SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Date of Amendment No. 1: March 17, 1995
Date of Initial Report: January 18, 1995
(Date of earliest event reported): January 3, 1995
AMERICAN HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
STATE OR OTHER JURISDICTION OF INCORPORATION: Delaware
COMMISSION FILE NUMBER: 0-10566
IRS EMPLOYER IDENTIFICATION NO.: 95-3419191
376 MAIN STREET, P. O. BOX 74, BEDMINSTER, NJ 07921
-------------------------------------------------------
(Address of Principal Executive Offices)
Registrant's telephone number: (908) 234-9220
<PAGE>
Item 7. FINANCIAL STATEMENTS, PROFORMA FINANCIAL INFORMATION
AND EXHIBITS
a. Financial Statements of Businesses Acquired:
- Financial statements of Dr. Madis Laboratories,
Inc. ("Madis") as of and for the two years ended
December 31, 1994 together with Independent
Accountant's Report.
b. Proforma Financial Information:
- Proforma consolidated condensed balance sheet as
of December 31, 1994.
- Proforma consolidated condensed statement of
operations for the year ended December 31, 1994.
c. Exhibits:
(1) Plan of Reorganization of Dr. Madis Laboratories,
Inc.
(2) Disclosure Statement related to Plan of
Reorganization
<PAGE>
AMERICAN HOLDINGS, INC.
PROFORMA CONSOLIDATED CONDENSED BALANCE SHEET
DECEMBER 31, 1994
($000 OMITTED)
(UNAUDITED)
<TABLE>
<CAPTION>
American
Holdings Madis Proforma
HISTORICAL HISTORICAL ADJUSTMENTS PROFORMA
<S> <C> <C> <C> <C>
ASSETS:
Cash and cash
equivalents .................................................................... $ 13,427 $ 427 ($ 2,045)A $ 11,209
( 300)B
( 100)C
( 200)D
Accounts
receivable ..................................................................... 664 664
Inventory ....................................................................... 1,459 1,459
Prepaid expenses ................................................................ 36 36
-------- --------- --------- ---------
Total current
assets ....................................................................... 13,427 2,586 ( 2,645) 13,368
-------- --------- --------- ---------
Marketable
securities ..................................................................... 2,018 2,018
Other assets .................................................................... 1,491 309 200 D 3,425
1,668 E
( 243)E
--------- --------- --------- ---------
Total assets .................................................................. $ 16,936 $ 2,895 ($ 1,020) $ 18,811
========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current
liabilities .................................................................... $ 621 $ 2,950 ($ 2,045)A 2,226
( 100)C
800 F
Other liabilities ............................................................... 270 270
Stockholders'
equity:
Capital stock ................................................................... 77 1,819 ( 1,819)E 77
Additional paid
-in capital .................................................................... 43,800 -- -- 43,800
Retained earnings
(deficit) ...................................................................... (26,820) ( 2,144) 2,144E ( 26,820)
Unrealized losses
on marketable
securities ..................................................................... ( 742) ( 742)
--------- --------- --------- ---------
Total
stockholders'
equity ....................................................................... 16,315 ( 325) 325 16,315
--------- --------- --------- ---------
Total liabilities
and stockholders'
equity ....................................................................... $ 16,936 $ 2,895 ($ 1,020) $ 18,811
========= ========= ========= =========
</TABLE>
See accompanying notes to proforma consolidated
condensed financial statements.
<PAGE>
AMERICAN HOLDINGS, INC.
PROFORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994
($000 OMITTED, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
American
Holdings Madis Proforma
HISTORICAL HISTORICAL ADJUSTMENT PROFORMA
<S> <C> <C> <C> <C>
Revenues ........................................................................ $ 5,995 $ 5,995
Cost of goods sold .............................................................. 4,008 4,008
--------- ---------
Gross profit .................................................................... 1,987 1,987
--------- ---------
150 G
Selling, general and ............................................................ 60 H
administrative
expenses ....................................................................... $ 1,771 $ 1,254 ( 154)I 3,081
--------- --------- ------- ---------
Income (loss) from
operations ..................................................................... ( 1,771) 733 ( 56) ( 1,094)
--------- --------- ------- ---------
Other income
(expense) ...................................................................... 1,802 ( 3) 37 J 441
( 111)K
( 80)L
( 144)M
1,060 I
Reorganization
expenses ....................................................................... --------- ( 1,219) 1,219 N --
--------- -------- ------- --------
Income (loss) before
income taxes ................................................................... 31 ( 489) ( 195) ( 653)
-------- -------- ------ -------
Income taxes (benefits).......................................................... 5 7 ( 12)O --
-------- -------- ------ -------
Net income (loss) ............................................................. $ 26 ($ 496) ($ 183) ($ 653)
======== ======== ====== ========
Earnings (loss) per
common share ................................................................... -- ($ .08)
======== ========
Weighted average number
of common shares
outstanding ................................................................... 8,095 8,095
======== ========
</TABLE>
See accompanying notes to proforma consolidated
condensed financial statements.
<PAGE>
AMERICAN HOLDINGS, INC.
NOTES TO PROFORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
DECEMBER 31, 1994
(UNAUDITED)
The following adjustments have been made to the proforma consolidated condensed
financial statements to reflect the acquisition of Madis by American Holdings,
Inc. (the "Company") on January 3, 1995. The acquisition is being treated as a
purchase under generally accepted accounting principles.
(A) Cash disbursed to the Trustee in Bankruptcy in accordance with the
confirmed Plan of Reorganization.
(B) Cash disbursed for a finder's fee ($100,000) and estimated professional
fees ($200,000) incurred in connection with the acquisition.
(C) Cash disbursed to a Madis employee benefit plan in accordance with the
Plan of Reorganization.
(D) Loan made to an affiliate of Madis in accordance with the Plan of
Reorganization.
(E) Eliminate the intercompany investment in Madis and record goodwill.
(F) Contractual payments to former owners of Madis over next four years.
(G) Record higher salary expense based on employment agreements with Madis
executive officers.
(H) Record additional rental payment to an affiliate of Madis for the lease
of the Company's facilities in accordance with a lease agreement. The
lease requires the same base payment as in 1994 plus an additional
rental payment of 1% of sales each year up to an additional $200,000
per annum over the term of the lease.
(I) On September 21, 1993, the Board of Directors of the Company
approved in principle a plan to distribute the common stock of
NorthCorp Realty Advisors, Inc. ("NorthCorp"), a real estate
asset manager and a wholly-owned subsidiary of the Company, to
all holders of the Company's outstanding common stock (the
"Distribution"). Under the plan of distribution, the Company
declared a dividend of one share of NorthCorp common stock for
every two shares of the Company's common stock outstanding on
the record date of the Distribution, July 8, 1994. At the
date of distribution (July 11, 1994), 8,250,000 shares of
NorthCorp common stock were outstanding. Approximately
4,000,000 shares, or 48%, of NorthCorp's common stock were
distributed to the shareholders of the Company.
<PAGE>
On August 4, 1994, the Company sold substantially all of its remaining
interest in NorthCorp. As part of the transaction, NorthCorp assumed
the lease of the Company's Washington, D.C. office and the employment
contract of one of the Company's executive officers. This entry
eliminates these items and NorthCorp's results of operations. The
unaudited proforma condensed consolidated statement of operations does
not reflect the following proforma adjustments related to the
disposition of NorthCorp and the Washington, D.C. office of the
Company:
1. Interest income on the assumed reinvestment of the $1.5
million proceeds received.
2. Net gain of $378,000 on the sale of substantially all of
the Company's remaining interest in NorthCorp.
3. The market value of the NorthCorp common stock
distributed to the Company's shareholders.
(J) Record interest income on the loans to affiliates.
(K) Record amortization of goodwill incurred in the acquisition over 15
years.
(L) Record 20% minority interest in earnings of Madis.
(M) Reflect decreased interest income due to a decrease in investable cash
used to acquire Madis.
(N) Remove Reorganization expenses to show Madis operations as if Madis had
not been under Chapter 11 in 1994.
(O) Record proforma tax provision.
The proforma results of operations have been adjusted to reflect the
disposition of NorthCorp and the Washington, D.C. office of the Company
(the "Disposition") had the Disposition taken place on January 1, 1994.
The proforma results of operations also include the operations of Madis
as if the acquisition of Madis had taken place on the same date. The
proforma consolidated condensed balance sheet includes the accounts of
Madis as if the acquisition had occurred on December 31, 1994.
The proforma consolidated condensed financial information is
not intended to reflect the results of operations which would have
actually resulted had these transactions been effected on the dates
indicated. Moreover, this proforma financial data is not intended to be
indicative of results of operations which may be attained in the
future.
<PAGE>
DR. MADIS LABORATORIES, INC.
FINANCIAL STATEMENTS
AS OF AND FOR THE TWO YEARS ENDED
DECEMBER 31, 1994
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
Dr. Madis Laboratories, Inc.
South Hackensack, New Jersey
We have audited the accompanying balance sheet of Dr. Madis Laboratories, Inc.
(the "Company") as of December 31, 1994, and the related statements of
operations, accumulated deficit and cash flows for the years ended December 31,
1994 and 1993. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1994, and
the results of its operations and its cash flows for the years December 31,
1994 and 1993 in conformity with generally accepted accounting principles.
As discussed in Notes 1 and 9 to the financial statements, on December 7, 1994,
the Bankruptcy Court entered an order confirming the plan of reorganization
which became effective on January 3, 1995. Under the plan of reorganization,
the Company is required to comply with certain terms and conditions as more
fully described in Notes 1 and 9.
/s/ DELOITTE & TOUCHE
- -----------------------
Dated: February 28, 1995
<PAGE>
DR. MADIS LABORATORIES, INC.
BALANCE SHEET
DECEMBER 31, 1994
<TABLE>
<CAPTION>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash .................................... $ 426,714
Accounts receivable, net of allowance for
uncollectible accounts and returns and
allowances of $102,000 ................ 664,150
Inventory ............................... 1,458,676
Prepaid expenses ........................ 35,978
-----------
TOTAL CURRENT ASSETS .................... 2,585,518
PROPERTY AND EQUIPMENT, at cost ........... 3,557,651
Less: Accumulated depreciation ......... 3,308,024
-----------
NET PROPERTY AND EQUIPMENT .............. 249,627
-----------
OTHER ASSETS:
Security deposits ....................... 29,000
Notes receivable - stockholder .......... 30,000
-----------
TOTAL OTHER ASSETS ...................... 59,000
-----------
TOTAL ASSETS .............................. $ 2,894,145
===========
</TABLE>
(CONTINUED ON NEXT PAGE)
<PAGE>
DR. MADIS LABORATORIES, INC.
BALANCE SHEET
DECEMBER 31, 1994
<TABLE>
<CAPTION>
<S> <C>
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable - trade ................ $ 724,228
Accounts payable - affiliate ............ 33,587
Current portion of long-term debt ....... 32,683
Accrued expenses and payroll taxes ...... 1,875,088
Accrued environmental costs ............. 280,000
Federal and state income taxes payable .. 3,500
-----------
TOTAL CURRENT LIABILITIES ............... 2,949,086
-----------
OTHER LIABILITIES:
Long-term debt (net of current
portion) .............................. 257,957
Notes payable - stockholder ............. 12,347
-----------
TOTAL OTHER LIABILITIES ................. 270,304
-----------
STOCKHOLDERS' DEFICIT:
Capital stock ........................... 1,818,549
Accumulated deficit ..................... (2,143,794)
-----------
TOTAL STOCKHOLDERS' DEFICIT ............. ( 325,245)
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 2,894,145
===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
DR. MADIS LABORATORIES, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1994 AND 1993
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
SALES ............................. $ 5,995,369 $ 5,219,732
COST OF GOODS SOLD ................ 4,008,138 3,522,649
----------- -----------
GROSS PROFIT ...................... 1,987,231 1,697,083
SELLING, OPERATING AND
ADMINISTRATIVE EXPENSES ......... 1,253,724 992,210
----------- -----------
INCOME FROM OPERATIONS ............ 733,507 704,873
OTHER INCOME ...................... 32,324 106,333
INTEREST EXPENSE .................. ( 35,232) ( 217,308)
----------- -----------
730,599 593,898
----------- -----------
REORGANIZATION ITEMS:
Chapter 11 professional fees .... ( 1,192,016) ( 94,614)
Income tax penalties and interest ( 27,314) ( 3,688)
----------- -----------
TOTAL REORGANIZATION ITEMS ...... ( 1,219,330) ( 98,302)
----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES . ( 488,731) 495,596
PROVISION FOR INCOME TAXES ........ 7,500 3,751
----------- -----------
NET INCOME (LOSS) ................. ($ 496,231) $ 491,845
=========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
DR. MADIS LABORATORIES, INC.
STATEMENTS OF ACCUMULATED DEFICIT
YEARS ENDED DECEMBER 31, 1994 AND 1993
<TABLE>
<CAPTION>
1994 1993
------------ ------------
<S> <C> <C>
ACCUMULATED DEFICIT -
BEGINNING OF YEAR . ($ 1,647,563) ($ 2,139,408)
Net income (loss) . ( 496,231) 491,845
------------ ------------
ACCUMULATED DEFICIT -
END OF YEAR ....... ($ 2,143,794) ($ 1,647,563)
============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
DR. MADIS LABORATORIES, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994 AND 1993
<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ................. ($496,231) $ 491,845
Adjustments to reconcile net
income (loss) to net cash
provided by operating activities:
Deferred costs .................. -- 1,129
Depreciation .................... 148,883 169,986
(Increase) decrease in:
Accounts receivable ........... ( 6,285) (226,960)
Inventory ..................... (202,686) (225,344)
Notes receivable -
shareholders ................. -- (30,000)
Prepaid expenses .............. ( 8,308) 14,232
Security deposits ............. 3,333 (5,000)
Increase (decrease) in:
Accounts payable - trade ...... 87,417 (223,481)
Accrued expenses and
payroll taxes ................ 813,039 234,504
Due from affiliate ............ ( 30,365) (90,371)
Federal and state income
tax payable .................. ( 251) 3,751
--------- ---------
NET CASH PROVIDED BY
OPERATING ACTIVITIES ............. 308,546 114,291
--------- ---------
CASH FLOWS USED IN INVESTING
ACTIVITIES:
Purchase of property and equipment (46,831) (40,277)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on bank loan ... (26,353) (30,340)
Principal payments on capital lease
obligations ..................... ( 7,354) ( 8,739)
--------- ---------
NET CASH USED IN FINANCING
ACTIVITIES ....................... (33,707) (39,079)
--------- ---------
</TABLE>
(CONTINUED ON NEXT PAGE)
<PAGE>
DR. MADIS LABORATORIES, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994 AND 1993
(CONTINUED)
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
NET INCREASE IN CASH ............... 228,008 34,935
CASH, Beginning of year ............ 198,706 163,771
-------- --------
CASH, End of year .................. $426,714 $198,706
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid for:
Interest ....................... $ 33,893 $ 17,660
======== ========
Income taxes ................... $ 4,000 $ 3,751
======== ========
SCHEDULE OF NON-CASH FINANCING
AND INVESTING ACTIVITIES:
Equipment acquired through capital
lease obligations .............. $ 20,233 $ 10,750
======== ========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
DR. MADIS LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
NOTE 1 - REORGANIZATION UNDER CHAPTER 11
On March 17, 1988, Dr. Madis Laboratories,
Inc. (the "Company") filed a voluntary petition for reorganization
under Chapter 11 of the United States Bankruptcy Code, and
continued to operate its business as debtor-in-possession, subject
to the approval of the Bankruptcy Court for certain of its
proposed actions, until November 6, 1991. At that point, a Trustee
was appointed, operating the business as a Trustee-In-Possession.
Effective January 3, 1995, American Holdings, Inc. ("HOLD"), a
Delaware corporation, acquired an 80% ownership interest in the
Company pursuant to a Plan of Reorganization ("the Plan"). The
Plan called for substantially all secured and unsecured creditors
to be paid 100% of their claims with interest. See Note 9 of Notes
to Financial Statements.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The Company's financial statements are presented on the historical
cost basis. Pursuant to the Plan, the Company will merge with a
wholly-owned subsidiary of HOLD, as further discussed in Note 9
of Notes to Financial Statements. Accordingly, the Company has
not prepared these financial statements on a "fresh-start" basis
of accounting.
OPERATIONS
Dr. Madis Laboratories, Inc., is engaged in the manufacture
of botanical derivatives. The Company's headquarters, sales
office, laboratories and main warehouse are located in South
Hackensack, New Jersey.
INVENTORIES
Merchandise inventories are valued at the lower of cost or
market. Cost is determined by the first-in, first-out (FIFO)
method.
PROPERTY AND EQUIPMENT
Depreciation and amortization are provided primarily using the
double-declining balance method over the useful lives of the
assets (seven to twelve years).
<PAGE>
DR. MADIS LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
ENVIRONMENTAL COSTS
Environmental expenditures that relate to current operations are
expensed or capitalized as appropriate. Expenditures that relate
to an existing condition caused by past operations, and which do
not contribute to current or future revenue generation, are
expensed. These amounts are recorded when environmental
assessments and/or remedial efforts are probable, and the cost can
be reasonably estimated. The timing of these accruals generally
coincides with completion of a feasibility study or the Company's
commitment to a formal action plan. Amounts included in the
accompanying balance sheet for estimated environmental costs at
December 31, 1994 were $280,000.
INCOME TAXES
Deferred income taxes reflect the net effects of (a) temporary
differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income
tax purposes, and (b) operating loss carryforwards. The deferred
tax asset at December 31, 1994 was completely offset by a
valuation allowance.
NOTE 3 - INVENTORIES
Inventory is comprised of the following:
<TABLE>
<S> <C>
Raw materials $ 217,420
Work in process 163,874
Finished goods 1,077,382
----------
$1,458,676
==========
</TABLE>
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment is comprised of the following:
<PAGE>
DR. MADIS LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
<TABLE>
<S> <C>
Machinery and equipment $3,331,031
Equipment under capital lease 30,983
Furniture and fixtures 195,637
----------
Total 3,557,651
Less: Accumulated depreciation 3,308,024
----------
$ 249,627
==========
</TABLE>
NOTE 5 - LONG-TERM DEBT
Long-term debt at December 31, 1994 consisted of the following:
<TABLE>
<S> <C>
Note payable to American Holdings, Inc.,
with interest payable at 85% of the prime
lending rate, due March 1, 2003, secured
by substantially all assets of the Company $268,205
Capital lease obligation to Yale Financial,
due in monthly installments of $299,
including interest, through August 1996,
secured by equipment 5,972
Capital lease obligation to Yale Financial,
due in monthly installments of $399,
including interest, through July 1997,
secured by equipment 12,387
Capital lease obligation to Sanwa Leasing,
due in monthly installments of $177,
including interest, through November 1996,
secured by equipment 4,076
--------
290,640
Less: current maturities 32,683
--------
$257,957
========
</TABLE>
<PAGE>
DR. MADIS LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
Maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
<S> <C>
Years Ending
DECEMBER 31,
-------------
1995 $ 32,683
1996 33,634
1997 29,862
1998 29,900
1999 33,030
Thereafter 131,531
--------
$290,640
========
</TABLE>
NOTE 6 - INCOME TAXES
As of December 31, 1994, the Company had net operating loss
carryforwards ("NOL") of approximately $246,000 and $767,000 for
federal and state income tax purposes, respectively, which may
provide current and future tax benefits. The federal NOL's expire
in the years 2006 and 2007. The state NOL's expire during the
years 1995 through 1998.
The provision (benefit) for income taxes is comprised of the
following:
<TABLE>
<CAPTION>
<S> <C> <C>
1994 1993
--------- -------
Federal:
Current $ 7,500 $ 3,751
Deferred ( 139,024) 168,183
Increase (decrease)
in valuation
allowance 139,024 ( 168,183)
-------- --------
Total federal $ 7,500 $ 3,751
======== ========
</TABLE>
<PAGE>
DR. MADIS LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
<TABLE>
<CAPTION>
<S> <C> <C>
1994 1993
--------- -------
State:
Current - -
Deferred ($ 43,986) $ 44,834
Increase (decrease)
in valuation
allowance 43,986 ( 44,834)
-------- --------
Total $ - $ -
======== ========
</TABLE>
Significant components of the Company's deferred tax assets at
December 31, 1994 are as follows:
<TABLE>
<S> <C>
Current:
Accounts receivable allowance $ 40,739
Inventory obsolescence 58,524
Environmental costs 111,832
Employee stock ownership
plan 39,940
Valuation allowance ( 251,035)
---------
Total current -
---------
Noncurrent:
Reorganization costs 345,830
Net operating loss
carryforwards 152,901
Alternative minimum tax credits 4,604
Valuation allowance ( 503,335)
---------
Total noncurrent -
---------
Total deferred tax assets $ -
=========
</TABLE>
A reconciliation of the provision for income taxes to the
expected provision for income taxes [income (loss) before income
taxes times the statutory tax rate of 34%] is as follows:
<PAGE>
DR. MADIS LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Income (loss) before
income taxes ($ 488,731) $ 495,596
Statutory federal income
tax 34% 34%
--------- ---------
Expected income tax
provision (benefit) ( 166,169) 168,503
State taxes, net of
federal benefit ( 29,324) 29,736
Increase (decrease) in
valuation allowance 183,010 ( 213,017)
Other 19,983 18,529
--------- ---------
Provision for income
taxes $ 7,500 $ 3,751
========= =========
</TABLE>
NOTE 7 - CONTINGENCIES AND COMMITMENTS
The Company conducts its operations in facilities leased from a
corporation owned by the Company's shareholders for five years
with renewal options for fifteen additional years. The rental
payment for the premises is $20,000 per month plus an annual
payment not to exceed $200,000 based on 1% of gross revenue.
Rental expense to related parties totalled $240,000 in both 1994
and 1993.
The Company also leases a warehouse facility from an
unaffiliated entity under a two-year lease period at the rate of
$8,333 per month beginning January 3, 1995. The lease has a
renewal option for one three-year period at rates up to $10,833
per month.
NOTE 8 - CAPITAL STOCK
Capital stock of the Company at December 31, 1994 was comprised
of the following:
<PAGE>
DR. MADIS LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
Preferred stock, $100 par value; 1,017,000 shares authorized,
24,497 shares issued and outstanding.
Common stock, Class A voting, no par value; 100 shares
authorized, 100 shares issued and outstanding.
Common stock, Class B non-voting, no par value; 10,000 shares
authorized, 10,000 shares issued and outstanding.
NOTE 9 - SUBSEQUENT EVENT
On January 3, 1995, the Company, a New Jersey corporation,
merged with HOLD's wholly-owned subsidiary, a Delaware
corporation (the "Merger"), which then changed its name to Dr.
Madis Laboratories, Inc. ("Madis Labs"). In the Merger, the
former stockholders of the Company received 20% of the
outstanding shares of the common stock of Madis Labs and an
option to acquire 250,000 shares of HOLD's common stock at its
book value of $2.10 per share. The balance of the common stock
of Madis Labs is owned by HOLD.
The Merger was effected in conjunction with the Joint Plan of
Reorganization (the "Plan") filed by the Company in Chapter 11
proceedings under the Federal Bankruptcy Law and confirmed by
the Court on November 29, 1994. Under the Plan, HOLD advanced
$2,300,000 to the Company which, together with $900,000 of cash
on hand, was used to fund the Plan. The balance of
indebtedness was assumed by Madis Labs and will be paid from its
working capital over a period of years or by HOLD in the event
of any deficiency. The Company believes that its creditors will
receive 100% of their approved claims. Therefore, pre- and post-
petition liabilities are not separately disclosed.
<PAGE>
DR. MADIS LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
In connection with the Merger, two principal stockholders who
previously served as executive officers of the Company entered
employment agreements with Madis Labs pursuant to which one will
serve as chairman emeritus for three years at an annual salary
of $100,000 and the other will serve as president for four years
at an annual salary of $150,000. In addition, Madis Labs leased
its principal business premises from a corporation owned by
former stockholders of the Company. The lease may not be
cancelled prior to December 1999 and has renewal options by
Madis Labs for an additional fifteen years. The rental for the
premises is $20,000 per month plus an additional annual payment
of up to $200,000 based on 1% of gross revenue. HOLD also paid
$100,000 to the Trustee of the Company's Employee Stock
Ownership Plan to fund its termination.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AMERICAN HOLDINGS, INC.
By: /s/ Mark Koscinski
--------------------------
Mark Koscinski
Vice President
(Principal Accounting Officer)
Date: March 17, 1995
GODLESKY & SYWILOK
51 MAIN STREET
HACKENSACK, New Jersey 07601
(201) 487-9390
Attorney for Debtors-In Possession
UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF NEW JERSEY
____________________________ : HONORABLE WILLIAM F. TUOHEY
In the Matter of: CASE NOS. 88-01805 (WFT)
: 88-01806 (WFT)
DR. MADIS LABORATORIES, INC.,
: In Administratively
Debtor Consolidated Proceedings for
____________________________ : Reorganization Under
Chapter 11 of the Bankruptcy
In the Matter of: : Code
IVM CORPORATION, : CASE NO. 88-01806 (WFT)
Debtors Second Amended
Debtor : JOINT DISCLOSURE STATEMENT
___________________________ PURSUANT TO 11 U.S.C. 1125
FOR THE JOINT CHAPTER 11 PLAN
OF REORGANIZATION OF
DEBTORS-IN-POSSESSION
Dr. Madis Laboratories, Inc. and IVM Corporation, the above-captioned
administratively consolidated Debtors, submit the following Joint Disclosure
Statement for consideration by creditors and interest holders.
IVM CORPORATION
BY: /S/ VOLDEMAR MADIS
Voldemar Madis, President
DATED: November 18, 1994
DR. MADIS LABORATORIES, INC.
BY: /S/ VOLDEMAR MADIS
Voldemar Madis, President
<PAGE>
INTRODUCTION
This Joint Disclosure Statement ("Disclosure Statement") is submitted
pursuant to Section 1125 of Title 11, United States Code (the "Bankruptcy Code")
and includes and describes the Joint Chapter 11 Plan of Reorganization ("Plan")
of Dr. Madis Laboratories, Inc. ("DML") and IVM Corporation ("IVM").
Capitalized terms used in this Disclosure Statement which are not
otherwise defined herein have the meanings ascribed to such terms in the Plan or
the Bankruptcy Code.
On _______________________, 1994, after notice and a hearing, the
Bankruptcy Court entered an Order approving this Disclosure Statement as
containing information of a kind, and in sufficient detail, adequate to enable a
hypothetical, reasonable investor typical of the creditor classes whose votes
are being solicited to make an informed judgement about whether to accept or
reject the Plan.
APPROVAL OF THE DISCLOSURE STATEMENT, HOWEVER, DOES NOT CONSTITUTE A
DETERMINATION BY THE BANKRUPTCY COURT OF THE FAIRNESS OR MERITS OF THE PLAN.
EXHIBITS. Accompanying this Disclosure Statement are copies of the
following:
1. Merger Agreement Between DML & MACO which is Exhibit A
2. The Order of the Court (1) approving the Disclosure Statement, (2)
fixing the time for filing of acceptances or rejections of the Plan, (3) the
date and time of the hearing to consider confirmation of the Plan, (4) the
manner by which notice of the confirmation hearing is to be given to all parties
in interest, and (5) the time for filing objections to the Plan.
3. Liquidation Analysis; Exhibit B
4. Financial Statement of American Holdings, Inc. which is Exhibit C
5. Ballot
6. Employee Petition Exhibit; Exhibit D
7. Analysis of funds available and to be distributed under plan;
Exhibit E
<PAGE>
READ THE PLAN. You are urged to read the Plan, Disclosure Statement and
all exhibits carefully and in their entirety before voting on the Plan. If your
Claims or Interests (as defined in the Plan) are impaired by the Plan, you are
entitled to vote on the Plan. Particular attention should be directed to the
provisions of the Plan affecting or impairing your rights as they may presently
exist.
INFORMATION SUBMITTED BY DEBTORS. The information contained in this
Disclosure Statement has been submitted from information obtained from the
Debtors' records and employees, unless specifically stated to be from other
sources.
The Debtors believe that the contents of this Disclosure Statement are
accurate and complete in all material respects. Any information, representations
or inducements made to secure or obtain acceptances of this Plan which are other
than, or inconsistent with, the information contained in this Disclosure
Statement should not be relied upon by any holder of a Claim or Interest in
arriving at a decision to vote for or against the plan.
DEBTORS' RECOMMENDATION. THE DEBTORS BELIEVE THAT CONFIRMATION AND
IMPLEMENTATION OF THE PLAN IS IN THE BEST INTERESTS OF, AND PROVIDES THE
GREATEST POSSIBLE RECOVERY TO, CREDITORS AND EQUITY INTERESTS. THE PLAN PROVIDES
CREDITORS WITH MORE THAN THEY ARE LIKELY TO RECEIVE IN A LIQUIDATION OF THE
DEBTORS' ASSETS UNDER CHAPTER 7 OF THE BANKRUPTCY CODE.
VOTING. Voting instructions are contained in ARTICLE I of this
Disclosure Statement. To be counted, your Ballot must be duly completed,
executed and filed with the Clerk of the United States Bankruptcy Court and
received by the Debtors Counsel by 4:00 P.M. Eastern Standard Time on
____________________,1994.
<PAGE>
ARTICLE I.
VOTING PROCEDURES AND REQUIREMENTS
1. BALLOTS AND VOTING DEADLINES. Accompanying this Disclosure Statement
is a Ballot for acceptance or rejection of the Plan. When you vote and return
your Ballot, please indicate the class or classes in which your Claims are
classified by marking the appropriate space provided on your Ballot for such
purpose.
THE BANKRUPTCY COURT HAS DIRECTED THAT TO BE COUNTED FOR VOTING
PURPOSES, BALLOTS FOR THE ACCEPTANCE OR REJECTION OF THE PLAN MUST BE FILED WITH
THE CLERK OF THE UNITED STATES BANKRUPTCY COURT AND SERVED ON THE DEBTORS'
COUNSEL NO LATER THAN 4:00 P.M. EASTERN STANDARD TIME ON ____________________,
1994. Ballots that do not indicate either an acceptance or rejection of the Plan
will be deemed to constitute an acceptance of the Plan.
Please vote and return your original Ballot to:
Clerk
United States Bankruptcy Court
50 Walnut Street, Third Floor
Newark, New Jersey 07102; and
Additionally, a copy of your Ballot should be sent to Debtors' counsel:
Godlesky & Sywilok
51 Main Street
Hackensack, New Jersey 07601
If you have any questions regarding the procedure for voting, please
contact:
John W. Sywilok
Godlesky & Sywilok
51 Main Street
Hackensack, New Jersey 07601
tel #: (201) 487-9390
fax#: (201) 487-9393
It is important for all creditors to exercise their rights to vote to
accept or reject the Plan. Even if you do not vote to accept the Plan, you may
be bound by the Plan if it is accepted by the requisite holders of Claims or
Equity Interests and confirmed by the Bankruptcy Court.
2. PARTIES IN INTEREST ENTITLED TO VOTE. Any holder of a claim against
or Equity Interest in the Debtors, whose Claim or Equity Interest has not been
disallowed previously by the Bankruptcy Court, is entitled to vote to accept or
reject the Plan, if such Claim or Equity Interest is impaired under the Plan and
either (i) such holder's Claim or Equity Interest has been scheduled by the
Debtors and is not scheduled as disputed, contingent or unliquidated; or (ii)
<PAGE>
such holder has filed a proof of Claim or Interest on or before the Bar Date set
by the Bankruptcy Court for such filings. Any claim or Equity Interest to which
an objection has been filed is not entitled to vote, unless the Bankruptcy
Court, upon application of the holder to whose Claim or Equity Interest an
objection has been made, temporarily allows such Claim or Equity Interest in an
amount that it deems proper for the purpose of accepting or rejecting the Plan.
A vote may be disregarded if the Bankruptcy Court determines, after notice and a
hearing, that such vote was not solicited or procured in good faith or in
accordance with the provisions of the Bankruptcy Code.
3. GENERAL BAR DATE. In accordance with an Order of the Court entered
on March 27, 1989, May 30, 1989 was fixed as the last day for the filing of
Claims by unsecured creditors, except such Claims that may arise from the
rejection of an executory contract pursuant to Section 365 of the Bankruptcy
Code. Subsequently, the court entered an Order on April 29, 1991, approving a
prior disclosure of the Debtors, which fixed August 1, 1991 as the last day for
filing Claims by all creditors.
4. DEFINITION OF IMPAIRMENT. Pursuant to Section 1124 of the Bankruptcy
Code, a class of Claims or Equity Interests is impaired under a plan of
reorganization unless, with respect to each Claim or Equity Interest of such
class, the plan:
(a) leaves unaltered the legal, equitable, and contractual right of
the holder of such Claim or Equity Interest; or
(b) notwithstanding any contractual provision or applicable
law that entitles the holder of a Claim or Equity Interest to demand or receive
accelerated payment of such Claim or Equity Interest after the occurrence of a
default:
(i) cures any such default that occurred before or after the
commencement of the case under the Bankruptcy Code, other than a default of a
kind specified in Section 365 (b)(2) of the Bankruptcy Code;
(ii) reinstates the maturity of such Claim or Interest as it
existed before such default;
(iii) compensates the holder of such Claim or Interest for any
damages incurred as a result of any reasonable reliance on such contractual
provision or such applicable law; and
<PAGE>
(iv) does not otherwise alter the legal, equitable or
contractual rights to which such Claim or Interest entitles the holder of such
Claim or Interest; or
(c) provides that, on the effective date of the plan, the
holder of such Claim or Interest receives, on accountof such Claim or Interest,
cash equal to:
(i) with respect to a Claim, the allowed amount of such Claim;
or
(ii) with respect to an Interest, if applicable, the greater
of:
(A) any fixed liquidation preference to which the terms
of any security representing such Interest entitle the holder of such Interest;
or
(B) any fixed price at which the debtor, under the terms
of such security, may redeem such security from such holder.
5. CLASSES IMPAIRED UNDER THE PLAN. No classes of creditors are
impaired and therefore are not entitled to vote on the Plan. All creditor
classes are deemed to accept the plan pursuant to 1126(f).
<PAGE>
ARTICLE II.
CONFIRMATION PROCEDURE
1. CONFIRMATION OF HEARING. A hearing before the Honorable William F.
Tuohey, United States Bankruptcy Judge, has been scheduled for the ______ day of
_____________, 1994, at _____ a.m./p.m., at the United States Bankruptcy Court,
Martin Luther King, Jr. Federal Building, 50 Walnut Street (Third Floor),
Newark, New Jersey 07102 to consider confirmation of the Plan. The Confirmation
Hearing may be adjourned from time to time by the Bankruptcy Court without
further notice, except for an announcement of the adjourned date made at the
Confirmation Hearing.
2. PROCEDURE FOR OBJECTIONS. Any objection to confirmation of the Plan
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 Equity
Interest held by the objector. Any such objection must be filed with the
Bankruptcy Court and served on the Debtors' counsel and all parties who have
filed a notice of appearance by 4:00 p.m. Eastern Standard Time on
____________________, 1994. Unless an objection to confirmation is timely filed
and served, it may not be considered by the Bankruptcy Court.
3. REQUIREMENTS FOR CONFIRMATION. The Bankruptcy Court will confirm the
Plan only if it meets all the requirements of Section 1129 of the Bankruptcy
Code. Among the requirements for confirmation are that the Plan be (i) accepted
by all impaired classes of Claims and Equity Interests or, if rejected by an
impaired class, that the Plan "does not discriminate unfairly" against and is
"fair and equitable" with respect to such class; (ii) feasible; and (iii) in the
"best interests" of creditors and stockholders impaired under the Plan. The
Bankruptcy Court must also find that:
(a) The Plan has classified Claims and Interests in a permissible
manner;
(b) The Plan complies with the technical requirements of Chapter 11
of the Bankruptcy Code; and
(c) The Plan has been proposed in good faith.
4. CLASSIFICATION OF CLAIMS AND INTERESTS. Section 1122 of the
Bankruptcy Code requires the Plan to place a Claim or Interest in a particular
Class only if such Claim or Interest is substantially similar to the other
Claims or Interests in such class. The Plan creates separate classes to deal
respectively with secured Claims, unsecured Claims, and shareholder Interests.
<PAGE>
The Debtors believe that the Plan's classifications place substantially similar
Claims or Interests in the same class and thus, meets the requirements of
Section 1122 of the Code.
5. VOTING AND ACCEPTANCE OF THE PLAN. As a condition to confirmation of
the Plan, the Bankruptcy Code requires each class of "impaired" Claims or
Interests entitled to vote on the Plan to vote to accept the Plan.
(a) ACCEPTANCE. The Bankruptcy Code defines acceptance of a
plan by a class of creditors as acceptance by holders of two-thirds (2/3) in
dollar amount and more than one-half (1/2) in number of those claims actually
voting. Acceptance of the plan by a class of equity interests is defined as
acceptance by holders of two-thirds of the number of shares actually voting.
Holders of Claims or Equity Interests who fail to vote will not be counted as
either accepting or rejecting the plan. A vote, moreover, may be disregarded if
the Bankruptcy Court determines, after notice and a hearing, that it was not
made or solicited in good faith.
Classes of Claims or Equity Interests that are not "impaired" under a
plan of reorganization are conclusively presumed to have accepted the plan of
reorganization and thus are not entitled to vote.
6. BEST INTERESTS TEST. The "best interests" of creditors test requires
that each holder of a Claim or Equity Interest receive or retain under the Plan
property of a value 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 members of each impaired class of Claims and Equity Interests
would receive if the Debtors were liquidated, the Bankruptcy Court must
determine the dollar amount that a liquidation of the Debtors' businesses and
assets would generate in the context of a Chapter 7 liquidation sale. The amount
available for satisfaction of Claims and Equity Interests would consist of the
proceeds resulting from the sale, reduced by the Claims of secured creditors, to
the extent of the value of their collateral, and the costs and expenses of the
liquidation.
After consideration of the effects a Chapter 7 liquidation would have
on the ultimate proceeds available for distribution to Creditors in this case,
the Debtors believe that the Plan satisfies the "best interests" of creditors
test. The Debtors liquidation analysis is attached as Exhibit B.
<PAGE>
7. THE FEASIBILITY TEST. The "feasibility" test requires the Bankruptcy
Court to find that confirmation of the Plan is not likely to be followed by the
liquidation or the need for further reorganization of the Debtors. As set forth
on Exhibit C, there will be sufficient funds on hand to make the required Plan
payments.
8. THE FAIR AND EQUITABLE TEST. If any impaired class of Claims or
Equity Interests does not accept the Plan, the Bankruptcy Court may still
confirm the Plan despite such nonacceptance. To obtain such confirmation, the
Plan must not "discriminate unfairly" and be "fair and equitable" with respect
to each impaired class of Claims or Interests that has rejected the Plan.
Under Section 1129 (b) of the Bankruptcy Code, a plan is "fair and
equitable" to a class if, among other things, the plan provides: (a) with
respect to secured Claims, that each holder of a Claim included in the rejecting
class will receive or retain on account of its Claim property that has a value,
as of the effective date of the plan, equal to the allowed amount of such Claim;
and (b) with respect to unsecured Claims and Equity Interests, that the holder
of any Claim or Equity Interest that is junior to the Claims or Equity Interests
of such class will not receive or retain on account of such junior Claim or
Equity Interest any property at all unless the senior class is paid in full. A
plan does not discriminate unfairly if the legal rights of a dissenting class
are treated in a manner consistent with the treatment of other classes whose
legal rights are similar to those of the dissenting class and if no class
receives more than it is entitled to receive on account of its Claim or
Interest.
9. OTHER REQUIREMENTS OF SECTION 1129. The Debtors believe that the
Plan meets all the other technical requirements of Section 1129 of the
Bankruptcy Code, including that the Plan has been proposed in good faith.
THE DEBTORS MAY AND SHALL SEEK CONFIRMATION OF THE PLAN IF LESS THAN
THE REQUISITE AMOUNTS OF CLAIMS OR INTERESTS IN ANY ONE OR MORE CLASSES VOTE TO
ACCEPT THE PLAN.
<PAGE>
ARTICLE III.
BACKGROUND INFORMATION
This section of the Disclosure Statement describes a brief history and
background of the Debtors.
1. INTRODUCTION. On March 17, 1988 (the "Petition Dates"), the Debtors
filed voluntary petitions for reorganization under Chapter 11 of the Bankruptcy
Code. On October 24, 1990, an Order was entered directing the joint
administration of the Debtors' cases for procedural purposes only. The Debtors
remained in possession of their assets as debtors-in-possession pursuant to
Sections 1107 and 1108 of the Bankruptcy Code, until November 5, 1991 when a
Trustee was appointed by the Office of the United States Trustee for the Third
Region.
2. DESCRIPTION OF THE DEBTORS AND THEIR BUSINESSES.
(a) DML is a New Jersey corporation engaged in the business of
producing botanical flavor and medicinal extracts. Its founder, Dr. V.H. Madis,
was born in Estonia and received his undergraduate, graduate and doctoral
degrees from the Royal Hungarian University of Science in 1938. After working in
private industry, Dr. Madis, along with his son, Voldemar, founded DML and began
processing botanical derivatives. In the early 1980's the company upgraded its
facility, and its core business of botanical extraction and wholesaling, into
the area of contract manufacturing. In 1983, an explosion in DML's plant caused
a temporary closure of the business and required repairs and renovations. As a
result, operations did not resume until December 1984. Debtor was forced to sell
its existing inventory to maintain sales, and the insurance proceeds received in
connection with the explosion were insufficient to cover reconstruction and loss
of business costs. Because operating capital was used for reconstruction rather
than for typical working capital purposes, revenue diminished and ultimately
DML's primary lender froze its line of credit facility. This inhibited DML's
ability to purchase raw materials. Efforts to generate cash flow from asset
sales, refinancing or additional capital contributions proved unsuccessful and
ultimately, the company was forced to file for protection under Chapter 11 of
the Bankruptcy Code on March 17, 1988.
<PAGE>
(b) IVM CORPORATION. IVM has no business operations. It serves
as a real estate holding company and owns the real estate and improvements
located at 375 Huyler Street, South Hackensack, New Jersey. There is a lease
agreement between IVM and DML at an annual amount of $240,000. DML also pays all
utilities.
3. REAL PROPERTY OWNED BY IVM CORPORATION AND LIENS THEREON. DML owns
no real estate. IVM owns the following real property:
(a) 375 HUYLER STREET, SOUTH HACKENSACK, NEW JERSEY. IVM owns
the operating facility of DML located at 375 Huyler Street, South Hackensack,
New Jersey. The property consists of approximately two and nine-tenths (2.9)
acres, and is improved by a single and multi-story building containing
approximately one hundred ten thousand (110,000) square feet, including
approximately five thousand (5,000) square feet of office space. The property is
encumbered by a first mortgage lien held by Columbia Savings & Loan Association
("Columbia") dated July 19, 1977, recorded July 21, 1977 in Mortgage Book 5938,
Page 8 to secure a promissory note in the original principal sum of
$1,500,000.00. Columbia filed a Proof of Claim in the IVM case on April 18, 1988
in the amount of $968,357.32. Columbia is owed the sum of $660,339.98 in
principal and accrued interest as of August 4, 1994. The balance accrues
interest at the per diem rate of $163.69. Interest only payments have been made
since the appointment of the Trustee in November, 1991.
As of filing date, the property was encumbered by mortgages held by
United Jersey Bank ("UJB"). On or about May 18, 1983, IVM executed and delivered
a promissory note in the principal sum of $1,000,000.00 to the New Jersey
Economic Development Authority ("EDA"). On or about May 18, 1983, DML executed
and delivered to the EDA a promissory note in the principal sum of
$1,500,000.00. These notes were secured by separate mortgages dated May 18,
1983, both recorded on May 20, 1983 in Mortgage Book 6540, Page 107 and Mortgage
Book, 6540, Page 133, respectively. IVM also executed an Assignment of Leases to
the EDA, which in turn assigned its Mortgages and Assignment of Lease to UJB on
May 18, 1983. On or about August 1983, UJB extended a $1,000,000.00 Credit Line
to DML, which Credit Line was secured by a mortgage made by IVM to UJB dated
August 10, 1983, and recorded November 4, 1983 in Mortgage Book 6604, Page 206.
On May 23, 1989, UJB filed separate Proofs of Claim in the DML and IVM
bankruptcy case indicating that as of the filing date, the sum of $2,799,657.20
was owed by the Debtors. Prior to the Trustee's appointment, a series of cash
<PAGE>
collateral orders respecting the Debtors' use of the real property and the
income therefrom were entered on May 2, 1988; October 6, 1988, January 30, 1989,
February 16, 1989, March 21, 1989, April 10, 1989 and May 8, 1989. As of May 5,
1989 the indebtedness owed to UJB was $2,444,199.01. As noted in Article IV of
this Disclosure Statement, IVM sold adjacent property located at 100 Huyler
Street, Teterboro, New Jersey approximately one year prior to the Trustee's
appointment and a significant portion of the Debtors' obligation to UJB was paid
from the proceeds of that sale. Weekly and subsequent monthly payments were made
representing principle and interest to UJB reducing the indebtedness as of
August 31, 1994, to $273,858.65 which accrues interest at the per diem rate of
$47.66. Subsequently, American Holdings purchased the claim of UJB for the sum
of $250,000.00 on September 13, 1994.
The property is further encumbered by a mortgage filed by International
Sabila, S.A. ("Sabila") recorded on April 30, 1987, in Mortgage Book 7283, Page
663 to secure the sum of $1,500,000.00 The mortgage was given by IVM to secure
DML's obligations under an agreement dated April 24, 1987 relating to the
purchase of raw aloe leaves by DML from Sabila as set forth in more detail in
Article IV below. On March 29, 1994, the court entered a stipulation settling an
adversary proceeding instituted by the Trustee against Sabila, wherein Sabila's
Claim was settled for $366,000.00. The Trustee has been making payments in
accordance with the stipulation and at present the balance due Sabila is
$336,000.00. Subsequently Zuellig purchased the claim of International Sabila.
The property is encumbered by a pre-petition lien for unpaid real
estate taxes and sewer/water charges. The Township of South Hackensack was
determined to hold a valid pre-petition municipal lien in the total sum of
$201,022.44 consisting of principal of $138,651.44 and accrued interest as of
May 15, 1992 of $62,371.00. The secured Claim of South Hackensack is discussed
in more detail below.
In accordance with an appraisal of the Huyler Street property dated May
8, 1992, prepared by Carl Krell, Inc., the property was appraised to have a
value of $4,400,000.00.
(b) IVM also owns a residential home located at 40 Park Slope
Terrace, Hawthorne, New Jersey. The property is subject to a mortgage made by
IVM to Columbia recorded March 7, 1986, in Mortgage Book 196, Page 42 to secure
the original principal sum of $200,000.00. The mortgage was assigned by Columbia
to Interboro Savings & Loan Association ("Interboro") on October 15, 1987, in
<PAGE>
Assignment of Mortgage Book N14, Page 147. The home is occupied by Dr. V.H.
Madis.
Interboro filed a motion for relief from the automatic stay on August
14, 1992. The stay motion was continued to enable Interboro to submit an
appraisal. On May 3, 1993 a Consent Order was entered which provided, in part,
for the continuation of the stay and for Trustee to pay current monthly
principal and interest of $1,366.49, plus $500.00 on account of the arrearage
under the loan, for a total monthly payment of $1,866.49. The Trustee, in turn,
received an equivalent sum from Dr. Madis as rent for the home. On October 4,
1993, another Consent Order was entered continuing the monthly payments and
providing for a continuation of the hearing. Although the stay was lifted on the
latest hearing date, the Trustee and Interboro have since agreed that the
monthly adequate protection payments will continue until September 1, 1994.
Interboro's appraisal of the Hawthorne property indicates a value as as of
September 4, 1992, of $378,000.00. As of June 30, 1994, the balance owed to
Inerboro was $205,099.61, which accrues interest at the per diem rate of $30.22.
<PAGE>
ARTICLE IV.
SIGNIFICANT EVENTS DURING THE CHAPTER 11 CASE
This section of the Disclosure Statement summarizes significant events
during the debtor-in-possession period and since the Trustee's appointment.
1. DEBTOR-IN-POSSESSION PERIOD FROM MARCH 17, 1988 TO NOVEMBER 5, 1991.
(a) SALE OF 100 HUYLER STREET, TETERBORO, NEW JERSEY. On November
17, 1989, the Debtors filed a motion for authorization to sell real property
owned by IVM located at 100 Huyler Street, Teterboro, New Jersey to Panorama
Park, Inc. for the price of $1,400,000.00 The motion also sought authority for
DML to lease the property back from the purchaser. The transaction was approved
by the late Hon. Vincent J. Commisa by Order dated December 21, 1989. The
approximate sum of $1,300,000.00 was paid to UJB on account of its secured
Claims against IVM and DML from the proceeds of sale. DML remains as tenant on
the 100 Huyler Street property in accordance with a Lease Agreement dated
December 29, 1989 between DML and the purchaser's assignee, Teterboro '89
Associates. Pursuant to the lease, DML is obligated to pay fixed monthly rent in
the amount of $23,333.33. In January of 1992, the Trustee negotiated a
modification of the rental payments based on DML's cash flow problems at that
time. The modification permitted the Trustee to apply the security deposit to
the monthly rent and pay one half (1/2) of the rent for four (4) months. After
the modification period expired, the Trustee resumed monthly payments of
$24,105.24, which includes a real estate tax escalation above the fixed base
rental amount. On July 13, 1994, $31,666.67 was paid to bring the lease up to
date. The lease expires on December 31, 1994, and as of September 1st the sum of
$72,315.72 remains on the lease.
(b) DEBTOR'S FAILURE TO PAY PAYROLL, INCOME AND FICA TAXES,
REAL ESTATE TAXES AND SEWER AND WATER CHARGES. After filing for bankruptcy
protection, the Debtors operated their businesses as Debtors-in-Possession
pursuant to 1107 and 1108 of the Bankruptcy Code. For the period from December
1989 through December 1991, DML fell behind in its obligation to pay payroll
taxes, income taxes and FICA taxes in the total amount of $227,769.13. IVM
Corporation also failed to pay federal taxes amounting to $145,186.00. In
addition, IVM Corporation did not pay real estate taxes, sewer and water use
charges, and accrued interest thereon, during the Debtor-in-Possession period.
The total arrearage owed by IVM to the Township of South Hackensack through
February 1991 was approximately $430,000.00.
<PAGE>
(c) STAY MOTION BY TOWNSHIP OF SOUTH HACKENSACK AND TAX
FORECLOSURE SALE. On March 11, 1991, the Township of South Hackensack filed a
motion seeking relief from the automatic stay. The motion was resolved by the
entry of a Consent Order on April 9, 1991 which provided, in part, that the
Debtors agreed to (1) pay the sum of $105,000.00 to the Township on or before
April 24, 1991, (2) remain current on all payments of taxes, sewer and water use
charges, and (3) permit the automatic stay to be lifted upon submission by the
Township of an EX PARTE Application to the Court in the event the Debtors failed
to make the specified payments or confirm a Plan of Reorganization by August 1,
1991. On June 17, 1991 the Court entered an EX PARTE Order vacating the
automatic stay and on August 8, 1991, the Township of South Hackensack held a
tax foreclosure sale. At the sale, the Township purchased the tax sale
certificate for the sum of $323,566.54, consisting of taxes for 1987-1988 in the
principal sum of $90,823.92 with accrued interest of $64,258.71, and the sewer
charges for the years 1987- 1990 in the principal sum of $121,530.61 with
accrued interest of $46,853.30. Township would not accept Debtors payments
thereafter as they wanted to be paid in the entirety.
(d) CONSENT ORDER WITH INTERNAL REVENUE SERVICE. In March
1990, the Internal Revenue Service filed a motion which sought an Order
dismissing or converting the Debtors' cases for failure to pay federal taxes. On
April 6, 1990, an Order was entered which provided that DML make a payment to
the Internal Revenue Service in the amount of $10,000.00 per week and that upon
DML's failure to do so, the Internal Revenue Service was entitled to submit an
Affidavit requesting conversion of the case to Chapter 7. The Order was silent
with respect to the outstanding amount of taxes paid as of that date.
(e) THE DEBTORS' PLAN OF REORGANIZATION. On August 24, 1990,
the Debtors filed a joint Plan of Reorganization and Disclosure Statement.
Objections to the Disclosure Statement were filed by the Township of South
Hackensack and International Sabila, S.A. On April 17, 1991, an Amended
Disclosure Statement and Plan were filed by the Debtors and on April 29, 1991 an
Order was entered approving the Disclosure Statement and Amendment, and fixing a
confirmation hearing date for June 14, 1991. On May 31, 1991 the Internal
Revenue Service filed an objection to Debtors' Plan. After numerous adjournments
of the confirmation hearing, the Plan was withdrawn.
<PAGE>
2. SIGNIFICANT EVENTS SINCE APPOINTMENT OF TRUSTEE.
(a) ADVERSARY PROCEEDING AGAINST TOWNSHIP OF SOUTH HACKENSACK. As
----------------------------------------------------------
noted in Paragraph 1(b) of this Article, the Township of South Hackensack
obtained relief from the automatic stay and purchased a tax sale certificate for
unpaid real estate taxes, water and sewerage charges and interest thereon. On
April 8, 1992, the Trustee filed an adversary proceeding against the Township to
vacate prior Orders of the Court lifting the automatic stay, to reimpose the
stay, and to determine the extent and validity and priority of the Township's
municipal liens. The Complaint also sought to restrain the Township from
proceeding to an IN REM tax foreclosure judgement. The adversary proceeding was
- -- ---
resolved by the entry of a Consent Order on June 8, 1992. Under the Consent
Order, the automatic stay was reinstated and the Township was determined to hold
a valid pre-petition municipal lien in the principal amount of $138,651.44, plus
accrued interest in the amount of $62,371.00 as of May 15, 1992. The Township
was also determined to hold an administrative expense claim in the principal
amount of $182,059.14, plus accrued interest of $21,829.29 as of May 15, 1992.
Pursuant to the Consent Order, the Trustee paid the sum of $86,000.00 on account
of all post-petition administrative charges, thus satisfying the Township's
administrative expense claim in full. Additionally, the Trustee commenced
making monthly adequate protection payments of $1,155.43 to the Township,
representing interest on the Township's pre-petition municipal lien.
(b) OFFER AND MOTION OF TRIARCO CORP. On May 8, 1992, a Motion
was filed by Triarco Corp. which sought to compel the Trustee to accept or
reject Triarco's offer to purchase all of the assets of both Debtors for the sum
of $2,500,000.00. The Motion was filed as a result of Triarco's dissatisfaction
with the Trustee's rejection of the offer as being inadequate. On June 1, 1992,
the Trustee filed a response and objection to Triarco's Motion and on June 11,
1992, an Order was entered denying the Motion.
(c) OPPOSITION TO REQUEST FOR PAYMENT OF ATTORNEYS' FEES AND COSTS
BY ALFIO LANUTO. As noted in Paragraph 1(c) of this Article, prior to the
Trustee's appointment the Debtors entered into a Consent Order with the Township
of South Hackensack. The Order that was submitted to the Court, in part,
recognized an entitlement to counsel fees of $20,598.82 to Alfio S. Lanuto,
Esq., the Township's attorney. The Court deleted the portion of the Order which
recognized Mr. Lanuto's entitlement to fees and directed that any fees be fixed
upon and after Application to the Court. Mr. Lanuto filed a fee Application
<PAGE>
seeking fees of $28,100.00, and costs of $44.75. A hearing on M. Lanuto's fee
application was scheduled for December 18, 1991. The Trustee filed an objection
on various grounds, including the absence of a Court Order retaining Mr. Lanuto,
and the lack of any benefit to the bankruptcy estates. The hearing was adjourned
several times, and ultimately on the latest hearing date of December 14, 1992,
Mr. Lanuto withdrew his application.
(d) INVESTIGATION OF CLAIMS RELATING TO 1983 EXPLOSION. An
explosion occurred at DML's facility on September 12, 1983. The Debtor contended
that the explosion caused a loss of saleable products and substantial cash flow
problems. Specifically, the Debtor asserted that a defect in the production of
Veragel(R), its major product at that time, was a consequence of the explosion.
On March 19, 1985, DML submitted a claim to the Chubb Group of Insurance
Companies ("Chubb") under DML's insurance policy #694 11 81, which was
underwritten by Federal Insurance Company ("Federal"). After a series of
correspondence between the parties, the claim was denied.
Upon the Trustee's appointment, the Debtors' management placed great
emphasis on the value of the claim and asserted that coverage was wrongfully and
improperly denied. However, the Debtors took no action in the Bankruptcy Court
against Chubb or Federal. The Trustee, with the assistance of his counsel,
conducted an extensive review of the files relating to the insurance claim, and
commenced negotiations with Chubb and Federal. Chubb and Federal remained
steadfast in their denial of the claim. On June 3, 1992, the Trustee filed a
Complaint against Federal and Chubb seeking a declaration that the claim was
covered by the insurance policy, and for damages. The adversary proceeding was
filed to preserve the bar date under the policy which was June 4, 1992.
Ultimately, the Trustee determined that the facts of the matter were not
favorable and that it would be in the best interests of the estate to
voluntarily dismiss the adversary proceeding. This was done with the
participation and knowledge of the Debtors and their counsel, and on November
13, 1992 an Order was entered dismissing the adversary proceeding.
(e) ADVERSARY PROCEEDING AGAINST INTERNATIONAL SABILA, S.A. DML's
principal supplier of raw aloe leaves used in the production of Veragel(R) was
International Sabila, S.A. ("Sabila"). As of December 31, 1986, DML was
indebted to Sabila in the sum of $260,282.55 for past purchases of raw aloe
leaves. In early 1987, DML requested that Sabila supply additional raw
materials. Sabila agreed to do so only if arrangements were made to address
the outstanding
<PAGE>
balance, and to provide collateral for further purchases by DML. On April 24,
1987, Sabila, DML and IVM entered into an Agreement which provided, in part,
that DML would pay the balance of $262,000.00 to Sabila in equal monthly
installments, at 6% interest per year, until the balance was fully paid. The
Agreement also provided that DML would purchase minimum amounts of Aloe product
in the future.
To secure the obligations of DML to pay the prior balance, and to pay
for future shipments, DML granted Sabila a security interest in all of its
machinery, equipment, furniture and fixtures, and proceeds. As further security
for DML's obligations under the Agreement, IVM granted Sabila a mortgage on the
375 Huyler Street property in the sum of $1.5 million. The mortgage amount
corresponded to the amount of further credit that Sabila was to extend to DML
under the Agreement. Sabila perfected its security interests in the DML assets
by filing a UCC financing statement, and also duly perfected its mortgage lien
by filing the mortgage with the appropriate recording office.
DML made several payments on account of the past debt and thereafter
defaulted under the Agreement. DML also received additional Aloe product, for
which only partial payment was made. The Agreement provides that in the event of
a default by DML, interest shall accrue on the amount owed at the rate of 14%
per year. By letter dated May 22, 1989, Sabila notified DML of its default under
the Agreement and demanded payment, including interest of $78,729.44 as of May
1988. DML's records indicated that as of October 1989, the principal sum of
$314,809.30, exclusive of interest, was owed to Sabila. Prior to the Trustee's
appointment, the Debtors filed an Amendment and Supplement to their Joint Plan
and Disclosure Statement which recognized that Sabila was a valid secured
creditor and that as of October 12, 1990, Sabila was owed the sum of
$519,029.06. Based on the accrual of interest under the Agreement, Sabila would
currently be owed in excess of $700,000.00.
On June 24, 1993, the Trustee filed an adversary proceeding against
Sabila. The Complaint sought to determine the validity, priority and extent of
the liens of International Sabila and to avoid and recover preferential and
fraudulent transfers. The Trustee alleged, INTER ALIA, that the $260,282.55 past
due obligation was satisfied by virtue of an assignment by Voldemar Madis of his
preferred stock in the Debtors; that the mortgage lien and security interests
were fraudulent conveyances since there was no balance owed to Sabila at the
time; that certain payments made by DML to Sabila were preferential; that the
mortgage lien given by IVM to Sabila was a fraudulent conveyance since IVM was
<PAGE>
not indebted to Sabila; and that the granting of the mortgage lien and security
interests to Sabila were themselves preferential.
There were various difficulties with the Trustee's case, including the
existence of a letter written by Voldemar Madis which purportedly withdrew his
offer to convey his stock in satisfaction of the $260,282.55 debt; that the
liens and security interests of Sabila were validly perfected and recorded, thus
undermining the Trustee's preference argument; that Sabila gave substantial "new
value" in the form of additional Aloe shipments after the granting of the
security interests; that the Trustee's witnesses would consist of the Debtors'
shareholders and employees who lacked credibility since the Debtors' Amended
Disclosure Statement acknowledged the secured claim of Sabila; and that the
documentation pertaining to the relevant issues were conflicting, inconsistent
and unclear.
The adversary proceeding was settled on the basis that Sabila was
afforded an allowed secured claim of $366,000.00, of which $30,000.00 has been
paid by the Trustee. The balance of $336,000.00 shall be paid over a three (3)
year period with monthly payments of $1,400.00 representing interest only at 5%
during the first year, and monthly payments of $14,740.79 for the second and
third years, representing principal and interest at 5% per year. Sabila's
mortgage liens and security interests were deemed valid and perfected on the
assets of DML and IVM and Sabila waived all other liens, claims and interests of
any nature against the bankruptcy estates. On March 29, 1994, a Stipulation and
Order was entered approving the settlement and dismissing the adversary
proceeding.
(f) TRUSTEE'S NEGOTIATIONS WITH SYNTHELABO S.A. ("SBO") AND
SOCIETE EURIPEENNE DE PLANTES ET EXTRAITS ("SEPEX"). During the Trustee's
involvement, the Debtors and the Trustee actively sought to market the Debtors'
assets in order to fund a Plan of Reorganization. The Debtors and their counsel
had extensive negotiations with two French companies, Synthelabo S.A. ("SBO")
and Societe Europeenne de Plantes Et Extraits ("SEPEX"). Pursuant to these
negotiations, various draft agreements were prepared, including a trademark and
technology purchase and assignment agreement, a license agreement, a
distributorship agreement and a sales representative agreement. In general, the
negotiations contemplated a transfer of certain trademarks and technology by DML
to SBO for a cash payment, with DML retaining the right to recover the
transferred property in the future. SBO was to license back to DML the rights
transferred in exchange for DML's payment of a 10% royalty. Additionally, SEPEX
<PAGE>
was to obtain the exclusive right to market DML's products outside the United
States, and the parties discussed a reciprocal arrangement authorizing DML to
sell certain SEPEX products in the United States on a commission basis. After
lengthy negotiations, the parties were ultimately unable to reach an acceptable
agreement which could be utilized by the Debtors and Trustee in formulating a
Plan of Reorganization, and the negotiations terminated.
(g) POST PETITION TAXES AND TRADE DEBT DML's financial performance is
greatly improved since filing for Chapter 11. All post-petition payroll and FICA
taxes are paid. Unpaid interest of $88,504 and a penalty of $85,769.03 remain
unpaid. This debt was incurred before the Trustee's appointment and has not been
paid as it was not part of his obligation.
Trade debt upon filing for Chapter 11 was $865,534.46. As of August
31, 1994, post-petition trade debt is $270,103.03.
Accounts Receivable upon filing for Chapter 11 was
$638,669.89. As of August 31, 1994, receivables are $1,041,842.53.
The present management has been the same since the filing of
the Chapter 11 and the Trustee has permitted the management to continue their
role in the operation of the Debtors. If the Debtors' Plan is confirmed, the
present management will continue.
(h) AGREEMENT WITH PDK LABORATORIES, INC. After extensive negotiations,
the Chapter 11 Trustee has entered into agreements with DMLAC, the nominee of
PDK Labs, Inc. In general, the agreements provide for the sale of substantially
all of the assets of DML to DMLAC, and the lease by DMLAC of the 375 Huyler
Street property from IVM. On November 11, 1994 DML, IVM and Equity Interests
entered into a Merger Agreement with American Holdings and MACO.
<PAGE>
ARTICLE V
ENVIRONMENTAL CONCERNS REGARDING THE DEBTORS' PROPERTY
The Trustee and his professionals have addressed a variety of
environmental issues relating to DML's operations and the 375 Huyler Street
property which are described as follows:
1. UNDERGROUND STORAGE TANK ISSUES. Fifteen (15) underground storage
tanks ("UST") and four (4) above ground storage tanks ("AGST") are located at
the 375 Huyler Street, South Hackensack, New Jersey facility (the "Facility").
All of the AGSTs and nine (9) USTs at the Facility have been taken out of
service. The remaining six (6) USTs are operational and serve the Facility. The
USTs and AGSTs, which have been taken out of service, are approximately fifteen
(15) to twenty-five (25) years old.
An environmental audit of the Facility was conducted in 1988 by an
environmental consulting firm, Clayton Environmental Consultants, Inc.
("Clayton"). Clayton detected existing soil and groundwater contamination at the
Facility. The report generated by Clayton revealed that soil samples collected
and analyzed from the western part of the Facility contained petroleum
hydrocarbon ("PHCs") contamination in excess of the New Jersey Department of
Environmental Protection and Energy's ("DEPE") informal guidelines. Further, the
report indicated that laboratory analysis of groundwater samples did not reveal
contamination of priority pollutant volatile organic compounds, has determined
that no further work or remediation is necessary regarding UST No. E-7.
2. INDUSTRIAL SITE RECOVERY ACT ("ISRA") (FORMERLY KNOWN AS THE
ENVIRONMENTAL CLEANUP RESPONSIBILITY ACT ("ECRA")) ISSUES. Generally, in New
Jersey, before an industrial property or the assets of the company can be
transferred, approval from the DEPE is required. This is required pursuant to
ISRA (which was formerly known as ECRA). However, there are certain exceptions.
In anticipation of a sale of DML's assets, the Trustee, on or about
August 5, 1992, filed with the DEPE a letter of nonapplicability ("LNA")
application. The LNA application sought to exempt DML from the requirement to
obtain approval from the DEPE before selling the assets of DML and/or IVM to a
third party.
The basis for the LNA application was that the Facility is not an
industrial establishment, then covered by ECRA. Because of the type of work
conducted at the Facility, the Trustee argued that DML's standard industrial
classification number was not covered by ECRA, which would require approval of
the DEPE on the sale of the assets. The DEPE ultimately agreed with the Trustee
<PAGE>
and issued a LNA on September 18, 1992.
3. RESULTS OF PHASE II SOIL INVESTIGATION. In furtherance of the Phase
II, on June 1 through 3, 1994, DRAI conducted soil sampling around the various
tanks at the Facility. The results, which were available on July 13, 1994,
indicated two (2) areas of concern. The first was around Tank No. 6, which is a
two hundred fifty (250) gallon gasoline underground storage tank ("UST"). The
second area of concern is Tank No. 5, which is a one thousand (1,000) gallon No.
2 fuel oil UST.
The sample results obtained around Tank No. 6 indicated levels of
xylene in excess of the DEPE'S most stringent standard of ten (10) parts per
million ("ppm"). The results of the soil samples collected around Tank No. 5
indicated levels of petroleum hydrocarbons above DEP's guidelines of ten
thousand (10,000) ppm. Based on these foregoing results, there is a requirement
that the DEP be notified that a discharge occurred from these two (2) tanks. The
DEP will most likely require that the two (2) USTs be closed and that the
contaminated soil surrounding the tanks be excavated. The DEP will also most
likely require groundwater monitoring at these areas.
The Trustee obtained a cost estimate from Dan Raviv Associates Inc. to
address the two (2) USTs that are of concern. The cost estimate is approximately
$32,000.00. This cost estimate includes removal of the USTs, removal and
disposal of contaminated soil from each UST excavation, the installation of one
monitoring well in each excavation and a collection of one round of samples from
each well for laboratory analysis. Based on the results of those tests, the DEP
may require additional work. However, if the results of the initial
investigation, proposed in DRAI's estimate, indicate no further environmental
issues, DRAI will recommend to the DEP that no further action be taken by IVM.
Debtors intend to conform with the clean up plan initiated by the
Chapter 11 Trustee. A fund up to $200,000.00 will be set aside for this purpose.
In addition Successor Corporation will reimburse IVM up to the sum of
$80,000.00 in connection with the remediation of environmental problem and more
specifically the environmental tanks.
<PAGE>
ARTICLE VI
SUMMARY OF PLAN OF REORGANIZATION
The following is a brief summary of certain provisions of the Debtors'
Plan. This summary does not purport to be complete, the reader is urged to
review the Plan in full. A copy of the Plan is annexed to this Disclosure
Statement.
1. INTRODUCTION. In formulating the Plan, the goal was to find an
acceptable method for satisfying the Claims of Creditors and the Interests of
Interest holders in accordance with the priorities and requirements of the
Bankruptcy Code. There is a need to balance the competing Interests of the
various classes of Creditors and Interest holders to formulate a plan which is
fair and feasible. Debtors believe this Plan has greater recovery to Debtors and
Stockholders.
2. CLASSIFICATION OF CLAIMS AND INTERESTS AND THEIR TREATMENT UNDER THE
PLAN. The Plan classifies Claims and Equity Interests separately in accordance
with the Bankruptcy Code and provides different treatment for different Classes
of Claims and Interests. As described more fully below, the Plan provides,
separately for each class, either that the Claims or Interests are unimpaired or
that holders of the Claims will receive various types of distributions under the
Plan. Distributions on account of Allowed Claims under the Plan will be in full
settlement, satisfaction and discharge of such Claims. Upon confirmation of the
Plan, (i) the Debtors will be discharged from all Claims that arose before
confirmation of the Plan, except for payments and distributions provided for in
the Plan or the Confirmation Order, and (ii) all Equity Interests will be deemed
to be terminated, canceled and annulled, except as provided for in the Plan or
the Confirmation Order.
(a) UNCLASSIFIED CLAIMS. Pursuant to Section 1123 (a)(1) of the
Bankruptcy Code, Claims of a kind including those specified in Sections 507(a)
(1) or (a)(7) of the Bankruptcy Code, may not be designated in a class. Thus,
Administrative Claims and Priority Tax Claims against the Debtors shall be
treated separately as unclassified Claims.
(i) ADMINISTRATIVE CLAIMS. Administrative Claims are Claims
against the Debtors 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, including any actual and necessary costs and expenses of operating the
Debtors' businesses, any indebtedness or obligations incurred or assumed in
<PAGE>
connection with the conduct of the businesses, any allowance of compensation or
reimbursement of expenses to the Trustee or professionals to the extent allowed
by the Bankruptcy Court under Sections 330 and 331 of the Bankruptcy Code, and
fees or charges assessed against the Debtors' estates under Section 1930,
Chapter 12, Title 28, United States Code. These Claims consist primarily of (i)
payables incurred in the ordinary course of business of DML's and the Trustee's
post-petition operations, (ii) the commissions, fees and expenses, as approved
by the Court, for the Trustee, professional persons retained by the Debtors,
Trustee and the Creditors' Committee, (iii) certain post-petition taxes and
water and sewer use charges incurred by the Debtors on the South Hackensack
property before the Trustee's appointment; (iv) post-petition payroll, income
and FICA taxes incurred by the Debtors before the Trustee's appointment and
interest and penalties accrued thereon; and (v) post-petition rental obligations
remaining due to Teterboro '89 Associates for DML's lease of the 100 Huyler
Street Teterboro, New Jersey property.
Each professional person or firm which holds or asserts a Claim for
fees and costs as an administrative expense Claim that accrued before the
Confirmation Date shall file with the Bankruptcy Court, and serve on all parties
required to receive notice, no later than sixty (60) days after the Confirmation
Date, a fee application. Failure to timely file a fee application shall result
in the administrative Claim being forever barred and discharged.
Chapter 11 Trustee estimate of professional fees in the Chapter 11
cases, exclusive of services to be rendered post-confirmation, will total
approximately $583,000.00. In addition, the Chapter 11 Trustee estimates that
his commission will be in the approximate amount of $600,000.00. This is an
estimate only and the amount of such fees and commissions may be lower or
higher. The following schedule sets forth the professional persons and an
estimate of their fees, costs and commissions:
<TABLE>
<CAPTION>
Estimate of Unpaid Fees
PROFESSIONAL POSITION THROUGH CONFIRMATION
<S> <C> <C>
Edward P. Bond Chapter 11 Trustee $600,000.00
Cole, Schotz, Meisal, Trustee's Counsel $200,000.00
Forman & Leonard, P.A.
Bederson & Company Trustee's Accountants $150,000.00
John Sywilok, Esq. Debtor's Counsel $150,000.00
Michael Kopelman, Esq. Counsel to Creditors' $ 50,000.00
Committee
<PAGE>
Lampf, Lipkind, Prupis, Special Counsel for $ 5,000.00
Petigrow & LaBue Debtors (ESOP)
Dan Raviv Associates, Trustee's Environmental $ 13,000.00
Inc. Consultant
</TABLE>
The Chapter 11 Trustee & Debtors reserve their rights to object to the
fee applications of certain of the foregoing professionals, if appropriate.
The Plan provides for payment or treatment of Administrative Claims as
follows:
<TABLE>
<CAPTION>
Estimate of Unpaid Fees
PROFESSIONAL POSITION THROUGH CONFIRMATION
<S> <C> <C>
John F. Chiodi Debtors' Accountant $ 15,000.00
</TABLE>
(A) Payment of the administrative fees and expenses to the
Trustee, the professionals retained by him, counsel for the Debtors and
professionals retained by the Debtors' counsel for the Creditors' Committee, and
payment of the post-position real estate taxes and water and sewer charges due
to the Township of South Hackensack shall be made on the Consummation Date.
In addition to the above listed professional fees, timely payments have
been made to Bederson & Co., Cole, Schotz, Meisel, Forman & Leonard and Dan
Raviv Associates Inc. in compliance with Consent Orders.
(B) The accounts payable incurred by the Trustee in the
operation of DML's business shall be paid by Debtor in the ordinary course of
business from and after the entry of an order confirming the Plan up to the
Effective Date. All such Claims in existence on and after the Effective Date
shall be assumed by, and paid in the ordinary course of business until fully
satisfied.
(C) Accrued taxes and other expenses as of the Effective Date,
including payroll taxes and accrued expenses will be paid on the Consummation
Date.
(D) Payment of $174,323.00 to the Internal Revenue Service for
penalties and accrued interest on post-petition payroll taxes, income taxes and
FICA taxes which were incurred by DML before the Trustee's appointment will be
made on the Consummation Date.
(E) Chapter 11 Trustee states the following: "No payment to
the Internal Revenue Service for accrued penalties and interest on post-petition
federal taxes not paid by IVM before the Trustee's appointment. The accrued
penalties and interest totalled approximately $108,000.00 as of June 30, 1994.
<PAGE>
No payment will be made on penalties and interest accrued due to a mistake by
IVM's accountant. IVM's 1989 Federal Tax Form 1120 was improperly prepared on a
consolidated basis with DML's tax return due to the erroneous belief that a
parent-subsidiary relationship existed between the two companies. The Trustee
and his accountants discovered that this relationship did not exist and
subsequently amended the tax returns, giving rise to the penalties and interest
on the resulting tax liability, the principal amount of which has been fully
eliminated by the application of loss carrybacks since the Trustee's
appointment". Debtors dispute the same and will contest with IRS.
(F) Payment of $1,046.95 to the bankruptcy trustee in the case
of AAA TRUCKING CORPORATION, United States Bankruptcy Court for the District of
New Jersey, Case No. 90-20606 (WFT) in accordance with a Consent Order entered
in that case in August 1992 will be made on the Consummation Date.
(G) The remaining amounts due under DML's lease with Teterboro
'89 Associates will be paid by Debtors as and when due under the Lease.
(ii) PRIORITY TAX CLAIMS. All Allowed Priority Tax Claims
shall consist of any Claim held by a federal, state or local governmental unit
entitled to priority in payment under Section 507(a)(7) of the Bankruptcy Code.
Each holder of an Allowed Priority Tax Claim shall receive, on the Consummation
Date, the allowed amount of such Claim. Debtors estimate such Claims total
$244,340.00.
(b) CLASSIFIED CLAIMS AND INTERESTS. The following is a
description of the Plan's classification of those Claims against and Equity
Interests in the Debtors required to be classified under the Bankruptcy Code.
(i) CLASS 1 - SECURED CLAIM OF TOWNSHIP OF SOUTH HACKENSACK.
--------------------------------------------------------
Class 1 shall consist of the Allowed Secured Claim of the Township of South
Hackensack, which is not impaired. The Township of South Hackensack will be
deemed the holder of an Allowed Secured Claim in the amount of $201,022.44,
representing unpaid pre-petition real estate taxes and water and sewer use
charges agreed upon in the June 8, 1994 Consent Order. On the Consummation Date,
the Debtors shall pay the sum of $201,022.44 in full payment of this Claim.
(ii) CLASS 2 - SECURED CLAIM OF COLUMBIA SAVINGS & LOAN
--------------------------------------------------
ASSOCIATION. Class 2 shall consist of the Allowed Secured Claim of Columbia,
which is not impaired. As of the Effective Date, Columbia shall be deemed the
holder of an Allowed Secured Claim in the amount of $660,339.98. On the
Consummation Date, Debtors shall pay Columbia the sum of $660,339.98 in full
<PAGE>
satisfaction of its Claim.
(iii) CLASS 3 - SECURED CLAIM OF AMERICAN HOLDINGS. Class 3
----------------------------------------------
shall consist of the Allowed Secured Claim of American Holdings ("AMH"), which
is not impaired. This claim was purchased from United Jersey Bank. As of the
Effective Date, AMH shall be deemed the holder of an allowed Secured Claim in
the amount of $279,664.00. DML shall pay AMH the sum of $279,664.00 in fifteen
equal monthly installments.
(iv) CLASS 4 - SECURED CLAIM OF INTERBORO SAVINGS & LOAN
---------------------------------------------------
ASSOCIATION. Class 4 shall consist of the Allowed Secured Claim of Interboro,
which is not impaired. As of the Effective Date, Interboro shall be deemed the
holder of an Allowed Secured Claim in the amount of $205,099.61. Interboro shall
retain its mortgage lien on the 40 Park Slope Terrace, Hawthorne, New Jersey
premises owned by IVM, and shall receive monthly payments of $1,972.00,
representing principal reduction and interest payments on the claim at the
annual rate of nine (9%) percent for a period of two hundred three (203) months
until the claim is fully paid. In the event that IVM defaults in any payment,
Interboro's sole remedy shall be to foreclose its mortgage and pursue all of its
rights under its loan documents in accordance with applicable state law.
(v) CLASS 5 - SECURED CLAIM OF ZUELLIG GROUP N.A., INC.
----------------------------------------------------
Class 5 shall consist of the Allowed Secured Claim of Zuellig Group, Inc. in the
amount of $336,000.00 which is not impaired. This claim was purchased by Zuellig
from International Sabila. Successor Corporation shall pay the sum of
$336,000.00 in accordance with the stipulation and order entered in the
Bankruptcy Court.
(vi) CLASS 6 - PRIORITY NON-TAX CLAIMS. Class 6 shall consist
----------------------------------
of Claims entitled to priority pursuant to Sections 507(a)(2), (3), (4), (5) or
(6) of the Bankruptcy Code, but only to the extent that it is or has become an
Allowed Claim. The Debtors believe that no amounts are owed to members of this
Class. In the event any amounts are determined to be owed, the Debtors shall pay
creditors in this class in the full amount of their Allowed Claims on the
Consummation Date.
(vii) CLASS 7 - GENERAL UNSECURED CLAIMS. Class 7 shall
-----------------------------------
consist of all Allowed Unsecured Claims, consisting primarily of pre-petition
trade Claims. The Debtors listed a total of $865,534.46 of general unsecured
Claims on their bankruptcy schedules. The Debtors repaid certain pre-petition
unsecured claims during the debtor-in-possession period. An analysis of the
<PAGE>
Debtors' books and records conducted by the Trustee's accountants indicates
that the current amount of the Allowed General Unsecured Claims is approximately
$372,000.00. The holders of Allowed Unsecured Claims shall receive the aggregate
sum of $372,000.00, to be shared on a pro rata basis. This will constitute a
dividend of one hundred (100%) percent if all of the Claims that do not comport
with the Debtors' books and records are successfully challenged. Payment to this
class shall be made by the Trustee when the Trustee's/Debtors Claims Motion, as
defined in the Plan, is fully and finally adjudicated. In addition this class of
creditors will receive as interest: (i) $25,000.00 on the Distribution Date (ii)
$10,000.00 on each of the three consecutive anniversary dates of the
Distribution Date and (iii) 1% of the increment in DML's revenue calculated by
subtracting DML's revenue for year ending December 31, 1994 from DML's revenue
for year ending December 31, 1998 not to exceed $150,000.00 (viii) CLASS 8
- -EQUITY Interests of All Preferred Stockholders of DML. Class 8 shall consist of
the preferred stockholders of DML including the Interests of DML employee stock
ownership plan participants. The shares of issued and outstanding preferred
stock in DML are as follows: Dr. V.H. Madis (526.37); Voldemar Madis (1,343.88);
Nancy Madis (1,000); Kristin Madis (400); Heidi Madis (400); Lisa Madis (400);
Bethany Madis (400); and IVM (4,832.71). In addition, DML adopted an Employee
Stock Ownership Plan ("ESOP"), which was restated effective January 1, 1984. The
Trustees under the Plan are Voldemar Madis and Ilona Madis. DML was listed as
the Plan Administrator. The members of this class are not impaired. Each member
of this class (except the ESOP) shall retain their stock interests in DML
subject to the terms of the Merger Agreement. The ESOP will receive $100,000.00
on the Consummation Date in full satisfaction and thereafter the ESOP will be
terminated.
(ix) CLASS 9 - ALLOWED EQUITY INTERESTS OF ALL SHAREHOLDERS IN DML,
OTHER THAN CLASS 8 SHAREHOLDERS. There are one hundred (100) issued and
outstanding shares of Class A Common Stock owned as follows: Dr. V.H. Madis (38
shares); Voldemar Madis (25 shares); and IVM (37 shares). There are ten thousand
(10,000) issued and outstanding shares of Class B Non- Voting Stock as follows:
<PAGE>
J.J. Wallace, as Trustee for Dr. V.H. Madis (3,792 shares); Nancy Madis, as
Trustee for Voldemar Madis (2,491 shares); and IVM (3,717 shares). Each member
shall retain their stock interests subject to the terms of the Merger Agreement.
In accordance with Local Bankruptcy Rule 24, the Trustee's accountants have
reviewed a summary of the claims on file with the Bankruptcy Court as of
November 21, 1993. Based upon this review, as well as the Trustee's analysis of
unpaid general unsecured creditor claims as of the filing dates compared to the
present, the Trustee anticipates objecting to approximately forty (40) unsecured
claims. In several instances, the basis of the objection is the discrepancy
between the claim as filed and the claim as reflected on the Debtors' books and
records.
<PAGE>
(x) CLASS 10 - PREFERRED STOCK INTERESTS IN IVM CORPORATION. Class 10 shall
consist of the preferred stock Interests in IVM. There are twenty-one thousand
six hundred forty (21,640) authorized shares of preferred stock in IVM at
$100.00 per share, eight (8%) percent noncumulative. The issued and outstanding
shares are as follows: Dr. V.H. Madis (60); Voldemar Madis (4,973.23); Voldemar
Madis, in Trust for Kristin Madis (1,915.67); Voldemar Madis, in Trust for Heidi
Madis (1,915.67); Voldemar Madis, in Trust for Lisa Madis (1,754.17); Voldemar
Madis, in Trust for Bethany Madis (1,754.17); Ilona Quest (3,681.31); Ilona
Quest, in Trust for Wendy Quest (1,915.67); Ilona Quest, in Trust for Amy Quest
(1,915.67); and Ilona Quest, in Trust for Susan Quest (1,754.17). Each member of
this Class shall retain their Interests in IVM.
(xi) CLASS 11 - COMMON STOCK INTERESTS IN IVM CORPORATION.
Class 11 shall consist of the common stock
Interests in IVM. There are one hundred (100) issued and outstanding shares of
IVM Class A Common Voting Stock held by Dr. V.H. Madis (55.55 shares) and
Voldemar Madis (44.45 shares). Additionally, IVM Class B Common Stock shares are
owned as follows: Voldemar Madis and Family (5,675.67 shares); Donald Quest
Family (4,015.45 shares); and J.J. Wallace, Trustee for V.H. Madis (308.88
shares). The members of this Class shall retain their stock interests.
3. REJECTION OF EXECUTORY CONTRACTS AND LEASES. A Chapter 11 plan may provide
for the assumption or rejection of 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 resulting from the rejection. A Claim for
damages arising from the rejection of an executory contract or unexpired lease
shall be an Allowed Claim only if a proof of Claim is filed with the Bankruptcy
Court and served on Debtors' counsel no later than thirty (30) days after entry
of the Confirmation Order. Such a Claim is treated as a pre- petition general
unsecured Claim pursuant to the Bankruptcy Code and shall be included within
Class 10. The Plan provides for the continuance of all of DML's unexpired
executory contracts, if any.
4. MEANS FOR EXECUTION OF THE PLAN. Funds to be provided by Merger Agreement
between DML and MACO of $3,000,000.00. See attached Exhibit A-Merger Agreement
terms. In addition Debtors have cash on hand of approximately $900,000.00
which shall also be used to fund the Plan. See Exhibit E. This is a all cash
deal with no contingency other than Confirmation of Plan. The present
<PAGE>
management will continue to operate the business pursuant to employment
agreements with Successor Corporation in merger as provided in Merger Agreement.
In addition, American Holdings will pay the sum of $100,000.00 to R.G. Quintero
and Company as a finder's fee.
5. LEASE OF 375 HUYLER STREET BY IVM BY SUCCESSOR
CORPORATION. Pursuant to the terms of Merger Agreement IVM Corporation shall
lease the 375 Huyler Street facility to the Successor Corporation.
6. TIME AND
METHOD OF DISTRIBUTION. All distributions to be made under the Plan by the
Trustee in accordance with terms of Plan. Distributions on account of
post-confirmation professional fee awards shall be made upon entry of a Court
Order awarding such fees and costs. Subject to Bankruptcy Rule 9010,
distributions to holders of Allowed Claims shall be made at the address of each
holder as set forth in the proofs of Claims or proofs of Interest filed by such
holders. If any holder's distribution is returned as undeliverable, no further
distributions to such holder shall be made unless and until the Trustee is
notified of such holder's then-current address, at which time all missed
distributions shall be made to such holder without interest. Amounts with
respect to distributions which remain undeliverable sixty (60) days after the
Consummation Date shall be deposited into the Disbursement Account for payment
in accordance with the terms of the Plan.
7. DISBURSING AGENT. The Trustee will
receive and maintain all funds to be deposited into the Disbursement Account and
shall act as the Disbursing Agent for all disbursements to be made under the
Plan, including, but not limited to, the disbursements to be made on the
Consummation Date and the Unsecured Claims Distribution Date. DML will pay all
current obligations of lease with Teterboro '89 Associates, and all trade
payables when due as a going concern.
8. EFFECT OF CONFIRMATION, DISCHARGE OF
DEBTOR AND INJUNCTION. Pursuant to Section 1141(a) of the Bankruptcy Code, the
provisions of the Plan shall bind the Debtors, IVM and any holder of a Claim and
Equity Interest, whether or not the Claim or Interest is impaired under the
Plan, and whether or not the Creditor or Equity Security holder has accepted the
Plan. Pursuant to Section 1141(c) of the Bankruptcy Code, except as otherwise
provided in the Plan, the Confirmation Order shall be a judicial determination
of discharge of the Debtors from any debt that arose before the Confirmation
Date and any debt of a kind specified in Section 502(g), (h) or (i) of the
Bankruptcy Code, whether or not (i) a proof of Claim based on such debt is filed
under Section 501 of the Bankruptcy Code, (ii)
<PAGE>
such Claim is allowed under Section 502 of the Bankruptcy Code, or (iii)
the holder of such Claim has accepted the Plan. On the Effective Date, without
further notice or order, all holders of any and all such Claims shall be
enjoined automatically from asserting any Claim against the Debtors or any asset
of the Debtors. Any judgement obtained at any time, to the extent such judgement
is a determination of the Debtors' liability with respect to any such Claim,
shall be void as provided in Section 524 of the Bankruptcy Code.
9. TREATMENT OF
DISPUTED GENERAL UNSECURED CLAIMS. As soon as practicable, but in no event later
than sixty (60) calendar days after the Confirmation Date, unless otherwise
ordered by the Bankruptcy Court, objections to Claims shall be filed with the
Bankruptcy Court and served upon the holders of such Claims. No distribution
will be made to any holder of a Contested Claim unless and until such Claim
becomes an Allowed Claim pursuant to Final Order of the Bankruptcy Court.
10. RETENTION OF JURISDICTION. Under the Plan, the Bankruptcy Court retains
jurisdiction over matters that may be pending before it on the Confirmation Date
and over a variety of matters that may arise subsequently. These matters
include, but are not limited to, the following: (a) Any modification or
amendment to the Plan; (b) The classification, allowance or disallowance of
Claims and Interests and objections thereto; (c) All controversies, suits and
disputes, if any, as may arise in connection with the interpretation or
enforcement of the Plan; (d) Applications for the allowance of compensation and
reimbursement of expenses to Professional Persons for services rendered before
and after the Confirmation Date; (e) Any and all applications, adversary
proceedings and contested and litigated matters not released or discharged as of
the Effective Date, including, without limitations, proceedings relating to the
prosecution of the Debtors' Claims; (f) All proceedings to estimate Claims for
the purpose of allowance, if any; (g) All proceedings to enforce and administer
the provisions of the Plan;
<PAGE>
(h) All proceedings to correct any defect, cure any omission or reconcile
any inconsistency in the Plan or the Confirmation Order as may be necessary to
effect the purposes and intent of the Plan; (i) All proceedings to determine
such other matters as may be provided for in the Confirmation Order or as may be
authorized from time to time under the relevant provisions of the Bankruptcy
Code or any applicable law; (j) All proceedings to enforce all Orders,
judgements, injunctions and rulings entered in connection with the Debtors'
cases; and (k) All proceedings to enter such Orders as may be necessary and
appropriate in aid of confirmation and to facilitate implementation of the Plan.
If the Court abstains from exercising jurisdiction, or declines to exercise
jurisdiction, or is otherwise without jurisdiction over any matter set forth
herein, or if the Trustee or Debtors elect to bring an action or proceeding in
any forum other than the Bankruptcy Court, this Article of the Plan shall have
no effect upon and shall not control, prohibit or limit the exercise of
jurisdiction by any other court, public authority or commission having
jurisdiction over such matters.
11. MODIFICATION OF THE PLAN. The Debtors may
amend or modify the Plan before confirmation in accordance with Section 1127 of
the Bankruptcy Code and Bankruptcy Rule 3017, provided that (i) the Plan, as
modified, meets the requirements of Sections 1122 and 1123 of the Bankruptcy
Code, and (ii) the Debtor shall have complied with section 1125 of the
Bankruptcy Code. The Debtors may amend or modify the Plan after confirmation
provided that (i) the Plan, as modified, meets the requirements of Sections 1122
and 1123 of the Bankruptcy Code and (ii) the Bankruptcy Court, after notice and
a hearing, confirms the Plan, as modified, under Section 1129 of the Bankruptcy
Code. A holder of a Claim or Equity Interest that has accepted or rejected the
Plan shall be deemed to have accepted or rejected the modified Plan, as the case
may be, unless, within the time fixed by the Bankruptcy Court, such holder
changes its previous acceptance or rejection.
12. REVOCATION OF PLAN. The Debtors may revoke and withdraw the Plan at any
time before confirmation.
<PAGE>
ARTICLE VII.
LIQUIDATION ANALYSIS
In the event the Plan is not confirmed by the Court, the Debtors'
assets could be liquidated pursuant to Chapter 7 of the
Bankruptcy Code. As set forth in the Liquidation Analysis annexed as Exhibit B,
in the event of liquidation all Creditors will be paid. The Liquidation Analysis
assumes that in the event these Chapter 11 cases were converted to liquidation
proceedings pursuant to Chapter 7 of the Bankruptcy Code, only ninety (90%)
percent of the accounts receivable would be collected, and the actual saleable
value of DML's inventory would be no greater than fifty (50%) percent of its
book value.
<PAGE>
ARTICLE VIII.
CONCLUSION
Neither the filing of the Plan nor Disclosure
Statement, nor any statement or provision contained therein, nor the taking of
any action by the Debtors, a Claimant or an Interest holder with respect to the
Plan or Disclosure Statement is, or shall be deemed an admission or waiver of
any of the Debtors rights or defenses. The Debtor shall reserve all of his
rights to amend the Plan and the proposed treatment of claimants and Interest
holders. In the event confirmation does not occur or the Plan does not become
effective, no statement contained herein or in the Plan may be used or relied
upon in any manner in any suit, action, proceeding, or controversary within or
outside of this case. The Debtor further reserves any and all of his rights as
against all persons in the event the Plan is not confirmed.
THIS DISCLOSURE STATEMENT WAS APPROVED BY THE COURT, AFTER NOTICE AND A
HEARING, AS CONTAINING ADEQUATE INFORMATION SUFFICIENT FOR CLAIMANTS AND
INTEREST HOLDERS TO MAKE AN INFORMED DECISION ABOUT THE PLAN. THE DEBTORS
BELIEVE THAT CONFIRMATION OF THE PLAN IS THE BEST ALTERNATIVE FOR AND
IN THE BEST INTERESTS OF ALL PARTIES-IN-INTEREST.
/S/ VOLDEMAR MADIS
President
Dr. Madis Laboratories, Inc.
and IVM Corp.
DATED: November 18, 1994
<PAGE>
GODLESKY & SYWILOK
51 MAIN STREET
HACKENSACK, New Jersey 07601
Attorney for Debtors-In Possession
(201) 487-9390
UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF NEW JERSEY
____________________________ : HONORABLE WILLIAM F. TUOHEY
In the Matter of: CASE NOS. 88-01805 (WFT)
: 88-01806 (WFT)
DR. MADIS LABORATORIES, INC.,
: In Administratively
Debtor Consolidated Proceedings for
____________________________ : Reorganization Under
Chapter 11 of the United States
In the Matter of: : Bankruptcy Code
IVM CORPORATION, : CASE NO. 88-01806 (WFT)
Debtors Second Amended
Debtor: Joint Chapter 11 Plan of Reorganization
___________________________ of Dr. Madis Laboratories, and
IVM Corporation
Dr. Madis Laboratories, Inc. ("DML") and IVM Corporation ("IVM"), the above-
captioned administratively consolidated debtors and debtors-in-possession
("Debtors"), hereby submits the following Plan of Reorganization ("Plan")
pursuant to Section 1121(a) of Title 11 of the United States Code (the
"Bankruptcy Code").
By: /S/ VOLDEMAR MADIS
President
Dr. Madis Laboratories, Inc.
and IVM Corp.
DATED: November 18, 1994
<PAGE>
ARTICLE I
RULES OF CONSTRUCTION AND DEFINITIONS
As used in the Plan, the following terms shall have the respective
meanings specified below:
1.1 RULES OF CONSTRUCTION.
1.1.1. In the Plan, unless otherwise provided, the capitalized
terms shall have the meaning set forth in Section 1.2 of this Article.
1.1.2 Any capitalized term used in this Plan that is not
defined in Section 1.2 of this Article shall have the meaning ascribed to such
term in the Bankruptcy Code.
1.1.3 The rules of construction used in Section 102 of the
Bankruptcy Code will apply to the construction of this plan.
1.1.4 For purposes of this Plan, the meanings below and in the
Bankruptcy Code shall apply equally to the singular, plural and possessive forms
and masculine, feminine and neuter genders of the defined terms.
1.1.5 All of the foregoing definitions are intended to be, and
hereby are, part of the substantive provisions of this Plan and have the same
force and effect as any other provision of this Plan.
1.2 DEFINITIONS.
1.2.1 "ADMINISTRATION CREDITOR" shall mean any person entitled to
payment of an Administrative Claim.
1.2.2 "ADMINISTRATIVE CLAIM" shall mean any Claim constituting
a cost or expense of administration of the Debtors' Chapter 11 Cases allowable
under Section 503(b) and referred to in Section 507(a)(1) and (2) of the
Bankruptcy Code incurred by the Debtors on or after the Petition Date,
including, without limitation, the actual, necessary costs and expenses of
preserving the Debtors' estates and operating the Debtors' businesses,
including, but not limited to, compensation for legal and other services and
reimbursement of expenses awarded under Section 330(a) of the Bankruptcy Code,
and all fees and charges assessed against the Debtors' estates under Chapter
1930 of Title 28 of the United States Code incurred by the Debtors and the
Trustee from the Petition Date through the Confirmation Date. Administrative
Claim shall not include any interest earned
<PAGE>
on a Secured Claim during the period from the Petition Date through the
Effective Date.
1.2.3 "ALLOWED ADMINISTRATIVE CLAIM" shall mean any Administrative
Claim that is or becomes an Allowed Claim.
1.2.4 "ALLOWED" when used as an adjective preceding the words
"Claim" or "Equity Interest", shall mean any Claim against or Equity Interest in
the Debtors, that is scheduled by or on behalf of the Debtors as liquidated in
amount and not disputed or contingent, or proof of which was filed on or before
the date designated by the Bankruptcy Court as the last date for filing Proofs
of Claim or Equity Interests against the Debtors and, in either case, a Claim
(i) as to which no objection to the allowance thereof has been interposed within
the applicable period of limitations fixed by the Plan, the Bankruptcy Code, the
Federal Rules of Bankruptcy Procedure ("Bankruptcy Rules"), the Local Rules of
Bankruptcy Procedure or the Bankruptcy Court, or (ii) as to which an objection
has been interposed and such Claim has been allowed, in whole or in part, by a
Final Order. Unless otherwise specified in the Plan, "Allowed Claim' and
"Allowed Equity Interest" shall not, for purposes of computation of
distributions under the Plan, include interest on the amount of such Claim or
Equity Interest from and after the Petition Date.
1.2.5 "ALLOWED CLASS 1 CLAIM" shall mean the Allowed Secured Claim
of the Township of South Hackensack ("South Hackensack").
1.2.6 "ALLOWED CLASS 2 CLAIM" shall mean the Allowed Secured Claim
of Columbia Savings and Loan Association ("Columbia").
1.2.7 "ALLOWED CLASS 3 CLAIM" shall mean the Allowed Secured Claim
of American Holdings ("AMH").
1.2.8 "ALLOWED CLASS 4 CLAIM" shall mean the Allowed Secured Claim
of Interboro Savings and Loan Association ("Interboro").
1.2.9 "ALLOWED CLASS 5 CLAIM" shall mean the Allowed Secured Claim
of Zuellig Group N.A., Inc. ("Zuellig")
1.2.10 "ALLOWED CLASS 6 CLAIM" shall mean the Allowed
Unsecured Priority Claims that are or become Allowed pursuant to Section
507(a)(3), (4), (5) or (6) of the Bankruptcy Code.
<PAGE>
1.2.11 "ALLOWED CLASS 7 CLAIM" shall mean the Allowed Claims of
-----------------
Unsecured Creditors.
1.2.12 "ALLOWED CLASS 8 CLAIM" shall mean the Allowed Equity
Interests of DML employee stock ownership plan participants and preferred
stockholders.
1.2.13 "ALLOWED CLASS 9 CLAIMS shall mean the Allowed Equity
Interests of all stockholders of DML other than preferred stockholders and
employee stock ownership plan participants.
1.2.14 "ALLOWED CLASS 10 CLAIM" shall mean the Allowed Equity
Interests of the preferred stockholder of IVM.
1.2.15 "AMERICAN HOLDINGS" shall mean American Holdings, Inc.
a Delaware Corporation which trades on the national market of NASDAQ under the
symbol "Hold".
1.2.16 "ALLOWED CLASS 11 CLAIM" shall mean the Allowed Equity
Interests of the common stockholders of IVM.
1.2.17 "BALLOT" shall mean the form transmitted to Creditors
with the Plan and Disclosure Statement on which they may vote to accept or
reject the Plan pursuant to Rule 3018 of the Bankruptcy Rules and Section 1126
of the Bankruptcy Code.
1.2.18 "BANKRUPTCY CODE" shall mean the Bankruptcy Reform Act,
as amended, and as codified in Title 11 of the United States Code (11 U.S.C.101,
ET SEQ.).
1.2.19 "BANKRUPTCY COURT" shall mean the United States
Bankruptcy Court for the District of New Jersey having jurisdiction over the
Debtors' Chapter 11 Cases and, to the extent of any reference made pursuant to
28 U.S.C. 157, the unit of such District Court constituted pursuant to 28 U.S.C.
151.
1.2.20 "BANKRUPTCY RULES" shall mean the Federal Rules of
Bankruptcy Procedure originally promulgated pursuant to 28 U.S.C. 2075.
1.2.21 "BAR DATE" shall mean August 1, 1991.
1.2.22 "CASH" shall mean legal tender of the United States of
America or cash equivalents.
1.2.23 "CHAPTER 11 CASES" shall mean the Cases under Chapter
11 of the Bankruptcy Code in which DML and IVM are the Debtors.
<PAGE>
1.2.24 "CLAIM" shall mean any right to payment from the
Debtors, whether or not such right is reduced to judgement, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured, or unsecured; or any right to an equitable remedy for
breach of performance if such breach gives rise to a right of payment from the
Debtors, whether or not such right to an equitable remedy is reduced to
judgement, fixed, contingent, matured, unmatured, disputed, undisputed, secured,
or unsecured.
1.2.25 "CLAIMS MOTION" shall mean a motion filed by the
Trustee/Debtor after the Effective Date to reduce, modify and/or expunge the
Claims of Creditors.
1.2.26 "COMMITTEE" or "CREDITORS' COMMITTEE" shall mean the
Official Committee of Unsecured Creditors appointed in the Debtors' Chapter 11
Cases pursuant to Section 1102 of the Bankruptcy Code.
1.2.27 "CONFIRMATION" shall mean entry by the Bankruptcy Court
of the Confirmation Order.
1.2.28 "CONFIRMATION DATE" shall mean the date of entry by the
Bankruptcy Court of the Confirmation Order.
1.2.29 "CONFIRMATION HEARING" shall mean the hearing conducted
by the Bankruptcy Court for the purpose of considering confirmation of the Plan.
1.2.30 "CONFIRMATION ORDER" shall mean the Order entered by
the Bankruptcy Court confirming the Plan in accordance with the provisions of
Chapter 11 of the Bankruptcy Code.
1.2.31 "CONSUMMATION DATE" shall mean 30 days after the Plan has
-------------------
been confirmed.
1.2.32 "CONTESTED CLAIM" shall mean any Claim to which the
Trustee/Debtors has interposed an objection in accordance with the Plan, the
Bankruptcy Code or the Bankruptcy Rules, which objection has not been determined
by a Final Order.
1.2.33 "CREDITOR" shall mean any person that has a Claim
against the Debtors that arose on or before the Petition Date, or a Claim
against the Debtors' estates of any kind specified in Section 502(g), 502(h) or
502(i) of the Bankruptcy Code.
1.2.34 "DEBTORS" shall mean DML and IVM.
1.2.35 "DEBTORS' COUNSEL" shall mean John Sywilok, Esq.
<PAGE>
1.2.36 "DISBURSEMENT ACCOUNT" shall mean the account to be
established by the Trustee to disburse all funds.
1.2.37 "DISBURSING AGENT" shall mean Trustee.
1.2.38 "DISCLOSURE STATEMENT" shall mean the Disclosure
Statement (and all exhibits and schedules annexed thereto and referenced herein)
that relates to the Plan and that was approved by the Bankruptcy Court pursuant
to Section 1125 of the Bankruptcy Code.
1.2.39 "DML" shall mean the Debtor, Dr. Madis Laboratories, Inc.
1.2.40 "EFFECTIVE DATE" shall mean the same date as the
Consummation Date.
1.2.41 "ENVIRONMENTAL COMPLIANCE FUND" shall mean the Fund
that will be established by the Debtors for the payment of environmental cleanup
costs in an amount not to exceed $200,000.00.
1.2.42 "EQUITY INTEREST" shall mean the holder of an equity
Interest in the Debtors.
1.2.43 "FEE APPLICATION" shall mean an application of a
Professional Person under section 330 or 503 of the Bankruptcy Code for a final
allowance of compensation and reimbursement of expenses in the Chapter 11 Cases.
1.2.44 "FINAL ORDER" shall mean an Order of the Bankruptcy
Court or a Court of competent jurisdiction to hear appeals from the Bankruptcy
Court which, not having been reversed, modified, or amended, and not having been
stayed, and the time to appeal from which or to seek review or rehearing of
which having expired, has become final and is in full force and effect.
1.2.45 "INTEREST HOLDER" shall mean the holder of any interest
in the Debtors that existed on the Petition Date.
1.2.46 "IVM" shall mean the Debtor, IVM Corporation.
1.2.47 "LEASE AGREEMENT" shall mean the Lease Agreement by and
between Successor Corporation and IVM for 375 Huyler Street, South Hackensack,
N.J.
1.2.48 "MACO" shall mean Amhold MACO, Inc. the subsidiary corporation
of American Holdings, Inc. which is merging with DML.
1.2.49 "MERGER AGREEMENT" shall mean the Agreement between
MACO and DML merging the corporations.
<PAGE>
1.2.50 "PERSON" shall mean any individual, corporation,
partnership, association, joint stock company, joint venture, estate, trust,
unincorporated organization, or governmental unit or any political subdivision
thereof or other entity.
1.2.51 "PETITION DATE" shall mean March 17, 1988, the date on
which the Debtors filed their voluntary petitions for relief commencing their
Chapter 11 Cases.
1.2.52 "PLAN" shall mean this Plan of Reorganization proposed
by the Debtors either in its present form or as may be altered, amended or
modified from time to time.
1.2.53 "PRIORITY TAX CLAIMS" shall mean Claims that are
Allowed pursuant to Section 507(a)(7) of the Bankruptcy Code.
1.2.54 "PROFESSIONAL PERSON" shall mean a Person retained or
to be compensated pursuant to sections 327, 328, 330, 503(b) or 1103 of the
Bankruptcy Code.
1.2.55 "SECURED CLAIM" shall mean any Claim which is secured
by a valid lien, security interest, or other interest in property in which the
Debtors have an interest, which has been perfected properly as required by
applicable law, but only to the extent of the value of the Debtors' interests in
such property as determined pursuant to Section 506 of the Bankruptcy Code.
1.2.56 "SUCCESSOR CORPORATION" shall mean successor in
interest of the merger between DML and MACO.
1.2.57 "UNSECURED CLAIM" shall mean any Claim against the
Debtors which arose or which is deemed by the Bankruptcy Code to have arisen
before the Petition Date, and which is NOT (a) a Secured Claim pursuant to
Section 506 of the Bankruptcy Code, or (b) a Claim entitled to priority under
Section 503 or 507 of the Bankruptcy Code.
1.2.58 "UNSECURED CLAIMS DISTRIBUTION DATE" shall mean the
date which is ten (10) days after the entry of a final and nonappealable Order
or Orders with respect to the Claims Motion resolving all Contested Claims.
<PAGE>
ARTICLE 2
UNCLASSIFIED CLAIMS AND THEIR TREATMENT
2.1 ADMINISTRATIVE CLAIMS. Administrative Claims are unclassified
pursuant to Section 1123(a)(1) of the Bankruptcy Code. Each holder of an Allowed
Administrative Claim shall be paid the full amount of such Allowed
Administrative Claim in Cash on the Effective Date, or upon such other terms as
may be agreed to between such holder and the Debtors or as ordered by the
Bankruptcy Court; PROVIDED HOWEVER, that (1) accounts payable incurred by the
Trustee in the operation of DML's business shall be paid by the Trustee in the
ordinary course of business from and after the Confirmation Date to the
Consummation Date and all such claims in existence on and after the Closing Date
shall be assumed by, and paid in the ordinary course of business of, DML until
fully satisfied, (2) no payment shall be made on account of accrued penalties
and interest on post-petition taxes incurred by IVM to the Internal Revenue
Service.
Compensation to Professional Persons and others whose compensation must
be approved by the Bankruptcy Court will be paid only after the Bankruptcy Court
approves such compensation.
The Debtors shall also pay, on the Effective Date, all fees due and
payable to the United States Trustee's Office.
2.2 PRIORITY TAX CLAIMS. Priority Tax Claims are not classified pursuant
to Section 1123(a)(1) of the Bankruptcy Code. Each holder of an Allowed Priority
Tax Claim shall receive, on the Consummation Date the sum of $244,340.00 or the
Allowed amount of such Claim.
<PAGE>
ARTICLE 3
CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS
All Claims and Equity Interests are classified as follows:
3.1 A Claim is in a particular class only to the extent the Claim
qualifies within the description of Claims of that class, and only to the extent
that it is an Allowed Claim, and such Claim is in a different class to the
extent the remainder of the Claim qualifies within the description of the
different class. Pursuant to Section 1123(a)(4) of the Bankruptcy Code, all
Allowed Claims of a particular class shall receive the same treatment unless the
holder of a particular Allowed Claim has agreed to a less favorable treatment
for such Allowed Claim on or before the Confirmation Date. All Claims shall be
bound by the provisions of this Plan and are hereby classified as follows:
3.2 CLASS 1 CLAIM. The Allowed Secured Claim of the Township of South
Hckensack.
3.3 CLASS 2 CLAIM. The Allowed Secured Claim of Columbia Savings & Loan
Association.
3.4 CLASS 3 CLAIM. The Allowed Secured Claim of American Holdings.
---------
3.5 CLASS 4 CLAIM. The Allowed Secured Claim of Interboro Savings & Loan
---------
Association.
3.6 CLASS 5 CLAIM The Allowed Secured Claim of Zuellig Group N.A., Inc.
3.7 CLASS 6 CLAIM. The Allowed Unsecured Priority Claims pursuant to
Section 507(a), (3), (4), (5) or (6) of the Bankruptcy Code.
3.8 CLASS 7 CLAIM. The Allowed Unsecured Claims of Unsecured Creditors.
---------
3.9 CLASS 8 CLAIM. The Allowed Equity Interests of all DML employee
---------
stock ownership plan participants and preferred stockholders.
3.10 CLASS 9 CLAIM. The Allowed Equity Interests of all shareholders of
DML other than preferred stockholders and employee stock ownership plan
participants.
3.11 CLASS 10 CLAIM. The Allowed Interests of all preferred stockholders
----------
of IVM.
3.12 CLASS 11 CLAIM. The Allowed Interests of all common stockholders of
----------
IVM.
<PAGE>
ARTICLE 4
IMPAIRMENT OF CLAIMS AND EQUITY INTERESTS
4.1 In the event of any controversy regarding the impaired or
unimpaired status of any Claim Holders or holders of Equity Interests, the
Bankruptcy Court shall determine whether an Allowed Claim or Equity Interest or
a Class of Claims or Equity Interests is impaired or unimpaired.
4.2 IMPAIRED CLASSES. No class of creditors are impaired under this
Plan and no creditor class is entitled to vote on the Plan. All class of
creditors are deemed to accept this Plan.
<PAGE>
ARTICLE 5
PROVISION FOR PAYMENT OF THE ALLOWED SECURED CLAIM OF TOWNSHIP OF SOUTH
HACKENSACK (CLASS 1)
5.1 The Allowed Secured Claim of Township of South Hackensack is not
impaired.
5.2 The Township of South Hackensack will be deemed the holder of an
Allowed Secured Claim in the amount of $201,022.44, representing unpaid
pre-petition real estate taxes and water and sewer use charges. On the
Consummation Date, the Trustee shall pay the sum of $201,022.44 in full payment
of this Claim.
<PAGE>
ARTICLE 6
PROVISION FOR PAYMENT OF THE ALLOWED SECURED CLAIM
OF COLUMBIA SAVINGS & LOAN ASSOCIATION
("COLUMBIA") (CLASS 2)
6.1 The Allowed Secured Claim of Columbia is not impaired.
6.2 The Allowed Secured Claim of Columbia shall be treated as follows:
As of the Effective Date, Columbia shall be deemed the holder of an Allowed
Secured Claim in the amount of $660,339.98. On the Consummation Date, the
Trustee shall pay Columbia the sum of $660,339.98 in full satisfaction of its
Claim.
<PAGE>
ARTICLE 7
PROVISION FOR THE PAYMENT OF THE ALLOWED SECURED CLAIM OF AMERICAN HOLDINGS
("AMH") (CLASS 3)
7.1 The Allowed Secured Claim of American Holdings is not impaired.
7.2 The Allowed Secured Claim of American Holdings shall be treated as
follows: As of the Effective Date, AMH shall be deemed the holder of an Allowed
Secured Claim in the amount of $279,664.00. DML shall pay AMH the sum of
$279,664.00 in full satisfaction of its Claim or such amount as may be due in
fifteen equal monthly installments.
<PAGE>
ARTICLE 8
PROVISION FOR THE PAYMENT OF THE ALLOWED SECURED
CLAIM OF INTERBORO SAVINGS & LOAN
ASSOCIATION ("INTERBORO") (CLASS 4)
8.1 The Allowed Secured Claim of Interboro shall not be impaired.
8.2 The Allowed Secured Claim of Interboro shall be treated as follows:
As of the Effective Date, Interboro shall be deemed the holder of an Allowed
Secured Claim in the amount of $205,099.61. Interboro shall retain its mortgage
lien on the 40 Park Slope Terrace, Hawthorne, New Jersey premises owned by IVM,
and shall receive monthly payments of $1,972.00, representing principal
reduction and interest payments on the claim at the annual rate of nine (9%)
percent for a period of two hundred three (203) months until the claim is fully
paid. In the event that IVM defaults in any payment, Interboro's sole remedy
shall be to foreclose its mortgage and pursue all of its rights under its loan
documents in accordance with applicable state law.
<PAGE>
ARTICLE 9
PROVISION FOR THE PAYMENT OF THE ALLOWED SECURED CLAIM OF
ZUELLIG GROUP N.A. INC.
9.1 The Allowed Claim of Zuellig Group N.A., Inc. is not impaired.
9.2 The Allowed Claim of Zuellig shall be treated as follows: Zuellig
shall retain all of its rights under the Stipulation and Order Approving
Settlement and Dismissing Adversary Proceeding entered by the Court on March 29,
1994 in the adversary proceeding, EDWARD P. BOND, CHAPTER 11 TRUSTEE V.
INTERNATIONAL SABILA, S.A., Adv. Pro. No. 93-2041. Specifically, Zuellig shall
retain its security interests and liens on the Debtors' property pursuant to the
Stipulation and will receive all of the payments provided for in the Stipulation
The liens and security interests of Zuellig in and to the Debtors' assets shall
survive. The payments shall be made by the Trustee until the Consummation Date,
after which the obligation to make the payments in accordance with the
Stipulation shall be assumed and made by Successor Corporation.
<PAGE>
ARTICLE 10
PROVISION FOR THE PAYMENT OF THE ALLOWED CLAIMS PURSUANT TO
SECTIONS 507 (A) (3), (4), (5) AND (6) OF THE
BANKRUPTCY CODE (CLASS 6)
10.1 The Allowed Claims pursuant to Section 507(a) (3), (4), (5) and
(6) of the Bankruptcy Code shall be treated as follows: The Debtors believe that
no amounts are owed to members of this Class. In the event any amounts are
determined to be owed, the Trustee shall pay creditors in this class the full
amount of their Allowed Claims on the Consummation Date, or such other payments
as may be agreed to by the Trustee and Debtors and this Class.
<PAGE>
ARTICLE 11
PROVISION FOR THE PAYMENT OF THE ALLOWED UNSECURED CLAIMS (CLASS 7)
11.1 The Allowed Unsecured Claims of unsecured creditors shall not be
impaired.
11.2 The Allowed Unsecured Claims of unsecured creditors shall be
treated as follows: The holders of Allowed Unsecured Claims shall receive the
aggregate sum of $372,000.00, to be shared on a pro rata basis. This will
constitute a dividend of one hundred (100%) percent if all of the Claims that do
not comport with the Debtors' books and records are successfully challenged by
the Trustee. Payment to this class shall be made by the Trustee when the
Trustee's/Debtors Claims Motion, as defined in the Plan, is fully and finally
adjudicated. In addition this class of creditors will receive as interest:
(i) $25,000.00 on the Distribution Date
(ii) $10,000.00 on each of the three consecutive anniversary dates
of the Distribution Date and
(iii) 1% of the increment in DML's revenue calculated by
subtracting DML's revenue for year ending December 31, 1994
from DML's revenue for year ending December 31, 1998 not to
exceed $150,000.00.
<PAGE>
ARTICLE 12
PROVISION FOR THE TREATMENT OF ALLOWED EQUITY INTERESTS OF PREFERRED
STOCKHOLDERS OF DML, INCLUDING DML EMPLOYEE STOCK OWNERSHIP PLAN PARTICIPANTS
("ESOP")(CLASS 8)
12.1 Allowed Equity Interests of this class shall not be
impaired.
12.2 Allowed Equity interests of the ESOP (excluding Madis Family
members) shall receive on a pro rata basis in proportion to their respective
percentage the sum of $100,000.00 and thereafter the ESOP Plan shall be
terminated. $100,000.00 will be paid on the Consumation Date.
12.3 All other Equity Interests of this class will retain their interest
subject to the Merger Agreement between MACO and DML.
<PAGE>
ARTICLE 13
PROVISION FOR THE TREATMENT OF ALLOWED EQUITY INTERESTS OF ALL STOCKHOLDERS
OF DML, OTHER THAN PREFERRED STOCKHOLDERS AND EMPLOYEE STOCK OWNERSHIP PLAN
PARTICIPANTS (CLASS 9)
13.1 Allowed Equity Interests of this class is not impaired.
13.2 The members of this class shall retain their interest in DML
subject to the terms of the Merger Agreement between MACO and DML.
<PAGE>
ARTICLE 14
PROVISION FOR THE TREATMENT OF ALLOWED INTERESTS OF PREFERRED STOCKHOLDERS
OF IVM (CLASS 10)
14.1 Allowed Equity Interests of Preferred Stockholders of IVM is not
impaired.
14.2 The members of this class shall retain their Interests in IVM.
<PAGE>
ARTICLE 15
PROVISION FOR TREATMENT OF ALLOWED INTERESTS OF COMMON STOCKHOLDERS OF
IVM (CLASS 11)
15.1 Allowed Equity Interests of Common Stockholders of IVM is not
impaired.
15.2 The members of this class shall retain their interest in IVM.
<PAGE>
ARTICLE 16
ACCEPTANCE OR REJECTION OF PLAN
16.1 CLASSES ENTITLED TO VOTE. Each impaired class of Claims or Equity
Interests shall be entitled to vote separately to accept or reject
the Plan.
16.2 CLASS ACCEPTANCE REQUIREMENT. A class of Claims shall have accepted the
Plan if accepted by at least two-thirds in dollar amount and more than
one-half in number of the Allowed Claims of such
class that have voted on the Plan pursuant to Section 1126(c) of the Bankruptcy
Code. A class of Equity Interests shall have accepted the Plan if it is accepted
by at least two-thirds in amount of the Allowed Equity Interests of such class
that have voted on the Plan in accordance with Section 1126(d) of the Bankruptcy
Code.
16.3 DEEMED ACCEPTANCE. Since all classes of creditors are not impaired
then all classes of creditors are deemed to accept this plan.
<PAGE>
ARTICLE 17
MEANS FOR EXECUTION OF THE JOINT PLAN
17.1 REVESTING OF ASSETS OF IVM & DML. On Confirmation, title to and
possession of any and all property of the IVM and DML estate, real or personal,
tangible or intangible, shall be revested in IVM and DML on the Consummation
Date, free and clear of all liens, claims and encumbrances, except such liens
and claims expressly provided herein.
17.2 FINANCING PROVIDED BY AMERICAN HOLDINGS, INC. pursuant to the
Merger Agreement between MACO and DML the Successor Corporation shall
lease the 375 Huyler Street premises from IVM in accordance with the terms
set forth in the Merger Agreement. $3,000,000.00 in United States Treasury
Bills are being held by MACO solely for the purpose of financing the Plan. The
present management will continue to operate the business pursuant to
employment agreements with the Successor Corporation after the merger as
provided in Merger Agreement. In addition, American Holdings will pay the sum
of $100,000.00 to R.G. Quintero & Co. as a finder's fee.
17.3 ENVIRONMENTAL COMPLIANCE FUND. In addition to the Disbursement Account, the
Trustee shall establish and maintain the Environmental Compliance Fund, which
will be funded in an amount not to exceed $200,000.00. The funds in the
Environmental Compliance Fund shall be paid in the Trustee's discretion, as
incurred, to address environmental cleanup costs after the application of the
payments for this purpose by DML in accordance with the Lease Agreement. Any
funds remaining in the Environmental Compliance Fund after a no further action
letter is received from the DEPE, shall revert to DML.
17.4 TIME AND METHOD OF DISTRIBUTION.
All distributions to be made under the Plan by the Trustee, except
(a) distributions to class 7 General Unsecured Claims, (b) distributions, if
any, to Class 8 DML employee stock ownership plan participants, (c) payment of
post-confirmation professionals' fee awards, shall be made in cash within ten
(10) days of the Consummation Date. Distributions to Class 7 Claimants shall be
made on the Unsecured Claims Distribution Date. Distributions on account of
post-confirmation professional fee awards shall be made upon entry of a Court
Order awarding such fees and costs. In addition American Holdings will pay the
finder's fee required under the Merger Agreement. This is an all cash deal with
no contingency other than Confirmation of the Plan.
<PAGE>
Subject to Bankruptcy Rule 9010, distributions to holders of Allowed
Claims shall be made at the address of each holder as set forth in the proofs
of Claim or proofs of Interest
filed by such holders. If any holder's distribution is returned as
undeliverable, no further distributions to such holder shall be made unless and
until the Trustee is notified of such holder's then-current address, at which
time all missed distributions shall be made to such holder without interest.
Amounts with respect to distributions which remain undeliverable sixty (60) days
after the Consummation Date shall be deposited by the Trustee into the
Disbursement Account for payment in accordance with the terms of the Plan.
17.5 DISBURSING AGENT. The Trustee will receive and maintain all funds to be
deposited into the Disbursement Account. The Trustee shall act as the Disbursing
Agent for all disbursements to be made under the Plan, including, but not
limited to, the disbursement to be made on the Consummation Date. Successor
Corporation shall act as the Disbursing Agent as to all obligations that will
continue as a going concern, including (a) the remaining obligations under DML's
lease with Teterboro'89 Associates, (b) all other lease agreements and (c) all
trade payables. The disbursements to be made by Successor Corporation will occur
as and when such obligations become due.
17.6 BAR DATE FOR FEE APPLICATION CLAIMS. Each and every Professional Person
requesting compensation in the Case
pursuant to Sections 327, 328, 330, 331, 503(b) or 1103 of the Bankruptcy Code
shall be entitled to file a Fee Application for allowance of final compensation
and reimbursement of expenses in the Chapter 11 Cases within sixty (60) days of
the Confirmation Date, or such fees and expenses shall be deemed to be waived.
17.7 OBJECTIONS TO CLAIMS. Any objections to Claims must be filed with the
Bankruptcy Court within sixty (60) days after the Confirmation Date or within
the specific time required in any Order of the Court entered relative thereto or
shall be forever barred.
17.8 PROSECUTION OF PENDING OBJECTIONS TO CLAIMS.
Objections to Claims that are pending on the Confirmation Date shall be
prosecuted after confirmation. The Debtors shall have the discretion to litigate
to judgement, settle or withdraw objections to contested Claims. 17.9 To the
extent practicable, the Trustee as Disbursing Agent shall invest any cash and
reserve in a manner that will yield a reasonable net return taking into account
the safety of the investment.
<PAGE>
17.10 PROVISION FOR PAYMENT OF POST-CONFIRMATION PROFESSIONAL FEES AND COSTS.
The Trustee shall set aside the
sum of $100,000.00 from the Disbursement Account to be used for payment of
professional fees and costs (1) incurred by the Trustee and his professionals
after the Effective Date, and (2) awarded by the Bankruptcy Court.
17.11 A sum not to exceed $80,000.00 will be paid to IVM to remediate any
liability or environmental conditions associated with removal of the
underground tanks.
<PAGE>
ARTICLE 18
EXECUTORY CONTRACTS AND UNEXPIRED LEASES
18.1 REJECTION OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES. On the
Confirmation Date, all executory contracts and unexpired leases of the Debtors
will be deemed current and will be paid when such obligations become due.
18.2 CLAIMS BASED ON REJECTION OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES.
Any party to a lease or contract rejected pursuant to the Plan shall be
deemed an unsecured creditor included within Class 7, provided each such
Creditor files a Proof of Claim by thirty (30) days after the Confirmation Date
<PAGE>
ARTICLE 19
CONDITIONS TO CONFIRMATION
19.1 CONFIRMATION ORDER. The Plan shall be null
and void and have no force and effect unless the Bankruptcy Court enters a
Confirmation Order which shall provide, among other things, that:
19.1.1 Except
as otherwise expressly provided in the Plan, on the Confirmation Date, the
rights afforded in the Plan shall be in exchange for and in complete
satisfaction, discharge and release of all Claims against, debts of or Equity
Interests in the Debtors, their estates, assets and property, of any nature
whatsoever, and the liability and respect thereof shall be extinguished
completely, regardless of whether reduced to judgement, liquidated or
unliquidated, contingent or non-contingent, asserted or unasserted, fixed or
not, matured or unmatured, disputed or undisputed, legal or equitable, known or
unknown, that arose or are deemed to have arisen on or before the Confirmation
Date, including, without limitation, (i) all interest, if any, on any such
Claims, debts or Interests, whether such interest accrued before or after the
Petition Date, and (ii) any liability of a kind specified in Sections 502(g),
502(h) and 502(i) of the Bankruptcy Code, regardless of whether a proof of Claim
or Equity Interest is filed or deemed filed under Section 501 of the Bankruptcy
Code, such Claim of Equity Interest is allowed, or the holder of such Claim or
Equity Interest has accepted the Plan.
19.1.2 Except as otherwise provided in
the Plan, all Creditors and holders of Interests shall be precluded from
asserting against the Debtors or their estates, assets or property, any other or
further Claim or Interest based on any act or omission, transaction or other
activity of any kind or nature that occurred before the Effective Date;
provided, however, that nothing contained in the Plan shall alter the legal,
equitable and contractual rights of the holder of any Claim or Interest
specifically designated as unimpaired in the Plan.
19.1.3 The provisions of the
Confirmation Order shall not be severable and are mutually dependent.
<PAGE>
ARTICLE 20
RETENTION OF JURISDICTION
20.1 Under the Plan, the Bankruptcy Court
retains jurisdiction over matters that may be pending before it on the
Confirmation Date and over a variety of matters that may arise subsequently.
These matters include, but are not limited to, the following:
20.1.1 Any modification or amendment to the Plan.
20.1.2 The Classification, allowance or disallowance of Claims and
Interests and objections thereto;
20.1.3 All controversies, suits and disputes, if any, as may arise in
connection with the interpretation or enforcement of the Plan;
20.1.4 Applications for the allowance of compensation and reimbursement of
expenses to Professional Persons for services rendered before and after the
Confirmation Date;
20.1.5 Any and all applications, adversary proceedings and contested and
litigated matters not released or discharged as of the Effective Date,
including, without limitations, proceedings relating to the prosecution of
the Debtors' Claims;
20.1.6 All proceedings to estimate Claims for the purpose of allowance, if any;
20.1.7 All proceedings to enforce and administer the provisions of the Plan;
20.1.8 All proceedings to correct any defect, cure any omission or
reconcile any inconsistency in the Plan or the Confirmation Order as may
be necessary to effect the purposes and intent of the Plan;
20.1.9 All proceedings to determine such other matters as may be provided for
in the Confirmation Order or as may be authorized from time to time under the
relevant provisions of the Bankruptcy Code or any applicable law;
20.1.10 All proceedings to enforce all Orders,
judgements, injunctions and rulings entered in connection with the Debtors'
cases; and
20.1.11 All proceedings to enter such Orders as may be necessary and
appropriate in aid of confirmation and to facilitate implementation of the Plan.
<PAGE>
If the Court abstains from exercising jurisdiction, or declines to
exercise jurisdiction, or is otherwise without jurisdiction over any matter set
forth herein,
or if the Trustee or Debtors elect to bring an action or proceeding in any
forum other than the Bankruptcy Court, this Article of the Plan shall have no
effect upon and shall not control, prohibit or limit the exercise of
jurisdiction by any other court, public authority or commission having
jurisdiction over such matters.
<PAGE>
ARTICLE 21
EFFECTS OF PLAN CONFIRMATION
21.1 DISCHARGE. Except as otherwise expressly provided in the Plan,
pursuant to Section 1141 of the Bankruptcy Code, confirmation of the Plan shall
discharge the Trustee and the Debtors effective on the date that the
Confirmation Order becomes final and nonappealable, from any Claim and any debt
and the Debtors' liability in respect thereof is extinguished completely,
whether reduced to judgement or not, liquidated or unliquidated, contingent or
non-contingent, asserted or unasserted, fixed or not, matured or unmatured,
disputed or undisputed, legal or equitable, known or unknown, that arose from
any agreement the Debtors entered into or obligation of the Debtors incurred
before the Confirmation Date or from any conduct of the Debtors before the
Confirmation Date, or that otherwise arose before the Confirmation Date,
including, without limitation, all interest, if any, on any such Claim or debt,
whether such interest accrued before or after the Petition Date, and from any
liability of a kind specified in Sections 502(g), 502(h) and 502(i) of the
Bankruptcy Code, whether or not a Proof of Claim or Interest is filed or deemed
filed under Section 501 of the Bankruptcy Code, such Claim or Interest us
Allowed under Section 502 of the Bankruptcy Code, or the holder of such Claim or
Interest has accepted the Plan. Except as otherwise provided herein, all
Creditors and Equity Interest holders shall be precluded from asserting against
the Debtors, their estates or assets or property, or against the Trustee its
successors and assigns, except as to Stipulation between the Trustee and
International Sabila, any other or further Claim or Interest based on any act or
omission, transaction or other activity of any kind or nature that occurred
prior to the Confirmation Date.
21.2 TERM OF INJUNCTION OR STAYS. Unless
otherwise provided, all injunctions or stays provided for in the case pursuant
to Section 362 of the Bankruptcy Code or otherwise extant on the Confirmation
Date shall become permanent and remain in full force and effect unless otherwise
provided for by Court Order.
<PAGE>
ARTICLE 22
CRAMDOWN UNDER THE BANKRUPTCY
22.1 In the event any impaired Class hereunder rejects this
Plan, it is the intention of the Debtors to seek confirmation and implementation
of the Plan, pursuant to the provisions of Section 1129(b) of the Bankruptcy
Code, as it applies to any and all such classes, which provision is commonly
referred to as the "cramdown provision" of the Bankruptcy Code.
<PAGE>
ARTICLE 23
MISCELLANEOUS PROVISIONS
23.1 Distributions to Creditors and treatment of
Interest Holders pursuant to the Plan shall be in full settlement, release,
discharge and satisfaction of all Claims and Interests, release, discharge and
satisfaction of all Claims and Interests, if any, against the Debtors and their
property, whether or not such Claim or Interest has been timely asserted and
whether or not such Creditor or Interest Holder shares in the distribution under
the Plan pursuant to 11 U.S.C. 1141, except as provided in Article 14, Section
14.3 pertaining to the Claims of Unsecured Creditors in the event of a Chapter
11, 7 or Assignment for the Benefit of Creditors filing by the Reorganized
Company.
23.2 MODIFICATION OF THE PLAN. The Debtors reserve the right to amend
or modify the Plan before confirmation in accordance with Section 1127 of the
Bankruptcy Code and Bankruptcy Rule 3017, provided that (i) the Plan, as
modified, meets the requirements of Sections 1122 and 1123 of the Bankruptcy
Code and (ii) the Debtors shall have complied with Section 1125 of the
Bankruptcy Code. The Debtors may amend or modify the Plan after confirmation
provided (i) the Plan, as modified, meets the requirements of Sections 1122 and
1123 of the Bankruptcy Code and (ii) the Bankruptcy Court, after notice and a
hearing, confirms the Plan, as modified, under Section 1129 of the Bankruptcy
Code. A holder of a Claim or Equity Interest that has accepted or rejected the
Plan shall be deemed to have accepted or rejected the modified plan, as the case
may be, unless, within the time fixed by the Bankruptcy Court, such holder
changes its previous acceptance or rejection.
23.3 The Debtors reserve the right
to modify the treatment of any Allowed Claims or Interest at any time after the
Effective Date upon the consent of the Creditor or Interest Holder whose Allowed
Claim or Interest treatment is being modified.
23.4 All notices, requests or
demands in connection with this Plan shall be in writing and shall be deemed to
have been given when received, or if mailed, five (5) days after the date of
mailing, provided such writing shall be sent by registered or certified mail,
postage prepaid, return receipt requested, and if sent to the Debtors, addressed
to: John W. Sywilok Godlesky & Sywilok 51 Main Street Hackensack, N.J. 07601
<PAGE>
with a copy to: American Holdings 376 Main Street Box 74 Bedminister,
N.J. 07921
23.5 The headings used in this Plan are inserted for convenience only
and neither constitute a portion of this Plan nor in any manner affect the
provisions of this Plan.
23.6 If confirmation of this Plan does not occur or if,
after confirmation occurs, the Debtors elect to terminate the Plan, the Plan
shall be deemed null and void. In such event, nothing contained in this Plan
shall be deemed to constitute a waiver or release of any Claims by or against
the Debtors of their estates or any other persons, or to prejudice in any manner
the rights of the Debtors or any person in any further proceeding involving the
Debtors or their estates.
Respectfully submitted,
/S/ VOLDEMAR MADIS
Voldemar Madis
President
Dr. Madis Laboratories, Inc.
and IVM Corp.
DATED: November 18, 1994
<PAGE>
GODLESKY & SYWILOK 51 MAIN STREET HACKENSACK, New Jersey 07601
Attorney for Debtors-In Possession UNITED STATES BANKRUPTCY COURT FOR THE
DISTRICT OF NEW JERSEY ____________________________ : HONORABLE WILLIAM F.
TUOHEY In the Matter of: CASE NOS. 88-01805 (WFT) : 88-01806 (WFT) DR. MADIS
LABORATORIES, INC., : In Administratively Debtor Consolidated Proceedings for
____________________________ : Reorganization Under Chapter 11 of the Bankruptcy
In the Matter of: : Code IVM CORPORATION, : Debtor : ORDER APPROVING DISCLOSURE
___________________________ STATEMENT AND FIXING TIME FOR FILING ACCEPTANCES OR
REJECTIONS OF PLAN, COMBINED WITH NOTICE THEREOF A Disclosure Statement under
Chapter 11 of the Bankruptcy Code having been filed by the Debtors, Dr. Madis
Laboratories, Inc. and IVM Corporation, referring to a Plan under Chapter 11 of
the Code filed by Dr. Madis Laboratories, Inc. and IVM Corporation on November ,
1994 and it having been determined after hearing on notice that the Disclosure
Statement contains adequate information pursuant to Section 1125 of the
Bankruptcy Code,
<PAGE>
IT IS on this day of , 1994, ORDERED and notice is
hereby given that: 1. The Disclosure Statement filed by the Debtors dated
November , 1994 is approved. 2. __________, 1994 is fixed as the last day for
filing written acceptances or rejections of the Plan referred to above. 3.
Within ________ days after the entry of this Order, the Plan, the Disclosure
Statement and a ballot conforming to Official Form 14 shall be mailed to
creditors, equity security holders and other parties in interest, and shall be
transmitted to the United States Trustee, as provided in Fed. R. Bankr. P.
3017(d). 4. ______, 1994, at ________ _.m., is hereby fixed for the hearing on
confirmation of the Debtors Plan. 5. _____________, 1994 is fixed as the last
day for filing and serving pursuant to Fed. R. Bankr. P. 3020(b) (1) written
objections to confirmation of the Plan. -------------------------- Bankruptcy
Judge
<PAGE>
