 0
Ohio 1 0
Tennessee 7 3
Texas 5 0
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West Virginia 3 0
Wyoming 1 0
Total --- --
141 19
As of the Petition Date, all but 30 of Prime's 141 funeral
home locations were owned by the Subsidiary Debtors. The leases with respect to
the 30 leased properties have terms ranging from 5 to 21 years.
As of the Petition Date, Prime owned 19 cemeteries containing
a total of approximately 772 acres. Approximately 63% of the total acreage is
developed. Prime also owns six crematories, two of which are located in Illinois
and the remaining four of which are located in California, Florida, Indiana and
Tennessee.
Prime occupies 20,000 square feet of office space in a
building in Erlanger, Kentucky under a lease agreement which expires in December
2007. The lease may be terminated in December 2004 by Prime under certain terms
and conditions.
C. The Death Care Industry
According to the United States Bureau of the Census, the
number of deaths in the United States is expected to increase by approximately
1% per year from 2.40 million in 1999 to 2.64 million in 2010. In addition,
industry studies indicate that while the death rate is declining slightly, the
average age of the population in the United States is increasing. The aging
population, particularly the "baby boomers" who have recently begun to turn 50,
represents a significant opportunity for firms such as Prime to expand their
customer base and secure future market share by actively marketing prearranged
sales of property, merchandise and services. According to the Bureau of the
Census, the United States population, age 50 and over, will increase from 74.4
million in 1999 to 97.1 million in 2010. Prime's principal target market for
sales of prearranged cemetery property, merchandise and services is customers
who are age 50 and above.
The death care industry is largely comprised of small
family-owned, locally operated entities that have been passed down through
successive generations within a single family and have established goodwill and
tradition over a period of time. For this reason, new competitors entering the
market are at a disadvantage to those well established businesses who have
earned a reputation for maintaining high professional standards, superior
service, attractive facilities and offer a competitive pricing structure. Other
barriers to market entry include zoning restrictions,
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regulatory complexities and the existence of an adequate number of facilities
serving mature markets. The industry recently experienced a transition in which
family-owned firms consolidate with larger organizations such as Prime due to
the desire of owner to address management succession and estate planning issues
as well as to achieve liquidity and diversification of their investments. A more
recent trend has been the announcement by the larger publicly traded companies
to either curtail or suspend acquisition activity and concentrate on maximizing
profitability of properties already in their possession.
D. Operations
Clustering. Prime operates most of its funeral homes and
cemeteries in "clusters" which are groups of funeral homes and cemeteries
located close enough to each other that their operations can be integrated to
achieve economies of scale. Clustered facilities share vehicles, employees,
computer systems and some general administrative functions, centralized
embalming services and inventory management. This allows Prime to decrease its
overall operating costs.
Funeral Operations. Funeral operations accounted for
approximately 82.4% of Prime's revenues for the fiscal year ended December 31,
1999. Prime's funeral homes offer a complete range of funeral services and
products at the time of need or on a prearranged basis. Prime's services and
products include family consultation, removal and preparation of remains, the
use of funeral home facilities for visitation, worship and funeral services,
transportation services, flowers and caskets. In addition to traditional funeral
services, all of Prime's funeral homes offer cremation products and services.
Most of Prime's funeral homes have a non-denominational chapel on the premise,
which permits family visitation and religious services to take place at the same
location. As of the Petition Date, Prime operated 141 funeral homes.
Cemetery Operations. Cemetery operations accounted for
approximately 17.6% of Prime's revenues for the fiscal year ended December 31,
1999. Prime's cemetery operations involve the sale of cemetery property and
related merchandise, including lots, lawn crypts, mausoleums, monuments,
memorials, burial vaults, along with the sale of burial site openings and
closings. Cemetery property and merchandise sales are made at the time of need
or on a prearranged basis. Prearranged sales represented approximately 71.5% of
cemetery revenue during the fiscal year ended December 31, 1999. As of the
Petition Date Prime owned and operated approximately 19 cemeteries.
Combined Funeral Home and Cemetery Operations. A combined
operation is a funeral home located on a cemetery site where both are operated
under the same ownership. Combined operations help to increase market share by
allowing
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Prime to offer families the convenience of complete funeral home and cemetery
planning and services from a single location at a competitive price at the time
of need or on a prearranged basis. In addition, combined operations enhance
Prime's margins, enabling it to employ more sophisticated management systems,
and allowing it to share facilities, equipment, personnel and a prearrangement
sales force, resulting in lower average operating costs as well as expanded
marketing and sales opportunities. Of Prime's 19 cemeteries, 9 have a funeral
home on site that is operated in conjunction with the cemetery. Many of these
facilities are in Prime's key markets, including Fort Lauderdale, Birmingham and
Memphis.
Prearrangement. Prearranged funeral planning allows families
to specify in advance, and prepay, the services to be performed and the products
to be used. Prime markets death care products and services on a prearranged
basis through a staff of approximately 180 commissioned sales counselors. The
cost of such products and services is set at prices prevailing at the time the
agreement is signed, rather than when the products and services are delivered.
Prearranged plans also permit the avoidance of the emotional strain of making
death care decisions at the time of need. Prime believes that an aggressive
marketing of prearranged products and services produces a backlog of future
business and enhances current and future market share.
Trust Funds. Prearranged funeral plans are funded through
trust funds, life insurance, or secured by surety bonds, depending on the
regulatory requirements of the relevant jurisdiction. When trust funding is
used, Prime places into a trust fund a percentage (which varies by jurisdiction)
of the sale price, which is often paid in installments. It retains the remainder
of the sale price to defray costs related to the sale. Prime withdraws the
amount placed in the trust fund when the funeral service is performed to cover
the costs of the service. Generally, principal and earnings (including interest,
dividends and net realized capital gains) on the trust funds are paid to Prime
only when the funeral service is performed. When insurance funding is used,
Prime applies the customers' payments to pay premiums on life insurance policies
designed to cover the cost of providing the funeral service in the future.
Approximately 65% of all prearranged funeral plans sold by Prime are funded
through insurance with the balance being funded through trust funds or secured
by surety bonds. As of December 31, 1999, Prime's backlog of prearranged
funerals totaled approximately $162 million with approximately $95 million
funded by life insurance contracts.
Prime also establishes trust funds to fund the cost of
delivering prearranged cemetery merchandise. Generally, Prime withdraws the
principal and earnings from these funds only when the merchandise is delivered
or contracts are canceled. As of December 31, 1999, Prime's cemetery merchandise
trust funds totaled approximately $6.3 million.
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Prime defrays its obligation to maintain cemetery grounds by
placing a portion, generally 10%, of the proceeds from cemetery property sales
into perpetual care trust funds. Income from these funds is withdrawn and used
for maintenance of the cemeteries, but principal, including in some
jurisdictions net realized capital gains, generally must be held in perpetuity.
As of December 31, 1999, Prime's perpetual care trust funds totaled
approximately $8.9 million.
Management believes that balances in Prime's trust funds,
along with insurance proceeds, and installment payments due under contracts,
will be sufficient to cover its estimated cost of providing the related
prearranged services in products in the future.
E. Management and Employees
Management. Prime has an experienced team of managers. The
management structure is designed to allow the managers of local funeral homes
and cemeteries substantial flexibility in deciding how their firms will be
operated as well as how their products and services will be priced and
merchandised. At the same time, financial goals are established by management at
the corporate level and Prime maintains centralized supervisory controls. In
addition, Prime provides information systems support, accounting and payroll
functions through its corporate office.
Currently, Prime is divided into a funeral division, a
cemetery division, and a pre-arranged sales division. There are six Directors of
Operations in the funeral division and one Director of Operations in the
cemetery division, all of whom report directly to the Senior Vice President of
Operations. The pre-need sales division has one Vice President of Funeral Sales
and one vice President of Cemetery Sales, both of whom report to the President.
Employees. As of the Petition Date, Prime employed
approximately 1,160 people in funeral and cemetery operations, approximately 180
commissioned sales people and 30 telemarketing staff. None of the employees of
Prime or its subsidiaries are covered by a collective bargaining agreement.
F. History and Capital Structure
Prime was incorporated in Delaware as Blackhawk Acquisition
Corp. in May 1996 as a precursor to the acquisition (the "Acquisition") of
Holdings (formerly known as Prime Succession, Inc.) by Blackstone Capital
Partners II Merchant Banking Fund L.P. and its affiliates (collectively,
"Blackstone") and Loewen Group International, Inc. ("Loewen") a subsidiary of
The Loewen Group Inc. ("Loewen Group"). The total purchase price was
approximately $320 million of which approximately $130 million was contributed
by Blackstone and Loewen, and $190
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million was financed through bank borrowings and the issuance of senior
subordinated notes.
All of the outstanding shares of common stock of Prime are
held by Holdings.3/ Blackstone and certain of its affiliates including PSI
Management Direct L.P. ("PSIM") are the holders of 78.2% of the common stock of
Holdings. Loewen holds 21.8% of the common stock of Holdings.
In connection with the Acquisition, which was consummated on
August 26, 1996 (the "Acquisition Closing Date"), Prime (i) received all of the
assets and liabilities of, and became a wholly-owned subsidiary of, Holdings,
(ii) entered into credit facilities (collectively, the "Bank Credit Facilities")
with a syndicate of financial institutions (the "Lenders"), Goldman Sachs Credit
Partners, L.P., as syndication agent and The Bank of Nova Scotia, as
administrative agent (the "Administrative Agent") providing a senior secured
term loan facility in an aggregate principal amount of $90 million (the "Bank
Term Facility") and a senior secured revolving credit facility in an aggregate
principal amount of up to $25 million (the "Bank Revolving Facility") and (iii)
privately placed $100 million aggregate principal amount of 10 3/4% Senior
Subordinated Notes due 2004, which subsequently were exchanged for $100 million
aggregate principal amount of publicly-registered notes with identical material
terms (the "Notes").
The proceeds of the Bank Term Facility were used to finance
the Acquisition and related transaction costs, to pre-fund certain capital
expenditures and to refinance Prime's existing indebtedness. The proceeds of the
Bank Revolving Facility may be used for general corporate purposes, a portion of
which may be extended (as agreed upon) in the form of swing line loans or
letters of credit for the account of Prime. The Bank Term Facility matures 7
years after the Acquisition Closing Date, and the Bank Revolving Facility
matures 5 years after the Acquisition Closing Date.4/
The Bank Term Facility requires monthly interest payments and
semi- annual principal payments from February 1, 1997 through August 1, 2003.5/
In
------------------------
3/ In connection with the Acquisition, Prime issued 100 shares of common
stock to Holdings, which shares represent all of the outstanding common
stock of Prime. There is no established public trading market for the
common stock of Prime.
4/ As of December 31, 1999, Prime had $87,000,000 in term loans
outstanding under the Bank Term Facility.
5/ The Bank Term Facility is subject to amortization, subject to certain
(continued...)
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October 1996 Prime entered into interest rate swap agreements to reduce the
impact of changes in interest rates on its term loans from the period of
February 26, 1997 to August 26, 2000. These agreements effectively limit Prime's
interest rate exposure on $72,000,000 of its then $90,000,000 term loans to a
fixed 7% during the term of the agreements. Prime is exposed to credit loss in
the event of nonperformance by the other parties to the interest swap
agreements.
The Bank Revolving Facility will be payable in full at
maturity, with no prior amortizations. As of December 31, 1999 there was a
commitment fee of 0.5% on the unused portion of the credit line. There were
outstanding letters of credit of approximately $1,330,000 and borrowings of
$22,000,000 on the line of credit bearing interest at 9.09%.
Prime also has a $500,000 bank credit line, renewable
annually, for general corporate purposes exclusive of the Bank Revolving
Facility. At December 31, 1998, there were borrowings of $500,000 on the line of
credit bearing interest at 7.75% and no borrowings as of December 31, 1999.
All the obligations under the Bank Credit Facilities and any
interest rate hedging agreements entered into with the Lenders or their
affiliates in connection therewith are unconditionally guaranteed (the "Bank
Guarantees") jointly and severally by Holdings and each of Prime's existing and
future domestic subsidiaries (the "Bank Guarantors"). All of the obligations of
Prime and the Bank Guarantors under the Bank Credit Facilities and the Bank
Guarantees are secured by first priority security interests in all existing and
future assets (other than real property and vehicles covered by certificates of
title) of Prime and the Bank Guarantors. In addition, the Bank Credit Facilities
are secured by a first priority security interest in 100% of the capital stock
of Prime and each subsidiary thereof and all intercompany receivables.
The Notes mature on August 15, 2004. Interest on the Notes is
payable semi-annually on February 15 and August 15 at the annual rate of 10
3/4%. The Notes are redeemable in cash at Prime's option, in whole or in part,
at any time on or after August 15, 2000, at prices ranging from 105.375% with
annual reductions
------------------------
5/ (continued...)
conditions, in semi-annual installments in the amounts of $1 million in
each of the first three years after the anniversary of the closing date
of the Bank Term Facility (the "Bank Closing"); $4 million in the
fourth year after the Bank Closing; $9 million in the fifth year after
the Bank Closing; $12.5 million in the sixth year after the Bank
Closing and $61.5 million upon the maturity of the Bank Term Facility.
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to 100% in 2003 plus accrued and unpaid interest, if any, to the redemption
date. The proceeds of the Notes were used, in part to finance the Acquisition.
Prime is subject to certain restrictive covenants contained in
the Indenture relating to the Notes, including, but not limited to, covenants
imposing limitations on the incurrence of additional indebtedness; certain
payments, including dividends and investments; the creation of liens; sales of
assets and preferred stock; transactions with interested persons; payment
restrictions affecting subsidiaries; sale- leaseback transactions; and mergers
and consolidations. In addition, the Bank Credit Agreement contains certain
restrictive covenants that, among other things, limit the ability of Prime and
its subsidiaries to dispose of assets, incur additional indebtedness, prepay
other indebtedness, pay dividends or make certain restricted payments, create
liens on assets, engage in mergers or acquisitions or enter into lease
transactions with affiliates.
Prime also has approximately $4,100,000 of other debt
outstanding as of December 31, 1999. Approximately $1,740,000 of other debt as
of December 31, 1999 is due to former owners with rates ranging from 6% to 9%.
G. Put/Call Agreement and Related Party Transactions
Pursuant to an agreement executed by Blackstone, Loewen and
PSIM, in connection with the Acquisition (the "Put/Call Agreement"), (i) Loewen
has a call option (the "Call Option"), exercisable from and after the fourth
anniversary of the Acquisition Closing Date until but excluding the sixth
anniversary of the Acquisition Closing Date, to purchase the shares of common
stock of Holdings held by Blackstone and/or PSIM and (ii) each of Blackstone and
PSIM has a put option (the "Put Option"), exercisable from and after the sixth
anniversary of the Acquisition Closing Date until but excluding the eighth
anniversary of the Acquisition Closing Date, to sell such shares of common stock
of Holdings held by Blackstone or PSIM, as the case may be, to Loewen. The
option price in each case is derived from a formula based on earnings before
interest, taxes, depreciation and amortization. The performance by Loewen of its
obligations under the Put/Call Agreement will be guaranteed by the Loewen Group.
In addition, pursuant to the terms of a stockholders' agreement entered into by
Holdings, Blackstone, Loewen and PSIM on the Acquisition Closing Date (the
"Stockholders Agreement"), neither Blackstone nor Loewen may transfer its shares
of Holdings common stock without the prior written consent of the other party,
subject to certain exceptions, and PSIM may not transfer its shares of Holdings
common stock without the consent of Blackstone and Loewen.
Pursuant to the Stockholders' Agreement, Blackstone and Loewen
may designate five and three nominees, respectively, to the board of directors
of Holdings. Four of Holdings' current directors are the nominees designated by
Blackstone. Three
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of Holdings' current directors are the nominees designated by Loewen (none of
whom is an officer or director of Loewen). Each of Blackstone's and Loewen's
nominees to the board of directors of Holdings also was nominated to the board
of directors of Prime. The Stockholders' Agreement provides that Holdings shall
cause Prime's board of directors at all times to consist of the same individuals
who comprise Holdings' board of directors.
The Stockholders Agreement will terminate following the
exercise by either Blackstone or Loewen of its option pursuant to the Put/Call
Agreement or on such other date as Blackstone and Loewen may agree.
In connection with the Acquisition, Prime entered into an
administrative services agreement with Loewen on August 26, 1996 (the
"Administrative Services Agreement"). The Administrative Services Agreement
requires Loewen to provide various administrative services and share certain
resources with Prime. Such services include the licensing of, the maintenance of
and the provision of training and other support services with respect to,
software, hardware and other information systems; the provision of certain legal
services, training and support services relating to certain types of regulatory
compliance, risk management services, travel arrangement services and assistance
and support with respect to environmental compliance and remediation efforts,
and the granting of access to certain telecommunications equipment and services,
as well as technical support therefor. In addition, Loewen is required to
provide Prime with the ability to purchase supplies under certain of Loewen's
supply agreements with third parties.
Prime is required to pay Loewen $250,000 annually as a
prepayment for services. The term of the Administrative Services Agreement is
eight years and allows for annual increases up to 2.5% on the $250,000 base fee
each August 26. The Administrative Services Agreement also requires Prime to
reimburse Loewen on a timely basis for all out of pocket costs and expenses
incurred from third parties in connection with the provision of services
described above.
The Administrative Services Agreement is subject to
termination (i) automatically on the eighth anniversary of the Acquisition
Closing Date; (ii) automatically upon closing following the exercise of the Call
Option or the Put Option, (iii) if required pursuant to a legally binding order
of a court or any other governmental agency with appropriate jurisdiction, (iv)
subject to applicable grace periods and an arbitration requirement, in the event
of a dispute, upon notice by either Prime or Loewen in the event of a material
breach by the other party of any provision of the Administrative Services
Agreement and (v) at the option of Prime.
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Prime also advances funds to Holdings, its parent, in order to
pay an annual monitoring fee of $250,000 to Blackstone, board of directors fees
and related expenses.
H. Obligations Under Agreements with Former Owners
Prime has entered into consulting and noncompetition
agreements (generally for ten years) with certain officers of Prime and former
owners and key employees of businesses acquired. In addition, Prime has issued
notes to certain former owners in connection with the purchase of their
businesses. Prime's obligations under covenants not to compete amount to
$9,190,000, its obligations under consulting agreements amount to $2,951,000 and
its obligations under former owner notes amount to $1,742,000
I. Growth
General. Prime has employed a number of management initiatives
designed to:
(a) Expedite collection of receivables by implementing a
specialty on-site financing program with an independent agency
during the year ended December 31, 1999. This program provides
immediate need financing to families who qualify, with no
recourse to Prime.
(b) Improve both revenues and profitability by capitalizing on
the location and concentration of its properties.
(c) Improve merchandising.
(d) Enhance pre-need marketing and to increase pre-need sales.
(e) Maintain a management structure that encourages an
entrepreneurial business culture.
Internal Growth.
----------------
Prearranged Services. Prime believes that extensive
marketing of prearranged merchandise and services will produce a backlog of
future business and will enhance current as well as future market share. Prime's
prearranged funeral services increased from $151 million at December 31, 1998 to
$162 million at December 31, 1999.
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Improved Merchandising. Prime frequently expands its
product and service offerings, adjusts the mix of products and services offered
in individual markets, takes advantage of enhanced pricing opportunities, and
implements selective marketing programs to increase revenue and improve profit
margins.
Alternative Service Firms. During fiscal year 1999,
Prime, through Aaron Cremation Services ("Aaron"), operated seven low cost
funeral firms offering cremations and related products and services. Because
these firms operate from leased locations with a small staff, they generally
have lower overhead then traditional funeral homes. The cost to the family for
death care arrangements at an Aaron location generally is less than the cost at
a traditional home. The Aaron model is part of Prime's effort to address the
growing cremation market, and it offers a cost- saving alternative to the
construction of a traditional funeral home. Prime plans to open additional
funeral stores similar to the Aaron model, although management expects this
expansion to occur slowly while it further develops and tests the concept in new
markets. Results from the funeral stores opened have generally met Prime's
initial expectations.
Cost Control. In addition to its strategies for
increasing revenues, Prime plans to continue to improve its operating margins by
achieving economies of scale, improving efficiencies and controlling costs
through a variety of measures including the following:
- Obtaining volume discounts from suppliers
- Leveraging operating costs through clustering
and the development of combined operations.
- Improving the utilization of its sales force.
- Reducing reliance on telemarketing.
Prime is party to a supply agreement with Batesville Casket
Company, Inc. ("BCC"), the Forethought Group and Forethought Life Insurance
Company ("FLIC"), pursuant to which Prime must purchase caskets exclusively from
BCC and, in connection with its pre-need sale of funeral services funded by
insurance, Prime must offer to its customers in specified markets exclusively
LFIC insurance products. The agreement expires on December 31, 2004. Management
believes that the terms of the supply agreement are favorable to Prime.
External Growth.
---------------
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Prime's predecessor commenced operations in 1992 and expanded
rapidly through the aggressive acquisition of funeral homes and cemeteries. It
had no funeral homes when it began operations in 1992 and grew to 146 funeral
homes in 1996. In order to achieve this rapid growth, former management was
primarily focused on identifying funeral homes to be acquired and consummating
acquisitions of such homes rather than on maximizing profitability of the
funeral homes and cemeteries which it had acquired. As a result, former
management did not take advantage of certain opportunities to improve the
efficiency and performance of the funeral homes acquired. New management
substantially eliminated the acquisition program. In addition, in order to
improve present and long-term operating performance, new management took
advantage of (i) the quality and size of Prime's portfolio of properties, (ii)
the opportunity to operate more efficiently those properties located in close
proximity to one another, and (iii) the shift in focus from acquisitions to
profit maximization at existing locations.
J. Competition
Prime's funeral home and cemetery operations generally face
competition in local markets that typically are served by a number of funeral
homes and cemetery firms. To a lesser degree, Prime also competes with monument
dealers, casket retailers and other non-traditional providers of limited
services or products. Because the market for death care services is relatively
stable, competition usually focuses on increasing market share and selling
prearranged products and services. Market share is largely a function of
goodwill and tradition, although competitive pricing, professional service and
attractive, well-maintained, conveniently located facilities are also important.
Because of the significant role played by goodwill and tradition, market share
increases are usually gained over a long period of time. Extensive marketing
through media advertising, direct mailings and personal sales calls has
increased in recent years, especially with respect to the sale of prearranged
funeral services.
Prime's traditional burial and funeral service operations face
competition from the increasing number of cremations. Industry studies indicate
that the percentage of cremations continue to increase and that cremation will
represent approximately 38% of the United States burial market by the year 2010,
compared with 24% in 1998. All of Prime's funeral homes offer cremation, and
Prime believes that it will be able to maintain its competitive position by
marketing full service cremations in combination with traditional funeral
services and memorialization. Additionally, development of the Alternative
Service Firms concept (as discussed above) by Prime represents another
opportunity for Prime to serve cremation customers.
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Prime also faces competition from large publicly-traded
funeral service companies, including Service Corporation International, Loewen
and Stewart Enterprises, Inc. as well as various smaller companies which compete
with Prime on a regional or local basis.
K. Regulation
Prime's funeral home operations are regulated by the Federal
Trade Commission (the "FTC") under the FTC's Trade Regulation Rule on Funeral
Industry Practices, 16 CFR Part 453 (the "Funeral Rule"), which went into effect
on April 30, 1984, and was revised effective July 19, 1994.
The Funeral Rule defines certain acts or practices as unfair
or deceptive, and contains certain requirements to prevent these unfair or
deceptive acts or practices. The preventive measures require a funeral provider
to give consumers accurate, itemized price information and various other
disclosures about funeral goods and services, and prohibits a funeral provider
from: (i) misrepresenting legal, crematory and cemetery requirements; (ii)
embalming for a fee without permission; (iii) requiring the purchase of a casket
for direct cremation; and (iv) requiring consumers to buy certain funeral goods
or services as a condition for furnishing other funeral goods or services.
Prime's operations are also subject to extensive regulation,
supervision and licensing under numerous federal, state and local laws and
regulations. Prime believes that it is in compliance with the Funeral Rule and
all such laws and regulations. State legislatures and regulatory agencies
frequently propose new laws and regulations, some of which, if enacted as
proposed, could have a material effect on Prime's operations and on the death
care industry in general. Prime cannot predict the outcome of any proposed
legislation or regulation, or the effect that any such legislation or regulation
might have on Prime.
L. Legal Proceedings
Gamble Settlement. On February 26, 1996, a lawsuit was filed
(the "Alabama Litigation") against Prime by World Service Life Insurance Company
of America ("World Service") and Jeffrey M. Gamble ("Gamble"), the former owner
of a business located in Alabama which was acquired by a subsidiary of Prime, in
connection with a pre-need funeral service funding agreement between Prime and
World Service (the "Alabama Pre-need Agreement"). On February 29, 1996, a
lawsuit (the "Texas Litigation") was filed against Prime by South Texas Bankers
Life Insurance Company ("South Texas") and Gamble in connection with a pre-need
funeral service funding agreement between Prime and South Texas (the "Texas Pre-
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need Agreement") together with the Alabama Pre-need Agreement, the "Pre-need
Agreements".)
On April 11, 1996, Prime settled the Alabama Litigation and
the Texas Litigation by entering into a Termination of Pre-need Funding
Agreements and Release with World Service, Gamble and South Texas (the
"Termination and Release"). Pursuant to the Termination and Release, (a) the
Pre-need Agreements were immediately terminated, (b) each of the parties
released the others from all claims under or with respect to the Pre-need
Agreements and (c) the Alabama Litigation and the Texas Litigation were
dismissed with prejudice. As consideration for such termination, release and
dismissal, Prime paid Gamble approximately $6,300,000, which was recorded as a
charge against income in Prime's financial statements.
On the Acquisition Closing Date, Prime funded the remaining
obligation provided for in the Termination and Release. Management believes that
Prime will recover a substantial portion of the cost of the settlement over time
through higher commission rates and increased policy benefits with the purchase
of pre-need insurance policies from an alternative insurance carrier.
Florida Subpoena. On February 25, 1999, the Department of
Legal Affairs of the Office of the Attorney General of the State of Florida
issued a subpoena duces tecum requiring that certain subsidiaries of Prime doing
business in the state provide various described documents and materials
regarding the compliance of their pre-need and at-need policies and procedures
with Florida law. Prime has produced the information required to respond to the
subpoena and those that have been issued subsequently. Management does not
believe that this investigation will have a material adverse effect on Prime or
its subsidiaries.
Other. Prime is a party to other legal proceedings in the
ordinary course of its business but Management does not expect the outcome of
any such proceeding will have a material adverse effect on Prime's financial
condition.
V.
KEY EVENTS LEADING TO COMMENCEMENT OF
THE CHAPTER 11 CASES
A. Decrease in Overall Performance and Operating Results and
Defaults under the Bank Credit Facilities and Notes
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During its fiscal year 1999, Prime experienced significant
declines in revenues, cash flow and profits due primarily to a reduction in the
nationwide death rate and the continuing slowdown in cremations, which produce
higher gross profit margins for Prime. This worsening financial performance
began to affect Prime's continuing compliance with its existing Bank Credit
Facilities and the indenture on its Notes during the fiscal year ended December
31, 1999. As of September 30, 1999, Prime was in default with respect to certain
financial covenants set forth in the Bank Credit Agreement relating to the Bank
Credit Facilities. On November 12, 1999, the Lenders granted Prime a conditional
waiver of non-compliance until January 31, 2000 pursuant to a Limited Waiver and
Amendment to Credit Agreement entered into among Prime, the Bank Guarantors, the
Lenders and the Administrative Agent.
On January 31, 2000, Prime and the Bank Guarantors entered
into a second Limited Waiver and Forbearance Agreement to Credit Agreement with
the Lenders and the Administrative Agent pursuant to which the Lenders agreed to
waive certain conditions to additional borrowings under the Revolving Credit
Facility and to forbear from exercising certain rights and remedies under the
Bank Credit Agreement through March 15, 2000. The Lenders have not granted Prime
a further waiver beyond March 15, 2000 and have specifically reserved all of
their rights and remedies under the Bank Credit Agreement with respect to the
existing defaults. However, the Lenders have not accelerated the indebtedness
outstanding under the Bank Credit Agreement or pursued any available remedies.
Pursuant to the Limited Waiver and Forbearance Agreement to
the Credit Agreement dated January 31, 2000, on February 8, 2000, the
Administrative Agent sent a Payment Blockage Notice to the Trustee under the
Indenture relating to the Notes. As a consequence, Prime did not make the
semi-annual interest payment due February 15, 2000 on the Notes. Prime has not
received an acceleration notice from either the Trustee under the Indenture or
the holders of the Notes, nor have the holders of the Notes otherwise pursued
any remedies available to them. Certain of the Note holders have formed the
Informal Committee to negotiate with Prime the terms of a consensual
restructuring of their indebtedness.
B. Discussions with Financial Advisors, Regulatory
Authorities and Informal Committee
In response to Prime's deteriorating financial situation,
Prime engaged Lazard Freres & Co. LLC ("Lazard") in December, 1999 to act as its
financial advisor to explore its strategic alternatives and to assist it in
negotiating a consensual restructuring.
Around the same time, institutions holding a substantial
amount of Prime's Notes formed an Informal Committee to negotiate a consensual
restructuring.
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As of the Petition Date, the members of the Informal Committee, or certain funds
managed or advised by them, held in the aggregate more than 662/3% of the
outstanding principal amount of the Notes. The members of the Informal Committee
are:
PPM America Inc
American Express Financial Corp.
Oaktree Capital Management L.L.C.
Merrill Lynch
The Informal Committee engaged Munger, Tolles & Olson LLC
("Munger") as its legal counsel and Chanin Capital Partners LLC ("Chanin") as
its financial advisor.
In June, 2000, negotiations between the Debtors and the
Informal Committee resulted in an agreement in principle on the terms of a
restructuring. Thereafter and through the Petition Date, Prime and the Informal
Committee continued to negotiate the definitive terms of the Plan and prepared
the documentation necessary to effectuate it.
Prior to the Petition Date, certain members of the Informal
Committee signed lock-up agreements (collectively, the "Lock-Up Agreements")
making certain undertakings and representations for the benefit of the members
of the Informal Committee and the Debtors. Pursuant to these Lock-Up Agreements,
members of the Informal Committee have agreed that (i) they will support the
Debtors in seeking confirmation of the Plan and (ii) they will not, directly or
indirectly, sell or otherwise transfer any of the Notes held by them or any
interest or participation therein, other than to a person who agrees in writing
to be subject to the terms and undertakings contained in the Lock-Up Agreements.
C. Steps Taken to Strengthen the Debtors' Operations and
Financial Performance
In response to Prime's declining operating performance,
management initiated certain strategic enhancements to improve sales and
financial performance. Prime has identified and has taken a number of
initiatives to expedite collection of receivables and increase revenues
including numerous steps to increase pre-need sales. Prime will continue to
focus on additional areas for reducing operating costs and endeavor to increase
revenues and profitability by capitalizing on the locations and concentration of
its properties, improved merchandising and a management structure that
encourages an entrepreneurial business culture.
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VI.
THE CHAPTER 11 CASES
A. Disclosure Statement/Plan Confirmation Hearings
Simultaneously with the filing of their chapter 11 petitions,
the Debtors filed a motion seeking an order from the Court scheduling a hearing
to consider the adequacy of this Disclosure Statement. On August 21, 2000, the
Court entered the Disclosure Statement Order. As provided by the Disclosure
Statement Order, hearing on confirmation of the Plan is scheduled for September
28, 2000.
B. Significant "First Day" Motions During the Chapter 11 Cases
On the Petition Date and during the first few weeks of the
Chapter 11 Cases, the Bankruptcy Court entered several orders authorizing the
Debtors to pay various prepetition claims. These orders were designed to ease
the strain on the Debtors' relationships with customers and employees as a
consequence of the filings. The Bankruptcy Court entered orders authorizing the
Debtors to, among other things, (i) pay prepetition compensation, benefits and
employee reimbursement to employees and (ii) to honor certain prepetition
customer obligations. The Debtors also obtained an Order from the Bankruptcy
Court authorizing them to pay certain prepetition claims of trade creditors and
service providers.
In addition, the Debtors filed numerous motions seeking orders
from the Bankruptcy Court authorizing the Debtors to retain professionals.
Specifically, the Debtors filed motions for authorization to retain (i) Paul,
Weiss, Rifkind, Wharton & Garrison ("Paul Weiss") and Young, Conaway, Stargatt &
Taylor ("Young Conaway"), as co-counsel, (ii) Lazard, as financial advisor,
(iii) certain ordinary course professionals, (iv) Ernst & Young LLP, as
accountants, and (v) Donlin, Recano & Co., Inc., as voting, tabulation and
noticing agent. The Debtors also filed motions seeking certain relief from
administrative requirements of the Bankruptcy Code.
C. DIP Credit Facility
To provide the Debtors with the cash and liquidity necessary
to continue operations and to maintain normal vendor relations, Prime (the
"Borrower") has entered into a $10,000,000 debtor-in-possession facility
(including a $2,000,000 reserve for amounts payable to The Bank of Nova Scotia
arising out of the Borrower's cash management arrangements) in the form of a
Debtor-in-Possession Credit and Guaranty Agreement (the "DIP Credit Facility"),
dated as of July 13, 2000, among the Borrower, each of the other debtors, as
guarantors, the lenders
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identified therein (the "Lenders"), Goldman Sachs Credit Partners, L.P., as
syndication agent, and The Bank of Nova Scotia, as administrative agent
(collectively, the "Agents"). All of the Borrower's obligations under the DIP
Credit Facility are unconditionally guaranteed jointly and severally by Holdings
and each of Prime's subsidiaries party thereto (the "DIP Guarantors"). The
Bankruptcy Court entered a final order (the "Order") on August 3, 2000 approving
the DIP Credit Facility. Pursuant to the Order, the Borrowers have been
authorized to borrow up to an aggregate amount of $10,000,000.
The Borrower's obligations to the Agents and the Lenders under
the DIP Credit Facility (the "DIP Obligations") are secured by a first priority
security interest in all of Prime's, Holdings' and the DIP Guarantor's assets
subject only to Permitted Encumbrances (as defined in the DIP Credit Facility),
certain other permitted liens and Carve-Out Expenses (as defined below). In
addition, pursuant to the Order, the DIP Obligations have been accorded
administrative expense status with priority over all other administrative
claims, other than certain agreed-to administrative claims, including the fees
and expenses of professionals retained by the Debtors' and any official
committees appointed in the Chapter 11 Cases and unpaid retention and stay
bonuses payable to the Debtors' key employees (the "Carve-Out Expenses").
Proceeds of the revolving loans made under the DIP Credit
Facility may be used by the Borrower solely in accordance with a budget approved
by the requested Lenders.
The DIP Credit Facility expires on the earlier of (x) March
31, 2001 and (y) the Commitment Termination Date (as defined in the DIP Credit
Facility).
D. Last Date to File Proofs of Claim
Simultaneously with the filing of their petitions, the Debtors
filed a motion seeking an order (the "Bar Date Order") from the Court requiring
any person or entity holding or asserting a Claim against the Debtors to file a
written proof of claim with the Clerk of the Court, United States Bankruptcy
Court for the District of Delaware, 824 Market Street, Wilmington, DE 19801, on
or before 4:00 p.m. (EST) on August 31, 2000 (the "Bar Date"). Such motion
requested that any person or entity (other than, among others, employees,
individual holders of Prime's Notes and the Indenture Trustees) which fails to
timely file a proof of claim will be forever barred, estopped and enjoined from
voting on, or receiving a distribution under, the Plan and will be forever
barred, estopped and enjoined from asserting a Claim against the Debtors, their
estates, the Reorganized Debtors, and any of their successors or
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assigns. On July 13, 2000, the Court entered the Bar Date Order and established
August 31, 2000 as the Bar Date.
E. Assumption/Rejection of Unexpired Leases and Executory
Contracts
Pursuant to the Bankruptcy Code, the Debtors have (a) 60 days
after the entry of the order for relief (which is the Petition Date) to assume
or reject unexpired leases of nonresidential real property and (b) until
confirmation of the Plan to assume or reject executory contracts. The Debtors,
in conjunction with their attorneys and financial advisors, together with the
Informal Committee and their attorneys and financial advisors will review the
Debtors' executory contracts and leases to determine which, if any, of such
contracts should be assumed or rejected. The Debtors will make any appropriate
motions with respect to assumed or rejected leases and existing contracts within
the time period established by the Bankruptcy Code.
F. The Official Committee of Unsecured Creditors
On July 26, 2000, the United States Trustee appointed an
Official Committee of Unsecured Creditors (the "Creditors Committee") in the
Chapter 11 Cases. The Creditors Committee currently consists of United States
Trust Company of New York, American Express Financial Corporation, PPM America
Inc., Jeffrey Mark Gamble, Donald and Betty Taylor.
By separate applications each dated August 11, 2000, the
Creditors Committee requested the retention of Munger, Tolles & Olson LLP and
Pachulski, Stang, Ziehl, Young and Jones as co-counsel to the Creditors
Committee and Chanin Capital Partners LLC as its financial advisor.
VII.
SUMMARY OF THE PLAN OF REORGANIZATION
A. Introduction
The Debtors believe that confirmation of the Plan is critical
to their continued survival and that the Plan provides the best opportunity for
maximum recoveries for its Creditors and Equity Interestholders. The Debtors
believe, and will demonstrate to the Court, that Creditors and Equity
Interestholders will receive at least as much, if not more, in value under the
Plan than they would receive in a liquidation under chapter 7 of the Bankruptcy
Code.
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The following is a summary of the Plan, in pertinent part. The
Plan is attached as Exhibit A to this Disclosure Statement. The terms of the
Plan govern in the event of any discrepancies with the following discussion.
B. Classification and Treatment of Administrative Claims, Claims
and Equity Interests Under the Plan
Only administrative expenses, claims and equity interests that
are "allowed" may receive distributions under a chapter 11 plan. An "allowed"
administrative expense, claim or equity interest simply means that the debtor
agrees, or in the event of a dispute, that the court determines, that the
administrative expense, claim or equity interest, including the amount, is in
fact a valid obligation of the debtor. Section 502(a) of the Bankruptcy Code
provides that a timely filed administrative expense, claim or equity interest is
automatically "allowed" unless the debtor or another party in interest objects.
However, section 502(b) of the Bankruptcy Code specifies certain claims that may
not be "allowed" in a bankruptcy case even if a proof of claim is filed. These
include, without limitation, claims that are unenforceable under the governing
agreement or applicable non-bankruptcy law, claims for unmatured interest,
property tax claims in excess of the debtor's equity in the property, claims for
certain services that exceed their reasonable value, lease and employment
contract rejection damage claims in excess of specified amounts, and late-filed
claims. In addition, Bankruptcy Rule 3003(c)(2) prohibits the allowance of any
claim or equity interest that either is not listed on the debtor's schedules or
is listed as disputed, contingent, or unliquidated, if the holder has not filed
a proof of claim or equity interest before the deadline to file proofs of claim
and equity interests.
The Bankruptcy Code also requires that, for purposes of
treatment and voting, a chapter 11 plan divide the different Claims against, and
Equity Interests in, the debtor into separate classes based upon their legal
nature. Claims of a substantially similar legal nature are usually classified
together, as are equity interests of a substantially similar legal nature.
Because an entity may hold multiple Claims and/or Equity Interests which give
rise to different legal rights, the holders of such Claims and/or Equity
Interests may find themselves members of multiple classes of Claims and/or
Equity Interests. As a result, under the Plan, for example, a creditor that
holds both a Claim based on a Note and Old Common Stock would have its Claim
classified in Class 5 and its Other Equity Interest classified in Class 7. To
the extent of this holder's Claim, the holder would be entitled to the voting
and treatment rights that the Plan provides with respect to Class 5, and, to the
extent of the holder's Other Equity Interest, the voting and treatment rights
that the Plan provides with respect to Class 7.
Under a chapter 11 plan, the separate classes of claims and
equity interests must be designated either as "impaired" (altered by the plan in
any way) or
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"unimpaired" (unaltered by the plan). If a class of claims is "impaired," the
Bankruptcy Code affords certain rights to the holders of such claims, such as
the right to vote on the plan (unless the plan provides for no distribution to
the holder, in which case, the holder is deemed to reject the plan), and the
right to receive an amount under the chapter 11 plan that is not less than the
value that the holder would receive if the debtor were liquidated under chapter
7. Under section 1124 of the Bankruptcy Code, a class of claims or interests is
"impaired" unless, with respect to each claim or interest of such class, the
plan (i) does not alter the legal, equitable, and contractual rights of the
holders of such claims or interests or (ii) irrespective of the holder's right
to receive accelerated payment of such claims or interests after the occurrence
of a default, cures all defaults (other than those arising from, among other
things, the debtor's insolvency or the commencement of a bankruptcy case),
reinstates the maturity of the claims or interests in the class, compensates the
holders of such claims or interests for any damages incurred as a result of
their reasonable reliance upon any acceleration rights, and does not otherwise
alter their legal, equitable or contractual rights. Typically, this means that
the holder of an unimpaired claim will receive on the later of the effective
date of the plan of reorganization or the date on which amounts owing are due
and payable, payment in full, in cash, with postpetition interest to the extent
permitted and provided under the governing agreement between the parties (or if
there is no agreement, under applicable non-bankruptcy law), and the remainder
of the debtor's obligations, if any, will be performed as they come due in
accordance with their terms. Thus, other than its right to accelerate the
debtor's obligations, the holder of an unimpaired claim will be placed in the
position it would have been in had the debtor's case not been commenced.
Consistent with these requirements, the Plan divides the
Claims against, and Equity Interests in, the Debtors into the following Classes:
Unclassified Administrative Claims Paid in full
Unclassified Priority Tax Claims Unimpaired
Class 1 Other Priority Claims Unimpaired
Class 2 Other Secured Claims Unimpaired
Class 3 Trade Claims Unimpaired
Class 4 Prepetition Lender Claims Impaired
Class 5 Senior Subordinated Note Claims, Impaired
Rejected Former Owner Obligations,
Other Rejected Obligations and Other
General Unsecured Claims
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Class 6 Old Preferred Stock Impaired
Class 7 Other Equity Interests Impaired
For purposes of computing distributions under the Plan,
Allowed Claims do not include postpetition interest unless otherwise specified
in the Plan.
1 Unclassified -- Administrative Claims
Administrative Claims are Claims constituting a cost or
expense of administration of the Chapter 11 Cases allowed under sections 503(b)
and 507(a)(1) of the Bankruptcy Code. Such Claims include any actual and
necessary costs and expenses of preserving the estates of the Debtors, any
actual and necessary costs and expenses of operating the Debtors in Possession's
businesses, any indebtedness or obligations incurred or assumed by the Debtors
in Possession in connection with the conduct of their businesses including,
without limitation, for the acquisition or lease of property or an interest in
property or the rendition of services, the reasonable fees and expenses of the
Indenture Trustee, all compensation and reimbursement of expenses to the extent
Allowed by the Court under section 330, 331 or 503 of the Bankruptcy Code, 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.
Except as provided for below with respect to Professional
Compensation and Reimbursement Claims, pursuant to the Plan, Administrative
Claims will be paid in full, in Cash, on the later of the Effective Date and the
date such Administrative Claim becomes an Allowed Claim, or as soon thereafter
as is practicable. Allowed Administrative Claims representing obligations
incurred in the ordinary course of business by the Debtors in Possession
(including amounts owed to vendors and suppliers that have sold goods or
furnished services to the Debtors in Possession since the Petition Date) will be
assumed and paid by the Reorganized Debtors in accordance with the terms and
conditions of the particular transactions and any agreements relating thereto.
On the Effective Date, all obligations of the Debtors in Possession to the DIP
Lenders under the DIP Credit Documents shall be paid in full in cash in
immediately available funds or otherwise satisfied in a manner acceptable to the
DIP Lenders in their sole discretion in accordance with the terms of the DIP
Credit Documents. Such payment shall be made to the DIP Agents for further
distribution to the holders of the DIP Facility Claims. Upon compliance with the
foregoing sentence, all Liens granted to secure such obligations shall be deemed
canceled and shall be of no further force and effect without the necessity of
any further action on behalf of the DIP Lenders or the Debtors. The reasonable
fees and expenses of the Indenture Trustee and its attorneys will be paid in
full on the Effective Date.
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Except for the Claims arising from the DIP Credit Facility,
the Debtors anticipate that most Administrative Expenses will be paid as they
come due during the Chapter 11 Cases and that the Administrative Claims to be
paid on the Effective Date essentially will comprise the Allowed fees and
expenses incurred by professionals in the Chapter 11 Cases, the costs attendant
to the Debtors' assumption of executory contracts and unexpired leases under the
Plan, the reasonable fees and expenses of the Indenture Trustee and the claims
of DIP Lenders.
2 Unclassified -- Professional Compensation and
Reimbursement Claims
Compensation and Reimbursement Claims are Administrative
Claims for the compensation of professionals and reimbursement of expenses
incurred by such professionals pursuant to sections 503(b)(2), 503(b)(3),
503(b)(4) and 503(b)(5) of the Bankruptcy Code (the "Compensation and
Reimbursement Claims"). All payments to professionals for Compensation and
Reimbursement Claims will be made in accordance with the procedures established
by the Bankruptcy Code, the Bankruptcy Rules and the Bankruptcy Court relating
to the payment of interim and final compensation for services rendered and
reimbursement of expenses. The Bankruptcy Court will review and determine all
applications for compensation for services rendered and reimbursement of
expenses.
Section 503(b) of the Bankruptcy Code provides for payment of
compensation to creditors and other entities making a "substantial contribution"
to a reorganization case, and to attorneys for and other professional advisors
to such entities. The amounts, if any, which may be sought by entities for such
compensation are not known by the Debtors at this time. Requests for
compensation must be approved by the Bankruptcy Court after a hearing on notice
at which the Debtors and other parties in interest may participate and, if
appropriate, object to the allowance of any compensation and reimbursement of
expenses.
Pursuant to the Plan, each holder of a Compensation and
Reimbursement Claim (i) shall file its respective final application for
allowance of compensation for services rendered and reimbursement of expenses
incurred through the Confirmation Date by the date that is 30 days after the
Effective Date or such other date as may be fixed by the Bankruptcy Court, and
(ii) if granted such an award by the Court, shall be paid in full in such
amounts as are Allowed by the Bankruptcy Court (a) on the date such Compensation
and Reimbursement Claim becomes an Allowed Administrative Claim, or as soon
thereafter as is practicable, or (b) upon such other terms as may be mutually
agreed upon between such holder of such Compensation and Reimbursement Claim and
the Debtors in Possession or, on and after the Effective Date, the Reorganized
Debtors. The Debtors estimate that
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Allowed Compensation and Reimbursement Claims should not exceed $4 million in
the aggregate.
The reasonable fees and expenses incurred after the Petition
Date by the Informal Committee's counsel and financial advisors, including,
without limitation, the success fee payable to Chanin pursuant to its engagement
letter with the Debtors (who were retained by agreement with the Debtors prior
to the Petition Date (together with the reasonable fees and expenses of local
counsel) with respect to these Chapter 11 Cases) shall be paid (without
application by or on behalf of any such professionals to the Bankruptcy Court
and without notice and a hearing) by the Reorganized Debtors as an
Administrative Claim under the Plan. Such claims shall be deemed to satisfy the
requirements of section 503(b) of the Bankruptcy Code. If the Reorganized
Debtors and any such professional retained by the Informal Committee cannot
agree on the amount of fees and expenses to be paid to such professional, the
amount of any such fees and expenses shall be determined by the Bankruptcy
Court.
3 Unclassified -- Priority Tax Claims
A Priority Tax Claim consists of any Claim of a governmental
unit of the kind specified in sections 502(i) and 507(a)(8) of the Bankruptcy
Code. These unsecured Claims are given a statutory priority in right of payment.
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 will receive, at the
sole option of the Debtors, (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 the statutory rate provided for under applicable federal, state or
local law, over a period through the sixth anniversary of the date of assessment
of such Allowed Priority Tax Claim, commencing on the first anniversary of the
Effective Date, or upon such other terms as may be 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.
The Debtors are essentially current with respect to all
Priority Tax Claims and estimate that on the Effective Date, the allowed amount
of such Claims will be de minimis, if any.
Under applicable law, the Debtors' tax returns are subject to
review for at least three years after filing. This means that the Debtors' and
Prime's non-debtor
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Subsidiaries that file consolidated tax returns may have contingent tax
obligations which have not been determined at the time of the Petition Date. The
Plan provides that each Priority Tax Claim that is not payable on or before the
Effective Date will survive confirmation of the Plan, remain unaffected thereby,
and be paid as and when due, except to the extent any holder of such a Claim
agrees to a different treatment.
4 Class 1 -- Other Priority Claims
(Unimpaired; therefore, deemed to have accepted the
Plan and not entitled to vote.)
Other Priority Claims are Claims which are entitled to
priority in accordance with section 507(a) of the Bankruptcy Code (other than
Administrative Claims and Priority Tax Claims). Such Claims include (i)
Unsecured Claims for accrued employee compensation earned within 90 days prior
to the commencement of the Chapter 11 Cases to the extent of $4,300 per employee
and (ii) contributions to employee benefit plans arising from services rendered
within 180 days prior to the commencement of the Chapter 11 Cases, but only for
each such plan to the extent of (a) the number of employees covered by such plan
multiplied by $4,300, less (b) the aggregate amount paid to such employees from
the estate for wages, salaries or commissions. Pursuant to the Plan, holders of
Allowed Other Priority Claims, if any exist, will be paid in full, in Cash on
the later of the Effective Date and the date such Other Priority Claim becomes
an Allowed Claim, or as soon thereafter as is practicable. The legal, equitable
and contractual rights of the holders of Other Priority Claims, if any exist,
are not altered by the Plan. Because the Bankruptcy Court entered an order
authorizing the Debtors to pay, among other things, prepetition compensation and
benefits, the Debtors estimate that the Allowed Claims in Class 1 that are due
and payable pursuant to the Plan on or before the Effective Date will be de
minimis, if any.
5 Class 2 -- Other Secured Claims
(Unimpaired; therefore, deemed to have accepted the
Plan and not entitled to vote.)
Other Secured Claims include Claims (other than the DIP
Financing Claims), 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. The Other
Secured Claims consist mainly of capitalized leases. The Debtors believe that
such claims are fully secured.
Except to the extent that a holder of an Allowed Other Secured
Claim agrees to a different treatment, at the sole option of the Debtors, (i)
each Allowed
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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 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.
6 Class 3 -- Trade Claims
(Unimpaired; therefore, deemed to have accepted the
Plan and not entitled to vote.)
Trade Claims consist of Unsecured Claims of entities against
the Debtors for (i) goods and services provided prior to the Petition Date by
such entities to the Debtors in the ordinary course of business; provided,
however, that such entities have continued to provide such goods and services to
the Debtors before and after the Petition Date on customary terms and credit or
as otherwise acceptable to the Debtors.
To the extent not satisfied by the Debtors in the ordinary
course of business prior to the Effective Date, in full and final satisfaction
of such Claims, the legal, equitable, and contractual rights to which such
Allowed Trade Claim entitles the holder thereof shall be left unaltered and,
accordingly, shall be satisfied on the latest of (i) the Effective Date, (ii)
the date a Trade Claim becomes an Allowed Claim, (iii) the date an Allowed Trade
Claim becomes due and payable in the ordinary course of business consistent with
the Debtors' ordinary payment practices, and (iv) the date on which the Debtors
and the holder of such Allowed Trade Claim agree in writing.
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7 Class 4 -- Prepetition Lender Claims
(Impaired; therefore, entitled to vote to accept or
reject the Plan.)
The Prepetition Lender Claims consist of the Claims of the
Prepetition Lenders arising under the Prepetition Credit Documents and all
agreements and instruments relating thereto, which claims are secured by a
security interest in all of the Debtors' assets (other than the real property
and vehicles covered by certificates of title).
Each holder of a Prepetition Lender Claim (which shall be
deemed allowed) shall receive payment in full in Cash. The Prepetition Lender
Claims shall be Allowed in the aggregate amount of $108,500,000.
8 Class 5 -- Senior Subordinated Note Claims, Rejected
Former Owner Obligations, Other Rejected Obligations
and Other General Unsecured Claims (Impaired;
therefore, entitled to vote to accept or reject the
Plan.)
Class 5 includes all claims against the Debtors based upon (i)
Prime's 10 3/4% Notes due August 15, 2004, (ii) claims arising from (a) the
rejection pursuant to sections 365 or 1123(b) of the Bankruptcy Code of (x) a
non-compete agreement with the Debtors, or any of them, (y) a consulting
agreement with the Debtors, or any of them, or (z) a lease of real or personal
property entered into by the Debtors, or any of them, with a former owner of any
of the Debtors' property, or (b) a note or other financial instrument entered
into by the Debtors, or any of them, in connection with the purchase by the
Debtors, or any of them, before the Petition Date, of a funeral home or other
property, (iii) claims arising from the rejection pursuant to sections 365 or
1123(b) of the Bankruptcy Code of a lease of real or personal property entered
into with any of the Debtors or any other agreement with the Debtors, or (iv)
any other unsecured claim (other than a Trade Claim). The Senior Subordinated
Note Claims shall be Allowed in the aggregate amount of $109,854,000.
On the Effective Date, or as soon thereafter as practicable,
in full and final satisfaction of such Class 5 Claims, each holder of an Allowed
Class 5 Claim will receive its Pro Rata share of (i) $20 million principal
amount of New Senior Subordinated Notes, and (ii) 5,000,000 shares of New Common
Stock.
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9 Class 6 -- Old Preferred Stock
(Impaired; therefore, entitled to vote to accept or
reject the Plan.)
Class 6 consists of the Old Preferred Stock interests of Prime
Holdings.
On the Effective Date or as soon thereafter as practicable,
each holder of Allowed Old Preferred Stock will receive its Pro Rata share of
new warrants to purchase in the aggregate 500,000 shares of New Common Stock of
Reorganized Prime Holdings.
10 Class 7 -- Other Equity Interests
(Impaired; no distributions shall be made, therefore
deemed to have rejected the Plan and not entitled to
vote.
Class 7 includes the outstanding common stock of Prime
Holdings and any option, warrant or right, contractual or otherwise, to acquire
any such interest.
All Other Equity Interests shall be canceled on the Effective
Date and the holders thereof shall receive no distributions.
C. Substantive Consolidation
Substantive consolidation is an equitable remedy that a
bankruptcy court may be asked to apply in chapter 11 cases involving affiliated
debtors. Substantive consolidation involves the pooling and merging of the
assets and liabilities of the affected debtors. All of the debtors in the
substantively consolidated group are treated as if they were a single corporate
and economic entity. Consequently, a creditor of one of the substantively
consolidated debtors is treated as a creditor of the substantively consolidated
group of debtors and issues of individual corporate ownership of property and
individual corporate liability on obligations are ignored.
Substantive consolidation of two or more debtors' estates
generally results in the deemed consolidation of the assets and liabilities of
the debtors, the deemed elimination of intercompany claims, subsidiary equity or
ownership interests, multiple and duplicative creditor claims, joint and several
liability claims and guarantees, and the payment of allowed claims from a common
fund.
At the Confirmation Hearing, the Debtors will seek 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. Subject to the occurrence of the Effective Date, (i) all
assets and liabilities of the Subsidiaries and Prime Holdings shall be deemed
merged or treated as though they were merged
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into and with the assets and liabilities of Prime, (ii) no distributions shall
be made under the Plan on account of intercompany claims among the Debtors,
(iii) no distributions under the Plan shall be made on account of Subsidiary
Equity Interests or Prime 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, (ii) intercompany claims by and
among the Debtors or Reorganized Debtors, (iii) Subsidiary Equity Interests or
Prime Equity Interests and (iv) pre- and post-Petition Date guarantees that are
required to be maintained (a) in connection with executory contracts, unexpired
leases or credit facilities that were entered into during the Chapter 11 Cases
or that have been or will be assumed, or (b) pursuant to the Plan, or (c) in
connection with any financing entered into by the Reorganized Debtors on the
Effective Date.
D. Provisions Regarding Corporate Governance and Management of
the Reorganized Debtors
1 Directors and Officers of Reorganized Prime and
Reorganized Prime Holdings
(a) The Initial Board of Directors. The initial
Boards of Directors of Reorganized Prime Holdings and Reorganized Prime will
consist of five (5) members, four (4) of whom will be designated by former
members of the Informal Committee and whose names shall be disclosed on or
before the date of the Confirmation Hearing; and one (1) of whom shall be Gary
Wright, who currently serves as Prime's President and Chief Executive Officer.
The respective Boards of Directors will select a Chairman at their initial
meeting.
(b) Management of Reorganized Prime Holdings and
Reorganized Prime. The officers of Prime Holdings and Prime immediately prior to
the Effective Date shall serve as the initial officers of Reorganized Prime
Holdings and Reorganized Prime, respectively, on and after the Effective Date.
Such officers shall serve in accordance with any employment agreement with
Reorganized Prime Holdings or Reorganized Prime and applicable nonbankruptcy
law, as the case may be. New employment agreements for Gary Wright, Prime's
President and Chief Executive Officer; Arthur Ansin, Prime's Chief Financial
Officer and Executive Vice President; Greg Hilgendorf, Prime's Senior Vice
President Funeral Operations; Brian Clary, Prime's Corporate Controller; and
Peter Cooper, Prime's General Counsel, to
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the extent such officers remain with the Reorganized Debtors, shall be in the
forms contained in the Plan Supplement and shall become effective on the
Effective Date (the "New Senior Management Employment Contracts").
2 Directors and Officers of the Reorganized
Subsidiaries
The initial board of directors of the Reorganized Subsidiaries
shall be Gary Wright and Arthur Ansin.
The officers of the Reorganized Subsidiaries immediately prior
to the Effective Date shall serve as the initial officers of the Reorganized
Subsidiaries on and after the Effective Date. Such officers shall serve in
accordance with any employment agreement with the Reorganized Subsidiaries and
applicable nonbankruptcy law.
3 Corporate Action
(a) Amended Prime Holdings Certificate of
Incorporation and Amended Prime Holdings By-Laws. The adoption of the Amended
Prime Holdings Certificate of Incorporation and Amended Prime Holdings By-Laws
will be deemed to have occurred and be effective as of the Effective Date
without any further action by the directors or stockholders of the Debtors or
the Reorganized Debtors. The Amended Prime Holdings Certificate of Incorporation
will, among other things, contain appropriate provisions (i) governing the
authorization of up to 6,000,000 shares of New Common Stock (up to 5,000,000
will be issued on the Effective Date), that will be available for issuance and
whose terms and conditions may be established by the Board of Directors, (ii)
prohibiting the issuance of nonvoting equity securities as required by section
1123(a)(6) of the Bankruptcy Code, and (iii) implementing such other matters as
stockholders and directors of Reorganized Prime Holdings believe are necessary
and appropriate to effectuate the terms and conditions of the Plan. On or prior
to the Effective Date, Prime Holdings will file with the Secretary of State of
the State of Delaware, in accordance with sections 103 and 303 of the Delaware
General Corporation Law, the Amended Prime Holdings Certificate of Incorporation
and such certificate shall be the certificate of incorporation for Reorganized
Prime Holdings. The Amended Prime Holdings Certificate of Incorporation shall be
substantially in the form contained in the Plan Supplement.
(b) Amended Prime Certificate of Incorporation and
Amended Prime By-Laws. The adoption of the Amended Prime Certificate of
Incorporation and Amended Prime By-Laws will be deemed to have occurred and be
effective as of the Effective Date without any further action by the directors
or stockholders of the Debtors or the Reorganized Debtors. The Amended Prime
Certificate of Incorporation will, among other things, contain appropriate
provisions
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(i) prohibiting the issuance of nonvoting equity securities as required by
section 1123(a)(6) of the Bankruptcy Code, and (ii) implementing such other
matters as stockholders and directors of Reorganized Prime believe are necessary
and appropriate to effectuate the terms and conditions of the Plan. On or prior
to the Effective Date, Prime will file with the Secretary of State of the State
of Delaware, in accordance with sections 103 and 303 of the Delaware General
Corporation Law, the Amended Prime Certificate of Incorporation and such
certificate shall be the certificate of incorporation for Reorganized Prime. The
Amended Prime Certificate of Incorporation shall be substantially in the form
contained in the Plan Supplement.
(c) Amended Subsidiaries Certificates of
Incorporation and Amended Subsidiaries By-Laws. The adoption of the Amended
Subsidiaries Certificates of Incorporation and Amended Subsidiaries By-Laws will
be deemed to have occurred and be effective as of the Effective Date without any
further action by the directors or stockholders of the Debtors, the Reorganized
Debtors, the Subsidiaries or the Reorganized Subsidiaries, as the case may be.
The Amended Subsidiaries Certificates of Incorporation will, among other things,
contain appropriate provisions (i) prohibiting the issuance of nonvoting equity
securities as required by section 1123(a)(6) of the Bankruptcy Code, and (ii)
implementing such other matters as stockholders and directors of the Reorganized
Subsidiaries believe are necessary and appropriate to effectuate the terms and
conditions of the Plan. On or prior to the Effective Date, the Subsidiaries will
file with the Secretary of State in the State in which they are incorporated,
the Amended Subsidiaries Certificate of Incorporation and such certificates
shall be the certificates of incorporation for the Reorganized Subsidiaries. The
Amended Subsidiaries Certificates of Incorporation shall be substantially in the
forms contained in the Plan Supplement.
4 Securities to Be Issued Pursuant to the Plan
(a) New Common Stock
On the Effective Date, pursuant to the Plan, Reorganized Prime
Holdings will issue 5,000,000 shares of New Common Stock without further act or
action under applicable law, regulation, rule or order. Each share of New Common
Stock will entitle its holder to one vote. Holders of New Common Stock will have
the right to participate proportionately in any dividends distributed by
Reorganized Prime Holdings.
(b) New Senior Subordinated Notes
The New Senior Subordinated Notes will be issued by
Reorganized Prime Holdings pursuant to an indenture (the "New Senior
Subordinated Notes Indenture"), which will be qualified under the Trust
Indenture Act of 1939, as
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amended. An indenture trustee will be selected by Prime prior to the
Confirmation Hearing. The New Senior Subordinated Notes will be issued on
substantially the following terms:
o $20MM principal amount, subordinated in
right of payment to the New Exit Financing
Facility.
o Interest shall accrue at the rate of 14.25%
per annum payable in kind; provided that
interest may be paid in cash annually on
February 28 (for the prior fiscal year) to
the extent of 50% of the amount, if any, of
Actual ECF (as defined below) above the
Projected ECF (as defined below) amount.
o Maturity: Earlier of August 29, 2004 or 4
years from the Effective Date.
o New Senior Subordinated Notes and New Common
Stock may only be transferred together.
o No covenants, security or amortization.
o All but $7.5 million of the outstanding New
Senior Subordinated Notes will be
convertible into equity of Reorganized Prime
Holdings, at the option of Lenders to the
Exit Credit Facility holding at least 662/3%
of the commitments under the Exit Credit
Facility (other than lenders, or their
affiliates, who are also shareholders of
Reorganized Prime Holdings) if (i) the Exit
Credit Facility has not been repaid in full
on or before May 31, 2003, (ii) the borrower
is in non-compliance for two consecutive
quarters with financial covenants contained
in the Exit Credit Facility, or (iii)
following a payment event of default under
the Exit Credit Facility which is not cured
upon 30 days notice or (iv) upon the
occurrence of (x) a voluntary or involuntary
bankruptcy filing (with 30 days grace for
involuntary filings unless filed by a
holder(s) of New Senior Subordinated Notes)
or (y) the acceleration of the New Senior
Subordinated Notes. Upon any such
conversion, the New Senior Subordinated
Notes maturity date of the remaining $7.5
million of New Senior Subordinated Notes
will be extended by five years.
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A copy of the New Senior Subordinated Notes Indenture will be
included in the Plan Supplement.
(c) The New Warrants
On the Effective Date, the issuance of Warrants to purchase up
to 500,000 shares of New Common Stock (without giving effect to any options that
may be issued under the Equity Incentive Plan) will be authorized under the Plan
without further act or action under applicable law, regulation, rule or order.
The Warrants will entitle the holders thereof to purchase New Common Stock, on a
one-for-one basis, at an initial exercise price of $16.76 per share. The
Warrants will be subject to customary anti-dilution provisions and will expire
on the fifth (5th) anniversary of the Effective Date. The Plan contemplates,
subject to certain conditions, that on the Effective Date, the New Warrants will
be issued to the Class 6 holders. A copy of the Warrant Agreement will be
included in the Plan Supplement.
E. Equity Incentive Plan
1 Reorganized Prime Holdings Equity Incentive Plan
On the Effective Date, Reorganized Prime Holdings will adopt a
stock option plan which permits Reorganized Prime Holdings to grant to its
officers and directors shares of New Common Stock. Such stock option plan shall
be in substantially the form contained in the Plan Supplement.
2 Description of Reorganized Prime Holdings Equity
Incentive Plan.
The purposes of the Reorganized Prime Holdings Equity
Incentive Plan (the "Equity Plan") are to promote the interests of Reorganized
Prime Holdings and its shareholders by (i) attracting and retaining exceptional
officers, directors and key employees of Reorganized Prime Holdings and its
subsidiaries and (ii) enabling such individuals to participate in the long-term
growth and financial success of Reorganized Prime Holdings. In connection with
and pursuant to the Plan, the Equity Plan will be adopted and certain shares of
New Common Stock will be granted to certain persons under the Equity Plan,
effective as of the Effective Date. The Equity Plan makes available for grant up
to 289,474 shares of the New Common Stock which equals 5% of the New Common
Stock on a fully diluted basis.
o Shares shall be granted as follows: 25% of
the shares to be granted ("To Be Granted
Shares") shall be granted, vested and
allocated 60 days following the Effective
Date and 25% of the To Be Granted Shares
shall be granted,
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vested and allocated each year thereafter on
the anniversary of the Effective Date;
allocations of the To Be Granted Shares to
be made annually by New Board.
o Each grant and allocation of To Be Granted
Shares ("Granted Shares") shall vest
immediately upon such grant.
o An employee terminated for cause shall lose
all of his or her Granted Shares and shall
not receive any further grant of To Be
Granted Shares, with such previously Granted
Shares to be reallocated at the discretion
of the New Board.
o An employee terminated without cause shall
not receive any additional grant of To Be
Granted Shares after termination.
o Upon sale of the Company, the grant and
allocation of all remaining To Be Granted
Shares shall be accelerated. Undistributed
To Be Granted Shares shall be granted and
allocated pro rata based on the allocation
of Granted Shares then outstanding, except
with respect to employees that are no longer
entitled to receive additional Granted
Shares pursuant to the proceeding
subsections.
F. Postpetition Financing.
The Debtors anticipate entering into the Exit Credit Facility
in order to obtain the working capital and cash necessary to satisfy in full the
Debtors' obligations under the DIP Credit Facility, to make other payments
required to be made on the Effective Date and to maintain their operations. The
Exit Credit Facility, among other things, shall (a) be effective on the
Effective Date; (b) be a senior secured credit facility; (c) provide for
aggregate borrowings of up to $118.5 million, consisting of (i) a $10.0 million
revolving credit facility (including a $3.0 million sub-limit for letters of
credit and a $2.0 million cash management indemnity facility) and (ii) a 108.5
million term loan facility. The collateral for the revolving credit facility
will consist of a first priority perfected security interest in (a) the stock of
Prime and its subsidiaries and (b) all assets and properties of Prime Holdings,
Prime and its subsidiaries. The collateral for the term loan facility will
consist of a second priority perfected security interest in the collateral for
the revolving credit facility. The revolving credit facility shall bear an
interest rate equal to LIBOR (to be
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defined in the Exit Credit Facility documents) plus 350 basis points or the Base
Rate (to be defined in the Exit Credit Facility documents) plus 250 basis
points, at the option of the Debtors, paid monthly in arrears. The term loan
facility shall bear an interest rate equal to LIBOR plus 400 basis points or the
Base Rate plus 300 basis points, at the option of the Debtors, paid monthly in
arrears. The Exit Credit Facility's maturity date will be the earlier of August
29, 2003 or three years from the Effective Date.
The Exit Credit Facility documents, or a commitment letter
with respect thereto, shall be filed by the Debtors with the Bankruptcy Court no
later than a date which is five (5) days prior to the deadline for submitting
ballots accepting or rejecting the Plan. In the Confirmation Order, the
Bankruptcy Court shall approve the Exit Credit Facility in substantially the
form filed with the Bankruptcy court and authorize the Debtors to execute the
same together with such other documents as the Exit Credit Facility Agents may
reasonably require in order to effectuate the treatment afforded to the lenders
under the Exit Credit Facility.
G. Distributions Under the Plan
1 Method of Distribution Under the Plan
(a) Date and Delivery of Distributions. Distributions
under the Plan shall be made by the Reorganized Debtors or their designee to the
holders of Allowed Administrative Claims, Allowed Priority Tax Claims, Allowed
Other Priority Claims, Allowed DIP Financing Claims, Allowed Other Secured
Claims, Allowed Trade Claims and Allowed Old Preferred Stock at the addresses
set forth on the Schedules, unless such addresses are superseded by proofs of
claim or transfers of claim filed pursuant to Bankruptcy Rule 3001 (or at the
last known addresses of such holders if the Debtors or the Reorganized Debtors
have been notified in writing of a change of address). Distributions under the
Plan to the holders of Allowed Senior Subordinated Note Claims, Rejected Former
Owner Obligations, Other Rejected Obligations and Other General Unsecured Claims
shall be made to the New Senior Subordinated Notes Indenture Trustee or a
disbursing agent who shall make the distributions to the holders of Allowed
Senior Subordinated Note Claims, Allowed Rejected Former Owner Obligations,
Allowed Other Rejected Obligations and Allowed Other General Unsecured Claims.
New Senior Subordinated Notes (including any interest earned thereon) and New
Common Stock (including dividends paid on account thereof) held by the
Reorganized Debtors for the benefit of holders of Disputed Other General
Unsecured Claims, Disputed Rejected Former Owner Obligations and Disputed Other
Rejected Obligations 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.
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(b) Distribution of Cash. Any payment of Cash by the
Reorganized Debtors pursuant to the Plan shall be made at the option and in the
sole discretion of the Reorganized Debtors by (i) a check drawn on, or (ii) wire
transfer from, a domestic bank selected by the Reorganized Debtors.
(c) Distribution of Unclaimed Property. Any
distribution of Cash under the Plan which is unclaimed after the later to occur
of (a) two years after distribution and (b) six months after the date on which
such claimant's Claim is Allowed shall be transferred to the Reorganized Debtors
notwithstanding state or other escheat or similar laws to the contrary.
Distributions under the Plan consisting of New Senior Subordinated Notes, New
Common Stock or New Warrants that are unclaimed for a period of two years after
distribution shall be canceled and any dividends or interest which has been paid
with respect to such securities shall be transferred to the Reorganized Debtors
and entitlement by the holder of a Claim or Old Preferred Stock to such
distribution shall be extinguished and forever barred. The Debtors shall file
with the Court a list of holders of unclaimed distributions of Cash, New Senior
Subordinated Notes, New Common Stock and New Warrants on the third, fourth and
fifth anniversaries of the Effective Date.
(d) Saturdays, Sundays, or Legal Holidays. If any
payment or act under the Plan is required to be made or performed on a date that
is not a Business Day, then the making of such payment or the performance of
such act may be completed on the next succeeding Business Day, and shall be
deemed to have been completed as of the required date.
(e) Fractional Notes and Fractional Shares and
Warrants.
(i) Fractional Notes. Whenever the issuance
of any New Senior Subordinated Note would otherwise call for the
issuance in an amount for a fraction of a denomination of a New Senior
Subordinated Note, the actual issuance of such New Senior Subordinated
Note shall reflect a rounding of such fraction to the nearest whole
denomination (up or down), with fifty percent being rounded down.
(ii) Fractional Shares and Warrants.
Whenever any distribution of shares of New Common Stock or New Warrants
to a holder would otherwise call for the distribution of a fractional
share or warrant, the Transfer Agent or Warrant Agent shall allocate
one whole share or one whole warrant to holders in order of the
fractional portion of their entitlements, starting with the largest
fractional portion until all remaining shares and warrants have been
allocated. Upon the allocation of a whole share or a whole warrant to a
holder in respect of the fractional portion of its entitlement, such
fractional portion shall be canceled. If two or more holders are
entitled to
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equal fractional entitlements and the number of holders so entitled
exceeds the number of whole shares or whole warrants, as the case may
be, which remain to be allocated, the Transfer Agent or Warrant Agent
shall allocate the remaining whole shares or whole warrants to such
holders by random lot or such other impartial method as the Transfer
Agent or Warrant Agent deems fair, in the Transfer Agent's or Warrant
Agent's sole discretion. Upon the allocation of all of the whole shares
or whole warrants authorized under the Plan, all remaining fractional
portions of the entitlements shall be canceled and shall be of no
further force and effect.
(f) Distributions to Holders as of the Record Date.
As at the close of business on the Record Date, the claims register (for Claims)
and transfer ledger (for Equity Interests) shall be closed, and there shall be
no further changes in the record holders of any Claims or Equity Interests. The
Debtors and the Reorganized Debtors shall have no obligation to recognize any
transfer of any Claims or Equity Interests occurring after the Record Date. The
Debtors and the Reorganized Debtors shall instead be entitled to recognize and
deal for purposes under the Plan (except as to voting to accept or reject the
Plan) with only those record holders stated on the claims register (for Claims)
and transfer ledgers (for Equity Interests) as of the close of business on the
Record Date.
2 Disputed Trade Claims
(a) Distributions Withheld For Disputed Trade
Claims.
(i) Establishment And Maintenance Of
Reserve. On the Effective Date, the Reorganized Debtors shall place
into a reserve an amount of Cash equal to 100% of the distributions to
which holders of Disputed Trade Claims would be entitled under the Plan
as of such date if such Disputed Trade Claims were Allowed Claims (the
"Reserve").
(ii) Property Held in Reserve. Cash held in
the Reserve, if any, shall be deposited in a segregated bank account or
accounts in the name of the Reorganized Debtors and designated as held
in trust for the benefit of holders of Allowed Trade Claims. Cash held
in the Reserve shall not constitute property of the Reorganized
Debtors. The Reorganized Debtors shall invest the Cash held in the
Reserve in a manner consistent with the investment guidelines set forth
in the Plan Supplement. The Reorganized Debtors 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 the Reorganized
Debtors on the last Subsequent Distribution Date under the Plan.
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(iii) Distributions Upon Allowance of
Disputed Trade Claims. The holder of a Disputed Trade Claim that
becomes an Allowed Claim subsequent to the Initial Distribution Date
shall receive a distribution of Cash from the Reserve on the next
Subsequent Distribution Date that follows the Quarter during which such
Disputed Trade 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 Trade Claim had been an Allowed Claim on
or prior to the Effective Date. Any Cash held in the Reserve after all
Trade Claims have been Allowed or disallowed shall be transferred to
and become the property of the Reorganized Debtors.
H. Objections To And Resolution Of Administrative Claims and
Claims; Administrative and Priority Claims Reserve
1 Objections To And Resolution of Administrative Claims
and Claims
Except as to applications for allowances of
compensation and reimbursement of expenses under sections 330 and 503 of the
Bankruptcy Code, the Debtors and the Reorganized Debtors shall have the
exclusive right to make and file objections to Administrative Claims, Claims and
Equity Interests subsequent to the Confirmation Date. All objections shall be
litigated to Final Order; provided, however, that 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 and the Reorganized Debtors shall file all
objections to Administrative Claims, Claims and Equity Interests that are the
subject of proofs of claims or requests for payment filed with the Bankruptcy
Court (other than applications for allowances of compensation and reimbursement
of expenses) or proofs of interest and serve such objections upon the holder of
the Administrative 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.
The DIP Lenders shall not be required to file proofs of claims with respect to
the DIP Facility Claims. The Debtors shall have no right to object to the DIP
Facility Claims except as set forth in the DIP Facility Order. The outstanding
amount of the DIP Facility Claims shall be paid in full on the Effective Date as
provided in the Plan.
I. Allocation of Consideration
The aggregate consideration to be distributed to the holders
of Allowed Claims in each Class under the Plan (other than the Claims, if any,
of the Internal Revenue Service) shall be treated as first satisfying an amount
equal to the stated
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principal amount of the Allowed Claim for such holders and any remaining
consideration as satisfying accrued, but unpaid, interest and costs, if any, and
attorneys' fees where applicable.
J. Cancellation and Surrender of Existing Securities and
Agreement
On the Effective Date, the Senior Subordinated Notes and
Equity Interests shall be deemed canceled and such agreements and securities,
together with all instruments issued pursuant thereto, shall have no further
legal effect other than as evidence of any right to receive distributions under
the Plan. In addition, the Senior Subordinated Note Indenture shall be
terminated and the Indenture Trustee's obligations shall be discharged.
Notwithstanding any other provision of the Plan, as a
condition precedent to receiving any distribution under the Plan, each holder of
a promissory note, share certificate, or other instrument or security evidencing
a Claim or Equity Interest must surrender such promissory note, share
certificate, or other instrument or security to the Reorganized Debtors or their
designee or must execute and deliver an affidavit of loss and furnish an
indemnity or bond in substance and amount reasonably satisfactory to the
Reorganized Debtors.
Any holder of a Claim or Equity Interest that fails to
surrender such instrument or security or to provide the affidavit and indemnity
or bond, before the later to occur of (i) the second anniversary of the
Effective Date and (ii) six months following the date such holder's Claim
becomes an Allowed Claim or Equity Interest, shall be deemed to have forfeited
all rights, Claims, and/or Equity Interests and may not receive or participate
in any distribution under the Plan.
K. Implementation of the Plan
1 New Senior Subordinated Notes Indenture, the Amended
Prime Certificate of Incorporation, the Amended Prime
By- Laws, the Amended Prime Holdings By-Laws, the
Amended Prime Holdings Certificate of Incorporation,
the Amended Subsidiaries Certificates of
Incorporation, the Amended Subsidiaries By-Laws, the
Amended Subsidiary Limited Partnership Agreement, the
Equity Incentive Plan, the Warrant Agreement, the New
Senior Management Employment Contracts, the New Exit
Financing Facility Documents and Other Implementation
Documents.
On or before the Effective Date, the Reorganized Debtors will
execute the New Senior Subordinated Notes Indenture, the Amended Prime
Certificate
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of Incorporation, the Amended Prime By-Laws, the Amended Prime Holdings By-Laws,
the Amended Prime Holdings Certificate of Incorporation, the Amended
Subsidiaries Certificates of Incorporation, the Amended Subsidiaries By-Laws,
the Amended Subsidiary Limited Partnership Agreement, the Equity Incentive Plan,
the Warrant Agreement, the Senior Management Employment Contracts, the New Exit
Financing Facility Documents and all other documents required and necessary to
implement the Plan, without the requirement of any further corporate action.
2 The Debtors' Release
On the Effective Date, pursuant to the Plan, the Debtors and
the Reorganized Debtors on behalf of themselves, and their estates, shall be
deemed to release unconditionally all of their respective officers, directors,
employees, advisors, attorneys, financial advisors, accountants, and other
professionals, the Indenture Trustee, the Prepetition Lenders, the DIP Lenders,
counsel to the Prepetition Lenders and the DIP Lenders, the Creditors' Committee
members, counsel to the Creditors' Committee, the Informal Committee members,
counsel to the Informal Committee, financial advisors to the Creditors'
Committee and Informal Committee and each of their representatives and agents
(including any professionals retained by such persons or entities) (the
"Released Parties") from any and all Claims, obligations, suits, judgments,
damages, rights, Causes of Action and liabilities whatsoever, whether known or
unknown, foreseen or unforeseen, existing or hereafter arising, in law, equity
or otherwise, based in whole or in part upon actions taken in their respective
capacities described above or any omission, transaction, event or other
occurrence taking place on or prior to the Effective Date in any way relating to
the Debtors, the Chapter 11 Cases or the Plan, except that (i) no individual
shall be released from any act or omission that constitutes gross negligence or
willful misconduct and (ii) the Reorganized Debtors shall not relinquish or
waive the right to assert any of the foregoing as a legal or equitable defense
or right of set-off or recoupment against any Claims of any such persons
asserted against the Debtors.
The Debtors do not believe that they have any Claims against
any of their current officers and directors or against the members of the
Informal Committee or their advisors.
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L. Effect of Confirmation of the Plan
1 Continued Corporate Existence and Vesting of Assets
in the Reorganized Debtors
The Debtors, as the Reorganized Debtors, shall continue to
exist after the Effective Date with all powers of a corporation under the laws
of their state of incorporation and without prejudice to any right to alter or
terminate such existence (whether by merger or otherwise) under such applicable
state law. Except as otherwise expressly provided in the Plan, on the Effective
Date, the Reorganized Debtors shall be vested with all of the property of their
estates free and clear of all claims, liens, encumbrances, charges and other
interests of creditors and equity security holders, and the Reorganized Debtors
may operate their businesses free of any restrictions imposed by the Bankruptcy
Code, the Bankruptcy Rules or by the Court, subject only to the terms and
conditions of the Plan.
2 Discharge of the Debtors
The rights afforded in the Plan and the treatment of all
Claims and Equity Interests in the Plan shall be in exchange for and in complete
satisfaction, discharge, and release of all Claims and Equity Interests of any
nature whatsoever, including any interest accrued on such Claims from and after
the Petition Date, against the Debtors, the Debtors in Possession, the
Reorganized Debtors or any of their assets or properties arising prior to the
Effective Date. Except as otherwise expressly specified in the Plan, the
Confirmation Order shall act as of the Effective Date as a discharge of all
debts of, Claims against, liens on, and Equity Interests in the Debtors, their
assets and properties, arising at any time before the entry of the Confirmation
Order, regardless of whether a proof of claim or interest with respect thereto
was filed, whether the Claim or Equity Interest is Allowed, or whether the
holder thereof votes to accept the Plan or is entitled to receive a distribution
thereunder. After the Effective Date, any holder of such discharged Claim or
Equity Interest shall be precluded from asserting against the Debtors, the
Reorganized Debtors, or any of their assets or properties, any other or further
Claim or Equity Interest based on any document, instrument, act, omission,
transaction, or other activity of any kind or nature that occurred before the
entry of the Confirmation Order. Except as set forth in the Plan or the
Confirmation Order, nothing in the Plan or the Confirmation Order (including
without limitation any discharge of Claims or cancellation of debts or Equity
Interests or the instruments evidencing same) is intended, or shall be
construed, to alter or affect the liability or obligation of any person or
entity against any other person or entity (other than the Debtors, the Debtors
in Possession and the Reorganized Debtors) in respect of such claims, debts or
Equity Interests.
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3 Injunction
Except as otherwise expressly provided in the Plan, the
Confirmation Order, or a separate order of the Court, all entities who have
held, hold, or may hold Claims against or Equity Interests in the Debtors which
arose before or were held as of the Effective Date, 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 against the Debtors 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.
4 Release of Collateral
Unless a particular Secured Claim is reinstated (i) each
holder of: (A) a Secured Claim and/or (B) a Claim that is purportedly secured
shall on or immediately before the Effective Date: (x) turn over and release to
the relevant Debtor (or its successor, as the case may be) any and all property
of the relevant Debtor that secures or purportedly secures such claim; and (y)
execute such documents and instruments as such Reorganized Debtor requires to
evidence such claimant's release of such property; and (ii) on the Effective
Date, all claims, right, title and interest in such property shall revert to the
relevant Reorganized Debtor (or the successor to any Debtor that does not
survive) free and clear of all Claims and Interests, including (without
limitation) liens, charges, pledges, encumbrances and/or security interests of
any kind. No distribution hereunder shall be made to or on behalf of any holder
of such Claim unless and until such holder executes and delivers to the relevant
Debtor or Reorganized Debtor such release of liens. Any such holder that fails
to execute and deliver such release of liens within 180 days of the Effective
Date shall be deemed to have no further Claim against the relevant Debtor,
Reorganized Debtor or their property in respect of such Claim and shall not
participate in any distribution hereunder. Notwithstanding the immediately
preceding sentence, any such holder of a Disputed Claim shall not be required to
execute and deliver such release of liens until the time such Claim is allowed
or disallowed.
5 Preservation of Rights
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Pursuant to the Plan and sections 544, 548, 549, 550, 551, 553
and 1123(b)(3)(B) of the Bankruptcy Code, the Debtors and the Reorganized
Debtors shall retain all rights and all Causes of Action accruing to the
Debtors, their estates, or the Reorganized Debtors, including, without
limitation, (i) the avoidance of any transfer of an interest of the Debtors in
property or any obligation incurred by the Debtors or (ii) the turnover of any
property to the estates, and except as expressly provided in the Plan or the
Confirmation Order, nothing contained in the Plan or the Confirmation Order
shall be deemed to be a waiver or relinquishment of any such rights or Causes of
Action. Nothing contained in the Plan or the Confirmation Order shall be deemed
to be a waiver or relinquishment of any Claim, Cause of Action, right of setoff,
or other legal or equitable defense which the Debtors had immediately prior to
the Petition Date which is not expressly waived or relinquished pursuant to the
Plan or the Confirmation Order. The Reorganized Debtors shall have, retain,
reserve and be entitled to assert all such Claims, Causes of Action, rights of
setoff and other legal or equitable defenses which the Debtors had immediately
prior to the Petition Date as fully as if the Chapter 11 Cases had not been
commenced; and all of the Reorganized Debtors' legal and equitable rights
respecting any Claim which are not expressly waived or relinquished pursuant to
the Plan or the Confirmation Order may be asserted after the Effective Date to
the same extent as if the Chapter 11 Cases had not been commenced.
6 Votes Solicited in Good Faith
The Plan provides that pursuant to section 1125(e) of the
Bankruptcy Code, the Debtors have, and upon confirmation of the Plan shall be
deemed to have, solicited acceptances of the Plan in good faith and in
compliance with the applicable provisions of the Bankruptcy Code. The Plan
further provides that pursuant to section 1125(e) of the Bankruptcy Code, the
Debtors (and each of their respective affiliates, agents, directors, officers,
employees, advisors, and attorneys) have participated in good faith and in
compliance with the applicable provisions of the Bankruptcy Code in the offer,
issuance, sale, and purchase of the securities offered and sold under the Plan
and therefore are not, and on account of such offer, issuance, sale,
solicitation, and/or purchase will not be, liable at any time for the violation
of any applicable law, rule, or regulation governing the solicitation of
acceptances or rejections of the Plan or the offer, issuance, sale, or purchase
of the securities offered and sold under the Plan.
7 Administrative Claims Incurred after the Confirmation
Date
Administrative Claims incurred by the Reorganized Debtors
after the date and time of the entry of the Confirmation Order, including
(without limitation) Claims for professionals' fees and expenses incurred after
such date, shall not be
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subject to application and may be paid by the Reorganized Debtors in the
ordinary course of business and without application for or Court approval.
8 Exculpation and Release of Released Parties;
Injunction
The Plan provides that the Debtors and the Reorganized Debtors
and the Released Parties shall have no liability whatsoever to any holder or
purported holder of an Administrative Claim, Claim, or Equity Interest for any
act or omission in connection with, or arising out of, the negotiation of the
Plan, the negotiation of the other documents included in the Plan Supplement,
the pursuit of approval of the Disclosure Statement or the solicitation of votes
for or confirmation of the Plan, the Chapter 11 Cases, the consummation of the
Plan, the administration of the Plan or the property to be distributed under the
Plan, or the various management, employee and director incentive bonus and stock
option plans, employment contracts, programs and arrangements adopted in
connection with the Plan or the Chapter 11 Cases, except for willful misconduct
or gross negligence as determined by a Final Order, and, in all respects, shall
be entitled to rely upon the advice of counsel with respect to their duties and
responsibilities. This exculpation shall be in addition to, and not in
limitation of, all other releases, indemnities, exculpations and any other
applicable law or rules protecting such Released Parties from liability.
The Plan provides that pursuant to section 105 of the
Bankruptcy Code, no holder or purported holder of an Administrative Claim, Claim
or Equity Interest shall be permitted to commence or continue any action,
employment of process, or an act to collect, offset, or recover any Claim
against a Released Party that accrued prior to the Effective Date and has been
released or waived pursuant to the Plan.
9 Preservation of Insurance
The Plan provides that the Debtors' discharge and release from
all Claims as provided in the Plan, except as necessary to be consistent with
the Plan, shall not diminish or impair the enforceability of any insurance
policy that may cover Claims against the Debtors, the Reorganized Debtors
(including, without limitation, their officers and directors) or any other
person or entity.
10 Term of Bankruptcy Injunction or Stays
The Plan provides that 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.
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11 Officers' and Directors' Indemnification Rights and
Insurance
The Plan provides that notwithstanding any other provision of
the Plan, the obligations of the Debtors to indemnify their directors, officers,
and employees against any obligations, liabilities, costs or expenses pursuant
to the articles of incorporation or by-laws of the Debtors, applicable state
law, specific agreement, or any combination of the foregoing, shall survive the
Effective Date. In addition, the Reorganized Debtors shall obtain tail coverage
under their existing directors and officers insurance policy covering their
existing directors and officers for any and all claims brought against them,
which coverage shall extend for a period of not less than 6 years after the
Effective Date.
12 Limitation of Governmental Release
Notwithstanding Sections VIII.H. and I. of the Plan, the Plan
shall not release, discharge, or exculpate any non-debtor party from any debt
owed to the Government, or from any liability arising under the Internal Revenue
Code, the Employee Retirement Income Security Act of 1974, as amended, or
environmental laws, securities laws or criminal laws of the United States. In
addition, notwithstanding Sections VIII.I.1 and 2 of the Plan, the Plan shall
not enjoin or prevent the Government from collecting any such liability from any
such non-debtor party.
M. Retention of Jurisdiction
The 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, section 105(a) and section 1142 of the Bankruptcy Code
and for, among other things, the following purposes: (1) to hear and determine
applications for the assumption or rejection of executory contracts or unexpired
leases pending on the date the Plan is confirmed, and the allowance of Claims
resulting therefrom; (2) to determine any other applications, adversary
proceedings, and contested matters pending on the Effective Date; (3) to ensure
that distributions to holders of Allowed Claims and Allowed Old Preferred Stock
are accomplished as provided by the Plan; (4) to resolve disputes as to the
ownership of any Claim or Equity Interest; (5) to hear and determine timely
objections to Administrative Claims and Claims; (6) to enter and implement such
orders as may be appropriate if the Confirmation Order is for any reason stayed,
revoked, modified or vacated; (7) to issue such orders in aid of execution of
the Plan, to the extent authorized by section 1142 of the Bankruptcy Code; (8)
to consider any modifications of the Plan, to cure any defect or omission, or to
reconcile any inconsistency in any order of the Court, including, without
limitation, the Confirmation Order; (9) to hear and determine all applications
for
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compensation and reimbursement of expenses of professionals under sections 330,
331, and 503(b) of the Bankruptcy Code; (10) to hear and determine disputes
arising in connection with the interpretation, implementation, or enforcement of
the Plan; (11) to hear and determine any issue for which the Plan requires a
Final Order of the Court; (12) to hear and determine matters concerning state,
local, and federal taxes in accordance with sections 346, 505, and 1146 of the
Bankruptcy Code; (13) to hear any other matter not inconsistent with the
Bankruptcy Code; (14) to hear and determine disputes arising in connection with
compensation and reimbursement of expenses of professionals for services
rendered during the period commencing on the Confirmation Date through and
including the Effective Date; (15) to hear and determine disputes arising in
connection with any fees and expenses of the Indenture Trustee for services
rendered through and including the Effective Date; and (16) to enter a final
decree closing the Chapter 11 Cases.
N. Miscellaneous Provisions
1 Payment of Statutory Fees
All fees payable on or before the Effective Date (i) pursuant
to section 1930 of title 28 of the United States Code, as determined by the
Court at the Confirmation Hearing, and (ii) to the United States Trustee, shall
be paid by the Debtors on or before the Effective Date and all such fees payable
after the Effective Date shall be paid by the Reorganized Debtors.
2 Dissolution of Creditors Committee
The Creditors Committee shall terminate on the Effective Date.
3 Modification of the Plan
The Debtors reserve the right, in accordance with the
Bankruptcy Code, upon the consent of the DIP Agents, to amend or to modify the
Plan prior to the entry of the Confirmation Order. After entry of the
Confirmation Order, the Reorganized Debtors or the Debtors may amend or modify
the Plan, upon the consent of the DIP Agents, or remedy any defect or omission
or reconcile any inconsistency in the Plan in such a manner as may be necessary
to carry out the purpose and intent of the Plan.
4 Governing Law
Unless a rule of law or procedure is supplied by Federal law
(including the Bankruptcy Code and Bankruptcy Rules) or the Delaware General
Corporation Law or such other corporate law that may apply to the Subsidiaries,
the laws of the
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State of New York (without reference to the conflicts of laws provisions
thereof) shall govern the construction and implementation of the Plan and any
agreements, documents, and instruments executed in connection with the Plan.
5 Filing or Execution of Additional Documents
On or before the Effective Date, the Debtors or the
Reorganized Debtors, shall file with the Court or execute, as appropriate, such
agreements and other documents as may be necessary or appropriate to effectuate
and further evidence the terms and conditions of the Plan.
6 Withholding and Reporting Requirements
In connection with the Plan and all instruments issued in
connection therewith and distributions thereon, the Reorganized Debtors shall
comply with all withholding and reporting requirements imposed by any federal,
state, local, or foreign taxing authority and all distributions thereunder shall
be subject to any such withholding and reporting requirements.
7 Exemption From Transfer Taxes
Pursuant to section 1146(c) of the Bankruptcy Code, the
issuance, transfer or exchange of New Senior Subordinated Notes, New Common
Stock or New Warrants under the Plan, the making or assignment of any lease or
sublease or the making or delivery of any other instrument whatsoever, in
furtherance of or in connection with the Plan shall not be subject to any stamp,
real estate transfer, recording or other similar tax.
8 Section 1145 Exemption
Pursuant to, in accordance with, and solely to the extent
provided under section 1145 of the Bankruptcy Code, the issuance of the New
Senior Subordinated Notes, New Common Stock and New Warrants under the Plan is
exempt from the registration requirements of Section 5 of the Securities Act, as
amended, and any State or local law requiring registration for offer or sale of
a security or registration or licensing of an issuer of, underwriter of, or
broker or dealer in such New Senior Subordinated Notes, New Common Stock or New
Warrants and is deemed to be a public offering of New Senior Subordinated Notes,
New Common Stock and New Warrants.
9 Waiver of Federal Rule of Civil Procedure 62(a)
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The Debtors may request that the Confirmation Order include
(a) a finding that Fed. R. Civ. P. 62(a) shall not apply to the Confirmation
Order and (b) authorization for the Debtors to consummate the Plan immediately
after entry of the Confirmation Order.
10 Plan Supplement
Forms of the documents relating to the Amended Prime
Certificate of Incorporation, the Amended Prime By-laws, the Amended Prime
Holdings By-Laws, the Amended Prime Holdings Certificate of Incorporation, the
Amended Subsidiaries Certificates of Incorporation, the Amended Subsidiaries
By-Laws, the Amended Subsidiary Limited Partnership Agreement, the New Senior
Subordinated Notes Indenture, the New Warrant Agreement, the form of the New
Warrants, investment guidelines referred to in Section VII.C.2.(a)(ii) and
C.3(b)(ii), Equity Incentive Plan, New Exit Financing Facility Documents and New
Senior Management Employment Contracts shall be contained in the Plan Supplement
which will be filed with the Clerk of the Court. The Plan Supplement may be
inspected in the office of the Clerk of the Court during normal court hours.
Holders of Claims or Equity Interests may obtain a copy of the Plan Supplement
upon written request to the Debtors in accordance with Section X.L. of the Plan.
The forms of documents to be included in the Plan Supplement shall be reasonably
acceptable to the Prepetition Agents, the DIP Agents and the Informal Committee.
O. Executory Contracts and Unexpired Leases
The Bankruptcy Code grants the Debtors the power, subject to
the approval of the Court, to assume or reject executory contracts and unexpired
leases. If an executory contract or unexpired lease is rejected, the other party
to the agreement may file a claim for damages, if any, incurred by reason of the
rejection. In the case of rejection of leases of real property and employment
agreements, such damage claims are subject to certain limitations imposed by the
Bankruptcy Code.
Other than (i) executory contacts or unexpired leases which
(x) are the subject of a motion to reject pending on the Confirmation Date, (y)
were previously assumed or rejected by the Debtors, or (z) have expired or
terminated pursuant to their own terms during the pendency of the Chapter 11
Cases, and (ii) employment agreements, if any, terminated prior to or in
connection with the Plan, all of the executory contracts, unexpired leases and
employment agreements that exist between the Debtors and any person are
specifically assumed as of the Effective Date pursuant to the Plan. All Claims
for damages arising from the rejection of executory contracts or unexpired
leases must be filed with the Court in accordance with the terms of the order
authorizing such rejection. Any Claims not filed within such time will be
forever barred from assertion against the Debtors, their estates and the
Reorganized
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Debtors. All Allowed Claims arising from the rejection of executory contracts or
unexpired leases shall be treated as Class 5 Claims. The Reorganized Debtors,
except as otherwise agreed by the parties, will cure any and all undisputed
defaults within 60 days of the Effective Date under any executory contract,
unexpired lease or employment agreement assumed pursuant to the Plan in
accordance with section 365 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 the Reorganized
Debtors' liability with respect thereto, or as may otherwise be agreed to by the
parties.
P. Benefit Plans
The Plan provides that all employment and severance agreements
and policies, and all employee compensation and benefit plans, policies, and
programs of the Debtors applicable generally to its employees, including
agreements and programs subject to section 1114 of the Bankruptcy Code, as in
effect on the Effective Date, including, without limitation, all savings plans,
retirement plans, health care plans, disability plans, severance benefit plans,
incentive plans, and life, accidental death, and dismemberment insurance plans,
shall be deemed to be, and shall be treated as though they are, executory
contracts that are assumed under the Plan, but only to the extent that rights
under such agreements and programs are held by the Debtors or individuals who
are the Reorganized Debtors' employees as of and after the Effective Date, and
the Debtors' obligations under such agreements and programs to individuals who
are employees of the Debtors on and after the Effective Date shall survive the
Effective Date of the Plan, without prejudice to the Reorganized Debtors' rights
under applicable non-bankruptcy law to modify, amend, or terminate the foregoing
arrangements, except for (i) such executory contracts or plans specifically
rejected pursuant to the Plan (to the extent such rejection does not violate
section 1114 of the Bankruptcy Code) and (ii) such executory contracts or plans
as have previously been terminated, or rejected, pursuant to a Final Order, or
specifically waived by the beneficiaries of such plans, contracts, or programs.
VIII.
PROJECTIONS AND VALUATION ANALYSIS
The Debtors and their advisors developed a set of financial
projections (summarized below and in Exhibit D) to assess the value of the
Reorganized Debtors generally, and specifically the value of the New Common
Stock to be distributed to Class 5 under the Plan. The projections and
valuations set forth below and in Exhibit D are based on a number of significant
assumptions including, among other things, the successful reorganization of the
Debtors, an assumed Effective Date of
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December 31, 2000 and no significant downturn in the specific markets in which
the Debtors operate.
THE PROJECTIONS ARE BASED UPON A NUMBER OF SIGNIFICANT
ASSUMPTIONS. ACTUAL OPERATING RESULTS AND VALUES MAY VARY.
A. Projections
As a condition to confirmation of a plan, the Bankruptcy Code
requires, among other things, that the Bankruptcy Court determine that
confirmation is not likely to be followed by the liquidation or the need for
further financial reorganization of the debtors. In connection with the
development of the Plan, and for purposes of determining whether the Plan
satisfies this feasibility standard, the Debtors' management with the assistance
of Lazard has, through the development of financial projections (the
"Projections"), analyzed the Debtors' ability to meet their obligations under
the Plan to maintain sufficient liquidity and capital resources to conduct its
business. The Projections were also prepared to assist each holder of a Claim or
Old Preferred Stock in Class 5 or 6 in determining whether to accept or reject
the Plan.
The Projections should be read in conjunction with the
assumptions, qualifications and footnotes to tables containing the Projections
set forth herein and in Exhibit D, the historical consolidated financial
information (including the notes and schedules thereto) and the other
information set forth in Prime's Form 10K for the fiscal year ended December 31,
1999 and Prime's Quarterly Report on Form 10Q for the period ended March 31,
2000 annexed hereto as Exhibits C and G, respectively, the full texts of which
are incorporated herein by reference. The Projections were prepared in good
faith based upon assumptions believed to be reasonable. The Projections, which
were prepared in July, 2000, were based, in part, on economic, competitive, and
general business conditions prevailing at the time. While as of the date of this
Disclosure Statement such conditions have not materially changed, any future
changes in these conditions may materially impact the ability of the Debtors to
achieve the Projections.
THE PROJECTIONS WERE NOT PREPARED WITH A VIEW TOWARDS
COMPLYING WITH THE GUIDELINES FOR PROSPECTIVE FINANCIAL STATEMENTS PUBLISHED BY
THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS. THE DEBTORS' INDEPENDENT
ACCOUNTANT, KPMG LLP, HAS NEITHER COMPILED NOR EXAMINED THE ACCOMPANYING
PROSPECTIVE FINANCIAL INFORMATION TO DETERMINE THE REASONABLENESS THEREOF AND,
ACCORDINGLY, HAS
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NOT EXPRESSED AN OPINION OR ANY OTHER FORM OF ASSURANCE WITH RESPECT THERETO.
THE DEBTORS DO NOT, AS A MATTER OF COURSE, PUBLISH PROJECTIONS
OF THEIR ANTICIPATED FINANCIAL POSITION, RESULTS OF OPERATIONS OR CASH FLOWS.
ACCORDINGLY, THE DEBTORS DO NOT INTEND TO, AND DISCLAIM ANY OBLIGATION TO (A)
FURNISH UPDATED PROJECTIONS TO HOLDERS OF CLAIMS OR EQUITY INTERESTS PRIOR TO
THE EFFECTIVE DATE OR TO HOLDERS OF NEW COMMON STOCK OR ANY OTHER PARTY AFTER
THE EFFECTIVE DATE, (B) INCLUDE SUCH UPDATED INFORMATION IN ANY DOCUMENTS THAT
MAY BE REQUIRED TO BE FILED WITH THE SEC, OR (C) OTHERWISE MAKE SUCH UPDATED
INFORMATION PUBLICLY AVAILABLE.
THE PROJECTIONS PROVIDED IN THE DISCLOSURE STATEMENT HAVE BEEN
PREPARED EXCLUSIVELY BY THE DEBTORS' MANAGEMENT WITH THE ASSISTANCE OF LAZARD.
THESE PROJECTIONS, WHILE PRESENTED WITH NUMERICAL SPECIFICITY, ARE NECESSARILY
BASED ON A VARIETY OF ESTIMATES AND ASSUMPTIONS WHICH, THOUGH CONSIDERED
REASONABLE BY MANAGEMENT, MAY NOT BE REALIZED, AND ARE INHERENTLY SUBJECT TO
SIGNIFICANT BUSINESS, ECONOMIC AND COMPETITIVE UNCERTAINTIES AND CONTINGENCIES,
MANY OF WHICH ARE BEYOND THE DEBTORS' CONTROL. THE DEBTORS CAUTION THAT NO
REPRESENTATIONS CAN BE MADE AS TO THE ACCURACY OF THESE FINANCIAL PROJECTIONS OR
TO THE REORGANIZED DEBTORS' ABILITY TO ACHIEVE THE PROJECTED RESULTS. SOME
ASSUMPTIONS INEVITABLY WILL NOT MATERIALIZE. FURTHER, EVENTS AND CIRCUMSTANCES
OCCURRING SUBSEQUENT TO THE DATE ON WHICH THESE PROJECTIONS WERE PREPARED MAY BE
DIFFERENT FROM THOSE ASSUMED OR, ALTERNATIVELY, MAY HAVE BEEN UNANTICIPATED, AND
THUS THE OCCURRENCE OF THESE EVENTS MAY AFFECT FINANCIAL RESULTS IN A MATERIAL
AND POSSIBLY ADVERSE MANNER. THE PROJECTIONS, THEREFORE, MAY NOT BE RELIED UPON
AS A GUARANTY OR OTHER ASSURANCE OF THE ACTUAL RESULTS THAT WILL OCCUR.
FINALLY, THE PROJECTIONS INCLUDE ASSUMPTIONS AS TO THE
ENTERPRISE VALUE OF THE REORGANIZED DEBTORS, THE FAIR VALUE OF THEIR ASSETS AND
THEIR ACTUAL LIABILITIES AS OF THE EFFECTIVE DATE. THE REORGANIZED DEBTORS WILL
BE REQUIRED TO MAKE SUCH ESTIMATIONS AS OF THE EFFECTIVE DATE. SUCH
DETERMINATION WILL BE BASED UPON THE FAIR VALUES AS OF THAT
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DATE, WHICH COULD BE MATERIALLY GREATER OR LOWER THAN THE VALUES ASSUMED IN THE
FOREGOING ESTIMATES.
B. Valuation
Two methodologies were used to derive the value of the
Reorganized Debtors based on the Projections: (i) a comparison of the company
and its projected performance to how the market values comparable companies, and
(ii) a calculation of the present value of the free cash flows under the
Projections, including an assumption for a terminal value.
The market based approach involves identifying a group of
publicly traded companies whose businesses or product lines are comparable to
those of the Debtors as a whole or significant portions of the company's
operations, and then calculating ratios of various financial results to the
public market values of these companies. The ranges of ratios derived are then
applied to the Debtors' projected financial results to derive a range of implied
values. The discounted cash flow approach involves deriving the unlevered free
cash flows that the Debtors would generate assuming the projections were
realized. These cash flows, and an estimated value of the company at the end of
the projected period (the "Terminal Value"), are discounted to the present at
the Debtors' estimated post-restructuring weighted average cost of capital to
determine the company's enterprise value.
ESTIMATES OF VALUE DO NOT PURPORT TO BE APPRAISALS NOR DO THEY
NECESSARILY REFLECT THE VALUES WHICH MAY BE REALIZED IF ASSETS ARE SOLD. THE
ESTIMATES OF VALUE REPRESENT HYPOTHETICAL REORGANIZED ENTERPRISE VALUES ASSUMING
THE IMPLEMENTATION OF MANAGEMENT'S BUSINESS PLAN AS WELL AS OTHER SIGNIFICANT
ASSUMPTIONS. SUCH ESTIMATES WERE DEVELOPED SOLELY FOR PURPOSES OF FORMULATING
AND NEGOTIATING A PLAN OF REORGANIZATION AND ANALYZING THE PROJECTED RECOVERIES
THEREUNDER.
Based upon the methods described above, the estimated
enterprise value for the Reorganized Debtors is between $140.0 million and $160
million, with a midpoint value of $150.0 million. After deducting the Debtors'
estimated, long-term indebtedness at the Effective Date of approximately $136.2
million, the estimated total equity value is between $3.8 million and $23.8
million, with a midpoint value of $13.8 million. Therefore, assuming 5,000,000
shares of New Common Stock will be issued on the Effective Date, the midpoint
value of New Common Stock is estimated to be $2.76 per share, before the impact,
if any, on the value of the stock from the issuance of the New Warrants. The
Debtors have estimated the value of the New Warrants to be deminimus, using the
Black-Scholes option pricing method; the
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valuation of the New Warrants was based upon, among other things, estimates of
volatility of the New Common Stock.
THE ESTIMATED ENTERPRISE VALUE IS HIGHLY DEPENDENT UPON
ACHIEVING THE FUTURE FINANCIAL RESULTS SET FORTH IN THE PROJECTIONS AS WELL AS
THE REALIZATION OF CERTAIN OTHER ASSUMPTIONS WHICH ARE NOT GUARANTEED.
THE VALUATIONS SET FORTH HEREIN REPRESENT ESTIMATED
REORGANIZATION VALUES AND DO NOT NECESSARILY REFLECT VALUES THAT COULD BE
ATTAINABLE IN PUBLIC OR PRIVATE MARKETS. THE EQUITY VALUE ASCRIBED IN THE
ANALYSIS DOES NOT PURPORT TO BE AN ESTIMATE OF THE POST-REORGANIZATION MARKET
VALUE. SUCH TRADING VALUE, IF ANY, MAY BE MATERIALLY DIFFERENT FROM THE
REORGANIZATION EQUITY VALUE RANGES ASSOCIATED WITH THE VALUATION ANALYSIS.
IX.
CERTAIN RISK FACTORS TO BE CONSIDERED
HOLDERS OF CLAIMS AGAINST, AND EQUITY INTERESTS IN, THE
DEBTORS SHOULD READ AND CONSIDER CAREFULLY THE FACTORS SET FORTH BELOW AS WELL
AS THE OTHER INFORMATION SET FORTH IN THIS DISCLOSURE STATEMENT (AND THE
DOCUMENTS DELIVERED TOGETHER HEREWITH AND/OR INCORPORATED BY REFERENCE), PRIOR
TO VOTING TO ACCEPT OR REJECT THE PLAN. THESE RISK FACTORS SHOULD NOT, HOWEVER,
BE REGARDED AS CONSTITUTING THE ONLY RISKS INVOLVED IN CONNECTION WITH THE PLAN
AND ITS IMPLEMENTATION.
The ultimate recoveries under the Plan to holders of Claims
and Equity Interests (other than those holders who are paid solely in cash under
the Plan) depend upon the realizable value of the New Senior Subordinated Notes,
New Common Stock and the New Warrants. The securities to be issued pursuant to
the Plan are subject to a number of material risks, including, but not limited
to, those specified below. The factors specified below assume that the Plan is
approved by the Bankruptcy Court and that the Effective Date occurs on or about
December 31, 2000. Although such risk factors are based upon a December 31, 2000
Effective Date, the Debtors believe that an actual Effective Date in the fourth
(4th) quarter of fiscal 2000 or in the first (1st) quarter of fiscal 2001 would
not have any material effect on the risk factors.
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1 Projected Financial Information
The financial projections included in this Disclosure
Statement are dependent upon the successful implementation of the business plan
and the validity of the other assumptions contained therein. These projections
reflect numerous assumptions, including confirmation and consummation of the
Plan in accordance with its terms, and anticipated future performance of the
Debtors, death care industry performance, certain assumptions with respect to
the Debtors' competitors, general business and economic conditions and other
matters, many of which are beyond the Debtors' control. In addition,
unanticipated events and circumstances occurring subsequent to the preparation
of the projections may affect the Debtors' actual financial results. Although
the Debtors believe that the projections are reasonably attainable, variations
between the actual financial results and those projected may occur and be
material.
2 Ability to Refinance Certain Indebtedness and
Restrictions Imposed by Indebtedness
Following the Effective Date of the Plan, the Reorganized
Debtors' working capital borrowings and letters of credit requirements are
anticipated to be funded by a new credit facility (the "New Credit Facility"), a
portion of the proceeds of which will be used to repay in full the DIP Financing
Facility. There can be no assurance that the Reorganized Debtors will be able to
obtain such financing or that such financing may be obtained on acceptable
terms.
The New Credit Facility and the New Senior Subordinated Notes
Indenture will restrict, among other things, the Company's ability to incur
additional indebtedness, pay dividends or make certain other restricted
payments, consummate certain asset sales, create liens on assets, enter into
transactions with affiliates, make investments, loans or advances, consolidate
or merge with or into any other person or convey, transfer or lease all or
substantially all of its assets or change the business conducted by the
Reorganized Debtors. In addition, the New Credit Facility will contain certain
other and more restrictive covenants and will prohibit the Reorganized Debtors
from prepaying certain indebtedness, including the New Senior Subordinated
Notes. A breach of any of these covenants could result in a default under the
New Credit Facility or the New Senior Subordinated Notes Indenture. Further, the
restrictions in the New Senior Subordinated Notes Indenture and the New Credit
Facility will therefore restrict the Debtors' ability to obtain additional
financing for working capital, capital expenditures or general corporate
purposes.
The Reorganized Debtors' indebtedness will also require
substantial debt service payments which will restrict their ability to use their
operating cash flow for capital expenditures and other working capital
requirements. In addition,
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substantially all of the Reorganized Debtors' assets will be pledged as security
under the New Credit Facility.
3 Significant Holders
If holders of significant numbers of shares of New Common
Stock were to act as a group, such holders could be in a position to control the
outcome of actions requiring stockholder approval, including the election of
directors. This concentration of ownership could also facilitate or hinder a
negotiated change of control of the Reorganized Debtors and, consequently, have
an impact upon the value of the New Common Stock.
Further, the possibility that one or more of the holders of
significant numbers of shares of New Common Stock may determine to sell all or a
large portion of their shares of New Common Stock in a short period of time may
adversely affect the market price of the New Common Stock.
4 Lack of Established Market for New Common Stock and
New Warrants
The New Common Stock will be issued to holders of pre-Petition
Date Claims, some or all of whom may prefer to liquidate their investment rather
than to hold it on a long-term basis. There currently is no trading market for
the New Common Stock nor is it known whether or when one would develop. Further,
there can be no assurance as to the degree of price volatility in any such
market. While the Plan was developed based on an assumed reorganization value of
$2.76 per share of the New Common Stock (which was calculated based on the
Company's mid-point enterprise valuation), such valuation is not an estimate of
the price at which the New Common Stock may trade in the market. The Debtors
have not attempted to make any such estimate in connection with the development
of the Plan. No assurance can be given as to the market prices that will prevail
following the Effective Date.
5 Lack of Trading Market for New Senior Subordinated
Notes
After the issuance of the New Senior Subordinated Notes
pursuant to the Plan, there can be no assurance that an active trading market
will develop therefor. Further, there can be no assurance as to the degree of
price volatility in any such market. Accordingly, no assurance can be given that
any holder of such securities will be able to sell such securities or as to the
price at which any sale may occur. If such market were to exist, such securities
could trade at prices higher or lower than the value attributed to such
securities hereunder, depending upon many factors, including, without
limitation, the prevailing interest rates, markets for similar securities,
industry conditions and the performance of, and investor expectations for, the
Debtors on a reorganized basis.
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6 Dividend Policies
The Debtors do not anticipate paying any dividends on the New
Common Stock in the foreseeable future. In addition, the covenants in certain
debt instruments to which the Reorganized Debtors will be a party (including the
New Credit Facility) may limit the ability of the Reorganized Debtors to pay
dividends. Certain institutional investors may only invest in dividend-paying
equity securities or may operate under other restrictions which may prohibit or
limit their ability to invest in New Common Stock.
7 Certain Bankruptcy Law Considerations
(a) Risk of Non-Confirmation of the Plan
Although the Debtors believe that the Plan will satisfy all
requirements necessary for confirmation by the Court, there can be no assurance
that the Bankruptcy Court will reach the same conclusion. Moreover, there can be
no assurance that modifications of the Plan will not be required for
confirmation or that such modifications would not necessitate the resolicitation
of votes.
(b) Risk of Non-Occurrence of the Effective Date
Although the Debtors believe that the Effective Date may occur
as soon as 10 days after the entry of the Confirmation Order, there can be no
assurance as to such timing or that such conditions will ever occur.
8 Certain Tax Matters
For a summary of certain federal income tax consequences of
the Plan to holders of Claims and Equity Interests and to the Debtors, see
Section XV. "CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN."
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X.
CONFIRMATION PROCEDURE
Under the Bankruptcy Code, the following steps must be taken
to confirm the Plan:
A. Solicitation of Votes
In accordance with sections 1126 and 1129 of the Bankruptcy
Code, the Claims and Equity Interests in Classes 4, 5, 6 and 7 of the Plan are
impaired. The holders of Allowed Claims and Allowed Equity Interests in Classes
4, 5 and 6 are entitled to vote to accept or reject the Plan. As the holders of
Class 7 Other Equity Interests shall receive no distributions under the Plan,
the holders of such claims are presumed to have voted to reject the Plan and the
solicitation of acceptances with respect to such class is therefore not required
under section 1126(g) of the Bankruptcy Code. Claims in Classes 1, 2 and 3 are
unimpaired. The holders of Allowed Claims in each of such Classes are
conclusively presumed to have accepted the Plan and the solicitation of
acceptances with respect to such Classes therefore is not required under section
1126(f) of the Bankruptcy Code.
As to classes of claims entitled to vote on a plan, the
Bankruptcy Code defines acceptance of a plan by a class of creditors as
acceptance by holders of at least two-thirds in dollar amount and more than
one-half in number of the claims of that class that have timely voted to accept
or reject a plan.
As to classes of interests entitled to vote on a plan,
acceptance is defined as acceptance by holders of at least two-thirds of the
number of shares in such class that have timely voted to accept or reject a
plan.
A vote may be disregarded if the Court determines, after
notice and a hearing, that acceptance or rejection was not solicited or procured
in good faith or in accordance with the provisions of the Code.
Any creditor in an impaired Class (i) whose Claim has been
listed by the Debtors in the Debtors' Schedules filed with the Court (provided
that such Claim has not been scheduled as disputed, contingent or unliquidated)
or (ii) who filed a proof of claim on or before August 31, 2000 (or, if not
filed by such date, any proof of claim filed within any other applicable period
of limitations or with leave of the Court), which Claim is not the subject of an
objection or request for estimation, is entitled to vote. Pursuant to the
Disclosure Statement Order, holders of Allowed Old Preferred Stock as of August
18, 2000, are entitled to vote their Old Preferred Stock.
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B. The Confirmation Hearing
The Bankruptcy Code requires the Court, after notice, to hold
a confirmation hearing. The Confirmation Hearing in respect of the Plan has been
scheduled for September 28, 2000 at 2:00 p.m., Eastern Time, before the
Honorable Peter J. Walsh at the United States Bankruptcy Court for the District
of Delaware, Marine Midland Plaza, 824 North Market Street, Wilmington, Delaware
19801. The Confirmation Hearing may be adjourned from time to time by the Court
without further notice except for an announcement of the adjourned date made at
the Confirmation Hearing. Any objection to confirmation must be made in writing
and specify in detail the name and address of the objector, all grounds for the
objection and the amount of the Claim or number of shares of common stock of the
Debtors or other Interests held by the objector. Any such objection must be
filed with the Court and served so that it is received by the Court and the
following parties on or before September 21, 2000 at 4:00 p.m., Eastern Time:
Paul, Weiss, Rifkind, Wharton & Garrison Young Conaway Stargatt & Taylor, LLP
Attorneys for the Debtors Attorneys for the Debtors
1285 Avenue of the Americas 1110 North Market Street
New York, New York 10019-6064 Rodney Square North, 11th Floor
Attn: Alan W. Kornberg, Esq. Wilmington, Delaware 19801
Jeffrey D. Saferstein, Esq. Attn: Pauline K. Morgan, Esq.
Munger, Tolles & Olson LLP Skadden, Arps, Slate, Meagher & Flom
Attorneys for the Informal Committee Attorneys for the DIP Agents
355 South Grand Avenue, 35th Floor 333 West Wacker Drive
Los Angeles, CA 90071 Chicago, IL 60606
Attn: Thomas B. Walper, Esq. Attn: J. Eric Ivester, Esq.
Office of the United States Trustee Mayer, Brown & Platt
601 Walnut Street Attorneys for the DIP Agents
Curtis Center, Suite 950 West 1675 Broadway
Philadelphia, Pennsylvania 19106 New York, New York 10019-5820
Attn: Attn: Raniero D'Aversa, Jr., Esq.
Objections to confirmation of the Plan are governed by Bankruptcy Rule 9014 and
orders of the Bankruptcy Court.
C. Confirmation
At the Confirmation Hearing, the Court will confirm the Plan
only if all of the requirements of section 1129 of the Bankruptcy Code are met.
Among the requirements for confirmation of a plan are that the plan is (i)
accepted by all
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impaired classes of claims and equity interests or, if rejected by an impaired
class, that the plan "does not discriminate unfairly" and is "fair and
equitable" as to such class, (ii) feasible and (iii) in the "best interests" of
creditors and stockholders that are impaired under the plan.
1 Acceptance
Classes 4, 5 and 6 of the Plan are impaired under the Plan and
are entitled to vote to accept or reject the Plan. Classes 1, 2 and 3 of the
Plan are unimpaired and, therefore, are conclusively presumed to have voted to
accept the Plan. Class 7 is presumed to have rejected the Plan.
2 Unfair Discrimination and Fair and Equitable Tests
To obtain nonconsensual confirmation of the Plan, it must be
demonstrated to the Court that the Plan "does not discriminate unfairly" and is
"fair and equitable" with respect to each impaired, nonaccepting Class. The
Bankruptcy Code provides a non-exclusive definition of the phrase "fair and
equitable." The Bankruptcy Code establishes "cram down" tests for creditors and
equity holders, as follows:
(a) Secured Creditors. Either (i) each impaired creditor
retains its liens securing its secured claim and receives on account of its
secured claim deferred cash payments having a present value equal to the amount
of its allowed secured claim, (ii) each impaired secured creditor realizes the
"indubitable equivalent" of its allowed secured claim or (iii) the property
securing the claim is sold free and clear of liens with such liens to attach to
the proceeds of the sale and the treatment of such liens on proceeds to be as
provided in clause (i) or (ii) of this subparagraph.
(b) Unsecured Creditors. Either (i) each impaired unsecured
creditor receives or retains under the plan property of a value equal to the
amount of its allowed claim or (ii) the holders of claims and interests that are
junior to the claims of the dissenting class will not receive any property under
the plan.
(c) Equity Interests. Either (i) each holder of an equity
interest will receive or retain under the plan property of a value equal to the
greatest of the fixed liquidation preference to which such holder is entitled,
the fixed redemption price to which such holder is entitled or the value of its
interest or (ii) the holder of an interest that is junior to the nonaccepting
class will not receive or retain any property under the plan.
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3 Feasibility
The Bankruptcy Code permits a plan to be confirmed if it is
not likely to be followed by liquidation or the need for further financial
reorganization. For purposes of determining whether the Plan meets this
requirement, the Debtors have analyzed their ability to meet their obligations
under the Plan. As part of this analysis, the Debtors have prepared projections
of their financial performance for each of the five fiscal years for the period
ending December 31, 2005 (the "Projection Period"). These projections, and the
assumptions on which they are based, are included in the Projected Financial
Information, annexed hereto as Exhibit D. Based upon such projections, the
Debtors believe that they will be able to make all payments required pursuant to
the Plan and, therefore, that confirmation of the Plan is not likely to be
followed by liquidation or the need for further reorganization.
The financial information and projections appended to the
Disclosure Statement include for the five fiscal years in the Projection Period:
o Pro-Forma Reorganized Prime Succession balance sheet
at December 31, 2000, including all reorganization
and fresh-start adjustments.
o Projected balance sheets for fiscal years ending in
2001, 2002, 2003, 2004 and 2005.
o Projected income statements for fiscal years ending
in 2001, 2002, 2003, 2004 and 2005.
o Projected statements of cash flow for fiscal years
ending in 2001, 2002, 2003, 2004 and 2005.
The pro forma financial information and the projections are
based on the assumption that the Plan will be confirmed by the Court and, for
projection purposes, that the Effective Date under the Plan will occur on
December 31, 2000. Although the projections and information are based upon a
December 31, 2000 Effective Date, the Debtors believe that an actual Effective
Date in the fourth (4th) quarter of fiscal 2000 or first (1st) quarter of fiscal
2000 would not have any material effect on the projections.
The Debtors have prepared these financial projections based
upon certain assumptions that they believe to be reasonable under the
circumstances. Those assumptions considered to be significant are described in
the financial projections, which are annexed hereto as Exhibit D. The financial
projections have not been examined or compiled by independent accountants. The
Debtors make no
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representation as to the accuracy of the projections or their ability to achieve
the projected results. Many of the assumptions on which the projections are
based are subject to significant uncertainties. Inevitably, some assumptions
will not materialize and unanticipated events and circumstances may affect the
actual financial results. Therefore, the actual results achieved throughout the
Projection Period may vary from the projected results and the variations may be
material. All holders of Claims and Old Preferred Stock that are entitled to
vote to accept or reject the Plan are urged to examine carefully all of the
assumptions on which the financial projections are based in evaluating the Plan.
4 Best Interests Test
With respect to each impaired Class of Claims and Equity
Interests, confirmation of the Plan requires that each holder of a Claim or
Equity Interest either (i) accept the Plan or (ii) receive or retain under the
Plan property of a value, as of the Effective Date, that is not less than the
value such holder would receive or retain if the Debtors were liquidated under
chapter 7 of the Bankruptcy Code. To determine what holders of Claims and Equity
Interests of each impaired Class would receive if the Debtors were liquidated
under chapter 7, the Bankruptcy Court must determine the dollar amount that
would be generated from the liquidation of the Debtors' assets and properties in
the context of a chapter 7 liquidation case. The Cash amount that would be
available for satisfaction of Unsecured Claims and Equity Interests would
consist of the proceeds resulting from the disposition of the unencumbered
assets and properties of the Debtors, augmented by the unencumbered Cash held by
the Debtors at the time of the commencement of the liquidation case. Such Cash
amount would be reduced by the amount of the costs and expenses of the
liquidation and by such additional administrative and priority claims that might
result from the termination of the Debtors' businesses and the use of chapter 7
for the purposes of liquidation.
The Debtors' costs of liquidation under chapter 7 would
include the fees payable to a chapter 7 trustee, as well as those fees that
might be payable to attorneys and other professionals that such a trustee might
engage. In addition, claims would arise by reason of the breach or rejection of
obligations incurred and leases and executory contracts assumed or entered into
by the Debtors during the pendency of the Chapter 11 Cases. The foregoing types
of claims and other claims that might arise in a liquidation case or result from
the pending Chapter 11 Cases, including any unpaid expenses incurred by the
Debtors and the Creditors' Committee during the Chapter 11 Cases such as
compensation for attorneys, financial advisors and accountants, would be paid in
full from the liquidation proceeds before the balance of those proceeds would be
made available to pay prepetition Unsecured Claims.
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To determine if the Plan is in the best interests of each
impaired class, the present value of the distributions from the proceeds of a
liquidation of the Debtors' unencumbered assets and properties, after
subtracting the amounts attributable to the foregoing claims, are then compared
with the value of the property offered to such Classes of Claims and Equity
Interests under the Plan.
After considering the effects that a chapter 7 liquidation
would have on the ultimate proceeds available for distribution to creditors in
the Chapter 11 Cases, including (i) the increased costs and expenses of a
liquidation under chapter 7 arising from fees payable to a trustee in bankruptcy
and professional advisors to such trustee, (ii) the erosion in value of assets
in a chapter 7 case in the context of the expeditious liquidation required under
chapter 7 and the "forced sale" atmosphere that would prevail and (iii) the
substantial increases in Claims which would be satisfied on a priority basis or
on parity with creditors in the Chapter 11 Cases, the Debtors have determined
that confirmation of the Plan will provide each holder of an Allowed Claim or
Equity Interest with a recovery that is not less than such holder would receive
pursuant to liquidation of the Debtors under chapter 7.
The Debtors also believe that the value of any distributions
to each class of Allowed Claims in a chapter 7 case, including all Secured
Claims, would be less than the value of distributions under the Plan because
such distributions in a chapter 7 case would not occur for a substantial period
of time. It is likely that distribution of the proceeds of the liquidation could
be delayed for two years after the completion of such liquidation in order to
resolve Claims and prepare for distributions. In the likely event litigation
were necessary to resolve Claims asserted in the chapter 7 case, the delay could
be prolonged.
The Debtors' Liquidation Analysis is attached hereto as
Exhibit E. The information set forth in Exhibit E provides a summary of the
liquidation values of the Debtors' assets, assuming a chapter 7 liquidation in
which a trustee appointed by the Bankruptcy Court would liquidate the assets of
the Debtors' estates. Reference should be made to the Liquidation Analysis for a
complete discussion and presentation of the Liquidation Analysis. The
Liquidation Analysis was prepared by the Debtors with the assistance of Lazard.
Underlying the Liquidation Analysis are a number of estimates
and assumptions that, although developed and considered reasonable by
management, are inherently subject to significant economic and competitive
uncertainties and contingencies beyond the control of the Debtors and their
management. The Liquidation Analysis is also based on assumptions with regard to
liquidation decisions that are subject to change. Accordingly, the values
reflected might not be realized if the Debtors were, in fact, to undergo such a
liquidation. The chapter 7 liquidation period is assumed to be a period of more
than one year, allowing for, among other
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things, the (i) discontinuation of operations, (ii) selling of assets and (iii)
collection of receivables.
XI.
EFFECTIVENESS OF THE PLAN
A. Conditions Precedent to Effectiveness
The Plan shall not become effective unless and until it has
been confirmed and the following conditions have been satisfied in full or
waived pursuant to Section XIII.B.2 thereof: (1) the Confirmation Order in a
form satisfactory to the Debtors, the DIP Lenders and the Creditors Committee
shall have become a Final Order; (2) the Amended Prime Holdings and Amended
Prime Certificates of Incorporation and Amended Subsidiaries Certificates of
Incorporation shall have been properly filed with the Secretary of State in
their respective state of incorporation; (3) all authorizations, consents and
regulatory approvals required (if any) for the Plan's effectiveness shall have
been obtained; (4) the Court shall have ordered the substantive consolidation of
the Chapter 11 Cases as provided in Section VI of the Plan; (5) on the Effective
Date, the Reorganized Debtors have entered into a senior secured credit facility
acceptable to the Creditors Committee; (6) the Plan Documents shall be in a form
acceptable to the Debtors, the DIP Agents and the Creditors Committee and shall
have been executed and delivered; (7) all of the Debtors' obligations owing to
any DIP Lender pursuant to the DIP Credit Documents shall have been paid in
full, in cash, in immediately available funds, and any commitments in respect of
the DIP Credit Documents shall have been terminated; and (8) the Reorganized
Debtors shall have sufficient cash on hand to make timely distributions as may
be required hereunder.
B. Waiver of Conditions
The Debtors, with the written consent of the DIP Agents and
the Creditors Committee (which consent shall not be unreasonably withheld), may
waive any or all of the other conditions set forth in Section XIII.B.1 of the
Plan without leave of or order of the Court and without any formal action.
C. Effect of Failure of Conditions
In the event that the Effective Date does not occur on or
before one hundred and twenty (120) days after the Confirmation Date, upon
notification submitted by the Debtors to the Court: (a) the Confirmation Order
shall be vacated, (b) no distributions under the Plan shall be made, (c) the
Debtors and all holders of
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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
had never occurred, and (d) the Debtors' obligations with respect to the Claims
and Equity Interests shall remain unchanged and nothing contained in the Plan
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.
D. Vacatur of Plan
If an order denying confirmation of the Plan is entered, then
the Plan shall be null and void in all respects, and nothing contained in the
Plan shall (a) constitute a waiver or release of any Claims against or Equity
Interests in the Debtors; (b) prejudice in any manner the rights of the holder
of any Claim against, or Equity Interest in, the Debtors; (c) prejudice in any
manner any right, remedy or claim of the Debtors; or (d) be deemed an admission
against interest by the Debtors.
XII.
SECURITIES LAWS MATTERS
No registration statement will be filed under the Securities
Act of 1933, as amended (the "Securities Act"), or any state securities laws
with respect to the offer and distribution under the Plan of New Common Stock,
New Senior Subordinated Notes and New Warrants (including the New Common Stock
issuable upon exercise thereof) (collectively, the "Plan Securities"). The
Debtors believe that the provisions of section 1145(a)(1) (and, with respect to
the New Common Stock issuable upon exercise of the New Warrants, section
1145(a)(2)) exempt the offer and distribution of the Plan Securities from
federal and state securities registration requirements.
A. Bankruptcy Code Exemptions from
Registration Requirements
1 Initial Offer and Sale of Plan Securities
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 laws if three principal requirements are satisfied:
(i) the securities must be offered and sold under a plan of reorganization and
must be securities of the debtor, of an affiliate participating in a joint plan
with the debtor or of a successor to the debtor under the plan; (ii) the
recipients of the securities must each hold a prepetition
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or administrative expense claim against the debtor or an interest in the debtor;
and (iii) the securities must be issued entirely in exchange for the recipient's
claim against or interest in the debtor, or principally in such exchange and
partly for cash or property. The Debtors believe that the offer and sale of the
Plan Securities under the Plan satisfy the requirements of section 1145(a)(1) of
the Bankruptcy Code and are, therefore, exempt from registration under the
Securities Act and state securities laws.
Section 1145(a)(2) of the Bankruptcy Code exempts the offer of
a security through any warrant, option or right to subscribe that was sold in
the manner specified in section 1145(a)(1) of the Bankruptcy Code and the sale
of a security upon the exercise of such a warrant, option or right to subscribe.
The Debtors believe that the offer and sale of New Common Stock pursuant to the
New Warrants, satisfy the requirements of section 1145(a)(2) of the Bankruptcy
Code and are, therefore, exempt from registration under the Securities Act and
state securities laws.
2 Subsequent Transfers of Plan Securities
In general, all resales and subsequent transactions in (i) the
New Common Stock, New Senior Subordinated Notes and New Warrants distributed
under the Plan and (ii) the New Common Stock issued upon the exercise of New
Warrants will be exempt from registration under the Securities Act pursuant to
section 4(1) of the Securities Act, unless the holder thereof is deemed to be an
"underwriter" with respect to such securities, an "affiliate" of the issuer of
such securities or a "dealer." Section 1145(b) of the Bankruptcy Code defines
four types of "underwriters":
(i) persons who purchase a claim against, an interest in
or a claim for administrative expense against the
debtor with a view to distributing any security
received in exchange for such a claim or interest
("accumulators");
(ii) persons who offer to sell securities offered under a
plan for the holders of such securities
("distributors");
(iii) persons who offer to buy securities from the holders
of such securities, if the offer to buy is (a) with a
view to distributing such securities and (b) made
under a distribution agreement; and
(iv) a person who is an "issuer" with respect to the
securities, as the term "issuer" is defined in
section 2(11) of the Securities Act.
Under section 2(11) of the Securities Act, an "issuer" includes any "affiliate"
of the issuer, which means any person directly or indirectly through one or more
intermediaries controlling, controlled by or under common control with the
issuer.
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Under section 2(12) of the Securities Act, a "dealer" is any person who engages
either for all or part of his or her time, directly or indirectly, as agent,
broker or principal, in the business of offering, buying, selling or otherwise
dealing or trading in securities issued by another person. Whether or not any
particular person would be deemed to be an "underwriter" or an "affiliate" with
respect to any Plan Security or to be a "dealer" would depend upon various facts
and circumstances applicable to that person. Accordingly, the Debtors express no
view as to whether any person would be an "underwriter" or an "affiliate" with
respect to any Plan Security or would be a "dealer."
The SEC has taken the position that resales by accumulators
and distributors of securities distributed under a plan of reorganization who
are not affiliates of the issuer of such securities are exempt from registration
under the Securities Act if effected in "ordinary trading transactions." The
staff of the SEC has indicated in this context that a transaction by such
non-affiliates may be considered an "ordinary trading transaction" if it is made
on an exchange or in the over-the-counter market and does not involve any of the
following factors:
(i) (a) concerted action by the recipients of securities
issued under a plan in connection with the sale of
such securities or (b) concerted action by
distributors on behalf of one or more such recipients
in connection with such sales;
(ii) the use of informational documents concerning the
offering of the securities prepared or used to assist
in the resale of such securities, other than a
bankruptcy court-approved disclosure statement and
supplements thereto, and documents filed with the SEC
pursuant to the Exchange Act; or
(iii) the payment of special compensation to brokers and
dealers in connection with the sale of such
securities designed as a special incentive to the
resale of such securities (other than the
compensation that would be paid pursuant to
arm's-length negotiations between a seller and a
broker or dealer, each acting unilaterally, not
greater than the compensation that would be paid for
a routine similar-sized sale of similar securities of
a similar issuer).
The views of the SEC on the matter have not, however, been sought by the Debtors
and, therefore, no assurance can be given regarding the proper application of
the "ordinary trading transaction" exemption described above. Any person
intending to rely on such exemption is urged to consult his or her counsel as to
the applicability thereof to his or her circumstances.
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Securities Act Rule 144 provides an exemption from
registration under the Securities Act for certain limited public resales of
unrestricted securities by "affiliates" of the issuer of such securities. Rule
144 allows a holder of unrestricted securities that is an affiliate of the
issuer of such securities to sell, without registration, within any three-month
period a number of shares of such unrestricted securities that does not exceed
the greater of one percent (1%) of the number of outstanding securities in
question or the average weekly trading volume in the securities in question
during the four calendar weeks preceding the date on which notice of such sale
was filed pursuant to Rule 144, subject to the satisfaction of certain other
requirements of Rule 144 regarding the manner of sale, notice requirements and
the availability of current public information regarding the issuer. The Debtors
believe that, pursuant to section 1145(c) of the Bankruptcy Code, the Plan
Securities will be unrestricted for purposes of Rule 144.
GIVEN THE COMPLEX NATURE OF THE QUESTION OF WHETHER A
PARTICULAR PERSON MAY BE AN UNDERWRITER, THE DEBTORS MAKE NO REPRESENTATIONS
CONCERNING THE RIGHT OF ANY PERSON TO TRADE IN THE PLAN SECURITIES. THE DEBTORS
RECOMMEND THAT HOLDERS OF CLAIMS AND INTERESTS CONSULT THEIR OWN COUNSEL
CONCERNING WHETHER THEY MAY FREELY TRADE SUCH SECURITIES.
State securities laws generally provide registration
exemptions for subsequent transfers by a bona-fide owner for his or her own
account and subsequent transfers to institutional or accredited investors. Such
exemptions are generally expected to be available for subsequent transfers of
New Common Stock, New Senior Subordinated Notes and New Warrants.
3 Certain Transactions by Stockbrokers
Under section 1145(a)(4) of the Bankruptcy Code, stockbrokers
effecting transactions in the New Common Stock, New Senior Subordinated Notes or
New Warrants prior to the expiration of 40 days after the Confirmation Date are
required to deliver to the purchaser of such securities a copy of this
Disclosure Statement (and supplements hereto, if any, if ordered by the Court)
at or before the time of delivery of such securities to such purchaser. In
connection with prior cases under the Bankruptcy Code, the staff of the SEC has
taken so-called "no-action" positions with respect to noncompliance by
stockbrokers with such requirement in circumstances in which the debtor was, and
the reorganized debtor was to continue to be, subject to and in compliance with
the periodic reporting requirements of the Exchange Act. The Debtors were and
will continue to be subject to the periodic reporting requirements of the
Exchange Act. The views of the SEC on the matter have not, however, been sought
by the Debtors and, therefore, no assurance can be
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given regarding the possible consequences of noncompliance by stockbrokers with
the disclosure statement delivery requirements of section 1145(a)(4).
Stockbrokers are urged to consult their own counsel with respect to such
requirements.
THE DEBTORS DO NOT PRESENTLY INTEND TO SUBMIT ANY NO-ACTION OR
INTERPRETATIVE REQUESTS TO THE SEC WITH RESPECT TO ANY SECURITIES LAWS MATTERS
DISCUSSED HEREIN.
XIII.
FINANCIAL INFORMATION
A. Financial Statements
The audited consolidated balance sheets of the Debtors for the
fiscal years ended December 31, 1998 and December 31, 1999 and the related
consolidated statements of operations, cash flows and shareholders' equity
(deficit) for the same years are contained in "Financial Statements" in the Form
10-K, a copy of which is annexed as Exhibit C to this Disclosure Statement and
the full text of which is incorporated herein by reference. This financial
information is provided to permit the holders of Claims and Equity Interests to
better understand the Debtors' historical business performance and the impact of
the Chapter 11 Cases on the Debtors' businesses. During the Chapter 11 Cases,
the Debtors are required to file monthly operating reports with the Court. Such
financial information is on file with the Court and available to the public for
review.
B. Management's Discussion and Analysis of Financial
Condition and Results of Operations
For a detailed discussion by management of the Debtors'
financial condition, most recent results of operations, liquidity, and capital
resources, see Item 7 -- "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in the Form 10-K and the Form 10-Q for the
quarter ended on March 31, 2000, annexed as Exhibits C and G, respectively, to
this Disclosure Statement.
C. Recent Performance
See the Form 10-K for the fiscal year ended December 31, 1999
and the Form 10-Q for the quarter ended on March 31, 2000 annexed as Exhibits C
and G, respectively, to this Disclosure Statement.
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XIV.
ALTERNATIVES TO CONFIRMATION AND
CONSUMMATION OF THE PLAN
If the Plan is not confirmed and consummated, the alternatives
to the Plan include (i) liquidation of the Debtors under chapter 7 of the
Bankruptcy Code and (ii) an alternative plan of reorganization.
A. Liquidation Under Chapter 7
If no plan is confirmed, the Chapter 11 Cases may be converted
to cases under chapter 7 of the Bankruptcy Code, pursuant to which one or more
trustees would be elected to liquidate the Debtors' assets for distribution in
accordance with the priorities established by chapter 7. A discussion of the
effects that a chapter 7 liquidation would have on the recoveries of holders of
Claims and Equity Interests and the Debtors' liquidation analysis are set forth
herein. The Debtors believe that liquidation under chapter 7 would result in (i)
smaller distributions being made to creditors than those provided for in the
Plan because of (a) the likelihood that the Debtors' assets would have to be
sold or otherwise disposed of over a relatively short period of time, (b)
additional administrative expenses involved in the appointment of one or more
trustees, and (c) additional expenses and claims, some of which would be
entitled to priority, which would be generated during the liquidation and from
the rejection of leases and other executory contracts in connection with a
cessation of the Debtors' operations, and (ii) no distributions being made to
the holders of Equity Interests.
B. Alternative Plan of Reorganization
If the Plan is not confirmed, the Debtors (or if the Debtors'
exclusive period in which to file a plan of reorganization has expired, any
other party in interest) could attempt to formulate a different plan. Such a
plan might involve either a reorganization and continuation of the Debtors'
businesses or an orderly liquidation of their assets. With respect to an
alternative plan, the Debtors have explored various alternatives in connection
with the formulation and development of the Plan. The Debtors believe that the
Plan, as described herein, enables creditors and Equity Interest holders to
realize the most value under the circumstances. In a liquidation under chapter
11, the Debtors' assets would be sold in an orderly fashion over a more extended
period of time than in a liquidation under chapter 7, possibly resulting in
somewhat greater (but indeterminate) recoveries than would be obtained in
chapter 7. Further, if a trustee were not appointed, because such appointment is
not required in a chapter 11 case, the expenses for professional fees would most
likely be lower than those incurred in a chapter 7 case. Although preferable to
a chapter 7 liquidation, the
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Debtors believe that any alternative liquidation under chapter 11 is a much less
attractive alternative to creditors and Equity Interest holders than the Plan
because of the greater returns provided by the Plan.
XV.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN
The following discussion summarizes certain federal income tax
consequences of the implementation of the Plan to holders of Senior Subordinated
Notes and to the Debtors. It does not address the federal income tax
consequences to holders whose secured or priority Claims are entitled to
reinstatement or payment in full in cash under the Plan.
The following summary is based on the Internal Revenue Code of
1986, as amended (the "Tax Code"), Treasury regulations promulgated and proposed
thereunder, judicial decisions, and published administrative rules and
pronouncements of the IRS in effect on the date hereof. Changes in, or new
interpretations of, such rules may have retroactive effect and could
significantly affect the federal income tax consequences described below.
The federal income tax consequences of the Plan are complex
and are subject to uncertainties. The Debtors have not requested a ruling from
the IRS or an opinion of counsel with respect to any of the tax aspects of the
Plan. Thus, no assurance can be given as to the interpretation that the IRS will
adopt. In addition, this summary does not address foreign, state, or local tax
consequences of the Plan, and it does not purport to address the federal income
tax consequences of the Plan to special classes of taxpayer (such as foreign
taxpayers, broker-dealers, banks, mutual funds, insurance companies, financial
institutions, small business investment companies, regulated investment
companies, tax-exempt organizations, and investors in pass-through entities).
ACCORDINGLY, THE FOLLOWING SUMMARY OF CERTAIN FEDERAL INCOME
TAX CONSEQUENCES IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT A SUBSTITUTE FOR
CAREFUL TAX PLANNING AND ADVICE BASED UPON THE INDIVIDUAL CIRCUMSTANCES OF A
HOLDER OF A CLAIM OR EQUITY INTEREST. EACH HOLDER OF A CLAIM OR EQUITY INTEREST
IS URGED TO CONSULT ITS OWN TAX ADVISOR FOR THE FEDERAL, STATE, LOCAL, AND OTHER
TAX CONSEQUENCES APPLICABLE UNDER THE PLAN.
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A. Consequences to Creditors
1 Tax Securities
The federal income tax consequences of the Plan may vary
depending upon, among other things, whether a holder's Claim being exchanged
constitutes a "security" of the Debtors for federal income tax purposes (a "Tax
Security"). The term "security" is not defined in the Tax Code but is generally
understood to include stock, rights to purchase stock, and debt instruments with
a maturity more than 10 years from the date of issuance, although the
determination whether a particular claim or debt constitutes a Tax Security
depends upon an overall evaluation of the nature of the claim or debt. An
instrument with an original term of as little as 5 years may qualify. Under
these principles, the New Common Stock and New Warrants will be characterized as
Tax Securities, and it is likely that the Senior Subordinated Notes and the New
Senior Subordinated Notes will be characterized as Tax Securities. However, each
holder should consult its tax advisor regarding the tax status of its Claim or
Claims.
The Tax Security issue arises because the Tax Code's corporate
reorganization provisions generally provide that a holder recognizes no gain or
loss upon exchanging an issuer's Tax Securities for other Tax Securities of such
issuer (except that consideration received for a claim for accrued but unpaid
interest must be included as current income). By contrast, a holder will
recognize gain upon exchanging (i) an issuer's obligations that are not Tax
Securities for Tax Securities of such issuer, or (ii) an issuer's Tax Securities
for obligations of such issuer that are not Tax Securities. See also subsection
A.3 below ("Consequences to Creditors--Claims or Consideration Not Constituting
Tax Securities").
To the extent a Claim holder's receipt of the New Senior
Subordinated Notes, New Common Stock, or New Warrants is attributable to accrued
interest, the exchanging holder will recognize current income.
2 Claims and Consideration Constituting Tax Securities
In general, each holder of a Claim that constitutes a Tax
Security will not recognize any gain or loss upon implementation of the Plan,
but may recognize gain (computed as described below in section A.3), to the
extent of any consideration other than Tax Securities issued by the Debtors in
satisfaction of its Claim. The character of any such gain or loss would be
determined in accordance with the principles discussed below in subsection A.3.
See also section C below ("Additional Tax Considerations for All Holders of
Claims").
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A holder's tax basis in New Senior Subordinated Notes, New
Common Stock, and New Warrants received in satisfaction of a Claim represented
by a Tax Security of the Debtors will be such holder's adjusted tax basis in
such Claim, decreased by the sum of the cash and the fair market value of any
notes received that are not Tax Securities, and increased by any gain recognized
by such holder on the exchange. A holder that receives Tax Securities of the
Debtors and whose exchanged Claim constitutes a Tax Security must apportion its
adjusted tax basis in such Claim (decreased by any cash received and the fair
market value of any obligations received that are not Tax Securities, and
increased by any gain recognized) between the New Senior Subordinated Notes, the
New Common Stock, and the New Warrants it receives in accordance with their
relative fair market values.
If a holder of a Claim constituting a Tax Security receives
Debtors' obligations that are Tax Securities, such holder may have a tax basis
in the new obligations that exceeds the stated principal amount of such
obligations. In such case, the excess basis may be the subject of annual
deductions to the holder under the bond premium amortization rules of the Tax
Code, or the holder may be entitled to exclude from income all or a portion of
any original issue discount income on the obligations. See the discussion of the
OID rules in subsection A.4 below ("Consequences to Creditors--Application of
OID Rules").
A holder's holding period for New Senior Subordinated Notes,
New Common Stock, and New Warrants received in exchange for the Debtors' Tax
Securities will include such holder's holding period for the obligations so
exchanged, except to the extent the New Senior Subordinated Notes, New Common
Stock, or New Warrants were issued in respect of such holder's Claim for accrued
interest. A holder's holding period for New Senior Subordinated Notes, New
Common Stock, or New Warrants issued in respect of its Claim for accrued
interest (or in respect of which the holder is otherwise required to recognize
gain) will begin on the day after their issuance.
3 Claims or Consideration Not Constituting Tax
Securities
If any of the Senior Subordinated Notes, the New Senior
Subordinated Notes, the New Common Stock, or the New Warrants were not treated
as Tax Securities, all or a portion of the exchange of Senior Subordinated Notes
for New Senior Subordinated Notes and New Common Stock would constitute a
taxable transaction. See also subsection C.1 below ("Additional Tax
Considerations for All Holders of Claims--Distributions in Discharge of Accrued
Interest").
If the Senior Subordinated Notes were not treated as Tax
Securities, an exchange relating to such notes that were not treated as Tax
Securities would constitute a taxable event in which a holder of Senior
Subordinated Notes would
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generally recognize gain or loss in an amount equal to the difference between
(a) the "amount realized," i.e., the cash and/or aggregate fair market value of
all property received by the Claim holder in exchange for its Claim (other than
a Claim for interest), and (b) its adjusted basis in the exchanged debt
instruments (exclusive of any basis attributable to accrued interest).
If the Senior Subordinated Notes were characterized as Tax
Securities but the New Senior Subordinated Notes were not, a holder of Senior
Subordinated Notes would recognize gain upon receipt of New Senior Subordinated
Notes equal to the lesser of (a) the fair market value of such New Senior
Subordinated Notes received in exchange for its Senior Subordinated Notes, and
(b) the total gain realized in the exchange, which amount would equal the
difference between the Senior Subordinated Note holder's tax basis in its Senior
Subordinated Note and the aggregate fair market value of the New Senior
Subordinated Notes and New Common Stock received in the exchange.
The character of any gain or loss recognized as long-term or
short-term capital gain or loss or as ordinary income or loss will be determined
by a number of factors, including the tax status of the holder, whether the
claim constitutes a capital asset in the hand of the holder, whether the claim
has been held for more than twelve months, whether the claim was purchased at a
discount (in which case the market discount rules of the Tax Code may apply to
recharacterize a portion of any gain as ordinary income), and whether and to
what extent the holder has previously claimed a bad debt deduction in respect of
such Claim. Also in this regard, Tax Code Section 582(c) provides that the sale
or exchange of a bond, debenture, note, certificate, or other evidence of
indebtedness by certain financial institutions will be considered the sale or
exchange of a non-capital asset. Accordingly, any gain or loss recognized by
such financial institutions as a result of the implementation of the Plan will
be ordinary gain or loss, regardless of the nature of their claims. See also
section C below ("Additional Tax Considerations for All Holders of Claims").
A holder's tax basis in any New Senior Subordinated Notes, New
Common Stock, or New Warrants will be the fair market value thereof included in
the holder's amount realized on the exchange. The holding period for the New
Senior Subordinated Notes, New Common Stock, or New Warrants so received will
begin on the day following the exchange.
4 Application of OID Rules
Under the Tax Code, a holder of a debt instrument that has
original issue discount ("OID") must include a portion of the OID in gross
income in each taxable year or portion thereof in which the holder holds the
debt instrument, even if the holder has not received a cash payment in respect
of such OID. In general, OID
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is equal to the excess of (i) an instrument's "stated redemption price at
maturity" over (ii) its "issue price."
The "issue price" of a debt instrument issued for property
(such as an outstanding debt instrument) depends upon the circumstances
surrounding its issuance. The issue price of a debt instrument that is publicly
traded is generally the fair market value of the debt instrument when issued.
The fair market value is generally determined from the price at which such debt
instrument trades on the first day after issuance. If the new debt instrument is
not publicly traded and is issued for property (such as an outstanding debt
instrument) that is publicly traded, then the issue price is generally
determined from the price at which such property trades on the issue date.
Although the matter is not free from doubt, the Debtors expect that the
outstanding Senior Subordinated Notes will constitute publicly traded property
for purposes of applying the foregoing rules. Accordingly, the issue price of
the New Senior Subordinated Notes is expected to be their fair market value, as
described above. Although the Debtors believe that such fair market value will
be the face value of the New Senior Subordinated Notes, their fair market value
will be determined by the actual trading prices at the time the New Senior
Subordinated Notes are issued. If the New Senior Subordinated Notes are issued
at a discount from face value, they would have OID of at least the amount of
such discount.
The "stated redemption price at maturity" of a debt instrument
is the sum of all payments to be made on such instrument, other than certain
interest payments based on a fixed rate payable unconditionally at fixed
periodic intervals of one year or less during the entire term of the instrument.
Under the applicable regulations, payments on the New Senior Subordinated Notes
will not be treated as such qualified periodic interest payments. Accordingly,
in all events, the New Senior Subordinated Notes will have OID and each holder
will be required to include a portion thereof in gross income for each taxable
year even if the holder receives no payments during that year or only receives
payment in the form of additional New Senior Subordinated Notes. However, the
precise amount and timing of inclusions will depend on a number of factors,
including whether the New Senior Subordinated Notes are treated as issued at a
discount or at par and accordingly will not be determinable until the New Senior
Subordinated Notes are issued. The Debtors will furnish annually to the Internal
Revenue Service (other than with respect to certain exempt holders) and to
holders of New Senior Subordinated Notes information with respect to the OID
accruing while such New Senior Subordinated Notes are held by such holders.
Treasury regulations provide that a holder acquiring a debt
instrument in a reorganization exchange may exclude all of the OID on such debt
instrument from such holder's taxable income if it is acquired at a "premium"
(i.e., if the adjusted tax basis in the acquired debt instrument exceeds the sum
of all payments due
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on the instrument after the acquisition date, less certain stated interest) and
may exclude a part of the OID on such debt instrument from such holder's taxable
income if it is acquired at an "acquisition premium" (i.e., if the adjusted tax
basis in the acquired debt instrument exceeds its adjusted issue price).
B. Consequences to the Debtors
The Debtors have reported for federal income tax purposes
substantial consolidated net operating loss ("NOL") carryforwards. In addition,
the Debtors have substantial tax basis in their assets. As discussed below,
certain tax attributes of the Debtors, such as NOLs and tax basis, will be
subject to reduction and limitation as a result of implementing the Plan.
1 Cancellation of Debt
In general, the Tax Code provides that a debtor in a
bankruptcy case does not include cancellation of debt ("COD") income in its
gross income, but rather must reduce its tax attributes, to the extent it has
such attributes to reduce, by the amount of COD that otherwise would have been
recognized. The amount of COD is the amount by which the indebtedness discharged
exceeds the consideration for which it is exchanged. A debtor's tax attributes
are generally reduced in the following order until COD is exhausted: NOLs,
general business credits, alternative minimum tax credits, capital losses, the
tax basis of its assets, passive activity losses, and credits and foreign tax
credits. Losses (and tax credits) are reduced only after the debtor's tax
liability for the current year is determined (with, in each case, current-year
losses being reduced before any carryforwards from prior years), and tax basis
is reduced as of the first day of the succeeding year. A debtor's tax basis in
its assets will not be reduced below the amount of its liabilities (as defined)
outstanding immediately after the COD is recognized. Any COD remaining after
exhausting available tax attributes is simply forgiven. Any reduction of tax
attributes generally occurs on a separate company basis, even though the Debtors
file a consolidated federal income tax return.
As a result of the reduction of the Debtors' indebtedness
pursuant to the Plan, the Debtors will suffer attribute reduction. The Debtors
believe they will have significant COD. The extent of resulting attribute
reduction to the Debtors will depend, however, primarily upon the amount of its
liabilities outstanding on the Effective Date. The attribute reduction is
expected to eliminate NOL carryforwards that otherwise might be available to the
Debtors and substantially all of the tax basis of the Debtors' long-term assets.
This will reduce the amount of tax depreciation and amortization that the
Company will be able to utilize on its tax returns starting in the fiscal year
ending December 31, 2001, and therefore potentially may increase taxes due in
future tax periods.
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2 Applicable High-Yield Discount Obligations
If the yield to maturity of the New Senior Subordinated Notes
(as determined for U.S. federal income tax purposes) exceeds the "applicable
federal rate" ("AFR") plus 500 basis points, the New Senior Subordinated Notes
will be subject to the applicable high-yield discount obligation ("AHYDO") rules
of the Code. The AFR will be determined according to the month in which the New
Senior Subordinated Notes are issued. The yield to maturity of the New Senior
Subordinated Notes is expected to exceed the appropriate AFR for the month of
issue plus 500 basis points. In such case, under the AHYDO rules the Debtors'
deductions with respect to OID will be suspended until such amounts are actually
paid, and the "disqualified portion" of such OID (defined as the portion that is
attributable to the yield on such New Senior Subordinated Note in excess of the
AFR plus 600 basis points), if any, will be permanently nondeductible. The AHYDO
rules generally do not affect the amount, timing, or character of a holder's
income. However, domestic corporate holders of New Senior Subordinated Notes may
be eligible for a dividends-received deduction with respect to their inclusion
in income of the "disqualified portion" if such amount, if paid with respect to
stock, would have constituted a dividend for U.S. federal income tax purposes.
The availability of a dividends-received deduction is subject to a number of
complex limitations.
3 Alternative Minimum Tax
In general, an alternative minimum tax ("AMT") is imposed on a
corporation's alternative minimum taxable income ("AMTI") at a 20-percent rate
to the extent such tax exceeds the corporation's regular federal income tax. For
purposes of computing AMTI, certain tax deductions and other beneficial
allowances are modified or eliminated. In particular, even though a corporation
otherwise might be able to offset all its taxable income for regular tax
purposes by available NOL carryforwards, only 90 percent of AMTI may be offset
by available NOL carryforwards (as computed for AMT purposes). Any AMT a
corporation pays will generally be allowed as a nonrefundable credit against its
regular federal income tax liability in future taxable years when the
corporation is no longer subject to AMT.
C. Additional Tax Considerations for All Claim Holders
1 Distributions in Discharge of Accrued Interest
A Claim holder that receives stock or other property in
discharge of a Claim for interest accrued during the period the holder owned
such Claim and not previously included in such holder's income will be required
to recognize ordinary income equal to the fair market value of the New Senior
Subordinated Notes, New Common Stock, and New Warrants, as the case may be,
received in respect of such
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Claim. A holder generally will recognize a deductible loss (or, possibly, a
write-off against a reserve for bad debts) to the extent any accrued interest
claimed was previously included in its gross income and is not paid in full by
the Debtors. The tax basis of any New Senior Subordinated Notes, New Common
Stock, or New Warrants received in exchange for Claims for accrued interest will
be the fair market value of the New Common Stock and New Warrants on the day of
the exchange or the issue price of the New Senior Subordinated Notes, as the
case may be. The holding period for such New Senior Subordinated Notes, New
Common Stock, and New Warrants will begin the day after the exchange.
Under the Plan, distributions in respect of Allowed Claims will be allocated
first to the stated principal amount of such Claims, with any excess allocated
to interest. However, there can be no assurance that the IRS or the courts will
respect the Plan allocation for federal income tax purposes.
2 Subsequent Sale of New Senior Subordinated Notes, New
Common Stock, or New Warrants
Any gain recognized by a holder upon a subsequent taxable
disposition of New Senior Subordinated Notes, New Common Stock, or New Warrants
received pursuant to the Plan in satisfaction of a Claim (or any stock or other
property received for them in a later tax-free exchange) may be treated as
ordinary income to the extent of (i) any bad debt deductions (or additions to a
bad debt reserve) previously claimed with respect to its Claim and any ordinary
loss deduction incurred upon satisfaction of its Claim, less any income (other
than interest income) recognized by the holder upon satisfaction of its Claim,
(ii) with respect to a cash-basis holder, any amounts that would have been
included in its gross income if the holder's Claim had been satisfied in full
but were not included by reason of the cash method of accounting, and (iii) any
accrued market discount that is assigned to the New Senior Subordinated Notes,
New Common Stock, or New Warrants, as discussed in subsection C.3 below
("Additional Tax Considerations for All Claim Holders--Market Discount").
3 Market Discount
The Treasury Department is expected to promulgate regulations
that will provide that any accrued "market discount" not treated as ordinary
income upon a tax-free exchange of market-discount bonds (generally, bonds
acquired for less than their issue price) would carry over to any nonrecognition
property received in the exchange. If such regulations are promulgated and
applicable to the Plan, any accrued but unrecognized market discount on an
exchanged Claim that constitutes a Tax Security would carry over to any New
Senior Subordinated Notes, New Common Stock, or New Warrants received pursuant
to the Plan. Any gain recognized by a
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holder upon a subsequent disposition of such New Senior Subordinated Notes, New
Common Stock, or New Warrants also would be treated as ordinary income to the
extent of any accrued market discount not previously included in such holder's
income. Holders are urged to consult their tax advisors as to the application of
the market discount rules.
4 Withholding
All distributions to holders of Allowed Claims and Allowed Old
Preferred Stock under the Plan are subject to applicable withholding (including
employment tax withholding). Under federal income tax law, interest, dividends,
and other reportable payments may, under certain circumstances, be subject to
"backup withholding" at a 31% rate. Backup withholding generally applies if the
holder (a) fails to furnish its social security number or other taxpayer
identification number ("TIN"), (b) furnishes an incorrect TIN, (c) fails to
report properly interest or dividends, or (d) under certain circumstances, fails
to provide a certified statement, signed under penalty of perjury, that the TIN
provided is its correct number and that it is not subject to backup withholding.
Backup withholding is not an additional tax, but merely an advance payment that
may be refunded to the extent it results in an overpayment of tax. Certain
persons are exempt from backup withholding.
THE FOREGOING FEDERAL INCOME TAX SUMMARY HAS BEEN PROVIDED FOR
INFORMATIONAL PURPOSES ONLY. ALL CREDITORS AND EQUITY HOLDERS ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS CONCERNING THE FEDERAL, STATE, LOCAL, AND OTHER
TAX CONSEQUENCES OF THE PLAN.
[INTENTIONALLY LEFT BLANK]
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XVI.
CONCLUSION
The Debtors believe the Plan is in the best interests of all
Creditors and Equity Interest holders and urge those entitled to vote to accept
the Plan.
Dated: Wilmington, Delaware
August 21, 2000
PRIME SUCCESSION HOLDINGS, INC.
By: /s/Arthur J. Ansin
-------------------
Name:
Title:
PRIME SUCCESSION, INC.
By: /s/Arthur J. Ansin
-------------------
Name:
Title:
AARON CREMATION & BURIAL SERVICES,
INC.
By: /s/Arthur J. Ansin
-------------------
Name:
Title:
AARON CREMATION & BURIAL SERVICES,
P.C.
By: /s/Arthur J. Ansin
-------------------
Name:
Title:
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BUCKNER-RUSH ENTERPRISES, INC.
By: /s/Arthur J. Ansin
-------------------
Name:
Title:
BURY-PINE FUNERAL HOME, INC.
By: /s/Arthur J. Ansin
-------------------
Name:
Title:
PINE FUNERAL HOME, INC.
By: /s/Arthur J. Ansin
-------------------
Name:
Title:
CLARY-GODWIN FUNERAL HOME, INC.
By: /s/Arthur J. Ansin
-------------------
Name:
Title:
CLAYTON FRANK & SONS, INC.
By: /s/Arthur J. Ansin
-------------------
Name:
Title:
COMANDER FUNERAL HOME, INC.
By: /s/Arthur J. Ansin
-------------------
Name:
Title:
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CREMATION SOCIETY OF AMERICA,
INCORPORATED
By: /s/Arthur J. Ansin
-------------------
Name:
Title:
FRASER FUNERAL HOME, INC.
By: /s/Arthur J. Ansin
-------------------
Name:
Title:
FRED HUNTER MEMORIAL SERVICES, INC.
By: /s/Arthur J. Ansin
-------------------
Name:
Title:
GROTEWOLD SIMI VALLEY
MORTUARY, INC.
By: /s/Arthur J. Ansin
-------------------
Name:
Title:
HUGHES FUNERAL CHAPEL
By: /s/Arthur J. Ansin
-------------------
Name:
Title:
J&W, INC.
By: /s/Arthur J. Ansin
-------------------
Name:
Title:
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JOHN A. BECK COMPANY
By: /s/Arthur J. Ansin
-------------------
Name:
Title:
LAMBERT CORPORATION, INC.
By: /s/Arthur J. Ansin
-------------------
Name:
Title:
McWANE FAMILY FUNERAL HOME, INC.
By: /s/Arthur J. Ansin
-------------------
Name:
Title:
NEAL-TARPLEY, INC.
By: /s/Arthur J. Ansin
-------------------
Name:
Title:
PRIME BUSINESS SOLUTIONS, INC.
By: /s/Arthur J. Ansin
-------------------
Name:
Title:
PRIME BUSINESS SOLUTIONS OF
KENTUCKY, INC.
By: /s/Arthur J. Ansin
-------------------
Name:
Title:
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PRIME ENTERPRISES OF CALIFORNIA, INC.
By: /s/Arthur J. Ansin
-------------------
Name:
Title:
PRIME HOLDINGS OF ARKANSAS, INC.
By: /s/Arthur J. Ansin
-------------------
Name:
Title:
PRIME HOLDINGS OF CALIFORNIA, INC.
By: /s/Arthur J. Ansin
-------------------
Name:
Title:
PRIME HOLDINGS OF MINNESOTA, INC.
By: /s/Arthur J. Ansin
-------------------
Name:
Title:
PRIME HOLDINGS OF NEBRASKA, INC.
By: /s/Arthur J. Ansin
-------------------
Name:
Title:
PRIME HOLDINGS OF OHIO, INC.
By: /s/Arthur J. Ansin
-------------------
Name:
Title:
91
<PAGE>
PRIME HOLDINGS OF WEST VIRGINIA, INC.
By: /s/Arthur J. Ansin
-------------------
Name:
Title:
PRIME INDIANA LIMITED PARTNERSHIP
By: /s/Arthur J. Ansin
-------------------
Name:
Title:
PRIME SUCCESSION OF ALABAMA, INC.
By: /s/Arthur J. Ansin
-------------------
Name:
Title:
PRIME SUCCESSION OF ARIZONA, INC.
By: /s/Arthur J. Ansin
-------------------
Name:
Title:
PRIME SUCCESSION OF ARKANSAS, INC.
By: /s/Arthur J. Ansin
-------------------
Name:
Title:
PRIME SUCCESSION OF CALIFORNIA, INC.
By: /s/Arthur J. Ansin
-------------------
Name:
Title:
92
<PAGE>
PRIME SUCCESSION OF FLORIDA, INC.
By: /s/Arthur J. Ansin
-------------------
Name:
Title:
PRIME SUCCESSION OF GEORGIA, INC.
By: /s/Arthur J. Ansin
-------------------
Name:
Title:
PRIME SUCCESSION OF ILLINOIS, INC.
By: /s/Arthur J. Ansin
-------------------
Name:
Title:
PRIME SUCCESSION OF IOWA, INC.
By: /s/Arthur J. Ansin
-------------------
Name:
Title:
PRIME SUCCESSION OF KENTUCKY, INC.
By: /s/Arthur J. Ansin
-------------------
Name:
Title:
PRIME SUCCESSION OF MINNESOTA, INC.
By: /s/Arthur J. Ansin
-------------------
Name:
Title:
93
<PAGE>
PRIME SUCCESSION OF MISSOURI, INC.
By: /s/Arthur J. Ansin
-------------------
Name:
Title:
PRIME SUCCESSION OF NEBRASKA, INC.
By: /s/Arthur J. Ansin
-------------------
Name:
Title:
PRIME SUCCESSION OF NEW YORK, INC.
By: /s/Arthur J. Ansin
-------------------
Name:
Title:
PRIME SUCCESSION OF TENNESSEE, INC.
By: /s/Arthur J. Ansin
-------------------
Name:
Title:
PRIME SUCCESSION OF TEXAS, INC.
By: /s/Arthur J. Ansin
-------------------
Name:
Title:
PRIME SUCCESSION PARTNERS, INC.
By: /s/Arthur J. Ansin
-------------------
Name:
Title:
94
<PAGE>
ROSELAWN MEMORIAL GARDENS, INC.
By: /s/Arthur J. Ansin
-------------------
Name:
Title:
ROSTAD MORTUARY, INC.
By: /s/Arthur J. Ansin
-------------------
Name:
Title:
TALISMAN ENTERPRISES, INC.
By: /s/Arthur J. Ansin
-------------------
Name:
Title:
THE FUNERAL OUTLET STORE, INC.
By: /s/Arthur J. Ansin
-------------------
Name:
Title:
WHITNEY & MURPHY FUNERAL
HOMES, INC.
By: /s/Arthur J. Ansin
-------------------
Name:
Title:
95
<PAGE>
EXHIBITS TO THE DISCLOSURE STATEMENT
A Proposed Plan of Reorganization
B Disclosure Statement Order
C Annual Report on Form 10-K
D Financial Projections
E Liquidation Analysis
96
<PAGE>
SCHEDULE A
List of Subsidiary Debtors
Aaron Cremation & Burial Services, Inc., Aaron-Cremation & Burial Services,
P.C., Buckner-Rush Enterprises, Inc., Bury-Pine Funeral Home, Inc., Pine Funeral
Home, Inc., Clary-Godwin Funeral Home, Inc., Clayton Frank & Sons, Inc.,
Comander Funeral Home, Inc., Cremation Society of America, Incorporated, Fraser
Funeral Home, Inc., Fred Hunter Memorial Services, Inc., Grotewold Simi Valley
Mortuary, Inc., Hughes Funeral Chapel, J&W, Inc., John A. Beck Company, Lambert
Corporation, Inc., McWane Family Funeral Home, Inc., Neal-Tarpley, Inc., Prime
Business Solutions, Inc., Prime Business Solutions of Kentucky, Inc., Prime
Enterprises of California, Inc., Prime Holdings of Arkansas, Inc., Prime
Holdings of California, Inc., Prime Holdings of Minnesota, Inc., Prime Holdings
of Nebraska, Inc., Prime Holdings of Ohio, Inc., Prime Holdings of West
Virginia, Inc., Prime Indiana Limited Partnership, Prime Succession of Alabama,
Inc., Prime Succession of Arizona, Inc., Prime Succession of Arkansas, Inc.,
Prime Succession of California, Inc., Prime Succession of Florida, Inc., Prime
Succession of Georgia, Inc., Prime Succession of Illinois, Inc., Prime
Succession of Iowa, Inc., Prime Succession of Kentucky, Inc., Prime Succession
of Minnesota, Inc., Prime Succession of Missouri, Inc., Prime Succession of
Nebraska, Inc., Prime Succession of New York, Inc., Prime Succession of
Tennessee, Inc., Prime Succession of Texas, Inc., Prime Succession Partners,
Inc., Roselawn Memorial Gardens, Inc., Rostad Mortuary, Inc., Talisman
Enterprises, Inc., The Funeral Outlet Store, Inc. and Whitney & Murphy Funeral
Homes, Inc.
<PAGE>
Exhibit A
---------
UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
Chapter 11
In re: )
) Case No. 00-2969 (PJW)
PRIME SUCCESSION, INC., et al., )
) (Jointly Administered)
)
Debtors. )
AMENDED JOINT PLAN OF REORGANIZATION OF PRIME
SUCCESSION HOLDINGS, INC. AND PRIME SUCCESSION, INC. AND
ITS SUBSIDIARIES UNDER CHAPTER 11 OF THE BANKRUPTCY CODE
PAUL, WEISS, RIFKIND, WHARTON & GARRISON
Alan W. Kornberg
Jeffrey D. Saferstein
1285 Avenue of the Americas
New York, New York 10019-6064
(212) 373-3000
-and-
YOUNG CONAWAY STARGATT & TAYLOR, LLP
Pauline K. Morgan
Michael Nestor
1110 N. Market Street
P.O. Box 391
Rodney Square North, 11th Floor
Wilmington, Delaware 19801
(302) 571-6600
Attorneys for the Debtors
Dated: Wilmington, Delaware
August 21, 2000
<PAGE>
Table of Contents
-----------------
<TABLE>
<CAPTION>
Page
<S> <C> <C> <C>
I. DEFINITIONS AND CONSTRUCTION OF TERMS........................................................1
A. Definitions.............................................................................1
B. Interpretation, Application of Definitions and Rules of
Construction...........................................................................18
II. CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS...............................................19
A. Introduction...........................................................................19
1. Unclassified Claims (not entitled to vote on the Plan).............................19
2. Unimpaired Classes Of Claims (deemed to have accepted the
Plan and, therefore, not entitled to vote on the Plan).............................20
3. Impaired Classes of Claims and Equity Interests (entitled to
vote on the Plan)..................................................................20
III. TREATMENT OF ADMINISTRATIVE
EXPENSE CLAIMS AND PRIORITY TAX CLAIMS......................................................21
A. Administrative Claims. ................................................................21
B. Professional Compensation And Reimbursement Claims.....................................21
C. Priority Tax Claims....................................................................22
IV. TREATMENT OF CLAIMS AND
EQUITY INTERESTS............................................................................23
A. Class 1 - Other Priority Claims........................................................23
1. Distributions......................................................................23
2. Impairment and Voting..............................................................23
B. Class 2 - Other Secured Claims.........................................................23
1. Distributions......................................................................23
2. Impairment and Voting..............................................................23
C. Class 3 - Trade Claims.................................................................24
1. Distributions......................................................................24
2. Impairment and Voting..............................................................24
D. Class 4 - Prepetition Lender Claims....................................................24
E. Class 5 - Senior Subordinated Note Claims, Rejected Former
Owner Obligations, Other Rejected Obligations and Other General
Unsecured Claims.......................................................................24
1. Distributions......................................................................24
2. Impairment and Voting..............................................................25
F. Class 6 - Old Preferred Stock..........................................................25
1. Distributions......................................................................25
2. Impairment and Voting..............................................................25
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
G. Class 7 - Other Equity Interests.......................................................25
1. Distributions......................................................................25
2. Impairment and Voting..............................................................25
V. PROVISIONS REGARDING CORPORATE GOVERNANCE
AND MANAGEMENT OF THE REORGANIZED DEBTORS...................................................25
A. Directors and Officers of Reorganized Prime Holdings and
Reorganized Prime; Amended Certificates of Incorporation and
Amended By-Laws........................................................................25
1. The Initial Board of Directors.....................................................25
2. Management of Reorganized Prime Holdings and Reorganized
Prime..............................................................................26
3. Amended Prime Holdings Certificate of Incorporation and
Amended Prime Holdings By-Laws.....................................................26
4. Amended Prime Certificate of Incorporation and Amended
Prime By-Laws......................................................................26
B. Directors and Officers of the Reorganized Subsidiaries..................................27
1. The Initial Board of Directors.....................................................27
2. Management of the Reorganized Subsidiaries.........................................27
3. Amended Subsidiaries Certificates of Incorporation and
Amended Subsidiaries By-Laws.......................................................27
C. Securities to Be Issued Pursuant to the Plan...........................................27
1. New Common Stock...................................................................27
2. New Senior Subordinated Notes......................................................28
3. The New Warrants...................................................................28
D. Reorganized Prime Holdings Equity Incentive Plan.......................................28
E. Postpetition Financing.................................................................28
VI. SUBSTANTIVE CONSOLIDATION OF THE DEBTORS....................................................29
VII. PROVISIONS REGARDING VOTING AND
DISTRIBUTIONS UNDER THE PLAN AND TREATMENT
OF DISPUTED, CONTINGENT AND UNLIQUIDATED
ADMINISTRATIVE CLAIMS, CLAIMS AND EQUITY
INTERESTS...................................................................................30
A. Voting of Claims and Equity Interests..................................................30
B. Nonconsensual Confirmation.............................................................30
C. Distributions..........................................................................30
1. Method of Distributions Under the Plan.............................................30
2. Disputed Trade Claims..............................................................32
(a) Distributions Withheld For Disputed Trade Claims..........................32
3. Objections To And Resolution Of Administrative Claims,
Claims and Equity Interests........................................................33
4. Allocation of Consideration........................................................34
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
5. Cancellation and Surrender of Existing Securities and
Agreements.........................................................................34
VIII. IMPLEMENTATION AND EFFECT OF CONFIRMATION OF
THIS PLAN...................................................................................35
A. New Senior Subordinated Notes Indenture, the Amended Prime
Certificate of Incorporation, the Amended Prime By-Laws, the
Amended Prime Holdings By-Laws, the Amended Prime Holdings
Certificate of Incorporation, the Amended Subsidiaries
Certificates of Incorporation, the Amended Subsidiaries By-Laws,
the Amended Subsidiary Limited Partnership Agreement, the Equity
Incentive Plan, the Warrant Agreement, the New Senior Management
Employment Contracts, the New Exit Financing
Facility Documents and Other Implementation Documents..................................35
B. Continued Corporate Existence and Vesting of Assets in
Reorganized Debtors....................................................................35
C. Discharge of the Debtors...............................................................36
D. Injunction.............................................................................36
E. Release of Collateral..................................................................37
F. Preservation/Waiver of Causes of Action................................................37
1. Preservation of Rights.............................................................37
G. Votes Solicited in Good Faith..........................................................38
H. Administrative Claims Incurred after the Confirmation Date.............................38
I. The Debtors' Release...................................................................38
J. Exculpation, Release and Injunction of Released Parties................................39
1. Exculpation........................................................................39
2. Injunction.........................................................................39
3. Limitation of Governmental Releases................................................39
K. Term of Bankruptcy Injunction or Stays.................................................40
L. Preservation of Insurance..............................................................40
M. Officers' and Directors' Indemnification Rights and Insurance..........................40
IX. RETENTION OF JURISDICTION...................................................................40
X. MISCELLANEOUS PROVISIONS....................................................................41
A. Payment of Statutory Fees..............................................................41
B. Dissolution of Creditors Committee.....................................................41
C. Modification of the Plan...............................................................41
D. Governing Law..........................................................................42
E. Filing or Execution of Additional Documents............................................42
F. Withholding and Reporting Requirements.................................................42
G. Exemption From Transfer Taxes..........................................................42
H. Section 1145 Exemption.................................................................42
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
I. Waiver of Federal Rule of Civil Procedure 62(a)........................................43
J. Headings...............................................................................43
K. Exhibits/Schedules.....................................................................43
L. Notices................................................................................43
M. Plan Supplement........................................................................44
N. Conflict...............................................................................44
O. Setoff by the United States............................................................44
XI. EXECUTORY CONTRACTS AND UNEXPIRED LEASES....................................................44
XII. BENEFIT PLANS...............................................................................45
XIII. EFFECTIVENESS OF THE PLAN...................................................................45
A. Confirmation of the Plan...............................................................45
B. Effectiveness of the Plan..............................................................46
1. Conditions Precedent to Effectiveness..............................................46
2. Waiver of Conditions...............................................................46
3. Effect of Failure of Conditions....................................................46
4. Vacatur of Plan....................................................................48
</TABLE>
iv
<PAGE>
Prime Succession Holdings, Inc., Prime Succession, Inc., Aaron
Cremation & Burial Services, Inc., Aaron-Cremation & Burial Services, P.C.,
Buckner-Rush Enterprises, Inc., Bury-Pine Funeral Home, Inc., Pine Funeral Home,
Inc., Clary-Godwin Funeral Home, Inc., Clayton Frank & Sons, Inc., Comander
Funeral Home, Inc., Cremation Society of America, Incorporated, Fraser Funeral
Home, Inc., Fred Hunter Memorial Services, Inc., Grotewold Simi Valley Mortuary,
Inc., Hughes Funeral Chapel, J&W, Inc., John A. Beck Company, Lambert
Corporation, Inc., McWane Family Funeral Home, Inc., Neal- Tarpley, Inc., Prime
Business Solutions, Inc., Prime Business Solutions of Kentucky, Inc., Prime
Enterprises of California, Inc., Prime Holdings of Arkansas, Inc., Prime
Holdings of California, Inc., Prime Holdings of Minnesota, Inc., Prime Holdings
of Nebraska, Inc., Prime Holdings of Ohio, Inc., Prime Holdings of West
Virginia, Inc., Prime Indiana Limited Partnership, Prime Succession of Alabama,
Inc., Prime Succession of Arizona, Inc., Prime Succession of Arkansas, Inc.,
Prime Succession of California, Inc., Prime Succession of Florida, Inc., Prime
Succession of Georgia, Inc., Prime Succession of Illinois, Inc., Prime
Succession of Iowa, Inc., Prime Succession of Kentucky, Inc., Prime Succession
of Minnesota, Inc., Prime Succession of Missouri, Inc., Prime Succession of
Nebraska, Inc., Prime Succession of New York, Inc., Prime Succession of
Tennessee, Inc., Prime Succession of Texas, Inc., Prime Succession Partners,
Inc., Roselawn Memorial Gardens, Inc., Rostad Mortuary, Inc., Talisman
Enterprises, Inc., The Funeral Outlet Store, Inc., and Whitney & Murphy Funeral
Homes, Inc. propose the following joint plan of reorganization under section
1121(a) of the Bankruptcy Code.
I.
DEFINITIONS AND CONSTRUCTION OF TERMS
A. Definitions. Unless otherwise defined herein, or the
context otherwise requires, the following terms shall have the respective
meanings set forth below:
1
<PAGE>
Administrative Claim means any right to payment constituting
a cost or expense of administration of
the Chapter 11 Cases of a kind specified
under section 503(b) of the Bankruptcy
Code and entitled to priority under
section 507(a)(1), 507(b) or 1114(e)(2)
of the Bankruptcy Code, including,
without limitation, any actual and
necessary costs and expenses of
preserving the Debtors' estates, any
actual and necessary costs and expenses
of operating the Debtors' businesses,
any indebtedness or obligations incurred
or assumed by the Debtors in Possession
in connection with the conduct of their
businesses, 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 awarded by the
Court under sections 330, 331 or 503 of
the Bankruptcy Code, any fees or charges
assessed against the Debtors' estates
under section 1930 of chapter 123 of
title 28 of the United States Code, and
DIP Facility Claims.
2
<PAGE>
Allowed Claim or Allowed Interest 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 with respect to which
no contrary proof of claim or interest
has been filed, (b) any Claim or Equity
Interest specifically allowed under the
Plan, (c) any Claim or Equity Interest
which is not Disputed or (d) any Claim
or Equity Interest the amount or
existence of which, if Disputed, (i) has
been determined by a Final Order of a
court of competent jurisdiction other
than the Court, or (ii) has been allowed
by Final Order of the Court; provided,
however, that any Claims or Equity
Interests allowed solely for the purpose
of voting to accept the Plan pursuant to
an order of the Court shall not be
considered "Allowed Claims" or "Allowed
Equity Interests" hereunder.
Amended Prime By-Laws means the Amended and
Restated By-Laws of Reorganized Prime,
which shall be in substantially the form
contained in the Plan Supplement.
Amended Prime Certificate of means the amended and restated
Certificate of Incorporation
Incorporation of Reorganized Prime,
which shall be in substantially the form
contained in the Plan Supplement.
Amended Prime Holdings By-Laws means the Amended and Restated By-Laws
of Reorganized Prime Holdings, which
shall be in substantially the form
contained in the Plan Supplement.
Amended Prime Holdings Certificate of means the amended and restated
Certificate of Incorporation
Incorporation of Reorganized Prime
Holdings which shall be in substantially
the form contained in the Plan
Supplement.
3
<PAGE>
Amended Subsidiaries By-Laws means the Amended and Restated By-Laws
of the Reorganized Subsidiaries, which
shall be in substantially the form
contained in the Plan Supplement.
Amended Subsidiaries Certificates of means the amended and restated
Certificates of Incorporation
Incorporation of the Reorganized
Subsidiaries, which shall be in
substantially the form contained in the
Plan Supplement.
Amended Subsidiary Limited means the amended and restated Limited
Partnership Agreement Partnership
Agreement of Prime Indiana Limited
Partnership, which shall be in
substantially the form contained in the
Plan Supplement.
Ballots means each of the ballot forms
distributed with the Disclosure
Statement to each holder of an Impaired
Claim or Equity Interest (other than to
holders not entitled to vote on the
Plan) upon which is to be indicated,
among other things, acceptance or
rejection of the Plan.
Bankruptcy Code means title 11 of the United States
Code, 11 U.S.C.ss.ss. 101 et seq., as in
effect on the date hereof.
Bankruptcy Court means the United States Bankruptcy Court
for the District of Delaware or such
other court as may have jurisdiction
over the Chapter 11 Cases.
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 local rules of the Court, as the
context may require.
Business Day means any day on which commercial banks
are open for business, and not
authorized to close, in the City of New
York, New York, except any day
designated as a legal holiday by
Bankruptcy Rule 9006(a).
4
<PAGE>
Cash means legal tender of the United States
of America.
Causes of Action means all claims, choses in action and
causes of action (including those
assertable derivatively), liabilities,
obligations, suits, debts, sums of
money, damages, demands, judgments,
whether known or unknown, now owned or
hereafter acquired by the Debtors, and
the Cash and non-Cash proceeds thereof,
whether arising under the Bankruptcy
Code or other Federal, state or foreign
law, in equity or otherwise, including,
without limitation, any causes of action
arising under sections 510, 544, 547,
548, 549, 550, 551 or any other section
of the Bankruptcy Code.
Chapter 11 Cases means the chapter 11 cases commenced by
the Debtors.
Collateral means any property or interest in
property of the Debtors' estates 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.
Confirmation Date means the date on which the Confirmation
Order is entered by the Court.
Confirmation Hearing means the hearing to consider
confirmation of the Plan pursuant to
section 1128 of the Bankruptcy Code, as
it may be adjourned or continued from
time to time.
Confirmation Order means the order entered by the Court
confirming the Plan pursuant to section
1129 of the Bankruptcy Code.
5
<PAGE>
Court means, (a) the United States Bankruptcy
Court for the District of Delaware,
having jurisdiction over the Chapter 11
Cases; (b) to the extent there is no
reference pursuant to section 157 of
title 28 of the United States Code, the
United States District Court for the
District of Delaware; and (c) any other
court having jurisdiction over the
Chapter 11 Cases.
Creditors Committee means the Official Committee of
Unsecured Creditors appointed by the
United States Trustee in the Chapter 11
Cases, as constituted from time to time.
6
<PAGE>
Debtors means Prime Succession Holdings, Inc.,
Prime Succession, Inc., Aaron Cremation
& Burial Services, Inc., Aaron-Cremation
& Burial Services, P.C., Buckner-Rush
Enterprises, Inc., Bury-Pine Funeral
Home, Inc., Pine Funeral Home, Inc.,
Clary-Godwin Funeral Home, Inc., Clayton
Frank & Sons, Inc., Comander Funeral
Home, Inc., Cremation Society of
America, Incorporated, Fraser Funeral
Home, Inc., Fred Hunter Memorial
Services, Inc., Grotewold Simi Valley
Mortuary, Inc., Hughes Funeral Chapel,
J&W, Inc., John A. Beck Company, Lambert
Corporation, Inc., McWane Family Funeral
Home, Inc., Neal-Tarpley, Inc., Prime
Business Solutions, Inc., Prime Business
Solutions of Kentucky, Inc., Prime
Enterprises of California, Inc., Prime
Holdings of Arkansas, Inc., Prime
Holdings of California, Inc., Prime
Holdings of Minnesota, Inc., Prime
Holdings of Nebraska, Inc., Prime
Holdings of Ohio, Inc., Prime Holdings
of West Virginia, Inc., Prime Indiana
Limited Partnership, Prime Succession of
Alabama, Inc., Prime Succession of
Arizona, Inc., Prime Succession of
Arkansas, Inc., Prime Succession of
California, Inc., Prime Succession of
Florida, Inc., Prime Succession of
Georgia, Inc., Prime Succession of
Illinois, Inc., Prime Succession of
Iowa, Inc., Prime Succession of
Kentucky, Inc., Prime Succession of
Minnesota, Inc., Prime Succession of
Missouri, Inc., Prime Succession of
Nebraska, Inc., Prime Succession of New
York, Inc., Prime Succession of
Tennessee, Inc., Prime Succession of
Texas, Inc., Prime Succession Partners,
Inc., Roselawn Memorial Gardens, Inc.,
Rostad Mortuary, Inc., Talisman
Enterprises, Inc., The Funeral Outlet
Store, Inc., and Whitney & Murphy
Funeral Homes, Inc.
Debtors in Possession means the Debtors in their capacity as
debtors in possession in the Chapter 11
Cases pursuant to sections 1107(a) and
1108 of the Bankruptcy Code.
7
<PAGE>
DIP Agents means The Bank of Nova Scotia and
Goldman Sachs Credit Partners, L.P. in
their capacity as agents under the DIP
Credit Documents.
DIP Credit Agreement means the Debtors in Possession Credit
and Guaranty Agreement dated as of July
13, 2000 among Prime Succession, Inc.,
as borrower, the parent and subsidiaries
of the borrower named therein, as
guarantors, the DIP Lenders and Goldman
Sachs Credit Partners, L.P., and The
Bank of Nova Scotia, as DIP Agents.
DIP Credit Documents means the DIP Credit Agreement and any
and all documents executed in connection
therewith, including, without
limitation, all security agreements,
pledge agreements and mortgages.
DIP Credit Facility means the postpetition financing
facility in the committed amount of
$10,000,000 provided by the DIP Lenders.
DIP Facility Claims means all Claims arising under or
relating to the DIP Credit Documents
and/or the DIP Credit Facility, which
shall be paid in full on the Effective
Date in accordance with the terms of the
DIP Credit Facility.
DIP Facility Order means, collectively, the interim order
entered by the Bankruptcy Court on July
13, 2000, and the final order entered by
the Bankruptcy Court on August 3, 2000,
whereby the DIP Credit Facility was
authorized and approved.
DIP Lenders means the Persons who are from time to
time lenders under the DIP Credit
Documents.
Disclosure Statement means the written disclosure statement
that relates to this Plan, as approved
by the Court pursuant to section 1125 of
the Bankruptcy Code, as such disclosure
statement may be amended, modified or
supplemented from time to time.
8
<PAGE>
Disputed means any Claim, or Equity Interest, or
any portion thereof, that is not an
Allowed Claim or Allowed Interest,
including, but not limited to, Claims or
Interests (a)(i) that have not been
Scheduled by the Debtors or (ii) have
been Scheduled at zero or as contingent,
unliquidated or disputed, or (b) that
are the subject of a proof of claim that
differs in nature, amount or priority
from the Debtors' Schedules, and (c) in
either case, the allowance or
disallowance of which is not yet the
subject of a Final Order.
Effective Date means the first Business Day on which
all of the conditions specified in
Section XIII.B.1 of the Plan have been
satisfied or waived in accordance with
Section XIII.B.2 of the Plan; provided,
however, that if a stay of the
Confirmation Order is in effect on such
date, the Effective Date will be the
first Business Day after such stay is no
longer in effect.
Equity Incentive Plan has the meaning assigned to such term in
Section V.E. of the Plan.
Equity Interest means Old Preferred Stock and Other
Equity Interests.
Exit Credit Facility means the revolving credit and term loan
facility to be entered into as a means
of implementing the Plan, all as is more
specifically described in Article V.E.
of the Plan.
Exit Facility Documents means the documents to be entered into
by the Reorganized Debtors on the
Effective Date pursuant to which the
Reorganized Debtors will obtain
financing to (i) fund consummation of
the Plan, (ii) pay in full the DIP
Financing Claims, (iii) pay in full the
Prepetition Lender Claims, and (iv) fund
certain working capital and general
corporate requirements of the
Reorganized Debtors.
9
<PAGE>
Final Order means an order or judgment of the Court,
or other court of competent
jurisdiction, as entered on the docket
in the Chapter 11 Cases, the operation
or effect of which has not been stayed,
reversed, vacated or amended, and as to
which order or judgment (or any
revision, modification, or amendment
thereof) the time to appeal, petition
for certiorari, or seek review or
rehearing has expired and as to which no
appeal, petition for certiorari, or
petition for review or rehearing was
filed or, if filed, remains pending.
Government has the meaning assigned to such term in
Section VIII.I.3 of the Plan.
Impaired means, when used with reference to a
Claim or Equity Interest, a Claim or
Equity Interest that is impaired within
the meaning of section 1124 of the
Bankruptcy Code.
Indenture Trustee means United States Trust Company of New
York, in its capacity as trustee under
the Senior Subordinated Note Indenture.
Informal Committee means the informal committee of certain
holders of Senior Subordinated Notes
that was formed prior to the Petition
Date.
Initial Distribution Date means the Effective Date or as soon
thereafter as practicable.
Initial Holder means, (a) any person or entity who will
initially hold shares of New Common
Stock on the Effective Date, (b) any
investment fund for which any person
thereof acts as manager, (c) any
partnership or other entity for which
any person thereof acts directly or
indirectly as a general partner,
managing member or controlling
stockholder, and (d) any person
otherwise affiliated with any of the
foregoing individuals or entities.
10
<PAGE>
Intercompany Claims means any Claim held by one of the
Debtors against any other Debtor,
including, without limitation, (a) any
account reflecting intercompany book
entries by such Debtor with respect to
any other Debtor, (b) any Claim not
reflected in book entries that is held
by such Debtor, and (c) any derivative
Claim asserted or assertable by or on
behalf of such Debtor against any other
Debtor.
Lien has the meaning set forth in Section 101
of the Bankruptcy Code.
New Common Stock means the common stock of Reorganized
Prime Holdings, par value $.01 per
share, to be authorized and issued by
Reorganized Prime Holdings on the
Effective Date pursuant to the Plan.
New Exit Financing Facility
Documents means the documents pursuant to which
the New Exit Financing Facility will be
provided to Reorganized Prime, and which
shall be in substantially the form
contained in the Plan Supplement.
New Senior Management Employment
Contracts has the meaning assigned to such term in
Section V.A.2. of the Plan.
New Senior Subordinated Notes means the promissory notes authorized
and to be issued pursuant to the Plan
and the New Senior Subordinated Notes
Indenture, and which shall be in
substantially the form contained in the
Plan Supplement.
New Senior Subordinated Notes
Indenture has the meaning assigned to such term in
Section V.C.2. of the Plan.
New Senior Subordinated Notes
Indenture Trustee means the bank or trust company that
will serve as trustee under the New
Senior Subordinated Notes Indenture.
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New Warrants means the warrants to purchase in the
aggregate 500,000 shares of New Common
Stock, which shall be issued pursuant to
the terms of the Warrant Agreement.
Old Preferred Stock means the 20,000 authorized shares of
10% pay- in-kind cumulative preferred
stock par value $.01 issued by Prime
Holdings and outstanding on the Petition
Date.
Other Equity Interest or Interest means any share of common stock or other
instrument evidencing an ownership
interest in Prime Holdings, whether or
not transferable, and any option,
warrant, or right, contractual or
otherwise, to acquire, sell or subscribe
for any such interest; provided,
however, that Other Equity Interests
shall not include Old Preferred Stock.
Other General Unsecured Claims means an Unsecured Claim (other than a
Senior Subordinated Note Claim, Rejected
Former Owner Obligation, Other Rejected
Obligation or Trade Claim).
Other Priority Claim means Claims entitled to priority
pursuant to section 507(a) of the
Bankruptcy Code (other than
Administrative Claims and Priority Tax
Claims), including, without limitation,
certain allowed employee compensation
and benefit claims of the Debtors'
employees incurred within ninety (90)
and one hundred eighty (180) days,
respectively, prior to the Petition
Date.
Other Rejected Obligations means any Unsecured Claim of any entity
against the Debtors arising from the
rejection pursuant to sections 365 or
1123(b) of the Bankruptcy Code of (a) a
lease of real or personal property
entered into with the Debtors, or any of
them, or (b) any other agreement with
the Debtors, or any of them.
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Other Secured Claims means any Claim, other than a DIP
Financing 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.
Petition Date means July 12, 2000 the date on which
the Debtors filed their petitions for
relief commencing the Chapter 11 Cases.
Person means an individual, corporation,
partnership, joint venture, association,
joint stock company, limited liability
company, limited liability partnership,
trust, estate, unincorporated
organization or other entity.
Plan means this Plan, as it may be amended or
modified from time to time, together
with all addenda, exhibits, schedules or
other attachments, if any.
Plan Documents means the documents to be included in
the Plan Supplement.
Plan Supplement means the forms of documents specified
in Section X.M. of the Plan.
Prepetition Credit Agreement means that certain Credit Agreement
dated as of August 26, 1996 among Prime,
Prime Holdings, the Prepetition Lenders,
The Bank of Nova Scotia, as
administrative agent and Goldman Sachs
Credit Partners, L.P., as syndication
agent.
Prepetition Credit Documents means the Prepetition Credit Agreement
and any and all documents executed in
connection therewith, including, without
limitation, all security agreements,
pledge agreements and mortgages.
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Prepetition Credit Facility Agents means The Bank of Nova Scotia and
Goldman Sachs Credit Partners, L.P. in
their capacity as agents under the
Prepetition Credit Documents.
Prepetition Lender Claims means the claims of the Prepetition
Lenders arising under the Prepetition
Credit Agreement.
Prepetition Lenders means the Persons who are from time to
time lenders under the Prepetition
Credit Documents.
Prime means Prime Succession, Inc.
Prime Equity Interests means any share of common stock or other
instrument evidencing a present
ownership interest in Prime, whether or
not transferrable, and any options,
warrants or rights contractual or
otherwise, to acquire any such interest.
Prime Holdings means Prime Succession Holdings, Inc.
Pro Rata means, at any time, the proportion that
(x) with respect to Claims, the amount
of a Claim in a particular Class bears
to the aggregate amount of all Claims
(including Disputed Claims) in such
Class and (y) with respect to Equity
Interests, the number of shares or other
equity interests held by a particular
holder in a particular Class bears to
the aggregate number of all shares and
other equity interests in a particular
Class, unless in each case the Plan
provides otherwise.
Priority Tax Claim means any unsecured Claim held by a
governmental unit entitled to a priority
in right of payment under section
507(a)(8) of the Bankruptcy Code.
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Quarter means the period beginning on the
Effective Date and ending on the
immediately succeeding June 30,
September 30, December 31 or March 31,
and each three-month period thereafter,
as the context may require.
Record Date means the record date for purposes of
making distributions under the Plan on
account of Allowed Claims and Allowed
Equity Interests, which date shall be
the Confirmation Date.
Rejected Former Owner Obligations means any Unsecured Claim of an entity
against the Debtors arising from (a) the
rejection pursuant to sections 365 or
1123(b) of the Bankruptcy Code of (i) a
non-compete agreement with the Debtors,
or any of them, (ii) a consulting
agreement with the Debtors, or any of
them, or (iii) a lease of real or
personal property entered into by the
Debtors, or any of them, with a former
owner of any of the Debtors' property,
or (b) a note or other financial
instrument entered into by the Debtors,
or any of them, in connection with the
purchase by the Debtors, or any of them,
before the Petition Date, of a funeral
home or other property.
Released Parties has the meaning assigned to such term in
Section VIII.H. of the Plan.
Reorganized Debtors means the Debtors, or any successors
thereto by merger, consolidation or
otherwise, on and after the Effective
Date.
Reorganized Prime means Prime, or any successors thereto
by merger, consolidation, or otherwise,
on and after the Effective Date.
Reorganized Prime Holdings means Prime Holdings, or any successors
thereto by merger, consolidation or
otherwise, on and after the Effective
Date.
Reorganized Subsidiaries means the Subsidiaries, or any
successors thereto by merger,
consolidation, or otherwise, on and
after the Effective Date.
Reserve has the meaning assigned to such term in
Section VII.C.2(a)(i) of the Plan.
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Schedules means the schedules of assets and
liabilities, statements of financial
affairs, and lists of holders of Claims
and Equity Interests filed with the
Court by the Debtors, including any
amendments or supplements thereto.
Scheduled means, with respect to any Claim or
Equity Interest, the status and amount,
if any, of such Claim or Equity Interest
as set forth in the Schedules.
Secured Claim means a Claim that is secured by a Lien
on property or interests in property, in
which the Debtors have an interest, to
the extent of the value as of the
Effective Date, or such other date as
may be established by the Court, of such
interest or Lien determined by a Final
Order of the Court pursuant to section
506 of the Bankruptcy Code or as
otherwise agreed upon in writing by the
Debtors and the holder of such Claim.
Senior Subordinated Notes means the 10 3/4% Notes, due August 15,
2004, of Prime issued and outstanding
under the Senior Subordinated Note
Indenture.
Senior Subordinated Note Claims means the unsecured Claims of the Senior
Subordinated Noteholders (excluding the
fees and expenses of the Indenture
Trustee).
Senior Subordinated Noteholders means the holders of the Senior
Subordinated Notes.
Senior Subordinated Note Indenture means that certain Indenture, dated as
of August 15, 1996, between Prime, as
issuer, and United States Trust Company
of New York, as Trustee, pursuant to
which the Senior Subordinated Notes were
issued, together with any amendments or
supplements thereto.
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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
end of each such subsequent Quarter.
Subsidiaries means Aaron Cremation & Burial Services,
Inc., Aaron-Cremation & Burial Services,
P.C., Buckner-Rush Enterprises, Inc.,
Bury-Pine Funeral Home, Inc., Pine
Funeral Home, Inc., Clary-Godwin Funeral
Home, Inc., Clayton Frank & Sons, Inc.,
Comander Funeral Home, Inc., Cremation
Society of America, Incorporated, Fraser
Funeral Home, Inc., Fred Hunter Memorial
Services, Inc., Grotewold Simi Valley
Mortuary, Inc., Hughes Funeral Chapel,
J&W, Inc., John A. Beck Company, Lambert
Corporation, Inc., McWane Family Funeral
Home, Inc., Neal-Tarpley, Inc., Prime
Business Solutions, Inc., Prime Business
Solutions of Kentucky, Inc., Prime
Enterprises of California, Inc., Prime
Holdings of Arkansas, Inc., Prime
Holdings of California, Inc., Prime
Holdings of Minnesota, Inc., Prime
Holdings of Nebraska, Inc., Prime
Holdings of Ohio, Inc., Prime Holdings
of West Virginia, Inc., Prime Indiana
Limited Partnership, Prime Succession of
Alabama, Inc., Prime Succession of
Arizona, Inc., Prime Succession of
Arkansas, Inc., Prime Succession of
California, Inc., Prime Succession of
Florida, Inc., Prime Succession of
Georgia, Inc., Prime Succession of
Illinois, Inc., Prime Succession of
Iowa, Inc., Prime Succession of
Kentucky, Inc., Prime Succession of
Minnesota, Inc., Prime Succession of
Missouri, Inc., Prime Succession of
Nebraska, Inc., Prime Succession of New
York, Inc., Prime Succession of
Tennessee, Inc., Prime Succession of
Texas, Inc., Prime Succession Partners,
Inc., Roselawn Memorial Gardens, Inc.,
Rostad Mortuary, Inc., Talisman
Enterprises, Inc., The Funeral Outlet
Store, Inc. and Whitney & Murphy Funeral
Homes, Inc.
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Subsidiary Equity Interests 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 options, warrants
or rights, contractual or otherwise, to
acquire any such interest.
Trade Claim means an Unsecured Claim (other than a
Senior Subordinated Note Claim, Rejected
Former Owner Obligation, Other Rejected
Obligation or Other General Unsecured
Claim) of any entity against the Debtors
for goods and services provided to the
Debtors in the ordinary course of the
Debtors' business; provided, however,
that such entity has continued to
provide goods and services to the
Debtors before and after the Petition
Date on customary terms and credit or as
otherwise acceptable to the Debtors
Transfer Agent means the transfer agent for the New
Common Stock.
Unsecured Claim means any Claim that is not a Secured
Claim, Administrative Claim, Priority
Tax Claim or Other Priority Claim.
Warrant Agent means the agent for the New Warrants.
Warrant Agreement means a warrant agreement pursuant to
which the New Warrants will be issued,
which shall be in substantially the form
contained in the Plan Supplement.
B. 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
plural, and pronouns stated in the masculine, feminine or neuter gender shall
include the masculine, feminine and neuter, such meanings to be applicable to
both the singular and plural forms of the terms defined. Capitalized terms in
the Plan that are not defined herein shall have the same meaning assigned to
such terms by the Bankruptcy Code or Bankruptcy Rules, as the case may be. The
words "herein,"
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"hereof," and "hereunder" and other words of similar import refer to the Plan as
a whole and not to any particular section or subsection in the Plan unless
expressly provided otherwise. All gender references shall be deemed to refer to
both genders. The words "includes" and "including" are not limiting and mean
that the things specifically identified are set forth for purposes of
illustration, clarity or specificity and do not in any respect qualify,
characterize or limit the generality of the class within which such things are
included. Captions and headings to articles, sections and exhibits are inserted
for convenience of reference only, are not a part of this Plan, and shall not be
used to interpret this Plan. The rules of construction set forth in section 102
of the Bankruptcy Code shall apply to this Plan. In computing any period of time
prescribed or allowed by this Plan, the provisions of Bankruptcy Rule 9006(a)
shall apply.
II.
CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS
A. Introduction.
All Claims and Equity Interests, except Administrative Claims
and Priority Tax Claims, are placed in the Classes set forth below. In
accordance with section 1123(a)(1) of the Bankruptcy Code, Administrative Claims
and Priority Tax Claims, as described below, have not been classified.
A Claim or Equity Interest is placed in a particular Class
only to the extent that the Claim or Equity Interest falls within the
description of that Class, and is classified in other Classes to the extent that
any portion of the Claim or Equity Interest falls within the description of such
other Classes. A Claim is also placed in a particular Class for the purpose of
receiving distributions pursuant to the Plan only to the extent that such Claim
is an Allowed Claim in that Class and such Claim has not been paid, released, or
otherwise settled prior to the Effective Date.
1. Unclassified Claims (not entitled to vote on
the Plan).
(a) Administrative Claims.
(b) Priority Tax Claims.
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2. Unimpaired Classes Of Claims (deemed to have
accepted the Plan and, therefore, not
entitled to vote on the Plan).
(a) Class 1: Other Priority Claims.
Class 1 consists of all Other Priority
Claims.
(b) Class 2: Other Secured Claims.
Class 2 consists of all Other Secured
Claims.
(c) Class 3: Trade Claims.
Class 3 consists of all Trade Claims.
3. Impaired Classes of Claims and Equity
Interests (entitled to vote on the Plan).
(a) Class 4: Prepetition Lender Claims.
Class 4 consists of all Prepetition Lender
Claims.
(b) Class 5: Senior Subordinated Note
Claims, Rejected Former Owner Obligations,
Other Rejected Obligations and Other General
Unsecured Claims.
Class 5 consists of all Senior Subordinated
Note Claims, Rejected Former Owner
Obligations, Other Rejected Obligations and
Other General Unsecured Claims.
(c) Class 6: Old Preferred Stock.
Class 6 consists of all Old Preferred Stock.
(d) Class 7: Other Equity Interests.
Class 7 consists of all Other Equity
Interests.
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III.
TREATMENT OF ADMINISTRATIVE
EXPENSE CLAIMS AND PRIORITY TAX CLAIMS
A. Administrative Claims.
Except to the extent that any entity entitled to payment of
any Allowed Administrative Claim agrees to a different treatment, each holder of
an Allowed Administrative Claim shall receive Cash in an amount equal to such
Allowed Administrative Claim on the later of the Effective Date and the date
such Administrative Claim becomes an Allowed Administrative Claim, or as soon
thereafter as is practicable; provided, however, that Allowed Administrative
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 Court if such authorization and approval was
required under the Bankruptcy Code) shall be paid in full and performed by the
Reorganized Debtors, as the case may be, 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. On the Effective Date, all obligations of the Debtors in
Possession to the DIP Lenders under the DIP Credit Documents shall be paid in
full in cash in immediately available funds or otherwise satisfied in a manner
acceptable to the DIP Lenders in their sole discretion in accordance with the
terms of the DIP Credit Documents. Such payment shall be made to the DIP Agents
for further distribution to the holders of the DIP Facility Claims. Upon
compliance with the foregoing sentence, all Liens granted to secure such
obligations shall be deemed canceled and shall be of no further force and effect
without the necessity of any further action on behalf of the DIP Lenders or the
Debtors.
The reasonable fees and expenses of the Indenture Trustee
including the reasonable fees and expenses of its attorneys shall be deemed
Allowed Administrative Claims and paid, in full, in Cash on the Effective Date.
In the event of a dispute between the Debtors and the Indenture Trustee
concerning the reasonableness of such fees and expenses, the Indenture Trustee
shall receive the undisputed portion of such fees and expenses on the Effective
Date. The Bankruptcy Court shall retain jurisdiction to determine the
reasonableness of any unpaid portion of the Indenture Trustee's fees and
expenses.
B. Professional Compensation And Reimbursement Claims.
All entities seeking an award by the Court of compensation for
services rendered or reimbursement of expenses incurred through and including
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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 allowance of compensation for services rendered and
reimbursement of expenses incurred through the Confirmation Date by the date
that is 30 days after the Effective Date or such other date as may be fixed by
the Court and (b) if granted, such an award by the Court shall be paid in full
in such amounts as are awarded by the Court (i) on the date such Administrative
Claim becomes an Allowed Administrative 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 Claim and the Debtors in Possession or, on and
after the Effective Date, the Reorganized Debtors. The reasonable fees and
expenses incurred after the Petition Date by the Informal Committee's counsel
and financial advisors, including, without limitation, the success fee payable
to Chanin pursuant to its engagement letter with the Debtors (who were retained
by agreement with the Debtors prior to the Petition Date, (together with
reasonable fees and expenses of local counsel) with respect to these Chapter 11
Cases) shall be paid (without application by or on behalf of any such
professionals to the Bankruptcy Court without notice and a hearing) by the
Reorganized Debtors as an Administrative Claim under the Plan. The fees and
expenses of the professionals representing the Informal Committee shall be
deemed to satisfy the requirements of sections 503(b) of the Bankruptcy Code.
C. 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 the Reorganized Debtors, (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 quarterly Cash payments in an
aggregate amount equal to such Allowed Priority Tax Claim, together with
interest at a fixed annual rate equal to the statutory rate provided for under
applicable federal, state or local law, over a period through the sixth
anniversary of the date of assessment of such Allowed Priority Tax Claim. Each
Priority Tax Claim which is not payable on or before the Effective Date will
survive confirmation of the Plan, remain unaffected thereby, and be paid as and
when due, except to the extent that a holder of such Claim agrees to a different
treatment.
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IV.
TREATMENT OF CLAIMS AND
EQUITY INTERESTS
A. Class 1 - Other Priority Claims.
1. Distributions. Except to the extent that a holder
of an Allowed Other Priority Claim agrees to a different treatment, in full and
final satisfaction of such claim, each holder of an Allowed Other Priority Claim
shall receive payment in full in Cash on the later of the Effective Date and the
date when such Other Priority Claim becomes an Allowed Claim, or as soon
thereafter as practicable.
2. Impairment and Voting. Class 1 shall be unimpaired
under the Plan. Holders of Allowed Claims in Class 1 are presumed to accept the
Plan and are not entitled to vote to accept or reject the Plan.
B. Class 2 - Other Secured Claims.
1. Distributions. Except to the extent that a holder
of an Allowed Other Secured Claim agrees to a different treatment, at the sole
option of the Debtors, in full and final satisfaction of such Claim, (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.
2. Impairment and Voting. Class 2 shall be unimpaired
under the Plan. The holders of Allowed Claims in Class 2 are presumed to accept
the Plan and are not entitled to vote to accept or reject the Plan.
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C. Class 3 - Trade Claims.
1. Distributions. To the extent not satisfied by the
Debtors in the ordinary course of business, in full and final satisfaction of
such claims, the legal, equitable and contractual rights to which such Allowed
Trade Claim entitles the holder thereof shall be left unaltered and,
accordingly, shall be satisfied on the latest of (i) the Effective Date, (ii)
the date such Trade Claim becomes an Allowed Claim, (iii) the date an Allowed
Trade Claim becomes due and payable in the ordinary course of business
consistent with the Debtors' ordinary payment practices, and (iv) the date on
which the Debtors and the holder of such Allowed Trade Claim agree in writing.
2. Impairment and Voting. Class 3 shall be unimpaired
under the Plan. The holders of Allowed Claims in Class 3 are presumed to accept
the Plan and are not entitled to vote to accept or reject the Plan.
D. Class 4 - Prepetition Lender Claims.
1. Allowance. The Prepetition Lender Claims are
deemed to be fully allowed in the aggregate amount of $108,500,000.
2. Distributions. Except to the extent that the
holders of the Prepetition Lender Claims agree to different treatment, on the
Effective Date, or as soon thereafter as practicable, in full and final
satisfaction of such Claims, each holder of an allowed Prepetition Lender Claim
shall receive payment in full in Cash.
3. Impairment and Voting. Class 4 is impaired under
the Plan. The holders of the Prepetition Lender Claims are entitled to vote to
accept or reject the Plan.
E. Class 5 - Senior Subordinated Note Claims, Rejected
Former Owner Obligations, Other Rejected Obligations and Other General Unsecured
Claims.
1. Distributions. On the Effective Date, or as soon
thereafter as is practicable, in full and final satisfaction of such Claims,
each holder of an Allowed Senior Subordinated Note Claim, Rejected Former Owner
Obligation, Other Rejected Obligation and Other General Unsecured Claims will
receive its Pro Rata share of (i) $20 million of New Senior Subordinated Notes;
and (ii) 5,000,000 shares of New Common Stock. The Senior Subordinated Note
Claims shall be Allowed in the aggregate amount of $109,854,000.
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2. Impairment and Voting. Class 5 is impaired under
the Plan. The holders of Allowed Claims in Class 5 are entitled to vote to
accept or reject the Plan.
F. Class 6 - Old Preferred Stock.
1. Distributions. On the Effective Date or as soon
thereafter as practicable, each holder of Allowed Old Preferred Stock will
receive its Pro Rata share of New Warrants.
2. Impairment and Voting. Class 6 is impaired under
the Plan. The holders of Allowed Old Preferred Stock are entitled to vote to
accept or reject the Plan.
G. Class 7 - Other Equity Interests.
1. Distributions. The holders of Class 7 Other Equity
Interests shall receive no distributions whatsoever on account of such Other
Equity Interests. All Other Equity Interests shall be canceled on the Effective
Date.
2. Impairment and Voting. Class 7 is impaired under
the Plan. As the holders of Other Equity Interests are receiving no
distributions they are conclusively presumed to have rejected the Plan and are
not entitled to vote to accept or reject the Plan.
V.
PROVISIONS REGARDING CORPORATE GOVERNANCE
AND MANAGEMENT OF THE REORGANIZED DEBTORS
A. Directors and Officers of Reorganized Prime Holdings
and Reorganized Prime; Amended Certificates of
Incorporation and Amended By-Laws.
1. The Initial Board of Directors. The initial boards
of directors of Reorganized Prime Holdings and Reorganized Prime shall consist
of five (5) members, four (4) of whom shall be designated by the former members
of the Informal Committee whose names shall be disclosed on or before the date
of the Confirmation Hearing, and one (1) of whom shall be Gary Wright. The
respective Boards of Directors of Reorganized Prime Holdings and Reorganized
Prime will select a Chairman at their initial meeting.
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2. Management of Reorganized Prime Holdings and
Reorganized Prime. The officers of Prime Holdings and Prime immediately prior to
the Effective Date shall serve as the initial officers of Reorganized Prime
Holdings and Reorganized Prime, respectively, on and after the Effective Date.
Such officers shall serve in accordance with any employment agreement with
Reorganized Prime Holdings or Reorganized Prime and applicable nonbankruptcy
law, as the case may be. New employment agreements for Gary Wright, Prime's
President and Chief Executive Officer; Arthur Ansin, Prime's Chief Financial
Officer and Executive Vice President; Greg Hilgendorf, Prime's Senior Vice
President Funeral Operations; Brian Clary, Prime's Corporate Controller; and
Peter Cooper, Prime's General Counsel, to the extent such officers are to remain
employed by the Reorganized Debtors, shall be in the forms contained in the Plan
Supplement and shall become effective on the Effective Date (the "New Senior
Management Employment Contracts").
3. Amended Prime Holdings Certificate of
Incorporation and Amended Prime Holdings By-Laws. The adoption of the Amended
Prime Holdings Certificate of Incorporation and Amended Prime Holdings By-Laws
will be deemed to have occurred and be effective as of the Effective Date
without any further action by the directors or stockholders of the Debtors or
the Reorganized Debtors. The Amended Prime Holdings Certificate of Incorporation
will, among other things, contain appropriate provisions (i) governing the
authorization of up to 6,000,000 shares of New Common Stock (up to 5,000,000
will be issued on the Effective Date) that will be available for issuance and
whose terms and conditions may be established by the Board of Directors, (ii)
prohibiting the issuance of nonvoting equity securities as required by section
1123(a)(6) of the Bankruptcy Code, and (iii) implementing such other matters as
stockholders and directors of Reorganized Prime Holdings believe are necessary
and appropriate to effectuate the terms and conditions of the Plan. On or prior
to the Effective Date, Prime Holdings will file with the Secretary of State of
the State of Delaware, in accordance with sections 103 and 303 of the Delaware
General Corporation Law, the Amended Prime Holdings Certificate of Incorporation
and such certificate shall be the certificate of incorporation for Reorganized
Prime Holdings. The Amended Prime Holdings Certificate of Incorporation shall be
substantially in the form contained in the Plan Supplement.
4. Amended Prime Certificate of Incorporation and
Amended Prime By-Laws. The adoption of the Amended Prime Certificate of
Incorporation and Amended Prime By-Laws will be deemed to have occurred and be
effective as of the Effective Date without any further action by the directors
or stockholders of the Debtors or the Reorganized Debtors. The Amended Prime
Certificate of Incorporation will, among other things, contain appropriate
provisions (i) prohibiting the issuance of nonvoting equity securities as
required by section 1123(a)(6) of the Bankruptcy Code, and (ii) implementing
such other matters as
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stockholders and directors of Reorganized Prime believe are necessary and
appropriate to effectuate the terms and conditions of the Plan. On or prior to
the Effective Date, Prime will file with the Secretary of State of the State of
Delaware, in accordance with sections 103 and 303 of the Delaware General
Corporation Law, the Amended Prime Certificate of Incorporation and such
certificate shall be the certificate of incorporation for Reorganized Prime. The
Amended Prime Certificate of Incorporation shall be substantially in the form
contained in the Plan Supplement.
B. Directors and Officers of the Reorganized
Subsidiaries.
1. The Initial Board of Directors. The initial board
of directors of the Reorganized Subsidiaries shall be Gary Wright and Arthur
Ansin.
2. Management of the Reorganized Subsidiaries. The
officers of the Subsidiaries immediately prior to the Effective Date shall serve
as the initial officers of the Reorganized Subsidiaries on and after the
Effective Date. Such officers shall serve in accordance with any employment
agreement with the Reorganized Subsidiaries and applicable nonbankruptcy law.
3. Amended Subsidiaries Certificates of Incorporation
and Amended Subsidiaries By-Laws. The adoption of the Amended Subsidiaries
Certificates of Incorporation and Amended Subsidiaries By-Laws will be deemed to
have occurred and be effective as of the Effective Date without any further
action by the directors or stockholders of the Debtors, the Reorganized Debtors,
the Subsidiaries or the Reorganized Subsidiaries, as the case may be. The
Amended Subsidiaries Certificates of Incorporation will, among other things,
contain appropriate provisions (i) prohibiting the issuance of nonvoting equity
securities as required by section 1123(a)(6) of the Bankruptcy Code, and (ii)
implementing such other matters as stockholders and directors of the Reorganized
Subsidiaries believe are necessary and appropriate to effectuate the terms and
conditions of the Plan. On or prior to the Effective Date, the Subsidiaries will
file with the Secretary of State in the State in which they are incorporated,
the Amended Subsidiaries Certificate of Incorporation and such certificates
shall be the certificates of incorporation for the Reorganized Subsidiaries. The
Amended Subsidiaries Certificates of Incorporation shall be substantially in the
forms contained in the Plan Supplement.
C. Securities to Be Issued Pursuant to the Plan.
1. New Common Stock. On the Effective Date,
Reorganized Prime Holdings will issue 5,000,000 shares of New Common Stock
without further act or action under applicable law, regulation, rule or order.
Each share of New Common Stock will entitle its holder to one vote. Holders of
New
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Common Stock will have the right to participate proportionately in any dividends
distributed by Reorganized Prime Holdings.
2. New Senior Subordinated Notes. The New Senior
Subordinated Notes will be issued by Reorganized Prime Holdings pursuant to an
indenture (the "New Senior Subordinated Notes Indenture"), which will be
qualified under the Trust Indenture Act of 1939, as amended. An indenture
trustee will be selected by Prime prior to the Confirmation Hearing. The New
Senior Subordinated Notes Indenture and the New Senior Subordinated Notes will
be in substantially the forms included in the Plan Supplement.
3. The New Warrants. On the Effective Date,
Reorganized Prime Holdings will issue New Warrants to purchase 500,000 shares of
New Common Stock (without giving effect to any options that may be issued under
the Equity Incentive Plan) without further act or action under applicable law,
regulation, rule or order. The New Warrants will be in substantially the form
included in the Plan Supplement and will be issued pursuant to a Warrant
Agreement in substantially the form included in the Plan Supplement.
D. Reorganized Prime Holdings Equity Incentive Plan.
On the Effective Date, Reorganized Prime Holdings will adopt a
stock plan (the "Equity Incentive Plan") which permits Reorganized Prime
Holdings to grant to its officers and directors shares of New Common Stock. Such
stock plan shall be in substantially the form contained in the Plan Supplement.
E. Postpetition Financing.
The Debtors anticipate entering into the Exit Credit Facility
in order to obtain the working capital and cash necessary to satisfy in full the
Debtors' obligations under the DIP Credit Facility, to make other payments
required to be made on the Effective Date and to maintain their operations. The
Exit Credit Facility, among other things, shall (a) be effective on the
Effective Date; (b) be a senior secured credit facility; (c) provide for
aggregate borrowings of up to $118.5 million, consisting of (i) a $10.0 million
revolving credit facility (including a $3.0 million sub-limit for letters of
credit and a $2.0 million cash management indemnity facility) and (ii) a 108.5
million term loan facility. The collateral for the revolving credit facility
will consist of a first priority perfected security interest in (a) the stock of
Prime and its subsidiaries and (b) all assets and properties of Prime Holdings,
Prime and its subsidiaries. The collateral for the term loan facility will
consist of a second priority perfected security interest in the collateral for
the revolving credit facility. The revolving credit facility shall bear an
interest rate equal to LIBOR (to be defined in the Exit Credit Facility
documents) plus 350 basis points or the Base Rate (to be defined in the Exit
Credit Facility documents) plus
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250 basis points, at the option of the Debtors, paid monthly in arrears. The
term loan facility shall bear an interest rate equal to LIBOR plus 400 basis
points or the Base Rate plus 300 basis points, at the option of the Debtors,
paid monthly in arrears. The Exit Credit Facility's maturity date will be the
earlier of August 29, 2003 or three years from the Effective Date.
The Exit Credit Facility documents, or a commitment letter
with respect thereto, shall be filed by the Debtors with the Bankruptcy Court no
later than a date which is five (5) days prior to the deadline for submitting
ballots accepting or rejecting the Plan. In the Confirmation Order, the
Bankruptcy Court shall approve the Exit Credit Facility in substantially the
form filed with the Bankruptcy court and authorize the Debtors to execute the
same together with such other documents as the Exit Credit Facility Agents may
reasonably require in order to effectuate the treatment afforded to the lenders
under the Exit Credit Facility.
VI.
SUBSTANTIVE CONSOLIDATION OF THE DEBTORS
On the Confirmation Date, the Chapter 11 Cases shall be
substantively consolidated for all purposes related to the Plan, including,
without limitation, for purposes of voting, confirmation and distribution.
Subject to the occurrence of the Effective Date, (i) all assets and liabilities
of the Subsidiaries and Prime Holding shall be deemed merged or treated as
though they were merged into and with the assets and liabilities of Prime, (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 or Prime 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 structure of the Reorganized Debtors,
(ii) Subsidiary Equity Interests or Prime Equity Interests, or (iii) pre-and
post-Petition 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, (b) pursuant
to the Plan, or (c) in connection with any financing entered into by the
Reorganized Debtors on the Effective Date.
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VII.
PROVISIONS REGARDING VOTING AND
DISTRIBUTIONS UNDER THE PLAN AND TREATMENT
OF DISPUTED, CONTINGENT AND UNLIQUIDATED
ADMINISTRATIVE CLAIMS, CLAIMS AND EQUITY INTERESTS
A. 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 may be entered by the 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 Court.
B. Nonconsensual Confirmation. As the holders of Other Equity
Interests in Class 7 are deemed to reject the Plan, the Debtors will seek to
have the Court confirm the Plan under section 1129(b) of the Bankruptcy Code.
C. Distributions.
1. Method of Distributions Under the Plan.
(a) Date and Delivery of Distributions.
Distributions under the Plan shall be made by the Reorganized Debtors or their
designee to the holders of Allowed Administrative Claims, Allowed Priority Tax
Claims, Allowed Other Priority Claims, Allowed DIP Financing Claims, Allowed
Other Secured Claims, Allowed Trade Claims and Allowed Old Preferred Stock at
the addresses set forth on the Schedules, unless such addresses are superseded
by proofs of claim or transfers of claim filed pursuant to Bankruptcy Rule 3001
(or at the last known addresses of such holders if the Debtors or the
Reorganized Debtors have been notified in writing of a change of address).
Distributions under the Plan to the holders of Allowed Senior Subordinated Note
Claims, Allowed Rejected Former Owner Obligations, Allowed Other Rejected
Obligations and Allowed Other General Unsecured Claims shall be made to the New
Senior Subordinated Notes Indenture Trustee who shall make the distributions to
the holders of Allowed Senior Subordinated Note Claims, Allowed Rejected Former
Owner Obligations, Allowed Other Rejected Obligations and Allowed Other General
Unsecured Claims. New Senior Subordinated Notes (including any interest earned
thereon) and New Common Stock (including dividends paid on account thereof) held
by the Reorganized Debtors for the benefit of holders of Disputed Other General
Unsecured Claims, Disputed Rejected Former Owner Obligations and Disputed Other
Rejected Obligations 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.
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(b) Distribution of Cash. Any payment of
Cash by the Reorganized Debtors pursuant to the Plan shall be made at the option
and in the sole discretion of the Reorganized Debtors by (i) a check drawn on,
or (ii) wire transfer from, a domestic bank selected by the Reorganized Debtors.
(c) Distribution of Unclaimed Property. Any
distribution of Cash under the Plan which is unclaimed after the later to occur
of (a) two years after distribution or (b) six months after the date on which
such claimant's Claim is Allowed shall be transferred to the Reorganized Debtors
notwithstanding state or other escheat or similar laws to the contrary.
Distributions under the Plan consisting of New Senior Subordinated Notes, New
Common Stock or New Warrants that are unclaimed for a period of two years after
distribution shall be canceled and any dividends or interest which has been paid
with respect to such securities shall be transferred to the Reorganized Debtors
and entitlement by the holder of a Claim or Old Preferred Stock to such
distribution shall be extinguished and forever barred. The Debtors shall file
with the Court a list of holders of unclaimed distributions of Cash, New Senior
Subordinated Notes and New Common Stock on the first and second anniversaries of
the Effective Date.
(d) Saturdays, Sundays, or Legal Holidays.
If any payment or act under the Plan is required to be made or performed on a
date that is not a Business Day, then the making of such payment or the
performance of such act may be completed on the next succeeding Business Day,
and shall be deemed to have been completed as of the required date.
(e) Fractional Notes and Fractional Shares
and Warrants.
(i) Fractional Notes. Whenever the
issuance of any New Senior Subordinated Note would otherwise call for
the issuance in an amount for a fraction of a denomination of a New
Senior Subordinated Note, the actual issuance of such New Senior
Subordinated Note shall reflect a rounding of such fraction to the
nearest whole denomination (up or down), with fifty percent being
rounded down.
(ii) Fractional Shares and Warrants.
Whenever any distribution of shares of New Common Stock or New Warrants
to a holder would otherwise call for the distribution of a fractional
share or warrant, the Transfer Agent or Warrant Agent shall allocate
one whole share or one whole warrant, as the case may be, to holders in
order of the fractional portion of their entitlements, starting with
the largest fractional portion until all remaining shares and warrants
have been allocated. Upon the allocation of a whole share or a whole
warrant to a holder in respect of the fractional portion of its
entitlement, such fractional
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portion shall be canceled. If two or more holders are entitled to equal
fractional entitlements and the number of holders so entitled exceeds
the number of whole shares or whole warrants, as the case may be, which
remain to be allocated, the Transfer Agent or Warrant Agent shall
allocate the remaining whole shares or whole warrants to such holders
by random lot or such other impartial method as the Transfer Agent or
Warrant Agent deems fair, in the Transfer Agent's or Warrant Agent's
sole discretion. Upon the allocation of all of the whole shares or
whole warrants authorized under the Plan, all remaining fractional
portions of the entitlements shall be canceled and shall be of no
further force and effect.
(f) Distributions to Holders as of
the Record Date. As at the close of business on the Record Date, the
claims register (for Claims) and transfer ledger (for Equity Interests)
shall be closed, and there shall be no further changes in the record
holders of any Claims or Equity Interests. The Debtors and the
Reorganized Debtors shall have no obligation to recognize any transfer
of any Claims or Equity Interests occurring after the Record Date. The
Debtor and the Reorganized Debtors shall instead be entitled to
recognize and deal for purposes under the Plan (except as to voting to
accept or reject the Plan pursuant to Section VII.A) with only those
record holders stated on the claims register (for Claims) and transfer
ledgers (for Equity Interests) as of the close of business on the
Record Date.
2. Disputed Trade Claims.
(a) Distributions Withheld For Disputed Trade Claims.
(i) Establishment And Maintenance Of
Reserve. On the Effective Date, the Reorganized Debtors shall place
into a reserve an amount of Cash equal to 100% of the distributions to
which holders of Disputed Trade Claims would be entitled under the Plan
as of such date if such Disputed Trade Claims were Allowed Claims (the
"Reserve").
(ii) Property Held in Reserve. Cash held in
the Reserve, if any, shall be deposited in a segregated bank account or
accounts in the name of the Reorganized Debtors and designated as held
in trust for the benefit of holders of Allowed Trade Claims. Cash held
in the Reserve shall not constitute property of the Reorganized
Debtors. The Reorganized Debtors shall invest the Cash held in the
Reserve in a manner consistent with the investment guidelines set forth
in the Plan Supplement. The Reorganized Debtors 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
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the Reorganized Debtors on the last Subsequent Distribution Date under
the Plan.
(iii) Distributions Upon Allowance of
Disputed Trade Claims. The holder of a Disputed Trade Claim that
becomes an Allowed Claim subsequent to the Initial Distribution Date
shall receive a distribution of Cash from the Reserve on the next
Subsequent Distribution Date that follows the Quarter during which such
Disputed Trade 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 Trade Claim had been an Allowed Claim on
or prior to the Effective Date. Any Cash held in the Reserve after all
Trade Claims have been Allowed or disallowed shall be transferred to
and become the property of the Reorganized Debtors.
3. Objections To And Resolution Of Administrative
Claims, Claims and Equity Interests.
Objections To And Resolution of
Administrative Claims, Claims and Equity Interests. Except as to applications
for allowances of compensation and reimbursement of expenses under sections 330
and 503 of the Bankruptcy Code, the Debtors and the Reorganized Debtors shall
have the exclusive right to make and file objections to Administrative Claims,
Claims and Equity Interests subsequent to the Confirmation Date. All objections
shall be litigated to a Final Order; provided, however, that the Reorganized
Debtors shall have the authority to compromise, settle, otherwise resolve or
withdraw any objections, without approval of the Court. Unless otherwise ordered
by the Court, the Debtors and the Reorganized Debtors shall file all objections
to Administrative Claims, Claims and Equity Interests that are the subject of
proofs of claims, requests for payment filed with the Court (other than
applications for allowances of compensation and reimbursement of expenses) or
proofs of interest and serve such objections upon the holders of the
Administrative 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 set by the Court. Notwithstanding
anything contained herein to the contrary, the DIP Lenders shall not be required
to file proofs of claims with respect to the DIP Facility Claims. The Debtors
shall have no right to object to the DIP Facility Claims except as set forth in
the DIP Facility Order. The outstanding amount of the DIP Facility Claims shall
be paid in full on the Effective Date as provided herein.
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4. Allocation of Consideration.
The aggregate consideration to be distributed to the
holders of Allowed Claims in each Class under the Plan (other than the Claims,
if any, of the Internal Revenue Service) shall be treated as first satisfying an
amount equal to the stated principal amount of the Allowed Claim for such
holders and any remaining consideration as satisfying accrued, but unpaid,
interest and costs, if any, and attorneys' fees, where applicable.
5. Cancellation and Surrender of Existing Securities
and Agreements.
On the Effective Date, the Senior Subordinated Notes
and all Equity Interests shall be deemed canceled and such agreements and
securities, including the Senior Subordinated Note Indenture, together with all
instruments issued pursuant thereto, shall have no further legal effect other
than as evidence of any right to receive distributions, fees and expenses under
the Plan. In addition, the Senior Subordinated Note Indenture shall be
terminated and the Indenture Trustee's obligations shall be discharged.
Notwithstanding any other provision of the Plan, as a
condition precedent to receiving any distribution under the Plan, each holder of
a promissory note, share certificate, or other instrument or security evidencing
a Claim or Equity Interest must surrender such promissory note, share
certificate, or other instrument or security to the Reorganized Debtors or their
designee or must execute and deliver an affidavit of loss and furnish an
indemnity or bond in substance and amount reasonably satisfactory to the
Reorganized Debtors.
Any holder of a Claim or Equity Interest that fails
to surrender such instrument or security or to provide the affidavit and
indemnity or bond, before the later to occur of (i) the second anniversary of
the Effective Date and (ii) six months following the date such holder's Claim
becomes an Allowed Claim or Equity Interest, shall be deemed to have forfeited
all rights, Claims, and/or Equity Interests and may not receive or participate
in any distribution under the Plan.
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VIII.
IMPLEMENTATION AND EFFECT OF CONFIRMATION OF THIS PLAN
A. New Senior Subordinated Notes Indenture, the Amended
Prime Certificate of Incorporation, the Amended Prime
By- Laws, the Amended Prime Holdings By-Laws, the
Amended Prime Holdings Certificate of Incorporation,
the Amended Subsidiaries Certificates of
Incorporation, the Amended Subsidiaries By-Laws, the
Amended Subsidiary Limited Partnership Agreement, the
Equity Incentive Plan, the Warrant Agreement, the New
Senior Management Employment Contracts, the New Exit
Financing Facility Documents and Other Implementation
Documents.
On or before the Effective Date, the Reorganized Debtors will
execute the New Senior Subordinated Notes Indenture, the Amended Prime
Certificate of Incorporation, the Amended Prime By-Laws, the Amended Prime
Holdings By- Laws, the Amended Prime Holdings Certificate of Incorporation, the
Amended Subsidiaries Certificates of Incorporation, the Amended Subsidiaries
By-Laws, the Amended Subsidiary Limited Partnership Agreement, the Equity
Incentive Plan, the Warrant Agreement, the Senior Management Employment
Contracts, the New Exit Financing Facility Documents and all other documents
required and necessary to implement the Plan, without the requirement of any
further corporate action.
B. Continued Corporate Existence and Vesting of Assets
in Reorganized Debtors.
The Debtors, as Reorganized Debtors, shall continue to exist
after the Effective Date with all powers of corporations under the laws of their
respective states of incorporation and without prejudice to any right to alter
or terminate such existence (whether by merger or otherwise) under such
applicable state law. Except as otherwise expressly provided in the Plan, on the
Effective Date, the Reorganized Debtors shall be vested with all of the property
of their estates free and clear of all claims, liens, encumbrances, charges and
other interests of creditors and equity security holders; and the Reorganized
Debtors may operate their businesses free of any restrictions imposed by the
Bankruptcy Code, the Bankruptcy Rules or by the Court, subject only to the terms
and conditions of the Plan.
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C. Discharge of the 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 all Claims and Equity Interests of any nature
whatsoever, including any interest accrued on such Claims from and after the
Petition Date, against the Debtors, the Debtors in Possession, the Reorganized
Debtors or any of their assets or properties, arising prior to the Effective
Date. Except as otherwise expressly specified in the Plan, the Confirmation
Order shall act as of the Effective Date as a discharge of all debts of, Claims
against, liens on, and Equity Interests in the Debtors, their assets and
properties, arising at any time before the entry of the Confirmation Order,
regardless of whether a proof of Claim or Equity Interest with respect thereto
was filed, whether the Claim or Equity Interest is Allowed, or whether the
holder thereof votes to accept the Plan or is entitled to receive a distribution
thereunder. Except as otherwise expressly specified in the Plan, after the
Effective Date, any holder of such discharged Claim or Equity Interest shall be
precluded from asserting against the Debtors, Reorganized Debtors, or any of
their assets or properties, any other or further Claim or Equity Interest based
on any document, instrument, act, omission, transaction, or other activity of
any kind or nature that occurred before the entry of the Confirmation Order.
Except as set forth in this Plan or the Confirmation Order, nothing in the Plan
or the Confirmation Order (including without limitation any discharge of Claims
or cancellation of debts or Equity Interests or the instruments evidencing same)
is intended, or shall be construed, to alter or affect the liability or
obligation of any person or entity against any other person or entity (other
than the Debtors, the Debtors in Possession and the Reorganized Debtors) in
respect of such Claims, debts or Equity Interests.
D. Injunction.
Except as otherwise expressly provided in the Plan, the
Confirmation Order, or a separate order of the Court, all entities who have
held, hold, or may hold Claims against or Equity Interests in the Debtors which
arose before or were held as of the Effective Date, 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 against the Debtors, 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
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shall extend to successors of the Debtors (including, without limitation, the
Reorganized Debtors) and their respective properties and interests in property.
E. Release of Collateral.
Unless a particular Secured Claim is reinstated (i) each
holder of: (A) a Secured Claim and/or (B) a Claim that is purportedly secured
shall on or immediately before the Effective Date: (x) turn over and release to
the relevant Debtor (or its successor, as the case may be) any and all property
of the relevant Debtor that secures or purportedly secures such claim; and (y)
execute such documents and instruments as such Reorganized Debtor requires to
evidence such claimant's release of such property; and (ii) on the Effective
Date, all claims, right, title and interest in such property shall revert to the
relevant Reorganized Debtor (or the successor to any Debtor that does not
survive) free and clear of all Claims and Interests, including (without
limitation) liens, charges, pledges, encumbrances and/or security interests of
any kind. No distribution hereunder shall be made to or on behalf of any holder
of such Claim unless and until such holder executes and delivers to the relevant
Debtor or Reorganized Debtor such release of liens. Any such holder that fails
to execute and deliver such release of liens within 180 days of the Effective
Date shall be deemed to have no further Claim against the relevant Debtor,
Reorganized Debtor or their property in respect of such Claim and shall not
participate in any distribution hereunder. Notwithstanding the immediately
preceding sentence, any such holder of a Disputed Claim shall not be required to
execute and deliver such release of liens until the time such Claim is allowed
or disallowed.
F. Preservation/Waiver of Causes of Action.
1. Preservation of Rights. Pursuant to the Plan, and
sections 544, 548, 549, 550, 551, 553 and 1123(b)(3)(B) of the Bankruptcy Code,
the Debtors (and the Reorganized Debtors) shall retain all rights and all Causes
of Action accruing to the Debtors, their estates, or the Reorganized Debtors,
including, without limitation, (i) the avoidance of any transfer of an interest
of the Debtors in property or any obligation incurred by the Debtors; or (ii)
the turnover of any property to their estates, and except as expressly provided
in the Plan or Confirmation Order, nothing contained in the Plan or the
Confirmation Order shall be deemed to be a waiver or relinquishment of any such
rights or Causes of Action. Nothing contained in the Plan or the Confirmation
Order shall be deemed to be a waiver or relinquishment of any Claim, Cause of
Action, right of setoff, or other legal or equitable defense which the Debtors
had immediately prior to the Petition Date which is not specifically waived or
relinquished by the Plan. The Reorganized Debtors shall have, retain, reserve
and be entitled to assert all such Claims, Causes of Action, rights of setoff
and other legal or equitable defenses which the Debtors had immediately prior to
the Petition Date as fully as if the
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Chapter 11 Cases had not been commenced; and all of the Reorganized Debtors'
legal and equitable rights respecting any Claim which is not specifically waived
or relinquished by the Plan may be asserted after the Effective Date to the same
extent as if the Chapter 11 Cases had not been commenced.
G. Votes Solicited in Good Faith.
The Debtors have, and upon confirmation of the Plan shall be
deemed to have, solicited acceptances of the Plan in good faith and in
compliance with the applicable provisions of the Bankruptcy Code. The Debtors
(and each of their affiliates, agents, directors, officers, employees, advisors
and attorneys) have participated in good faith and in compliance with the
applicable provisions of the Bankruptcy Code in the offer, issuance, sale, and
purchase of the securities offered and sold under the Plan and therefore have
not been, and on account of such offer, issuance, sale, solicitation, and/or
purchase will not be, liable at any time for the violation of any applicable
law, rule, or regulation governing the solicitation of acceptances or rejections
of the Plan or the offer, issuance, sale, or purchase of the securities offered
and sold under the Plan.
H. Administrative Claims Incurred after the Confirmation Date.
Administrative Claims incurred by the Reorganized Debtors
after the date and time of the entry of the Confirmation Order, including
(without limitation) Claims for professionals' fees and expenses incurred after
such date, shall not be subject to application and may be paid by the
Reorganized Debtors in the ordinary course of business and without application
for or Court approval.
I. The Debtors' Release.
As of the Effective Date, the Debtors and the Reorganized
Debtors, on behalf of themselves and their estates, hereby release
unconditionally all of their respective officers, directors, employees,
advisors, attorneys, financial advisors, accountants, and other professionals,
the Indenture Trustee, the Prepetition Lenders, the DIP Lenders, counsel to the
Prepetition Lenders and the DIP Lenders and their counsel, the Creditors
Committee members, counsel to the Creditors Committee, the Informal Committee
members, counsel to the Informal Committee, financial advisors to the Creditors
Committee and Informal Committee and each of their representatives and agents
(including any professionals retained by such persons or entities) (the
"Released Parties") from any and all claims, obligations, suits, judgments,
damages, rights, Causes of Action and liabilities whatsoever, whether known or
unknown, foreseen or unforeseen, existing or hereafter arising, in law, equity
or otherwise, based in whole or in part upon actions taken in their respective
capacities described above or any omission, transaction, event or other
occurrence taking place on or prior to the Effective Date in any way relating to
the
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Debtors, the Chapter 11 Cases or the Plan, except that (i) no individual shall
be released from any act or omission that constitutes gross negligence or
willful misconduct, and (ii) the Reorganized Debtors shall not relinquish or
waive the right to assert any of the foregoing as a legal or equitable defense
or right of set-off or recoupment against any Claims of any such persons
asserted against the Debtors.
J. Exculpation, Release and Injunction of Released Parties.
1. Exculpation. The Debtors and the Reorganized
Debtors and the Released Parties shall have no liability whatsoever to any
holder or purported holder of an Administrative Claim, Claim, or Equity Interest
for any act or omission in connection with, or arising out of, the Plan, the
Disclosure Statement, the negotiation of the Plan, the negotiation of the
instruments and documents included in the Plan Supplement, the pursuit of
approval of the Disclosure Statement or the solicitation of votes for
confirmation of the Plan, the Chapter 11 Cases, the consummation of the Plan,
the administration of the Plan or the property to be distributed under the Plan,
or any transaction contemplated by the Plan or Disclosure Statement or in
furtherance thereof (including, without limitation, the Equity Incentive Plan,
employment contracts, programs and arrangements adopted in connection with the
Plan or the Chapter 11 Cases), except for willful misconduct or gross negligence
as determined by a Final Order, and, in all respects, shall be entitled to rely
upon the advice of counsel with respect to their duties and responsibilities
under the Plan. This exculpation shall be in addition to, and not in limitation
of, all other releases, indemnities, exculpations and any other applicable law
or rules protecting such Released Parties from liability.
2. Injunction. Pursuant to section 105 of the
Bankruptcy Code, no holder or purported holder of an Administrative Claim, Claim
or Equity Interest shall be permitted to commence or continue any action,
employment of process, or any act to collect, offset, or recover any claim
against a Released Party that accrued on or prior to the Effective Date and has
been released or waived pursuant to Sections VIII.H and I.
3. Limitation of Governmental Releases.
Notwithstanding Sections VIII.H. and I of the Plan, the Plan shall not release,
discharge, or exculpate any non-debtor party from any debt owed to the United
States Government and/or its agencies, including the Pension Benefit Guaranty
Corporation (the "Government"), or from any liability arising under the Internal
Revenue Code, the Employee Retirement Income Security Act of 1974, as amended,
or the environmental laws, securities laws or criminal laws of the United
States. In addition, notwithstanding Sections VIII.I.1. and 2 of the Plan, the
Plan shall not enjoin or prevent the Government from collecting any such
liability from any such non-debtor party.
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K. 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.
L. Preservation of Insurance.
The Debtors' discharge and release from all Claims as provided
herein, except as necessary to be consistent with this Plan, shall not diminish
or impair the enforceability of any insurance policy that may cover Claims
against the Debtors, the Reorganized Debtors (including, without limitation, its
officers and directors) or any other person or entity.
M. Officers' and Directors' Indemnification Rights and
Insurance.
Notwithstanding any other provisions of the Plan, the
obligations of the Debtors to indemnify their directors, officers, and employees
against any obligations, liabilities, costs or expenses pursuant to the articles
of incorporation or by-laws of the Debtors, applicable state law, specific
agreement, or any combination of the foregoing, shall survive the Effective
Date. In addition, the Reorganized Debtors shall obtain tail coverage under
their existing directors and officers liability insurance policy covering their
existing directors and officers for any and all Claims brought against them,
which coverage shall extend for a period of not less than six (6) years after
the Effective Date.
IX.
RETENTION OF JURISDICTION
The 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, section 105(a) and section 1142 of the Bankruptcy Code
and for, among other things, the following purposes: (1) to hear and determine
applications for the assumption or rejection of executory contracts or unexpired
leases pending on the Confirmation Date, and the allowance of Claims resulting
therefrom; (2) to determine any other applications, adversary proceedings, and
contested matters pending on the Effective Date; (3) to ensure that
distributions to holders of Allowed Claims and Allowed Old Preferred Stock are
accomplished as provided herein; (4) to resolve disputes as to the ownership of
any Claim or Equity Interest; (5) to hear and determine timely objections to
Administrative Claims, Claims and Equity Interests; (6) 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;
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(7) to issue such orders in aid of execution of the Plan, to the extent
authorized by section 1142 of the Bankruptcy Code; (8) to consider any
modifications of the Plan, to cure any defect or omission, or to reconcile any
inconsistency in any order of the Court, including, without limitation, the
Confirmation Order; (9) 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; (10) to hear and determine disputes arising in
connection with the interpretation, implementation, or enforcement of the Plan;
(11) to hear and determine any issue for which the Plan requires a Final Order
of the Court; (12) to hear and determine matters concerning state, local, and
federal taxes in accordance with sections 346, 505 and 1146 of the Bankruptcy
Code; (13) to hear any other matter not inconsistent with the Bankruptcy Code;
(14) to hear and determine disputes arising in connection with compensation and
reimbursement of expenses of professionals for services rendered during the
period commencing on the Confirmation Date through and including the Effective
Date; and (15) to enter a final decree closing the Chapter 11 Cases.
X.
MISCELLANEOUS PROVISIONS
A. Payment of Statutory Fees.
All fees payable on or before the Effective Date (i) pursuant
to section 1930 of title 28 of the United States Code, as determined by the
Court at the Confirmation Hearing, and (ii) to the United States Trustee, shall
be paid by the Debtors on or before the Effective Date and all such fees payable
after the Effective Date shall be paid by the Reorganized Debtors.
B. Dissolution of Creditors Committee.
The Creditors Committee shall terminate on the Effective Date.
C. Modification of the Plan.
The Debtors reserve the right, in accordance with the
Bankruptcy Code, upon the consent of the DIP Agents, to amend or to modify the
Plan prior to the entry of the Confirmation Order. After entry of the
Confirmation Order, the Reorganized Debtors or the Debtors may amend or modify
the Plan, upon the consent of the DIP Agents, or remedy any defect or omission
or reconcile any inconsistency in the Plan in such a manner as may be necessary
to carry out the purpose and intent of the Plan.
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D. Governing Law.
Unless a rule of law or procedure is supplied by Federal law
(including the Bankruptcy Code and Bankruptcy Rules) or the Delaware General
Corporation Law or such other corporate law that may apply to the Subsidiaries,
the laws of the State of New York (without reference to the conflicts of laws
provisions thereof) shall govern the construction and implementation of the Plan
and any agreements, documents, and instruments executed in connection with the
Plan.
E. Filing or Execution of Additional Documents.
On or before the Effective Date, the Debtors or the
Reorganized Debtors, shall file with the Court or execute, as appropriate, such
agreements and other documents as may be necessary or appropriate to effectuate
and further evidence the terms and conditions of the Plan.
F. Withholding and Reporting Requirements.
In connection with the Plan and all instruments issued in
connection therewith and distributions thereon, the Reorganized Debtors shall
comply with all withholding and reporting requirements imposed by any federal,
state, local, or foreign taxing authority and all distributions hereunder shall
be subject to any such withholding and reporting requirements.
G. Exemption From Transfer Taxes.
Pursuant to section 1146(c) of the Bankruptcy Code, the
issuance, transfer or exchange of New Senior Subordinated Notes, New Common
Stock or New Warrants under the Plan, the making or assignment of any lease or
sublease or the making or delivery of any other instrument whatsoever, in
furtherance of or in connection with the Plan shall not be subject to any stamp,
real estate transfer, recording or other similar tax.
H. Section 1145 Exemption.
Pursuant to, in accordance with, and solely to the extent
provided under section 1145 of the Bankruptcy Code, the issuance of the New
Senior Subordinated Notes, New Common Stock and New Warrants under the Plan is
exempt from the registration requirements of Section 5 of the Securities Act, as
amended, and any State or local law requiring registration for offer or sale of
a security or registration or licensing of an issuer of, underwriter of, or
broker or dealer in such New Senior Subordinated Notes, New Common Stock or New
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Warrants and is deemed to be a public offering of New Senior Subordinated Notes,
New Common Stock and New Warrants.
I. Waiver of Federal Rule of Civil Procedure 62(a).
The Debtors may request that the Confirmation Order include
(a) a finding that Fed. R. Civ. P. 62(a) shall not apply to the Confirmation
Order and (b) authorization for the Debtors to consummate the Plan immediately
after entry of the Confirmation Order.
J. Headings.
Headings used in the Plan are for convenience and reference
only and shall not constitute a part of the Plan for any purpose.
K. Exhibits/Schedules.
All Exhibits and Schedules to the Plan are incorporated into
and constitute a part of the Plan as if set forth herein.
L. Notices.
All notices, requests, and demands hereunder 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:
To the Debtors: Prime Succession, Inc., 3940 Olympic Blvd.,
Suite 500, Erlanger, KY 41018, Attention: Arthur J. Ansin with a copy to Paul,
Weiss, Rifkind, Wharton & Garrison, 1285 Avenue of the Americas, New York, New
York 10019-6064, attention: Alan W. Kornberg, Tel.: (212) 373-3000/Fax: (212)
757-3990.
To the Creditors Committee: Munger, Tolles & Olson LLP, 355
South Grand Avenue, 35th Floor, Los Angeles, CA 90071, attention: Thomas B.
Walper, Esq., Tel.: (213) 683-9193/Fax: (213) 687-3702.
To the DIP Agents: Skadden, Arps, Slate, Meagher & Flom
(Illinois), 333 West Wacker Drive, Suite 2100, Chicago, Illinois, 60606,
attention: J. Eric Ivester, Tel.: (312) 407-0700/Fax: (312) 407-0411; and Mayer
Brown & Platt, 1675 Broadway, New York, New York 10019-5820, attention: Raniero
D'Aversa, Jr., Tel.: (212) 506-2595/Fax: (212) 849-5597.
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M. Plan Supplement.
Forms of the documents relating to the Amended Prime
Certificate of Incorporation, the Amended Prime By-laws, the Amended Prime
Holdings By-Laws, the Amended Prime Holdings Certificate of Incorporation, the
Amended Subsidiaries Certificates of Incorporation, the Amended Subsidiaries
By-Laws, the Amended Subsidiary Limited Partnership Agreement, the New Senior
Subordinated Notes Indenture, the New Warrant Agreement, the form of the New
Warrants, investment guidelines referred to in Section VII.C.2.(a)(ii) and
C.3(b)(ii), Equity Incentive Plan, New Exit Financing Facility Documents and New
Senior Management Employment Contracts shall be contained in the Plan Supplement
which has been filed with the Clerk of the Court. The Plan Supplement may be
inspected in the office of the Clerk of the Court during normal court hours.
Holders of Claims or Equity Interests may obtain a copy of the Plan Supplement
upon written request to the Debtors in accordance with Section X.L. of the Plan.
The forms of documents to be included in the Plan Supplement shall be reasonably
acceptable to the Prepetition Agents, the DIP Agents and the Creditors
Committee.
N. Conflict.
The terms of this Plan shall govern in the event of any
inconsistency with the summaries of the Plan set forth in the Disclosure
Statement.
O. Setoff by the United States.
The valid setoff rights, if any, of the United States of
America will be unaffected by this Plan or confirmation thereof.
XI.
EXECUTORY CONTRACTS AND UNEXPIRED LEASES
Other than (i) executory contacts or unexpired leases which
(x) are the subject of a motion to reject pending on the Confirmation Date, (y)
were previously assumed or rejected by the Debtors, or (z) have expired or
terminated pursuant to their own terms during the pendency of the Chapter 11
Cases, and (ii) employment agreements, if any, terminated prior to or in
connection with the Plan, all of the executory contracts, unexpired leases and
employment agreements that exist between the Debtors and any person are
specifically assumed as of the Effective Date pursuant to the Plan. All Claims
for damages arising from the rejection of executory contracts or unexpired
leases must be filed with the Court in accordance with the terms of the order
authorizing such rejection. Any Claims not filed within such time will be
forever barred from assertion against the Debtors, their estates and the
Reorganized Debtors. All Allowed Claims arising from the
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rejection of executory contracts or unexpired leases shall be treated as Class 5
Claims. The Reorganized Debtors, except as otherwise agreed by the parties, will
cure any and all undisputed defaults within 60 days of the Effective Date under
any executory contract, unexpired lease or employment agreement assumed pursuant
to the Plan in accordance with section 365 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 the
Reorganized Debtors' liability with respect thereto, or as may otherwise be
agreed to by the parties.
XII.
BENEFIT PLANS
All employment and severance agreements and policies, and all
employee compensation and benefit plans, policies, and programs of the Debtors
applicable generally to its employees, including agreements and programs subject
to section 1114 of the Bankruptcy Code, as in effect on the Effective Date,
including, without limitation, all savings plans, retirement plans, health care
plans, disability plans, severance benefit plans, incentive plans, and life,
accidental death, and dismemberment insurance plans, shall be deemed to be, and
shall be treated as though they are, executory contracts that are assumed under
the Plan, and the Debtors' obligations under such agreements and programs shall
survive the Effective Date of the Plan, without prejudice to the Reorganized
Debtors' rights under applicable non-bankruptcy law to modify, amend, or
terminate the foregoing arrangements, except for (i) such executory contracts or
plans specifically rejected pursuant to the Plan (to the extent such rejection
does not violate section 1114 of the Bankruptcy Code) and (ii) such executory
contracts or plans as have previously been terminated, or rejected, pursuant to
a Final Order, or specifically waived by the beneficiaries of such plans,
contracts, or programs.
XIII.
EFFECTIVENESS OF THE PLAN
A. Confirmation of the Plan.
The Plan can be confirmed either under section 1129(a) of the
Bankruptcy Code or in a non-consensual manner under section 1129(b) of the
Bankruptcy Code so long as the conditions of Section XIII.B.1. have been
satisfied or waived pursuant to Section XIII.B.2.
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<PAGE>
B. Effectiveness of the Plan.
1. Conditions Precedent to Effectiveness
The Plan shall not become effective unless and until
it has been confirmed and the following conditions have been satisfied in full
or waived pursuant to Section XIII.B.2.: (1) the Confirmation Order in a form
satisfactory to the Debtors, the DIP Lenders and the Creditors Committee, shall
have become a Final Order; (2) the Amended Prime Holdings and Prime Certificates
of Incorporation and Amended Subsidiaries Certificates of Incorporation shall
have been properly filed with the Secretary of State in their respective state
of incorporation; (3) all authorizations, consents and regulatory approvals
required (if any) for the Plan's effectiveness shall have been obtained; (4) the
Court shall have ordered the substantive consolidation of the Chapter 11 Cases
as provided in Section VI of the Plan; (5) on the Effective Date, the
Reorganized Debtors have entered into a senior secured credit facility
acceptable to the Creditors Committee; (6) the Plan Documents shall be in a form
acceptable to the Debtors, the DIP Agents and the Creditors Committee and shall
have been executed and delivered; (7) all of the Debtors' obligations owing to
any DIP Lender pursuant to the DIP Credit Documents shall have been paid in
full, in cash, in immediately available funds, and any commitments in respect of
the DIP Credit Documents shall have been terminated; and (8) the Reorganized
Debtors shall have sufficient cash on hand to make timely distributions as may
be required hereunder.
2. Waiver of Conditions
The Debtors with the written consent of the DIP
Agents and the Creditors Committee (which consent shall not be unreasonably
withheld) may waive any or all of the conditions set forth in Section XIII.B.1.
above at any time, without leave of or order of the Court and without any formal
action.
3. Effect of Failure of Conditions
In the event that the Effective Date does not occur
on or before one hundred and twenty (120) days after the Confirmation Date, upon
notification submitted by the Debtors to the Court: (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 had never occurred, and (d) the Debtors'
obligations with respect to the Claims and Equity Interests shall remain
unchanged and nothing contained in the Plan 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
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<PAGE>
prejudice in any manner the rights of the Debtors or any person in any further
proceedings involving the Debtors.
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<PAGE>
4. Vacatur of Plan
If an order denying confirmation of the Plan is
entered, then the Plan shall be null and void in all respects, and nothing
contained in the Plan shall (a) constitute a waiver or release of any Claims
against or Equity Interests in the Debtors; (b) prejudice in any manner the
rights of the holder of any Claim against, or Equity Interest in, the Debtors;
(c) prejudice in any manner any right, remedy or claim of the Debtors; or (d) be
deemed an admission against interest by the Debtors.
Dated: August 21, 2000
PRIME SUCCESSION HOLDINGS, INC.
By: __________________________
Name:
Title:
PRIME SUCCESSION, INC.
By: __________________________
Name:
Title:
AARON CREMATION & BURIAL
SERVICES, INC.
By: __________________________
Name:
Title:
AARON CREMATION & BURIAL
SERVICES, P.C.
By: __________________________
Name:
Title:
48
<PAGE>
BUCKNER-RUSH ENTERPRISES, INC.
By: __________________________
Name:
Title:
BURY-PINE FUNERAL HOME, INC.
By: __________________________
Name:
Title:
PINE FUNERAL HOME, INC.
By: __________________________
Name:
Title:
CLARY-GODWIN FUNERAL HOME, INC.
By: __________________________
Name:
Title:
CLAYTON FRANK & SONS, INC.
By: __________________________
Name:
Title:
COMANDER FUNERAL HOME, INC.
By: __________________________
Name:
Title:
49
<PAGE>
CREMATION SOCIETY OF AMERICA,
INCORPORATED
By: __________________________
Name:
Title:
FRASER FUNERAL HOME, INC.
By: __________________________
Name:
Title:
FRED HUNTER MEMORIAL SERVICES,
INC.
By: __________________________
Name:
Title:
GROTEWOLD SIMI VALLEY
MORTUARY, INC.
By: __________________________
Name:
Title:
HUGHES FUNERAL CHAPEL
By: __________________________
Name:
Title:
J&W, INC.
By: __________________________
Name:
Title:
50
<PAGE>
JOHN A. BECK COMPANY
By: __________________________
Name:
Title:
LAMBERT CORPORATION, INC.
By: __________________________
Name:
Title:
McWANE FAMILY FUNERAL HOME, INC.
By: __________________________
Name:
Title:
NEAL-TARPLEY, INC.
By: __________________________
Name:
Title:
PRIME BUSINESS SOLUTIONS, INC.
By: __________________________
Name:
Title:
PRIME BUSINESS SOLUTIONS OF
KENTUCKY, INC.
By: __________________________
Name:
Title:
51
<PAGE>
PRIME ENTERPRISES OF CALIFORNIA,
INC.
By: __________________________
Name:
Title:
PRIME HOLDINGS OF ARKANSAS, INC.
By: __________________________
Name:
Title:
PRIME HOLDINGS OF CALIFORNIA, INC.
By: __________________________
Name:
Title:
PRIME HOLDINGS OF MINNESOTA, INC.
By: __________________________
Name:
Title:
PRIME HOLDINGS OF NEBRASKA, INC.
By: __________________________
Name:
Title:
PRIME HOLDINGS OF OHIO, INC.
By: __________________________
Name:
Title:
52
<PAGE>
PRIME HOLDINGS OF WEST VIRGINIA,
INC.
By: __________________________
Name:
Title:
PRIME INDIANA LIMITED PARTNERSHIP
By: __________________________
Name:
Title:
PRIME SUCCESSION OF ALABAMA, INC.
By: __________________________
Name:
Title:
PRIME SUCCESSION OF ARIZONA, INC.
By: __________________________
Name:
Title:
PRIME SUCCESSION OF ARKANSAS, INC.
By: __________________________
Name:
Title:
PRIME SUCCESSION OF CALIFORNIA,
INC.
By: __________________________
Name:
Title:
53
<PAGE>
PRIME SUCCESSION OF FLORIDA, INC.
By: __________________________
Name:
Title:
PRIME SUCCESSION OF GEORGIA, INC.
By: __________________________
Name:
Title:
PRIME SUCCESSION OF ILLINOIS, INC.
By: __________________________
Name:
Title:
PRIME SUCCESSION OF IOWA, INC.
By: __________________________
Name:
Title:
PRIME SUCCESSION OF KENTUCKY, INC.
By: __________________________
Name:
Title:
PRIME SUCCESSION OF MINNESOTA,
INC.
By: __________________________
Name:
Title:
54
<PAGE>
PRIME SUCCESSION OF MISSOURI, INC.
By: __________________________
Name:
Title:
PRIME SUCCESSION OF NEBRASKA, INC.
By: __________________________
Name:
Title:
PRIME SUCCESSION OF NEW YORK, INC.
By: __________________________
Name:
Title:
PRIME SUCCESSION OF TENNESSEE, INC.
By: __________________________
Name:
Title:
PRIME SUCCESSION OF TEXAS, INC.
By: __________________________
Name:
Title:
PRIME SUCCESSION PARTNERS, INC.
By: __________________________
Name:
Title:
55
<PAGE>
ROSELAWN MEMORIAL GARDENS, INC.
By: __________________________
Name:
Title:
ROSTAD MORTUARY, INC.
By: __________________________
Name:
Title:
TALISMAN ENTERPRISES, INC.
By: __________________________
Name:
Title:
THE FUNERAL OUTLET STORE, INC.
By: __________________________
Name:
Title:
WHITNEY & MURPHY FUNERAL
HOMES, INC.
By: __________________________
Name:
Title:
58
